Verbund : Interim report quarters 1-3/2022

Interim Report Quarters 1-3/2022

The Power to Transform

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 ............................................................................................	29
Consolidated interim financial statements ....................................................	30
Income statement ................................................................................................................	31
Statement of comprehensive income .................................................................................	32
Balance sheet ........................................................................................................................	33
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

• Sharp rise in EBITDA and Group result
• Average sales prices obtained for own generation from hydropower up €60.3/MWh to €111.6/MWh
• At 0.84, water supply in quarters 1- 3/2022 down 16 percentage points on the long-term average and far below the prior-year figure (0.99)
• Negative measurement effects primarily from hedging of own generation owing to spike in wholesale prices for electricity
• Significantly higher contribution from flexibility products due to greater volatility in wholesale prices
• Negative trend in VERBUND shares in quarters 1 - 3/2022 (- 11.6%), yet still significantly outperforming the STOXX Europe 600 Utilities (- 20.0%) and the ATX (- 30.3%)
• Earnings forecast for 2022 adjusted because of the lower water supply: EBITDA expected to reach between around €2,800m and €3,300m and the Group result to between around €1,530m and €1,880m based on average levels of own generation from hydropower, wind power and photovoltaic production in quarter 4/2022 as well as the opportunities and risks currently identified

KPIs

		Unit		Q1 - 3/2021		Q1 - 3/2022		Change
Revenue		€m		2,819.8		7,617.3		170.1%
EBITDA		€m		1,150.6		1,933.3		68.0%
EBITDA adjusted		€m		1,150.6		1,933.3		68.0%
Operating result		€m		843.6		1,621.7		92.2%
Group result		€m		587.4		1,065.2		81.4%
Group result adjusted		€m		566.2		982.6		73.5%
Earnings per share		€		1.69		3.07		81.4%
EBIT margin		%		29.9		21.3		-
EBITDA margin		%		40.8		25.4		-
Cash flow from operating activities		€m		510.6		1,120.8		119.5%
Additions to property, plant and equipment		€m	430.0	811.4	88.7%
Free cash flow before dividends		€m		- 264.1		- 150.5		-
Free cash flow after dividends		€m		- 595.8		- 628.4		-
Average number of employees				3,110		3,487		12.1%
Electricity sales volume		GWh		44,194		47,995		8.6%
Hydro coefficient				0.99		0.84		-
New renewables coefficient				0.88		1.01
		Unit		31/12/2021		30/9/2022		Change
Total assets		€m		17,111.6		23,237.3		35.8%
Equity		€m		6,362.9		5,030.3		- 20.9%
Equity ratio (adjusted)		%		38.2		22.1		-
Net debt		€m		3,510.8		4,505.7		28.3%
Gearing		%		55.2		89.6		-

INTERIM FINANCIAL REPORT Report of the Executive Board

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Report of the Executive Board

Dear Shareholders,

Tough geopolitical and energy market developments cast a shadow over VERBUND in quarter 3/2022. The ongoing war in Ukraine, record inflation and expectations of interest rate hikes were the principal factors impacting on the Group's business performance. The difficult conditions caused significant distortion in Europe's energy markets above all and presented challenges that led to rocketing prices and price volatility as well as to massive changes in supply and demand structures. Prices for primary energy sources shot up during the course of the year, with gas prices in particular being hugely affected by changes in gas supply volumes and the off-take structure. European wholesale prices for electricity continued to rise as a result of soaring global market prices for primary energy and the increasing risks, reaching fresh highs.

In response to the headwinds in the European energy sector and to address the severe impending price pressure facing all customer groups, national and EU-level discussions on short- and long-term market intervention and skimming off of profits began with the intention of bringing down the extremely high energy prices and giving countries financial scope to reduce prices to the consumer. These discussions and decisions relating to market intervention generated uncertainty in the capital markets and also pushed down VERBUND's share price.

As a consequence of the dry summer, the volume of electricity VERBUND generated from its run-of- river power plants in quarter 3/2022 was well below average. The hydro coefficient was 0.75. Especially in July (0.71) and August (0.69), the hydro coefficient was significantly below the long-term average. The coefficient for quarters 1 - 3/2022 was 0.84. The reduced volume of electricity generated from hydropower had a pronounced negative impact on the development of earnings. The underproduction of hydroelectricity made it necessary to purchase large volumes of electricity so that the electricity volumes that had already been sold on the basis of the long-standing hedging strategy could be delivered. Due to the market conditions, some of these purchases had to be made at exceedingly high prices, which put additional pressure on earnings. Another challenge in the European energy sector was the margining payments for hedging transactions in electricity trading provided as security for open positions held with exchange clearing houses. VERBUND overcame this challenge without suffering adverse effects thanks to its foresighted financial planning, excellent credit standing and the timely increase in credit lines. However, measurement effects arising from customary hedging transactions in the energy sector for own generation had a material adverse effect on the Group's result. These effects will essentially be offset in subsequent periods by the realisation of the underlying transactions.

Particularly in these challenging times, VERBUND's management is keeping strictly to its sustainable 2030 strategy. We will continue our strategy of investing heavily in our traditional core business of hydropower and power grids as well as in the expansion of renewable generation and the development of Europe's hydrogen economy so that VERBUND can make an important contribution to ensuring security of supply in Austria and Europe and further advance its decarbonisation efforts.