Verbund : Interim Report Quarters 1-3/2023

Interim Report Quarters 1-3/2023

The power to transform. Together.

INTERIM FINANCIAL REPORT Contents

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Contents

At a glance	4
Report of the Executive Board	5
Investor relations	8
Interim Group management report	10
Business performance	10
Opportunity and risk management	19
Segment report	20
Events after the reporting date	28
Consolidated interim financial statements	29
Income statement	30
Statement of comprehensive income	31
Balance sheet	32
Cash flow statement	34
Statement of changes in equity	36
Selected explanatory notes	38
Responsibility statement of the legal representatives	61

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At a glance

• Stronger financial performance: EBITDA up 83.6% to €3,549.3m and Group result up 85.9% to €1,980.6m
• Average sales prices achieved for own generation from hydropower up by €64.4/MWh, from

€111.6/MWh to €176.0/MWh

• At 0.93, water supply in quarters 1-3/2023 7 percentage points below the long-term average but 9 percentage points above the prior-year figure (0.84)

• Higher volume of electricity generated from photovoltaic installations and wind power plants, especially as a result of the commissioning and acquisition of renewable power plants in Spain
• Contribution from flexibility products in quarters 1-3/2023 down €56.0m to €258.8m due mainly to a decrease in congestion management
• Earnings forecast for 2023 adjusted: EBITDA expected to reach between around €4,150m and €4,450m and the Group result to between around €2,250m and €2,450m based on average levels of own generation from hydropower, wind power and photovoltaic production in quarter 4/2023 as well as the opportunities and risks currently identified

KPIs

		Unit		Q1-3/2022		Q1-3/2023		Change
Revenue		€m		7,617.3		9,789.9		28.5%
EBITDA		€m		1,933.3		3,549.3		83.6%
EBITDA adjusted		€m		1,933.3		3,549.3		83.6%
Operating result		€m		1,621.7		3,145.9		94.0%
Group result		€m		1,065.2		1,980.6		85.9%
Group result adjusted		€m		982.6		2,000.9		103.6%
Earnings per share		€		3.07		5.70		85.9%
EBIT margin		%		21.3		32.1		-
EBITDA margin		%		25.4		36.3		-
Cash flow from operating activities		€m		1,120.8		4,153.4		-
Additions to property, plant and equipment		€m		811.4		986.2		21.5%
Free cash flow before dividends		€m		- 150.5		3,018.7		-
Free cash flow after dividends		€m		- 628.4		1,475.0		-
Average number of employees				3,487		3,752		7.6%
Electricity sales volume		GWh		47,995		47,515		- 1.0%
Hydro coefficient				0.84		0.93		-
New renewables coefficient				1.01		1.04
		Unit		31/12/2022		30/9/2023		Change
Total assets		€m		19,156.6		19,295.2		0.7%
Equity		€m		8,323.0		10,432.3		25.3%
Equity ratio (adjusted)		%		44.5		55.3		-
Net debt		€m		3,898.3		2,426.7		- 37.8%
Gearing		%		46.8		23.3		-

INTERIM FINANCIAL REPORT Report of the Executive Board

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Report of the Executive Board

Dear Shareholders,

Our entire energy system is currently undergoing a comprehensive transformation stemming from the dilemma of how to balance climate action and decarbonisation plus achieving greater energy independence with the need to maintain security of supply. A key component of the shift to an essentially carbon-free energy system is large-scale expansion of new renewable electricity generation from solar and wind power as well as hydropower. However, expanding new renewable electricity generation on this scale is making the European power grid far more volatile - something that can only be mitigated through major expansion of the power grid and the use of storage technologies, i.e. highly flexible electricity generation facilities such as pumped storage power plants. The draft of the Austrian network infrastructure plan recently presented anticipates a sharp uptick in demand for electricity until 2040. Electricity generation from renewable energy sources is expected to grow at a similar pace. Rapid expansion of the transmission system in particular is therefore crucial for maintaining security of supply in the Austrian economy. Austria also needs to make faster progress with regard to green hydrogen if it is to meet its ambitious climate targets. This requires accelerating the expansion of renewables plus the corresponding grid infrastructure in Austria. If a carbon-neutral economic system is to be achieved by 2040, all processes previously run on fossil fuels will need to be converted, either through direct electrification or the use of green hydrogen.

In addition, efforts are being stepped up within the EU to reduce dependence on fossil fuels. The European Commission's plan here is to wean ourselves off Russian gas completely by 2027. Beyond this, there are plans to outlaw the burning of fossil gas by 2050. A huge amount of investment is also needed at EU level to ensure that everyone is supplied with electricity. All of this is taking place with a view to mitigating climate change and achieving carbon neutrality.

Transforming the energy system requires increased expenditures. VERBUND has earmarked around €15bn for investment over the coming decade so that it can advance decarbonisation efforts and continue to guarantee security of supply in Austria. To implement these goals, VERBUND has established Mission V, a long-term comprehensive transformation programme. Not only does this programme aim to strengthen VERBUND's integrated positioning in its home market of Austria through further expansion of domestic hydropower and the power grid, supply customers in Austria with electricity from renewable sources of production and expand renewables in Europe, but it also seeks to position VERBUND as a European hydrogen player. This is what we are working on at VERBUND, and we welcome every milestone that we reach in this context. On 30 June 2023, for example, we took another step towards a renewable energy future with the ground-breaking ceremony for the Stegenwald hydropower plant. Hydropower is a frontrunner among renewables because it continuously delivers clean electricity throughout the year. Once completed, the run-of-river power plant along the central Salzach should deliver 72.8 GWh of electricity per year for the region. Two turbines will enable a maximum electrical capacity of 14.3 MW. Salzburg AG and VERBUND will co-invest around €100m in the power plant. In Austria, turbines and generators for the new power plant on the Mur River were also lifted in during quarter 3/2023. After the shell was finished, installation of the two generator sets began at the site in Gratkorn. The Reißeck II plus and Limberg III hydropower plant projects that we are building to boost our renewable electricity generation also advanced on schedule in quarter 3/2023. These will have an important role to play in the

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future as flexible pumped storage and storage power plants. In addition, grid projects such as the 380 kV Salzburg line are being implemented according to plan.

VERBUND's 2030 strategy also plans for significant growth in solar and wind power with the objective of producing around 20-25% of total electricity generated from photovoltaic systems and onshore wind farms. Spain has been defined as a strategic target market in this respect. VERBUND's most recent acquisition involves the purchase of operative wind power plants with a total capacity of 257 MW and potential for hybridisation and repowering from EDP Renewables Europe, S.L.U. for an enterprise value of around €0.46bn. VERBUND Green Power GmbH acquired 100% of the shares in the two companies Green Power Wind Spain 1, S.L.U. (formerly Viesgo Renovables S.L.) and Green Power Wind Marquesado, S.L.U. (formerly Viesgo Europa S.L.). The two companies hold nine wind portfolios at various sites in Spain. Overall, VERBUND has already achieved a capacity of around 1 GW across photovoltaic and wind power.

VERBUND saw an increase in the results posted for quarters 1-3/2023. EBITDA climbed by 83.6% year- on-year to €3,549.3m. The reported Group result rose by 85.9% to €1,980.6m and the Group result after adjustment for non-recurring effects (non-recurring effects in Q1-3/2023:€-20.2m;Q1-3/2022: €+82.6m) was up 103.6%. At 0.93, the hydro coefficient for the run-of-river power plants was 7 percentage points below the long-term average but 9 percentage points above the comparative prior-year figure. Generation from the annual storage power plants rose by 7.1% in quarters 1-3/2023 compared with the prior-year reporting period. Generation from hydropower thus increased by 2,266 GWh to 23,102 GWh. The sharp rise in wholesale electricity prices on the futures markets that were relevant for the reporting period gave earnings a considerable boost. Conversely, spot market prices fell in quarters 1-3/2023. The average sales price achieved for our own generation from hydropower rose by €64.4/MWh to €176.0/MWh. Furthermore, higher generation from photovoltaic installations and wind power plants, especially from the plants put into operation in Spain, had a positive effect. Higher earnings contributions from Gas Connect Austria GmbH and Austrian Power Grid AG in the Grid segment also had a positive effect. This stood in contrast to the reduction in earnings caused by a significant decrease in thermal generation and the negative earnings contribution from the Sales segment attributable to high procurement costs, among other factors. The measures to tax windfall profits likewise had an aggregate negative impact of around €77m on EBITDA.

INTERIM FINANCIAL REPORT Report of the Executive Board

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Based on expectations of average levels of own generation from hydropower, wind power and photovoltaic production in quarter 4/2023 as well as the opportunities and risks identified, VERBUND expects EBITDA of between around €4,150m and €4,450m and a Group result of between around €2,250m and €2,450m in financial year 2023. VERBUND's planned payout ratio for financial year 2023 is between 45% and 55% of the Group result of between around €2,270m and €2,470m, after adjusting for non- recurring effects. The earnings forecast and the information on the expected payout ratio are contingent on VERBUND not being impacted by possible additional energy policy measures to skim off some of the profits at energy companies.

Mag. Dr. Michael Strugl MBA

Dr. Peter F. Kollmann

Mag. Dr. Achim Kaspar

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Investor relations

Contact:

Andreas Wollein

Head of Group Finance and

Investor Relations

Tel.: + 43 (0)50 313-52604

E-mail: investor-

[e-mail]

The continuing weakness of the global economy with rife uncertainty and low to moderate growth prospects at best, along with repeated rate hikes in Europe and the United States, created the framework in quarter 3/2023. Other negative factors were rising oil prices caused by restrictions on production and exports, speculative behaviour by market participants and shrinking inventories, above all in the USA.

While the USA registered moderate macroeconomic growth in the quarter now ended and has managed to avoid a recession to date, the prevailing mood in the industry remained gloomy. The Federal Reserve is currently not expected to lower key rates in the US any time soon.

A varied picture emerged in Europe. The euro area as a whole is forecast to grow slightly this year, but Germany remains the biggest worry. Although well-filled order books have so far kept a recession at bay, a lasting economic turnaround is not yet in sight despite falling inflation rates. The European Central Bank raised key interest rates once again at its last meeting, but could be about to end its string of eurozone rate increases. Now that core inflation in the eurozone is falling, the measures put in place are starting to bear fruit.

The situation in China is likewise difficult. After a strong start in 2023, geopolitical and trade policy tensions as well as the crisis in China's property sector impacted on the economy, slowing consumer spending. However, the effects of the intervention by the Chinese government are already being felt and are expected to improve the situation as the year goes on.

In spite of the challenges outlined above, some stock markets saw marked price increases in quarters 1-3/2023. Japan's Nikkei 225 delivered a remarkable performance, climbing by as much as 22.1% compared with 31 December 2022. The US benchmark index Dow Jones Industrial Average ended quarters 1-3/2023 up by a moderate 1.1%. The Euro Stoxx 50 performed much better in the reporting period, closing 10.0% higher than at year-end 2022.

VERBUND share price: relative performance 2023

120
			ATX			STOXX Europe 600 Utilities
110
100								+ 1.3%
							- 1.0%
								- 2.0%
90
							VERBUND
80
1/1/	1/2/	1/3/	1/4/	1/5/	1/6/	1/7/	1/8/	1/9/

INTERIM FINANCIAL REPORT Investor relations

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VERBUND shares were characterised by volatile sideways movement in quarter 1/2023. Continuing regulatory uncertainties, in particular the ongoing discussions on changes to the electricity market design at EU level and the increase in Austria's inframarginal levy, weighed heavily on VERBUND's share price in quarter 2/2023. The price of VERBUND shares rose steadily in quarter 3/2023 before a correction set in at the end of September. Possible reasons for this increase were a reversal in the trend away from price losses in the first half of the year and shifts from other equities in the field of new renewables. Trading at a closing price of €77.1 as at 30 September 2023, VERBUND shares were down 2.0% in quarters 1-3/2023 against year-end 2022. As such, the shares underperformed slightly against the Austrian ATX (+1.3%) as well as against the STOXX Europe 600 Utilities sector index (-1.0%) in the first nine months of 2023.

KPIs - shares

		Unit		Q1-3/2022		Q1-3/2023		Change
Share price high		€		113.6		83.5		- 26.5%
Share price low		€		79.2		68.1		- 14.1%
Closing price		€		87.5		77.1		- 11.9%
Performance		%		- 11.6		- 2.0		-
Market capitalisation		€m		30,381.5		26,768.4		- 11.9%
ATX weighting		%		13.8		10.6		-
Value of shares traded		€m		5,955.5		3,510.7		- 41.1%
Shares traded per day		Shares		326,985		240,321		- 26.5%

Upcoming dates:

2023 annual results:

14 March 2024

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Interim Group management report

Business performance

Electricity supply and sales volume

Group electricity supply						GWh
		Q1-3/2022		Q1-3/2023		Change
Hydropower1		20,836		23,102		10.9%
Wind power		718		858		19.5%
Solar power		4		287		-
Thermal power		879		379		- 56.9%
Own generation		22,437		24,626		9.8%
Electricity purchased for trading and sales	26,132	23,248		- 11.0%
Electricity purchased for grid loss and
control power volumes		2,965		3,212		8.3%
Electricity supply		51,533		51,086		- 0.9%

1 incl. purchase rights

VERBUND's own generation was up 2,189 GWh (9.8%) to 24,626 GWh in quarters 1-3/2023 compared with the same period in 2022. Generation from hydropower plants increased by 2,266 GWh in the reporting period to 23,102 GWh. At 0.93, the hydro coefficient for the run-of-river power plants was 7 percentage points below the long-term average but 9 percentage points above the comparative prior- year figure. Generation from VERBUND's annual storage power plants rose by 7.1% in quarters 1-3/2023 as a consequence of a more pronounced reduction in reservoir levels and greater natural water inflows despite lower generation from turbining.

Hydro coefficient (monthly averages)

2.0
				long-term maximum
	long-term average			since 1926
1.5
1.0
0.5
				long-term minimum
				since 1926
0.0
2019	2020	2021	2022	2023