DGAP-Ad hoc: VERBUND AG: Decline in result - Outlook for fiscal 2010 confirmed

Ad hoc announcement

Keyword(s): Half Year Results/Half Year Results

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

Ad hoc announcement transmitted by DGAP - a company of EquityStory AG. The issuer is solely responsible for the content of this announcement.

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 http://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 investor@verbund.at

(c)DGAP 27.07.2010 
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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:     http://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)

End of News                                     DGAP News-Service

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270800 Jul 10

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