VERBUND SUSTAINABILITY REPORT 2008

Transcription

1 VERBUND SUSTAINABILITY REPORT 2008

2 INDICATORS ECONOMIC INDICATORS EVA MILLION DIVIDENDS PER SHARE 2 PRODUCTIVITY PER EMPLOYEE T , , ,473.7 ENVIRONMENTAL INDICATORS HYDROPOWER GENERATION GWh THERMAL GENERATION GWh ISO PLANTS % ,853 24,321 25, ,233 3,986 3, SOCIAL INDICATORS EMPLOYEES 3 PERSONS TRAINING HOURS PER EMPLOYEE h ACCIDENT RATE ,466 2,537 2, DUE TO THE MODIFIED PRESENTATION RELATING TO THE MEASUREMENT OF THE HEDGING INSTRUMENTS IN ACCORDANCE WITH IAS 39 IN THE ELECTRICITY BUSINESS, THE RATIOS FOR 2008 CAN ONLY BE COMPARED WITH THOSE OF THE PREVIOUS YEARS TO A LIMITED EXTENT. 2 THE STOCK SPLIT OF 23 MAY 2006 IN THE RATIO OF 1:10 IS CONSIDERED 3 NUMBER OF EMPLOYEES UNDER LABOR LAW AS PER 31 DECEMBER 4 NOTIFIABLE ACCIDENTS PER 1,000 EMPLOYEES

3 EVA MILLION DIVIDENDS PER SHARE PRODUCTIVITY PER EMPLOYEE T 1, , ,473.7 SALES MILLION 2, , ,744.7 EARNINGS PER SHARE CASH FLOW PER SHARE GENERATION FROM HYDROPOWER PLANTS GWh 23,853 24,321 25,308 GENERATION FROM THERMAL PLANTS GWh 4,233 3,986 3,352 SHARE OF LOCATIONS WITH ISO CERTIFICATE % SHARE OF LOCATIONS WITH EMAS AUDIT % CO 2 -EMISSIONS AVOIDED THROUGH HYDROPOWER GENERATION kt 21,795 22,180 22,430 WASTE t 37,994 12,218 16, NUMBER OF EMPLOYEES PERSONS 2,466 2,537 2,638 TRAINING HOURS PER EMPLOYEE HOURS ACCIDENT RATE SHARE OF WOMEN % NUMBER OF YEARS AT COMPANY YEARS FLUCTUATION RATE % DUE TO THE MODIFIED PRESENTATION RELATING TO THE MEASUREMENT OF THE HEDGING INSTRUMENTS IN ACCORDANCE WITH IAS 39 IN THE ELECTRICITY BUSINESS, THE RATIOS FOR 2008 CAN ONLY BE COMPARED WITH THOSE OF THE PREVIOUS YEARS TO A LIMITED EXTENT. 2 THE STOCK SPLIT OF 23 MAY 2006 IN THE RATIO OF 1:10 IS CONSIDERED 3 NUMBER OF EMPLOYEES UNDER LABOR LAW AS PER 31 DECEMBER 4 NOTIFIABLE ACCIDENTS PER 1,000 EMPLOYEES

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5 CONTENTS PREFACE OF THE MANAGING BOARD 2 MISSION STATEMENT VERBUND 6 CORPORATE PROFILE VERBUND 8 REGARDING THIS REPORT 15 HIGHLIGHTS BUSINESS FRAMEWORK 24 INDICATORS 32 ECONOMIC INDICATORS 32 ENVIRONMENTAL AND RESEARCH INDICATORS 40 SOCIAL INDICATORS 54 AUDITOR S CERTIFICATE 64 SUSTAINABILITY GOALS ATTACHED DOCUMENT

6 MAG. CHRISTIAN KERN DR. ULRIKE BAUMGARTNER-GABITZER DR. MICHAEL PISTAUER DR. JOHANN SEREINIG MEMBER OF THE MANAGING BOARD MEMBER OF THE MANAGING BOARD CHAIRMAN OF THE MANAGING BOARD DEPUTY CHAIRMAN OF THE MANAGING BOARD

7 PREFACE OF THE MANAGING BOARD VERBUND SUSTAINABILITY REPORT PREFACE OF THE MANAGING BOARD DEAR READER, Since our company was founded in 1947, the generation of electricity from hydropower has been our primary focus. The sustainable management of this renewable resource has facilitated the creation of an economic basis which is protecting our company from major losses in the current financial and economic crisis. In view of the limited availability of fossil fuel resources, hydropower as an energy source is constantly increasing in value not only for our company, but also for our country. Fifty-one percent of the profit we generate goes to our main shareholder, the Republic of Austria, and is subsequently used for the benefit of the Austrian people. Added to this are the tax payments we make and our employment record. In addition to the jobs that were successfully preserved after a consistent restructuring phase prior to liberalization, we have also managed to create new jobs, particularly in The successful management of the financial and economic crisis will be a primary focus for quite some time to come. In addition, climate change poses a special challenge. Although we produced 88 % of our electricity from Austrian hydropower in 2008 and are enhancing our focus on the new renewable energies such as wind power and photovoltaics, we will not be able to escape the effects of global warming unscathed. The good earnings position of the past years, the excellent positioning in the European energy sector and our orientation towards sustainability will allow us to continue our successful business trend. SUSTAINABLE MANAGEMENT As an energy producer, we can and indeed must make an important contribution to the management of this situation: Anti-cyclic investment is necessary in other words, we have to invest now. In Austria, the exploitable hydropower potential from an economic and ecological perspective lies at 13,000 GWh, whereby 7,000 GWh could be realized by This would allow Austria to reduce CO 2 emissions by 3.1 million tons. Our strategic investment program up to 2015 therefore also provides for the expansion of generation plants and transmission grids in Austria. ANTI-CYCLIC INVESTMENT

8 4 VERBUND SUSTAINABILITY REPORT 2008 PREFACE OF THE MANAGING BOARD Examples of the planned investments in Austria include the further expansion of the pumped storage power plant Limberg II, continued work on the replacement of the machine units in the Danube power plant Aschach and the construction of the run-of-river power plant Werfen/Pfarrwerfen. Added to this is the expansion of Hieflau power plant as well as the automation of the power plant and weir control on the Danube. The construction of the gas and steam turbine combination power plant at Mellach near Graz was started last autumn and commissioning is planned for Verbund has also made a great deal of progress in the new renewable energies area in Austria through the acquisition of three wind parks with a total capacity of 49 MW in the Lower Austrian district, Bruck an der Leitha. In Styria, work on the 380 kv extra-high voltage line is progressing swiftly. Commissioning is planned for mid This will mark the completion of an important sub-project that will serve to enhance security of supply in Austria. The next step involves the completion of the 380 kv ring in Salzburg: The section Salzach neu St. Peter was approved by the authorities in September FAIRNESS Fair business practices have been a matter of course within Verbund for decades. In 2008, we documented the business practices that have been used over the last decades in a guideline. This will be supplemented with training measures, examples and procedural instructions which shall serve to ensure that cooperative and correct dealings with business partners will be continued into the future. This clear commitment to fair business practices can also be seen as an important preventive measure for our international activities, which we also expanded in 2008: In Turkey, we will help to meet the rapidly growing demand for electricity, which is expected to triple by 2020, through the construction of nine hydropower plants and a gas power plant in a first step. Together with the Turkish Sabanci Group, we were also successful in our bidto purchase the distribution grid company Baskent EDAS, which supplies three million end customers. We will also erect another hydropower plant in Albania. In Spain, two new photovoltaic power plants meet the annual electricity requirements of approx. 1,500 households since autumn Further wind power projects are currently being developed or investigated in Croatia, Romania and Bulgaria. In May 2008, VERBUND-International GmbH (VI) assumed responsibility for the international shareholdings. VI is now responsible for the ongoing commitments of the Turkish Enerjisa Group, the French Poweo Group, where Verbund is the largest shareholder with a stake of approx. 30 %, and the Italian Sorgenia Group.

9 PREFACE OF THE MANAGING BOARD VERBUND SUSTAINABILITY REPORT In 2008, we carried out the first group-wide employee survey and the results were very positive. The feedback on the working atmosphere, job security and work challenge was particularly good. This results in a high level of motivation and distinctly positive loyalty and commitment values. Our employees are very satisfied with their activities and also greatly appreciate additional offers such as the Fit & Healthy at Verbund program which was initiated in EMPLOYEE SATISFACTION With the help of our highly motivated employees, we will further increase the share of renewable energies in our generation so that we can contribute to the achievement of the European climate protection goals and strengthen our position as one of the leading groups in the EU in the renewable energies area. DR. MICHAEL PISTAUER DR. JOHANN SEREINIG DR. ULRIKE BAUMGARTNER-GABITZER MAG. CHRISTIAN KERN

10 6 VERBUND SUSTAINABILITY REPORT 2008 MISSION STATEMENT VERBUND MISSION STATEMENT VERBUND VISION As Austria's leading electricity company we also have a clear international vision: To be the driving force for clean energy in Europe. MISSION We are the leading electricity company in Austria and are growing in the European market. We generate electricity in environmentally friendly plants, primarily from hydropower. With the Austrian transmission grid, we guarantee the quality of the power supply. We offer all customers optimal services through our electricity trade and distribution activities. We practice sustainability, communicate openly and are committed to our social responsibility. STRATEGY We concentrate on our core competencies, namely, electricity production, electricity trading and distribution and electricity transmission. Our primary objective is to achieve value-generating growth through the adoption of a selective investment policy in Europe. This growth objective is supplemented by consequent cost management and the optimization of the capital structure. Targeted selection, optimal deployment and ongoing training ensure that our employees always deliver peak performance. We base our actions on sustainable corporate management and always take the expectations of our stakeholders into consideration. CODE OF CONDUCT COOPERATION CLEAR AND OPEN COMMUNICATION CONFIDENTIALITY As Austria's largest electricity company, we operate successfully throughout Europe. We are aware of our liability towards our shareholders, our employees, our business partners, the society and the environment and act in accordance with the following principles. The collaboration with all stakeholders is cooperative, fair and reliable. We attach great importance to dealing with conflicts in a constructive manner. We seek open and factual dialog with our stakeholders. We ensure that our actions remain understandable and comprehensible.

11 MISSION STATEMENT VERBUND VERBUND SUSTAINABILITY REPORT As a listed company, we are obliged to observe the strict rules of the financial markets, the observance of which is guaranteed through the Compliance Officers. We do not tolerate any type of dishonesty in business practice and reject all forms of corruption and bribery (as, for example, accepting or offering bribe money). We stand for human rights and respect the dignity of each individual. We strictly condemn any form of child and forced labor. We also require our business partners to comply with such values. We comply with the applicable laws and honor our agreements and contracts. We commit ourselves to the Austrian Corporate Governance Code as well as to the unbundling regulations. Qualified and motivated employees form the basis for our success. Our employees stand out for personal commitment, top professional qualifications and their ability to identify with corporate objectives and principles. ACCOUNTABILITY COMPLIANCE WITH LAWS AND CONTRACTS EMPLOYEES We offer all employees individual development opportunities and good prospects for the future. We strive to harmonize the working conditions with the respective living circumstances of the employees so as to achieve a balanced relationship between career and private life. By achieving this work-life balance, we aim to secure a long-term cooperation. Loyalty to the company is very important to us. This also includes any constructive criticism, which we can share within Verbund in an appropriate and open fashion. We work with all people regardless of their gender, age, religion, culture, color of their skin, education, social background, sexual orientation or nationality. We do not tolerate any form of discrimination, mobbing or sexual harassment. Leadership skills are an essential prerequisite for the success of any company. Cornerstones here professional and social competence, open and direct communication, clear and unbureaucratic decision-making structures, constructive criticism and openness towards innovation. Customer orientation is of special importance to us. High service quality and competence, fair market conditions and the reliable provision of services make up our mandate. We strive to establish partnership-like business relationships with our suppliers and require that they observe our quality standards and sustainability principles. We commit ourselves to fair competition. We reject all cartel-like agreements, in particular, agreements on price-fixing, market share, capacity, carving-up of regional markets and price controls. In all our activities, we orientate on the principle of sustainability the holistic consideration of economic success, environmental conservation and the preservation of the interests of the employees and society. CUSTOMERS SUPPLIERS COMPETITION SUSTAINABILITY

12 8 VERBUND SUSTAINABILITY REPORT 2008 CORPORATE PROFILE VERBUND CORPORATE PROFILE VERBUND Verbund is listed in the commercial register as Österreichische Elektrizitätswirtschafts-AG and the head office is located at Am Hof 6a, 1010 Vienna. The object of the company is to engage in generation, transport, trade and distribution of electrical energy in Europe. The Republic of Austria holds 51 % of the company shares, approx. 25 % of the stock is held by other energy companies and approx. 24 % is in free float. Verbund is the leading electricity utility in Austria and one of the top hydropower groups in Europe. The company is and has been the largest producer and transporter of electrical energy in Austria for more than six decades. 51 % of the company is owned by the Republic of Austria and it is one of the most profitable energy utilities in Europe. The basis of its success is Austrian hydropower, which Verbund uses to meet almost 40 % of the national electricity requirements. Verbund also plays an important role in international electricity trading. Last, but by no means least, the group is one of the first in the area of climate and environmental protection: 100 % of the electricity supplied by Verbund to Austrian households is generated from hydropower. SHAREHOLDER STRUCTURE % REPUBLIC OF AUSTRIA 51 EVN AG > 10 WIENER STADTWERKE HOLDING AG > 10 TIWAG > 5 FREE FLOAT < 24 Since the beginning of deregulation, the Verbund Group has consistently expanded its activities at an international level and has also benefited from the opportunities offered by the emerging electricity markets almost half a billion consumers, more than 20 million of which are business customers. Today, Verbund generates 61 % of its sales outside of Austria, primarily in Germany and France.

13 CORPORATE PROFILE VERBUND VERBUND SUSTAINABILITY REPORT GROUP STRUCTURE VERBUND Österreichische Elektrizitätswirtschafts-Aktiengesellschaft (Verbundgesellschaft) GENERATION VERBUND- Austrian Hydro Power AG VERBUND- Austrian Thermal Power GmbH & Co KG Environmentally-friendly and costeffective generation form the basis for the success of Verbund across Europe. Approx. 90 % of the electricity produced by Verbund is generated from hydropower. The thermal subsidiaries supply important complementary energy. TRADE SALES TRANSMISSION PARTICIPATING INTERESTS VERBUND- Austrian Power Trading AG VERBUND- Austrian Power Sales GmbH VERBUND- Austrian Power Grid AG VERBUND- International GmbH Verbund is one of the most expansive and most successful electricity traders in Europe and operates in most of the EU member states. Since July 2005, Verbund has also been very actively involved in direct distribution to end customers in Austria. To date, approx. 180,000 customers have been acquired in this segment. Verbund operates the Austrian supra-regional high-voltage grid which transports approx. 50 % of the total volume of electricity consumed in Austria. Moreover, with its connections to the international grid, Verbund is an important switching location within the framework of European electricity transmission. Numerous shareholdings in Austria and abroad make growing contributions to earnings within the group. To promote further international growth, VERBUND- BeteiligungsgmbH was renamed to create VERBUND-International GmbH (VI) in May RENEWABLE ENERGIES VERBUND- Austrian Renewable Power GmbH In future, Verbund will focus even more strongly on generation from renewable energy sources. In addition to hydropower production, the generation portfolio will soon also include wind power and photovoltaics.

14 10 VERBUND SUSTAINABILITY REPORT 2008 CORPORATE PROFILE VERBUND Verbund trades on electricity exchanges in the European wholesale market as well as bilaterally with more than 150 partners. The group is represented on the electricity and certificate exchanges in Vienna, Leipzig, Paris, Amsterdam, Rome and Ljubljana. In addition, Verbund supplies industrial companies and resellers in Europe. Subsidiaries in Germany, Italy, Croatia, Macedonia, Romania, Serbia, Slovakia, Slovenia, Hungary, the Czech Republic and Hungary help to secure Verbund's market position. Verbund has entered into joint ventures in Italy, France and Turkey. At this point we would like to make a special reference to the competence and commitment of our employees, to whom we now extend a special word of thanks. With more than 2,600 employees, we have generated annual sales in excess of 3.7 billion. ECONOMY ENVIRONMENT In fiscal 2008, Verbund continued its successful development of the past years and displayed further profitable growth. Sales increased by 23.2 % compared to the previous year, the operating result was up 24.3 % and the group result rose by 18.6 %. This is attributable, above all, to Verbund's excellent strategic position, the foundation of which was laid over the last few years, and the hedging strategy under which a large share of Verbund's own generation is sold in advance. Since the introduction of a group-wide environmental management system, power plant and grid locations have been and are being certified in accordance with EMAS and ISO on an ongoing basis. In the VERBUND-Austrian Hydro Power AG area, an environmental management system has been implemented at all of the power plants in the Lower Danube power plant group, the Wallsee- Mitterkirchen and Abwinden-Asten power plants in the Upper Danube power plant group, all of the power plants in the power plant groups Mur, Glockner-Kaprun and Salzach, the Drau run-of-river power plants, the Malta/Reißeck power plant group and, since the end of 2008, the power plants on the Enns. The preliminary work is currently being carried out for the head office in Vienna. The currently operating thermal power plants of VERBUND-Austrian Thermal Power GmbH & Co KG have been audited and certified for many years already. In the grid area, the integrated environment, quality, safety and health management system has been implemented throughout VERBUND-Austrian Power Grid AG and has, along with the information safety management system, also been successfully certified. SOCIAL AFFAIRS GENERATION In 2008, we had 2,638 employees. This represents an increase of approx. 100 employees compared to the previous year. The new hirings are attributable to the timely replacement of retiring employees and the strong expansion of the company way beyond the Austrian frontiers. Verbund intends to further strengthen its international activities in the coming years. We also serve as a model in the Austrian labour market, not least due to the fact that the number of apprenticeships has been increased from 25 to 32: In this way, we aim to compensate at an early stage for the natural attrition of specialist workers. In terms of our growth strategy, it is very important that the right employees be selected and provided with the necessary expertise. For this reason, various focal points were set in 2008: Long-term personnel marketing ensures that the increased personnel requirements of the coming years can be covered. The number of apprentices for the dual training course in electrical/mechanical engineering has been increased to compensate for the natural attrition of specialist workers. A staff and health survey revealed a high level of employee satisfaction. The training and further education of the employees represents a long-term investment in the future of the group: The focal points in 2008 included executive development, the mechatronics courses for the employees at Control Center Danube and intercultural training. In 2008, Verbund generated over 40 % of the total volume of electricity that was consumed in Austria.

15 CORPORATE PROFILE VERBUND VERBUND SUSTAINABILITY REPORT % of our electricity came from 108 hydropower plants which form the basis for sustainable electricity generation within the group. We renovate and expand our power plants on an ongoing basis using state-of-the-art technology and in close cooperation with ecological experts. GROUP GENERATION TWh HYDROPOWER % 56,1 THERMAL POWER EXTERNAL PROCUREMENT Verbund's household customers are supplied with electricity from 100 % own-generated hydropower via VERBUND-Austrian Power Sales GmbH. The business and industrial customers of the electricity distribution subsidiary can choose between 100 % hydroelectricity at a premium or the European UCTE mix, which is made up of different energy sources. The UCTE mix for 2008 is as follows: 12 % hydropower, 6 % other renewable energy sources, 53 % fossil fuels, 29 % nuclear energy. POWER PLANT DATA QUANTITY BC 1 SC MW GWh GWh GWh GWh GWh HYDROPOWER 88 5,976 21,722 21,816 20,836 21,406 22,221 THERMAL POWER 8 1,520 4,223 4,233 3,986 3,352 PURCHASE RIGHTS FOR HYDROPOWER ,030 2,972 3,017 2,915 3,087 TOTAL 116 8,086 24,752 29,011 28,086 28, BOTTLENECK CAPACITY 2 STANDARD CAPACITY The focal point of our investment activity lies in the expansion of Austrian hydropower. At the end of 2008, VERBUND-Austrian Hydro Power AG was engaged in approx. a dozen hydropower projects. From today s perspective, it appears that, due to shorter construction time than anticipated, it will be possible to commission the pumped storage power plant Limberg II as early as This 400 MW power plant will increase the capacity of the Kaprun power plant group in the peak electricity sector to 833 MW. Reißeck II in Carinthia is a similar project. Here, the two power plants Reißeck and Malta will be connected to create a new, third power plant which is scheduled for completion in The new power plant will not have any additional water requirements but will increase the capacity of the power plant group by more than 40 %. Verbund, however, does not focus solely on large-scale technology and new power plants but also engages in the construction of small and medium-size hydropower plants and implements measures that are designed to increase efficiency. The four machine units in the Danube power plant Aschach are currently being replaced and the wheels are being enlarged so that the annual production of electricity can be increased by 3 % through the more efficient utilization of the existing water volumes. New wheels with a larger diameter will also be installed in the Mur power plant Gralla to increase electricity production by approx. 5 %. The new small power plant Mur in Leoben, which was commissioned in 2006 and has a capacity of just under 10 MW, already serves as an excellent example for highly modern, environmentally friendly and socially compatible electricity generation. HYDROPOWER

16 12 VERBUND SUSTAINABILITY REPORT 2008 CORPORATE PROFILE VERBUND Due to its location in the middle of an urban settlement area, the power plant has to meet a multitude of different requirements. These extend from improved flood protection, the ecologically attractive design of the banks of the Mur with new gravel and sand banks as well as shallow water areas, a fish pass and a new bridge over the Mur to the expansion of the leisure activities in the area of Mur Island. Verbund and Salzburg AG are constructing a new hydropower plant on the Salzach at Werfen. The power plant, which will have a capacity of 16 MW, will also comply with the latest environmental standards. THERMAL POWER In the thermal power area, VERBUND-Austrian Thermal Power GmbH & Co KG has a total of eight power plants three of these plants are operational, while the other five are currently shut down, taken off line or leased. Voitsberg power plant was sold to A-TEC Beteiligungs GmbH in October We are currently concentrating on the three locations that are most suitable for the production of electricity and heat. District heating is decoupled at the district heating power plants Mellach and Neudorf-Werndorf. These power plants are operated as highly efficient power-heat coupling plants in accordance with the Styrian ELWOG (Electricity Industry and Organization Act). The annual district heating volume lies at an average of 800 GWh. In the future, we will be enhancing our focus on the low-co 2 energy source, natural gas: The construction of the Mellach gas and steam turbine combination power plant started on 30 October The 832 MW plant will supply electricity and district heating from autumn The annual generation capacity comes to 5 TWh, which corresponds to 7 % of the total domestic demand for electricity. RENEWABLE ENERGIES In its role as one of the leading hydropower groups in Europe, Verbund will further enhance its focus on renewable energy carriers in the future. For this purpose, the subsidiary VERBUND-Austrian Renewable Power GmbH was founded in In a first step, the company aims to create new generation capacities of 400 MW on the basis of renewable energy sources, in particular, wind and photovoltaics. In 2008, two photovoltaic plants were purchased in Spain and three wind farms were acquired in Austria. Verbund is also increasing its commitment to wind energy at an international level: In Croatia, Verbund is planning a wind farm with a capacity of approx. 60 MW and a 150 MW wind farm project is being implemented in Romania. In addition, projects with a capacity of several hundred MW are currently being pursued in South East Europe. In spring 2008, Verbund entered into an energy partnership with the Styrian region Almenland. This partnership will also support the sustainable and environmentally friendly development of this Styrian region. GRID VERBUND-Austrian Power Grid AG is responsible for the planning, operation, maintenance and expansion of the 3,400-km-long grid which, being a high and extra-high voltage grid, accommodates three voltage levels namely, 110 kv, 220 kv and 380 kv. All activities in this area focus on enhancing security of supply and the two largest projects the construction of the Salzburg and Styria lines are hugely significant in this respect: In the case of the Salzburg line from Salzach neu (Salzburg) to St. Peter am Hart (Upper Austria), there were further submissions from the opponents of the project in spite of the fact that the environmental compatibility of the project had been confirmed by the independent environmental tribunal in April The Administrative Tribunal dismissed the applications of the project opponents for a suspensive effect due to the compelling public interest of the project. The preliminary work for the implementation of the project has now commenced: The construction work for the 116 million project is due to commence in mid-2009 and commissioning is scheduled for the end of 2010/beginning of 2011.

17 CORPORATE PROFILE VERBUND VERBUND SUSTAINABILITY REPORT The Tauern Salzach neu section has been affected by an amendment to the Salzburg Provincial Electricity Act under which the construction of a high voltage overhead line is in fact no longer possible. Discussions relating to the project are currently being held with various stakeholder groups. It is expected that a feasible solution will be found under the leadership of the EU Coordinator Georg Adamowitsch. In accordance with its responsibilities, Verbund will make every effort to ensure that the gap in the Austrian extra-high voltage ring is closed and that the project is implemented on the basis of tried and tested overhead line technology. The construction of the Styria line, an important section of the future 380 kv high-voltage ring in Austria, is proceeding according to schedule. The commissioning of the 100-kilometer-long line is scheduled for mid GRID DATA VOLTAGE LEVEL OVERHEAD LINES GRID SWITCHING STATIONS LINE LENGTH IN KM SYSTEM LENGTH IN KM 380 kv 1,002 2,027 SUBSTATIONS kv 1,657 3,309 SWITCHING UNITS kv 712 1,238 TOTAL 3,371 6, VERBUND'S POWER PLANT PARK AND EXTRA-HIGH VOLTAGE GRID Winkeln CH RUN-OF-RIVER PLANT > 4 MW STORAGE POWER PLANT JOINT-VENTURE POWER PLANT PARTICIPATING INTEREST OF VERBUND Slavetice CZ Sokolnice HYDROPOWER PLANT UNDER CONSTRUCTION OR IN PLANNING PHASE THERMAL POWER PLANT Jochensteinn THERMAL POWER PLANT OUT OF COMMISSION OR LEASED Passau-Inglin Aschach THERMAL POWER PLANT UNDER CONSTRUCTION Schärding-Neuhaus OR IN PLANNING PHASE Ottensheim-Wilhering Egglfing-Obernberg Greifenstein 380 kv TRANSMISSION LINE Abwinden-Asten Altenwörth Korneuburg Ering-Frauenstein St. Pantaleon PLANNED 380 kv TRANSMISSION LINE *) Pleinting Pirach 220 kv TRANSMISSION LINE Altheim Simbach Wallsee-Mitterk. Melk Freudenau TRANSPORT RIGHTS OF VERBUND Mühlrading Nußdorf Braunau-Simbach ON THIRD-PARTY LINES Staning Dürnrohr PLANNED SUBSTATION Garsten-St. Ulrich Losenstein Ybbs-Persenbeug Großraming SUBSTATION Rosenau Weyer D Ternberg Memmingen Schönau Nußdorf Klaus Leupolz Altenmarkt Obermooweiler Landl Oberaufdorf-Ebbs Werfen/Pfarrwerfen Salza Dionysen Krippau Kreuzbergmaut Sölk Hieflau Funsingau Bischofshofen St. Johann Pernegg Urreiting Leoben Schwarzach Triebenbach Laufnitzdorf Gerlos Zeltweg Rabenstein St. Veit Mandling Fisching Peggau Graz Mayrhofen Limberg II Wallnerau St. Georgen Häusling Friesach Bösdornau Kaprun- Bodendorf-Paal Weinzödl Kaprun- Hauptstufe Neudorf-Werndorf2 Oberstufe Neudorf-Werndorf 1 Mellach Roßhag Reißeck II Reißeck-Kreuzeck Malta-Oberstufe Bodendorf-Mur Mellach St. Martin Mellach II Malta-Hauptstufe Lebring Arnstein Gralla St. Andrä Gabersdorf Pradella DRAU Malta-Unterstufe Obervogau INN km I Soverzene SALZACH INN Paternion DONAU Villach Kellerberg Rosegg-St. Jakob Feistritz-Ludmannsdorf ENNS Ferlach-MariaRain MUR Annabrücke Lavamünd Schwabeck Podlog Edling Spielfeld Maribor SLO DO NAU SK H Györ Györ

18 14 VERBUND SUSTAINABILITY REPORT 2008 CORPORATE PROFILE VERBUND TRADING AND SALES VERBUND-Austrian Power Trading AG is the international electricity trading company of the Verbund Group. Its core competencies lie in the marketing of Verbund's own generation, electricity trading on the European electricity exchanges as well as on the bilateral trading market and direct distribution to resellers and public utilities in Austria and abroad. In addition to the core electricity business, VERBUND-Austrian Power Trading GmbH is involved in fuel trading with coal and gas and is also active in the area of environmental products with CO 2 and green certificates. The company is therefore one of the most important traders on the European electricity market. The group's distribution subsidiary, VERBUND-Austrian Power Sales GmbH, significantly increased electricity supplies to end customers households as well as commercial and agricultural enterprises with an annual electricity consumption of up to 100,000 kwh. In 2008, customer numbers increased from 130,000 to 180,000. Verbund also strengthened its position in the customer segments with higher energy requirements. In 2008, the customer base was increased to more than 200 business and industrial customers with a total volume of approx. 3.8 TWh. Today, Verbund is one of the top 5 energy suppliers in the Austrian market. PARTICIPATING INTERESTS In May 2008, Verbund grouped its international investments under the umbrella of VERBUND- International GmbH to make full use of synergistic potential. The investment portfolio has performed very well: In Italy, Verbund and its partner CIR Compagnie Industriali Riunite S.p.A. set up the fifth-largest energy utility in Italy. Over the coming years, Sorgenia plans to invest 2.6 billion, also in the expansion of renewable energies. In France, Poweo has created competition in the end customer market and is investing in gas and wind power plants. Together with its Turkish partner Sabanci Holding, Verbund purchased a 100 % share in Baskent EDAS, an electricity distributor in the Ankara region with approx. 3 million customers. The joint venture EnerjiSA aims to create new generation capacities totaling 5,000 MW by 2015, whereby hydropower will account for a substantial proportion of that, and achieve a 10 % share in the electricity market. VERBUND-International GmbH is also active in South East Europe. In summer 2008, Verbund won the tender for the construction and operation of a run-of-river plant in Albania. VERBUND MEMBERSHIPS Verbund is a member of the following sustainability-oriented organizations: respact austrian business council for sustainable development IWRA International Water Resources Association WEC World Energy Council (Austrian National Committee of the World Energy Council) International Association on Water Quality International ARGE Danube Research Societas Internationalis Limnologie

19 REGARDING THIS REPORT VERBUND SUSTAINABILITY REPORT REGARDING THIS REPORT The Verbund Sustainability Report provides an overview of the activities that are carried out by the company from the viewpoint of social responsibility. It embraces the activities of all companies of the Verbund Group that are consolidated in the group balance sheet. Important events taking place in companies that are not consolidated will also be described so as to provide a complete picture of the company. The reporting period is always the last completed calendar year. Special events that take place within the group outside of the reporting period which are of particular public interest are also included to guarantee up-to-dateness. The environmental data is collected site-specific and is audited and certified on a number of occasions, e.g. in accordance with ISO and EMAS. The product Electricity from Hydropower is TÜV-certified. GRI STANDARD This report was drafted in accordance with the guidelines of the Global Reporting Initiative (GRI) on the preparation of sustainability reports ( All of the G3 Guidelines were adhered to in the drafting of this report. The GRI Index is available under information. The GRI guidelines are applied from the moment the themes for the sustainability report are selected. The multi-stage process commences with the collection of the themes in the Sustainability Committee. The Sustainability Board evaluates these suggestions with regard to their relevance, topicality and presence in public discussion and suggests themes which are most suitable for presenting the sustainability policies of the group in the reporting period to the Managing Board. FURTHER DOCUMENTS This Sustainability Report builds on the contents of the Sustainability Reports 2002 to To render the report easy to read, the current projects and events are presented in a very compact form and other data sources are referred to for further details and background information: Fundamental issues, which have already been dealt with in earlier sustainability reports but which are still of relevance, are published on our homepage information. Data and activities relating to the economic pillars of sustainability are provided in the Annual Report They are published under reports. Extensive data and reports for the environment and research areas can be found under: & Research. Details relating to individual environment and research projects can be found in the Verbund publications under: & Research>Research>Reports. To render the report easy to read, groups of persons (employees, colleagues) are addressed in a neutral form, always referring to both male and female persons. BASIC INFORMATION ECONOMIC PERFORMANCE ENVIRONMENT AND RESEARCH DATA VERBUND PUBLICATIONS PLEASE NOTE: In the tables, differences can arise in the addition of rounded totals and percentages.

20 16 VERBUND SUSTAINABILITY REPORT 2008 CORPORATE PROFILE VERBUND BOARD MEMBERS 2008 MANAGING BOARD Dr. Michael Pistauer (up to ) General Director and Chairman of the Managing Board Dipl.-Ing. Wolfgang Anzengruber (as of ) General Director and Chairman of the Managing Board Dr. Johann Sereinig Dr. Ulrike Baumgartner-Gabitzer Mag. Christian Kern Deputy General Director Deputy Chairman Member of the Managing Board Member of the Managing Board SUPERVISORY BOARD Dr. Gilbert Frizberg Chairman (on Supervisory Board since , elected up to ordinary general meeting 2010) Managing Partner in Hereschwerke Holding GmbH, Member of the Managing Board of FI Beteiligungsund Finanzierungs AG, Chairman of the Supervisory Board of ISC Internationalisierungscenter Steiermark GmbH Gewerke DDr. Erhard Schaschl (up to ) Chairman of the Managing Board of ETN 1 st Deputy Chairman Vermögensverwaltung AG, Chairman of the (on Supervisory Board since ) Supervisory Board of Treibacher Industrie AG and FRAPAG Industrieholding AG, Member of Supervisory Board of Generali Vienna Holding AG, Austrian Airlines AG and Wienerberger Ziegelindustrie GmbH Dr. Maximilian Eiselsberg Attorney at Law, Chairman of the Supervisory 2 nd Deputy Chairman (up to ) Board of VIVAG Vorsorge Immobilienveranlagungs 1 st Deputy Chairman (as of ) AG, Member of Supervisory Board of Kurier (on Supervisory Board since , Beteiligungs-Aktiengesellschaft elected up to ordinary general meeting 2010) General Director (ret.) Dkfm. Peter Püspök 2 nd Deputy Chairman (as of ) (on Supervisory Board since , elected up to ordinary general meeting 2010)

21 CORPORATE PROFILE VERBUND VERBUND SUSTAINABILITY REPORT o. Univ.-Prof. Dipl.-Ing. Dr. Günther Brauner University professor, Member of the Managing (on Supervisory Board since , Board of the Institute for Power Systems and Energy elected up to ordinary general meeting 2010) Economics at the Technical University of Vienna Spokesperson of the Managing Board of EVN AG, Member of Supervisory Board of BEWAG Burgen- ländische Elektrizitätswirtschafts AG, BEGAS Burgenländische Gaswirtschafts AG, Burgenland Holding AG, RAG-Beteiligungs AG and HYPO Investmentbank AG Dipl.-Betriebswirt Alfred H. Heinzel (on Supervisory Board since , elected up to ordinary general meeting 2010) General Director Dr. Burkhard Hofer (on Supervisory Board since , elected up to ordinary general meeting 2010) Mag. Herbert Kaufmann (as of ) (on Supervisory Board since , elected up to ordinary general meeting 2010) Dr. Michael Losch (on Supervisory Board since , elected up to ordinary general meeting 2010) Managing Partner in Heinzel Holding GmbH, Member of Supervisory Board of MIBA AG, Allianz Elementar Versicherungs AG, Zellstoff Pöls AG, Wilfried Heinzel AG, Biocel Paskov AS, Czech Republic and Estonian Cell AS, Kunda, Estonia, General Council of the Österreichische Nationalbank Spokesperson of the Managing Board of Flughafen Wien AG; Member of Supervisory Board of Rail Cargo Austria AG and Austro Control Österr. Ges. für Zivilluftfahrt mbh Head of Department at the Federal Ministry for Economy and Labor, Center 1 Economic Policy, Innovation and Technology Dipl.-Ing. Hansjörg Tengg Managing Director of smart technologies (on Supervisory Board from to Management Beratungs- und Beteiligungsgesell and since , elected up schaft m.b.h. GmbH, Chairman of the Supervisory to ordinary general meeting 2010) Board of EXAA AG, Saubermacher Dienstleistungs AG and Konsum Österreich reg.gen., Deputy Chairman of the Supervisory Board of APCS AG, AGCS AG and Euro Bio Fuels AG Ing. Siegfried Wolf (on Supervisory Board since , elected up to ordinary general meeting 2010) Anton Aichinger Kurt Christof Harald Novak Dipl.-Ing. Ingeborg Oberreiner Ing. Joachim Salamon Chairman of the Managing Board of MAGNA International Europe AG, Co-CEO Magna International Inc., Member of Supervisory Board of ÖIAG, Siemens AG Austria, Strabag SE and HGI Beteiligungs AG Chairman of the Group Works Council of the Verbund employees Chairman of Central Works Council Chairman of Central Works Council Chairwoman of Works Council Central Works Councilor

22 18 VERBUND SUSTAINABILITY REPORT 2008 CORPORATE PROFILE VERBUND INDEPENDENCE OF THE MEMBERS OF THE SUPERVISORY BOARD Independence criteria. The Supervisory Board defined the following guidelines relating to its independence in accordance with C-Rule 53 of the Austrian Corporate Governance Code: The Member of the Supervisory Board should not have been a Member of the Managing Board or an executive of the company or a subsidiary of the company in the last five years. The Member of the Supervisory Board should not have, nor should he have had in the last year, business relations with the company or a subsidiary of the company that constitute a material conflict of interests for the Member of the Supervisory Board. This also applies for business relations with companies in which the member of the Supervisory Board has a considerable economic interest. The approval of individual transactions by the Supervisory Board in accordance with L-Rule 48 does not automatically lead to the member qualifying as being not independent. The member of the Supervisory Board should not have been the auditor of the company in the last three years, nor should he have held an interest in or been an employee of the company that conducted the audit. The member of the Supervisory Board should not be a member of the Managing Board in another company where a member of the Managing Board of the company is a member of the Supervisory Board. The Member of the Supervisory Board should not be a close relative (direct descendant, spouse, partner, parent, uncle, aunt, brother, sister, niece, nephew) of a Member of the Managing Board or of a person who holds one of the positions described in the points above. All elected members of the Supervisory Board have declared, in written form, their independence in accordance with C-Rule 53. Supervisory Board member Hofer declared that he does not meet the requirements under Point 2 of the independence guidelines (business relationship to company). The following shareholders on the Supervisory Board also meet the independence criteria defined in C-Rule 54: not a shareholder with a stake of more than 10 % : Frizberg, Eiselsberg, Püspök, Schaschl, Brauner, Heinzel, Kaufmann, Tengg and Wolf.

23 CORPORATE PROFILE VERBUND VERBUND SUSTAINABILITY REPORT COMMITTEES OF THE SUPERVISORY BOARD Working Committee, Dr. Gilbert Frizberg, Chairman also Auditing Committee and Dr. Maximilian Eiselsberg Emergency Committee DDr. Erhard Schaschl (up to ) Dkfm. Peter Püspök o.univ.-prof. Dipl.-Ing. Dr. Günther Brauner (as of ) Dr. Michael Losch Ing. Siegfried Wolf Anton Aichinger Harald Novak Dipl.-Ing. Ingeborg Oberreiner Nomination Committee Presidential Committee, also Compensation Committee Dr. Gilbert Frizberg, Chairman Dr. Maximilian Eiselsberg Dkfm. Peter Püspök (as of ) DDr. Erhard Schaschl (up to ) Anton Aichinger Dipl.-Ing. Ingeborg Oberreiner Dr. Gilbert Frizberg, Chairman Dr. Maximilian Eiselsberg Dkfm. Peter Püspök (as of ) DDr.Erhard Schaschl (up to )

24 20 VERBUND SUSTAINABILITY REPORT 2008 OVERVIEW OF 2008 HIGHLIGHTS 2008 JANUARY Sale of Voitsberg. The Verbund coal-fired power plant in Voitsberg, Styria, is to be divested; this decision is taken by its owners, namely the Verbund Group, Energie Steiermark AG and KELAG. A-TEC prevails in the EU-compliant tendering procedure in July FEBRUARY Limberg II construction site. Europe's largest power plant construction site Limberg II is four months ahead of schedule and an important intermediate goal is achieved: The 750-meter-long pressure shaft for the pumped storage power plant in Kaprun is completed. MARCH Cleaning up after Emma. Hurricane Emma damages the Verbund transmission line between Ernsthofen and St. Peter. In spite of this, security of supply is maintained at a supra-regional level, even during the storm. The repair work in Upper Austria is completed after just three days. Fit & Healthy at Verbund. Chairman of the Managing Board Dr. Michael Pistauer gives the green light for the commencement of the largest employee health campaign in the history of Verbund: All employees are invited to take part in an extensive and professional health and fitness check. Change in Supervisory Board. At the Annual General Meeting, Vice-President Erhard Schaschl hands over his supervisory board mandate to Vienna Airport boss Herbert Kaufmann. The former 2 nd Chairman Maximilian Eiselsberg is appointed the new Vice-President. Energy partnership. VERBUND-Austrian Renewable Power GmbH and VERBUND-Austrian Power Sales GmbH enter into a cooperation agreement with the Styrian region Naturpark Almenland. The region aims to be energy independent and, to the greatest extent possible, CO 2 -neutral by Building decision in Turkey. Verbund and its Turkish partner, Sabanci Holding, decide to erect the 920 MW gas power plant Bandirma in North West Turkey. APRIL Verbund s partner Sabanci excels in CSR in Turkey. In a study conducted by the market research institute GfK, Sabanci Holding, Verbund's partner in Turkey, received the best evaluations by far. Through its extensive foundation activities and the Sabanci University, Sabanci has implemented extensive CSR activities over the last decades with a focus on the disabled, training and women.

25 OVERVIEW OF 2008 VERBUND SUSTAINABILITY REPORT Environmental tribunal approves Salzburg line. The independent environmental tribunal at the ministery Lebensministerium confirms the environmental compatibility of the Verbund project 380 kv Salzburg line and therefore approves the execution of the project as an overhead line and recognizes this as being the best solution for the section Salzach neu St. Peter am Hart. APRIL First place in CSR ranking. At the Austrian CSR ranking, which is organized by the Center for Corporate Citizenship (CCCA) and involves the 100 largest companies in the country, Verbund and EVN are ranked No. 1 in the category Raw Materials and Energy. First photovoltaic power plant for Verbund. The Verbund Group purchases in Spain its first photovoltaic power plant. The 2 MW power plant is located in the Andalusian province of Jaén. Energ(y)etic daughters. In 2008, Verbund participates in the Vienna Daughter's Day for the fifth time and 31 girls are highly impressed with the event which focuses on renewable energies. The event aims to give girls between the ages of 11 and 16 an opportunity to learn more about technical vocations and extend their horizons when choosing their future career. MAY Less CO 2 through efficiency enhancement in Dürnrohr. The control technology in Dürnrohr power plant has been replaced. 900 kilometers of copper cable had to make way for the new control technology. The enhanced operational efficiency will result in a 20,000-ton reduction in CO 2 emissions per year. Partnership with mountain rescue service. Verbund supports the voluntary members of the Salzburg Mountain Rescue Service within the framework of a partnership. In addition to the purchase of new equipment, joint activities that focus on accident prevention and an information campaign on safety in the Alpine region will be initiated. JUNE Efficient Verbund power plants reduce CO 2 emissions. The Verbund district heating power plants Mellach and Neudorf-Werndorf 2 are classified as highly efficient power-heat coupling plants in accordance with the Styrian Electricity Industry and Organization Act. New Verbund boss. The Supervisory Board unanimously appoints Dipl.-Ing. Wolfgang Anzengruber as the new Chairman of the Managing Board with effect from 1 January Largest acquisition in company history. The bidder consortium Verbund/Sabanci wins the tender for the purchase of Baskent EDAS, the regional electricity distributor in the Ankara region. In 2007, Baskent EDAS sold approx. 10 billion kilowatt hours of electricity to end consumers. JULY More building decisions in Turkey. Verbund and Sabanci Holding decide to construct two hydropower plants in Turkey: Kandil with a capacity of 214 MW and Sarigüzel with a capacity of 103 MW.

26 22 VERBUND SUSTAINABILITY REPORT 2008 OVERVIEW OF 2008 New power plants on the Mur. Verbund and Energie Steiermark present plans for two new, jointlyowned Mur power plants to the north of Graz. The two plants will be able to supply 30,000 private households with electricity. Central Allocation Office set up. Through its grid subsidiary, Verbund establishes an auction house for cross-border line capacities (Central Allocation Office, CAO) in Central-East Europe. The regional electricity market will be continously developed in cooperation with a further seven transmission grid operators. Even more solar energy. Verbund purchases a further photovoltaic plant with a capacity of 1 MW in the Andalusian province of Jaén. Green light for Mellach. The contract with the plant supplier Siemens AG Austria regulating the construction of the 832 MW gas and steam turbine combination power plant in Mellach at the existing location Werndorf/Mellach is signed. The power plant will be connected to the grid in autumn SEPTEMBER Frontrunner in renewable energies. According to an industrial ranking of the German rating agency oekom research, Verbund is an international trailblazer in the renewable energies area with a hydropower share of more than 80 %. New transformer ensures security of supply. A new large-scale transformer weighing 221 tons is installed at the Verbund substation Hessenberg to enhance performance and increase operational safety. This will also increase security of supply in South East Austria. Qualified staff for the future. 32 new Verbund apprentices, three of which are female, receive their apprenticeship contracts for the course in electrical/mechanical engineering at Pernegg power plant. Construction progress in Werfen-Pfarrwerfen. The rerouting of the Salzach to its original bed represents an important milestone in the construction of the Werfen-Pfarrwerfen power plant. From 2009 onwards, the power plants will meet the annual electricity requirements of 22,000 households. Verbund hydropower plant in Albania. Verbund will construct a run-of-river power plant with an installed capacity of 48 MW to the south of Shkoder, the fourth-largest city in Albania. The Ashta power plant is the last plant in a chain of three existing power plants on the Drin River. With a capacity of 230 GWh, it will supply approx. 25 % of the annual generation volume of the Freudenau power plant. Another building decision in Turkey. Verbund and Sabanci Holding decide to construct the 85 MW hydropower plant Menge in Turkey. OCTOBER Climate Protection Municipality In cooperation with the Lebensministerium, the Association of Municipalities and the Kronen Zeitung (a major Austrian newspaper), Verbund initiates a nationwide search to find Austria's Climate Protection Municipality The winners in 2008 were the municipalities Munderfing, Großschönau and Güssing.

27 OVERVIEW OF 2008 VERBUND SUSTAINABILITY REPORT Yellow Fog. Successful premiere in front of the Verbund headquarters in central Vienna: The installation Yellow Fog by the artist Olafur Eliasson has attracted growing numbers of visitors. The yellow fog can be admired for one hour each day at dusk. Three new power plants in Turkey. Construction of three new large-scale power plants in Turkey commences. The gas power plant Bandirma and the two hydropower plants Kavsakbendi and Hacininoglu are owned by EnerjiSA, a joint venture in which Verbund and the Turkish SabanciHolding hold an equal share. Start of EIA for Reißeck II. Verbund submits the Environmental Impact Declaration for the planned pumped storage power plant Reißeck II to the provincial government of Carinthia. This marks the commencement of the environmental impact analysis for the project. Start for Mellach. The first sod on the construction of the new natural gas combined cycle power plant is turned. From 2011 onwards, this power plant will supply more than 5 TWh of electricity and approx. 800 MWh of district heating each year. Verbund Sustainability Report honored once again. At the Austrian Sustainability Reporting Awards (ASRA), the Verbund Sustainability Report 2007 takes second prize in the category Large Companies. This is the fourth ASRA award in succession. NOVEMBER Three wind farms for Verbund. VERBUND-Austrian Renewable Power GmbH signs the purchase agreement for three wind farms in the Bruck an der Leitha district in Lower Austria. The wind farms, which have a total capacity of 49 MW, will supply 29,000 households. Decision to construct the sixth hydropower plant in Turkey. With the decision to construct the 145 MW hydropower plant Köprü, Verbund and Sabanci Holding are now realizing a total of 869 MW of hydropower on the Ceyhan and Seyhan rivers. DECEMBER Wind development project in Romania. VERBUND-Austrian Renewable Power GmbH enters the Romanian wind market and, in cooperation with a Romanian partner, develops a wind farm project with a capacity of up to 150 MW. Tunnel breakthrough at Hieflau. The tunnel at Hieflau power plant, which is currently being extended, is completed. In just eight months, the miners excavated a 5.6-kilometer headrace tunnel which will increase annual generation by 100 million kwh. Retirement of Dr. Pistauer. The Chairman of the Managing Board of Verbund, Michael Pistauer, who served the company as Chief Financial Officer since 1994 and managed the company since mid-may 2007, leaves Verbund.

28 24 VERBUND SUSTAINABILITY REPORT 2008 BUSINESS FRAMEWORK BUSINESS FRAMEWORK ECONOMIC FRAMEWORK ECONOMIC DOWNTURN Economy weakened significantly in In the wake of the economic boom from 2004 to 2007, the crisis on the financial markets in 2008 and the acceleration in raw material prices up to summer 2008 curbed growth in the global economy: In 2008, the GDP is not likely to have grown by more than 3.4 % after an increase of 5.2 % in The simultaneous economic downturn in the three largest economic regions, the USA, Europe and Japan, also had a negative impact on economic development in the previously very expansive emerging markets in Asia and Latin America. Economic growth in the EU is likely to drop to 1 % (2007 : 2.9 %). The effects of the international slowdown are also noticeable in Austria: Exports in particular suffered as a result of the decline in foreign demand. The economic downturn had a negative impact on the investment climate, but with a plus of 1.8 % according to WIFO, economic growth in Austria is likely to have exceeded the EU average. The cooling of the speculative boom in the property and financial sectors in many countries, not least in the USA, is expected to have an adverse effect on the development of the global economy over a longer period. ECONOMIC ENVIRONMENT IN THE ENERGY SECTOR RISE IN ENERGY CONSUMPTION Low temperatures boost demand for heating energy. Over the past years, the total energy consumption in the EU, and also in Austria, displayed continuous growth which was only temporarily interrupted as a result of external developments, e.g. the oil prices, the economic situation or different weather conditions. Hence, energy consumption in the EU-15 has increased by 8 %, and in Austria by as much as 17 %, over the last ten years. Energy consumption in Austria also displayed a further increase in 2008: This was primarily due to the cooler weather conditions which lead to an increase in the demand for heating energy in private households. In 2008, the heating degree day totals the standard measure used by the energy industry for temperature-related energy requirements were approx. 4 % higher than the annual average in 2007 (higher heating degree day totals reflect higher heating energy requirements). The future development of the energy requirements in the EU as well as in Austria will greatly depend on the speed at which a trend turnaround can be achieved through the implementation of measures in areas that offer the greatest savings potential. Even though the required efficiency enhancements will be achieved through contributions from all areas, transport and space heating will be a central focus of attention.

29 BUSINESS FRAMEWORK VERBUND SUSTAINABILITY REPORT Electricity consumption also displays further increase. Electricity consumption in the EU also continued to grow in Countries such as Luxembourg, France and Portugal recorded growth rates of approx. 4 % each in the first ten months of 2008 alone. In the Czech Republic, Ireland and Slovakia, electricity consumption was up by 2 to 2.5 % respectively. Consumption in countries such as Germany, Greece, Belgium, Italy, Hungary and the UK was up by approx. 1 %. No change was recorded in Poland's electricity consumption, and in Denmark, the Netherlands, Spain, Sweden and Finland, a drop in electricity consumption of 0.2 % to 2.4 %. was observed (more recent data was not available from IEA at the time of going to print). There was a significant increase in electricity production in Austria in Over the last ten years, electricity consumption in Austria increased by 25 %, and therefore more dynamically than the total energy consumption. A further increase of 1.5 % was recorded in This is attributable to the cooler weather conditions in the first half of the year and the rise in the production of physical goods, which led to an increase in the electricity requirements of companies. RISE IN ELECTRICITY CONSUMPTION RISE IN ELECTRICITY GENERATION The total volume of electricity generated increased significantly by +4.8 % in 2008 according to the preliminary figures of E-Control while imports fell by 10.6 % and exports by 3.7 %. Generation from hydropower rose by a significant 5.3 % and thermal generation increased by 2.1 %. The increase in other generation (+10.6 %) includes the rise in electricity production from renewable energy sources (excluding biomass, which falls under thermal generation) and generation at plants that cannot yet be allocated in the statistics. MORE RENEWABLE ENERGIES As a result of this development, the deficit in foreign trade with electrical energy was reduced for the second time in succession. In 2008, it lay at approx. 7 % of consumption. In 2003, this value lay at approx. 9 % of consumption but was reduced to approx. 4 % in the years 2004 and In 2006, the foreign trade deficit with electrical energy rose similar to 2003 to more that 10 % as a result of the hot summer. This value was lowered to just under 10 % in In the past, electricity consumption always correlated closely with economic growth and E-Control believes that this positive correlation will continue to exist in the future, particularly as the consumption of electricity is, in part, further increased through the implementation of energy efficiency measures, e.g. through the utilization of heating pumps or electric cars. The demographic development with higher life expectancy and the growth in the number of single households as well as the increased utilization of electrical devices also lead to higher electricity consumption. As a result, E-Control anticipates medium-term growth in Austria of +1.8 % per year. In the short-term, however, the economic slowdown in 2009 will have a damping effect on electricity consumption. ELECTRICITY FOR ENERGY EFFICIENCY Raw material prices at all-time high. The price increases, which could already be observed on the international crude oil markets in2007, continued in the first half of 2008 and reached an all-time high at the beginning of July Since the beginning of the year, the price of a barrel of North Sea Brent (Front Month) increased by approx. USD 50 to more than USD 146/bbl at the beginning of July. This price increase is attributable to geopolitical tensions, the terrorist attacks on the oil infrastructure in the important oil-producing country Nigeria and strong economic growth in Asian countries with a large demand for oil. Added to this, investment in exploration and production was at a low level and speculation also pushed up the prices.

30 26 VERBUND SUSTAINABILITY REPORT 2008 BUSINESS FRAMEWORK RAW MATERIAL PRICES UNSTABLE The oil prices came under pressure from July 2008, above all, due to the financial market crisis and the resulting economic downturn. The price of crude oil fell steadily throughout the year and even dropped to below the USD 40/bbl mark towards the end of the year. Based on the average price for 2008, Brent crude oil cost USD 98/bbl compared to USD 73/bbl in 2007 (+36 %). Gas prices also displayed a noticeable upward trend in the first half of 2008, and reached their highest level in summer. After this, the prices declined. Based on the average price for 2008, gas on the EEX futures market (EGT front year) was 41 % more expensive than in the previous year. The high oil and gas prices in the first half of 2008 also pushed up the coal prices. Based on the average for 2008, the price for coal on the EEX futures market (ARA front year) lay just under 57 % above the average value in CO 2 prices sank in the second half of the year. The European Emission Trading System (EU-ETS) was introduced in January 2005, shortly prior to the enactment of the Kyoto Protocol. The EU-ETS is the central element of the European climate policy which focuses on reducing emissions by 8 % compared to 1990 in the period 2008 to 2012 in accordance with the requirements of the Kyoto Protocol. The reduction target of the EU is divided among the member states by way of the EU Burden Sharing Agreement, under which Austria is obliged to reduce emissions by 13 %. In the first emission trading period 2005 to 2007, the number of emission rights allocated EU-wide exceeded the number required. As a result, the CO 2 price (EU Allowance EUA) dropped steadily in 2007 until it reached a level of 0.01/t CO 2 in December The price did, however, increase significantly within the course of the restrictive allocation of the certificates for the 2 nd trading period 2008 to DROP IN CO 2 PRICES The price for the EUA benchmark contract for December 2008 delivery rose continuously in the first half of 2008 to approx. 29/t CO 2. The falling oil prices and the financial market crisis also lead to a drop in prices in the CO 2 market. The latest price for EUAs for December 2008 delivery came to approx. 15/t. At the end of 2008, the EUA contracts for December 2009 to December 2014 ranged from 16 to 21/t CO 2.

31 BUSINESS FRAMEWORK VERBUND SUSTAINABILITY REPORT REGULATORY FRAMEWORK Intense debate on the core of the internal market package. The deregulation process has resulted in a complete restructuring of the European energy markets: According to the EU Commission however, the internal electricity market has not yet been implemented to a satisfactory extent. On the basis of sector inquiries, the EU Commission presented the third legislative package on the internal energy market on 19 September The core element of the package is the introduction of a stricter unbundling regime for vertically integrated energy groups, namely the ownership unbundling of the transmission activities from the generation and supply activities of a vertically integrated electricity company. In autumn 2008, a political agreement was reached at EU level by the Council of Energy Ministers after intensive negotiations. In addition to the Ownership Unbundling and Independent System Operator (ISO) models, the 3 rd model proposed by the countries in the like minded group (which include Austria, Germany and France), i.e. Effective and Efficient Unbundling EEU model, was fully accepted as a third alternative. To facilitate cross-border energy trade, the Commission proposes to establish an Agency for the Cooperation of European Regulators (ACER). This agency will have binding decision-making powers to ensure the proper handling of cross-border grid problems. EFFECTIVE AND EFFICIENT UNBUNDLING INTERNATIONAL GRID COORDINATION The Commission also proposes a new European Network for Transmission System Operators ( European Network for TSOs, ENTSO) with a view to promoting bi- and multilateral cooperation and investment. Within this network, EU grid operators are to cooperate and develop common commercial and technical codes and security standards, as well as plan and coordinate the investments needed at EU level. The Commission plans to extend the existing transparency requirements so as to guarantee better market access for new and small suppliers and make pricing more transparent. These include supply and demand forecasts as well as new data publication obligations for energy producers and transmission grid operators. Ambitious targets to achieve climate goals: On 17 December 2008, the EU Parliament adopted the climate and energy package that had been agreed on after intense negotiations between the heads of state and government leaders of the 27 EU countries. AMBITIOUS CLIMATE GOALS With the goals, the European Union commits itself to an integrated energy and climate policy: 20 % reduction of greenhouse gas emissions by 2020 compared to 1990, whereby the target can be raised to 30 % if other industrial nations, including the USA, agree to comply with binding reduction goals, 20 % share of renewable energy sources in total energy consumption 20 % by 2020 and a 20 % increase in energy efficiency should be achieved by 2020.

32 28 VERBUND SUSTAINABILITY REPORT 2008 BUSINESS FRAMEWORK NEW GOALS FOR CO 2 TRADE, RENEWABLES AND EFFICIENCY The rules for CO 2 trading will change from 2013: Electricity producers will be required to purchase 100 % of their emission rights by auction. Excluded from this are power plants in countries where the gross domestic product per head is less than the half of the EU average. These will be required to purchase at least 30 % of the certificates by auction in 2013, whereby this share will increase to the full value by 2020 at the latest. The EU goal of achieving a 20 % share of renewable energy sources in total energy consumption will be divided among the member states, whereby the target quotas range from 10 % for Malta to 49 % for Sweden. Austria is obliged to increase its share of renewable energy sources from the current value of 23 % to 34 % by The member states have until 30 June 2010 to submit their national action plans to the European Commission, outlining the goals for the individual sectors and the measures that will be implemented to achieve these goals. The areas affected are electricity production, heat and cold generation and transport. Furthermore, the European Commission believes that energy efficiency within the EU will have to be improved by 20 % by 2020 to meet the climate goals. Most of the EU member states have now submitted action plans that include strategies for enhancing energy efficiency. CONSOLIDATION IN THE EUROPEAN ENVIRONMENT BIG FIVE Further growth through acquisitions and mergers. The consolidation wave that has been observed since the deregulation of the electricity market continued in 2008, albeit with less intensity. Given that the national competition authorities in most European countries no longer approve mergers and takeovers, the global players are now expanding primarily outside of their respective domestic markets. Today, the European market is dominated by a handful of energy groups. The five largest utilities in the EU-27 now account for approx. two-thirds of electricity sales. The merger between Gaz de France (GdF) and Suez in July 2008 is a clear reflection of the diversity super utilities will be aiming to achieve in the future. Electricité de France (EdF) further consolidated its dominant position in the European electricity market. In September 2008, the French group and the largest British nuclear power plant operator, British Energy, which accounts for approx. one-sixth of the country's electricity production, agreed on a multi-billion takeover. The major energy groups have not yet found their final position in the market; growth through acquisitions and mergers is still a focal point. National champions will use the basis they have established to protect themselves from takeovers or to pursue smaller cross border mergers. The further development in this area will, however, be influenced by the efforts of the EU to intensify competition: With the definition of new unbundling rules, Europe-wide regulation and the stricter application of the competition and antitrust legislation, the EU is keen to prevent the further concentration of market power.

33 BUSINESS FRAMEWORK VERBUND SUSTAINABILITY REPORT PROSPECTS FOR THE AUSTRIAN ENERGY MARKET Energy turning point with renewable energy sources and energy efficiency. Against a background of intense discussions in Europe on issues such as security of supply, climate protection and sustainability, the EU Commission presented the revised version of the EU Energy Strategy on 13 November The mainstays of the strategy are measures in the energy grid area, the EU action plan to enhance security of supply and promote solidarity as well as proposals for energy saving activities. The revised strategy represents a further contribution to achieving the climate protection goals. In spring 2008, the Association of Austrian Electricity Companies in cooperation with VERBUND- Austrian Hydro Power AG initiated a master Hydropower Master Plan which was adopted in the program of the Austrian Federal Government. The primary aims is to use the hydropower potential that exists in Austria to guarantee that there will also be an adequate supply of electricity in the future. EU ENERGY STRATEGY HYDROPOWER MASTER PLAN FOR AUSTRIA If the measures are implemented swiftly, hydropower could, in a first step, be expanded by up to 7 TWh by This would have the following positive effects: Increase in the share of renewable energies in total energy consumption in Austria to 25 % Increase in the share of hydropower in electricity generation to 69 % Prevention of 3.1 million tons of CO 2 per year Investment in the amount of 8.4 billion 300 million Austrian value added per year 6,000 jobs guaranteed over a period of 10 years If the total technically and economically feasible remaining potential of 13 TWh whereby protected areas such as national parks and world cultural heritage regions are excluded were to be expanded the share of renewable energies in total energy consumption in Austria would increase to 26.5 %, the share of hydropower in generation would increase to 79 % and 5.8 million tons of CO 2 would be prevented each year. RISKS 2009 The business development of Verbund in 2009 will once again be significantly influenced by the uncertainty relating to the development of the wholesale prices, lower reserve capacities in European electricity generation, Europe's growing dependence on natural gas from Russia and the regulatory framework. Moreover, the primary energy prices (crude oil, natural gas and coal) which have a direct impact on the fuel costs incurred through own energy generation and hence, an indirect effect on the wholesale prices for electricity and the development of the prices for CO 2 emission rights will continue to be important determinants for the group result in the future. Finally, effects resulting from the financial market crisis can also be expected, particularly with regard to the financing of new projects.

34 30 VERBUND SUSTAINABILITY REPORT 2008 BUSINESS FRAMEWORK The separation of ownership of electricity transmission and generation Activities required by the European Commission, i.e. ownership unbundling, is an issue that will require the special attention of Verbund in the future. The benefits outlined by the European Commission relating to the enhancement of competition and more lively investment within the energy sector are very controversial. Particularly so, given that Verbund had already implemented legal unbundling as early as 1999 by clearly separating the regulated transmission grid from the generation, trading and sales activities. THE STRATEGY PROCESS WITHIN VERBUND In 2008, the group-wide strategy process was further developed to supplement the budgeting and planning activities. This forms the basis for the continuous discussion on the long-term orientation of the group. The process is divided into two areas: the first area focuses on fundamental essential issues for the group such as values, goals, market environment, market strategy, risk strategy, capital market expectations etc. while the second area concentrates on the development and consolidation of the sub-strategies of the group companies. In the course of drawing up the group strategy, strengths and weaknesses were analyzed along with opportunities and risks, options were developed and evaluated and strategic goals and activities were derived. In the next step, the sub-strategies were consolidated and integrated into the group strategy. This guarantees that the group strategy is interlocked with the changes in the energy and capital market environment. This process paved the way for the definition of key strategic and operating data and assumptions as well as possible investment projects for the 2009 budget and the medium-term planning. THE VERBUND STRATEGY HYDROPOWER RENEWABLE ENERGIES Sustainability, a sense of responsibility, high-yielding growth and an international orientation are still the most important values and targets of the Verbund Group. In Austria, domestic hydropower the most important resource can be seen as the basis of the group's sustainability approach. This is also reflected in the international activities, where Verbund pursues a challenging European growth portfolio that is focused on the generation of electricity primarily from renewable energies supplemented by gas. In 2008, Verbund has continued its very successful and profitable course as an energy utility in the heart of Europe. Against the backdrop of the current debates on sustainability and environmental protection, the focus on a clean and also practically CO 2 -free method of generating electricity has proven to be a decisive competitive advantage. This strategic orientation is supplemented by measures that are designed to ensure long-term security of supply in Austria as well as by the further development of defined target markets abroad through generation projects, shareholdings and partnerships. PARTICIPATING INTERESTS In 2008, the existing foreign investments in Italy, France and Turkey were grouped under VERBUND- International GmbH, which is responsible for the acquisition and development of all future expansion projects within the expanded EU.

35 BUSINESS FRAMEWORK VERBUND SUSTAINABILITY REPORT In the coming years, Verbund will focus on the further development of the participating interests referred to above. In Italy, we will top-up our interest in the Sorgenia Group and in Turkey, we intend to implement an ambitious business plan with our joint venture Enerjisa, where more than 1 billion will be invested up to The orientation towards sustainable and environmentally friendly energy production was also strengthened through the founding of VERBUND-Austrian Renewable Power GmbH in This subsidiary bundles all of Verbund's national and international activities in the new renewable energies area. The first projects two photovoltaic power plants in Spain and three wind farms in Austria were already successfully implemented in In future, the expansion activities in the renewables area will focus on wind power, followed by photovoltaic and small hydropower plant activities. Verbund's investment program up to 2015 will focus on international growth projects in the expanded EU as well as on the expansion of generation capacities and the transmission grids in Austria. Here, one focal point will be the increased utilization of hydropower and other renewable energy sources in line with Verbund's sustainability policy. In this way, Verbund is making an important contribution to the achievement of the European and Austrian climate protection goals. EXPANSION WITH CLEAN ENERGY Verbund's successful electricity trade and distribution activities in Europe will allow the company to strengthen its international presence as well as its market share in the Austrian end customer market. High-yielding growth through a value-generating investment portfolio in Austria and abroad combined with above-average profitability and the solid position on the capital market form the core of the sustainability-oriented and therefore very successful Verbund strategy. Taking account of the unfavourable business conditions and on the basis of an average water supply, Verbund aims to repeat the results achieved in fiscal Verbund also intends to adhere to its current dividend policy.

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37 ECONOMIC INDICATORS VERBUND SUSTAINABILITY REPORT ECONOMIC INDICATORS Two major issues dominated economic activity in 2008: In the first half of the year, it was the oil prices which rose to unpredictable heights, not least due to the large demand in China and India. The prices began to fall in summer and the crisis on the financial market dominated the headlines from autumn onwards. This also resulted in a noticeable economic slowdown in the last few months. Due to its strong orientation towards generating energy from sustainable hydropower, Verbund once again achieved a very positive result in the year under review: In spite of the unfavourable conditions, Verbund increased sales by 23.2 % to 3,744.7 million, improved the operating result by 24.3 % to 1,138.6 million and raised the group result by 18.6 % to million. INFLUENCING FACTORS Significantly higher spot market prices/stable forward prices. The significant recovery of the spot market pricehad a very positive effect on the earnings position. The developments on the forward market did not have any notable effects on the result as Verbund in line with its marketing strategy sells most of its production in advance and the prices for front year essentially displayed a lateral movement in the trading years 2006 and SPOT MARKET PRICES The average prices for forward contracts year base 2008 traded in 2007 came to 55.8/MWh and were just +1.5 % higher than the level recorded in the previous year (55.0 /MWh). The average price for front year peak 2008 came to 79.3/MWh in the trading year 2007 and was therefore 2.1 % lower than in the previous year ( 81.0/MWh). By contrast, the increase on the spot market was quite significant in 2008: This is attributable, above all, to the fact that the CO 2 price for the second trading period of the European Emissions Trading System was higher than the price for the first trading period which was relevant for The massive increase in the oil, gas and coal prices in the first half of 2008 also exerted additional upward pressure on the spot market prices. Based on the European Energy Exchange (EEX) rates, the average prices for both base and peak in 2008 were massively above the levels recorded the previous year: The price for baseload energy lay at 65.8/MWh and was therefore 73 % higher than the average value for The price for peak-load energy came to 88.1/MWh. This corresponds to an increase of 57 % compared to the average value the previous year. Water supply slightly above the long-term average. The average water supply from the rivers, which is measured with a hydro coefficient and plays a decisive role in the area of hydropower generation, is another important factor that can influence the result. In 2008, generation at run-of-river and run-of river pondage power plants was more or less in line with the long-term average: The hydro coefficient lay at 1.01 and was therefore four percentage points higher than the value recorded in 2007 and five percentage points higher than the corresponding value in WATER SUPPLY

38 34 VERBUND SUSTAINABILITY REPORT 2008 ECONOMIC INDICATORS ECONOMIC INDICATORS UNIT COMMENT SALES Million 2, , ,744.7 SALES GROWTH IN 2008 IS ESSENTIALLY ATTRIBUTABLE TO THE REALIZATION OF INCREASED MARKET PRICES. OPERATING RESULT Million ,138.6 THE POSITIVE BUSINESS DEVELOPMENT IS BASED ON THE (EBIT) SUCCESSFUL POSITION THAT HAS BEEN ESTABLISHED WITH REGARD TO WHOLESALE ACTIVITIES AND CONSEQUENT COST MANAGEMENT. PROFIT FOR THE PERIOD Million THE GROWTH IN THE OPERATING RESULT IS OFFSET BY AN 80 (EXCLUDING MINORITY MILLION DROP IN THE FINANCIAL RESULT AS WELL AS A 17 INTERESTS) MILLION INCREASE IN TAX EXPENSES. THE RISE IN PROFITS ALSO LED TO AN INCREASE IN THE SHARE OF MINORITY INTERESTS IN PROFIT. NET GEARING % INTEREST-BEARING NET DEBT INCREASED COMPARED TO THE PREVIOUS YEAR. THIS RESULTS IN HIGHER NET GEARING DESPITE THE INCREASE IN SHAREHODERS' EQUITY. ECONOMIC VALUE Million THE EVA REMAINED STABLE IN SPITE OF THE INCREASE IN ADDED (EVA) CAPITAL COSTS. THE POSITIVE BUSINESS RESULT IS OFFSET BY THE INCREASE IN INVESTING ACTIVITIES COMPARED TO THE PREVIOUS YEAR AND A WACC THAT HAS BEEN ADJUSTED IN LINE WITH THE MARKET ENVIRONMENT. EARNINGS PER SHARE COMPARED TO 2007, THE EPS INCREASED BY 19 %. CARRYING AMOUNT/SHARE THE SHAREHOLDERS' EQUITY ROSE BY APPROX. 17 %. CASH FLOW/SHARE THE CLEAR INCREASE IN THE CASH FLOW REFLECTS THE FINANCIAL POWER OF VERBUND. (PROPOSED) THE DIVIDEND DISTRIBUTION WAS INCREASED AS IN THE DIVIDEND /SHARE PREVIOUS YEARS AND DISPLAYS A RISE OF 17 % FOR FISCAL PAY-OUT RATIO % THE PLANNED PAY-OUT RATIO FOR 2008 DISPLAYED A SLIGHT DECREASE. DIVIDEND YIELD % THE DIVIDEND YIELD ROSE ON ACCOUNT OF THE HIGHER DIVIDEND AND THE LOWER SHARE PRICE. CLOSING PRICE OF THE CLOSING PRICE OF THE VERBUND SHARE IS LOWER THAN VERBUND SHARE THE VALUE RECORDED IN THE PREVIOUS YEAR. THIS IS ESSENTIALLY DUE TO THE TURBULENCE IN THE FINANCIAL MARKET. ELECTRICITY SALES GWh 102, ,191 92,525 BEFORE NETTING FOR EXTERNAL-ELECTRICITY TRADE GWh 55,472 57,038 56,057 AFTER NETTING FOR EXTERNAL-ELECTRICITY TRADE ONE-OFF EFFECTS One-off accounting measures have burdening effect. In 2008, the earnings development of the Verbund Group was marked by one-off accounting measures which had a negative impact overall on the operating result in the amount of approx million and on the financial result in the amount of approx million. The one-off effects in the operating result referred, predominantly, to unscheduled maintenance. The financial result was adversely affected, above all, by the impairment loss revealed for Energie Klagenfurt GmbH within the framework of the impairment test and a valuation-related devaluation of the investment portfolio as a result of the financial market crisis.

39 ECONOMIC INDICATORS VERBUND SUSTAINABILITY REPORT NOTES TO THE DEVELOPMENT OF INDIVIDUAL INDICATORS Sales revenue increased from 3,038.3 million in 2007 to 3,744.7 million in This corresponds to a growth of 23.2 %. The clear improvement in the earnings ratios is particularly positive. The operating result increased by 24.3 % from million to 1,138.6 million. The group result comes to million after million in the corresponding period the previous year resulting in a growth rate of 18.6 %. GROWTH RATE % The expenses for active and former employees in the amount of million included in the operating result (previous year: million) rose due to the hiring of new employees, but also due to the adjustments of the calculation parameters in provisions for employee benefits as well as the negative performance of the pension fund. The current outflows for active and pensioned employees only display a slight year-on-year increase of 10.2 million from million to million. Approx. 20 % of these outflows were paid for employees in semi-retirement, pensioned employees or their surviving dependents. In fiscal 2008, the Economic Value Added (EVA), the management ratio for value creation within the Verbund Group, remained stable at million in spite of the increase in capital costs. The capital structure based on net gearing only deteriorated slightly t 80.2 % (previous year: 70.0 %). Net debt rose by million to 2,508.0 million, due primarily to the increase in long and short-term financial obligations and the decrease in financial assets. The shareholders' equity rose to 3,128.1 million (previous year: 2,674.6 million) on account of the positive business development, thus leading to a slight decline in net gearing. The operating cash flow was also improved. It rose from million to million. Verbund feels an obligation towards its employees even after they retired and makes pension payments. These are, for a smaller number of employees, based on plant agreements and individual contracts in a defined-benefit pension system. A defined-contribution pension system, to which the employees can also make contributions, has been set up for the majority of the remaining employees. These defined-benefit pension obligations of Verbund are partially covered by the pension-fund assets which are earmarked for this purpose. The majority of the obligations not covered by fund assets are covered by securities that are held by Verbund over and above the legal requirements. To the extent that these defined-benefit obligations must be met by the pension fund, the employer is obliged to make contributions in case there are insufficient pension fund assets.

40 36 VERBUND SUSTAINABILITY REPORT 2008 ECONOMIC INDICATORS COVERAGE OF PENSION OBLIGATIONS Million PENSION OBLIGATIONS PRESENT VALUE OF OBLIGATIONS COVERED BY FUND ASSETS FAIR VALUE OF PLAN ASSETS NET VALUE OF OBLIGATIONS COVERED BY FUND ASSETS PRESENT VALUE OF OBLIGATIONS NOT COVERED BY FUND ASSETS OTHER POST EMPLOYMENT OBLIGATIONS PRESENT VALUE OF OBLIGATIONS NOT COVERED BY FUND ASSETS OBLIGATIONS NOT COVERED BY FUND ASSETS The employees also benefit from supplementary health insurance where premiums are paid by the employer and the employee. In Verbund, the subsidies to be paid by the employer on the premiums after the date of retirement are recognized as other post employment obligations. SALES ACCORDING TO CUSTOMER GROUPS GWh CHANGE END CUSTOMERS 4,392 8, % RESELLERS 24,799 24, % TRADERS 25,959 20, % OWN CONSUMPTION 1,888 1, % GROUP SALES 57,038 56, % FORWARD CONTRACTS 45,153 36, % SALES ACCORDING TO COUNTRIES GWh DEVIATION AUSTRIA 23,523 25, % GERMANY 23,689 22, % FRANCE 8,342 7, % SLOVENIA % BULGARIA % ITALY % OTHER % GROUP SALES 57,038 56, %

41 ECONOMIC INDICATORS VERBUND SUSTAINABILITY REPORT SOURCE OF FUNDS 2008 % Million ELECTRICITY REVENUE GRID REVENUE OTHER REVENUE 3,400, ALLOCATION OF RESOURCES 2008 ACCORDING TO COST ITEMS Million % EXPENSES FOR ELECTRICITY, GRID AND EMISSION RIGHT PURCHASES 1, USE OF FUELS AND EXPENSES FOR OTHER PURCHASED SERVICES OTHER OPERATING EXPENSES PAYROLL EXPENSES INTEREST AND SIMILAR EXPENSES DIVIDENDS, PAY-OUTS AND WITHDRAWALS CHANGES IN SHAREHOLDER'S EQUITY TAXES ON INCOME ACCORDING TO STAKEHOLDER GROUPS SUPPLIERS TAXES ON INCOME INVESTORS 2, EMPLOYEES

42 38 VERBUND SUSTAINABILITY REPORT 2008 ECONOMIC INDICATORS THE VERBUND SHARE The stock market year 2008 was marked by the crisis on the financial markets. In the first half of 2008, the international stock markets were as in 2007 influenced by the high value adjustment requirements of the financial institutions as a result of the US mortgage market crisis. Massive price losses were recorded on the stock markets from September and the crisis took on dramatic proportions. Towards the end of the year, it became very clear that the financial market crisis was also having massive effects on the real economy. Despite all the efforts made by governments and central banks to find an answer to the financial market crisis, the international stock markets were unable to recover from their lows by year s end and closed with massive price losses with regard to the full year. The negative stock market environment also had an adverse effect on the Verbund share. At the end of the year, the Verbund share closed at 32.6 with a negative performance of 32.0 % in fiscal The share did, however, perform much better than the ATX (-61.2 %) and also outperformed the DJ STOXX Utilities index (-38.5 %) in Stock exchange turnover in Verbund shares reached 6,221.1 million. On average, 546,238 shares were traded every day. The total value of the company derived from its market capitalization amounted to 10,035.0 million on 31 December 2008; its weighting on the ATX was 10.1 %. Based on its market capitalization, the Verbund Group had the highest valuation on the Vienna Stock Exchange over the full year RELATIVE SHARE DEVELOPMENT (1 YEAR, = 100%) Jan 08 Apr 08 Jul 08 Oct 08 Jan 09 DJ STOXX Utilities Verbund ATX ANTI CORRUPTION Group project Fair Business Practice Against Corruption and Bribery. We do not tolerate any type of dishonest business practices and, above all, we condemn corruption and bribery. This is also anchored in our mission statement. In 2007, this aspect of our corporate culture which we have lived for decades was documented in written form and, in 2008, a corresponding guideline was drafted in cooperation with the most affected areas. The next step will involve the implementation of information and training measures for all employees and the establishment of an internal compliance system. CONTACT Mag. Andreas Wollein, Tel. +43 (0) , [email protected]

43 39 VERBUND SUSTAINABILITY REPORT 2008 KENNZAHLEN

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45 ENVIRONMENTAL AND RESEARCH INDICATORS VERBUND SUSTAINABILITY REPORT ENVIRONMENTAL AND RESEARCH INDICATORS ENVIRONMENT Environmental protection and research are firmly anchored in Verbund's mission statement. An effective Environmental Management System ensures that high environmental standards can be maintained within the group. All environmentally-relevant measures and indicators are defined, audited and if technically possible continuously improved on an annual basis. Our research is highly practice-oriented. We concentrate on issues that arise in power plant and grid operations. We also take part in European projects which allow us to extend our expertise in the area of new renewable energies and their integration into grid operations. In addition, our participation in such projects helps us to enhance efficiency, further optimize the accompanying ecological measures and also forms a solid basis for our strategic corporate decisions. AUDITING AND CERTIFICATION Further monitoring and expansion audits were carried out at the hydropower plants of VERBUND- Austrian Hydro Power AG. As a result, the power plant groups Lower Danube, Drau, Kaprun-Salzach, Malta/Reißeck and Styria are now completely certified. In addition, the first two power plants of the Upper Danube power plant group, namely Wallsee-Mitterkirchen and Abwinden-Asten, are now also audited/certified in accordance with EMAS and ISO In 2008, the Ennskraft power plants were also certified in accordance with ISO In 2008, a total of 43 of the 108 hydropower plants of Verbund are already audited in accordance with EMAS (40 % of the hydropower plants which corresponds to 55 % of the standard capacity) and 86 are certified in accordance with ISO (80 % of the hydropower plants which corresponds to 69 % of the standard capacity). Moreover, the three thermal power plants currently being operated by VERBUND-Austrian Thermal Power GmbH & Co KG are certified in accordance with EMAS and ISO This is equivalent to 100 % of the available thermal power plants. In the area of VERBUND-Austrian Power Grid AG, the auditing of the existing environmental, safety and health management system in the regions West, North and South was extended to all APG locations. The quality management system already implemented at the main control center and the information safety management system, which was introduced in 2007, were also successfully audited throughout the company. Since May 2008, all locations and transmission lines as well as the main control center of APG are therefore certified in accordance with ISO 9001, ISO 14001, ISO 27001, OHSAS and EMAS.

46 42 VERBUND SUSTAINABILITY REPORT 2008 ENVIRONMENTAL AND RESEARCH INDICATORS ENVIRONMENTAL INDICATORS UNIT COMMENT GENERATION OF ELECTRICITY GWh 28,086 28,307 28,660 THEREOF HYDROPOWER GWh 23,853 24,321 25,308 THEREOF THERMAL POWER GWh 4,233 3,986 3,352 GENERATION OF DISTRICT HEATING GWh TRANSPORTED ELECTRICITY VOLUME IN GRID GWh 36,566 36,977 35,707 GRID LOSSES GWh SHARE OF GRID LOSSES IN TOTAL % TRANSPORTED VOLUME FUEL CONSUMPTION AT t 1,046,222 1,190,889 1,022,090 HARD COAL 1 THERMAL POWER PLANTS t 656, LIGNITE t 98,029 83,973 70,029 HEAVY OIL 1,000 m 3 21,436 25,156 13,532 GAS t 21,309 19,186 21,184 BIOMASS 1 (SEWAGE SLUDGE) EMISSIONS AVOIDED THROUGH t 11,301 11,501 11,630 SO 2 UTILIZATION OF HYDROPOWER 2 t 12,109 12,323 12,461 NO X t DUST kt 21,795 22,180 22,430 CO 2 EMISSIONS OF AIR POLLUTANTS AT t 1, SO 2 THERMAL POWER PLANTS t 2,110 1,811 1,716 NO X t DUST kt 3,701 3,407 2,885 CO2 FOSSIL (PRELIMINARY VALUE BEFORE ECA AUDIT) SPECIFIC CO 2 EMISSIONS g/kwh BASED ON TOTAL GENERATION HAZARDOUS WASTE t 839 1, THEREOF FROM ONGOING OPERATIONS t THEREOF FROM LARGE-SCALE MEASURES t 1, WASTE FROM THE TRANSFORMER EX- CHANGE PROGRAM, ACCUMULATOR EXCHANGE IN KAPRUN POWER PLANT NON-HAZARDOUS WASTE t 37,155 10,239 16,005 THEREOF FROM ONGOING OPERATIONS t 8,441 3,621 4,542 THEREOF FROM LARGE-SCALE MEASURES t 28,713 6,618 11,463 4 RESIDUES FROM THERMAL POWER PLANTS t 307, , ,606 BOTTOM AND FLY ASH, DESULPHURIZATION PRODUCTS WATER, INPUT AND OUTPUT AT 1,000 m DRINKING WATER HYDROPOWER PLANTS AND HEAD OFFICES 1,000 m 3 14,603 14,506 14,653 WATER FOR INDUSTRIAL USE 1,000 m WASTE WATER WATER, INPUT AND OUTPUT 1,000 m DRINKING WATER AT THERMAL PLANTS 1,000 m 3 509, , ,442 RIVER WATER (COOLING WATER) 1,000 m WELL WATER WATER, INPUT AND OUTPUT AT GRID FACILITIES 1,000 m DRINKING WATER 1,000 m WATER FOR INDUSTRIAL USE 1,000 m WASTE WATER LOCATIONS IN/BESIDE NATURE RESERVES ha 3 3,390 3,365 ENVIRONMENTAL FEES T TOTAL ENVIRONMENTAL COSTS Million THEREOF ENVIRONMENTAL Million COSTS/HYDROPOWER THEREOF ENVIRONMENTAL Million COSTS/THERMAL POWER THEREOF ENVIRONMENTAL COSTS/GRID Million RESEARCH COSTS Million INVESTMENTS INCLUDED IN RESEARCH COSTS Million THE VOLUMES STATED REFER TO THE AS-DELIVERED CONDITION, I.E. DAMP BIOMASS 2 CALCULATION ON BASIS OF A MODERN HARD-COAL FIRED POWER PLANT (DÜRNROHR POWER PLANT) 3 LOCATIONS IN/BESIDE NATURE RESERVES RECORDED SINCE TRANSFORMER EXCHANGE PROGRAM, SOIL EXCAVATION DUE TO CONSTRUCTION OF MAIN CONTROL CENTER NEU, CLEARANCE OF WAR ARTIFACTS IN AN AREA NEAR SUBSTATION VIENNA-SOUTHEAST, VARIOUS RENOVATION AND REPLACEMENT MEASURES IN THE HYDROPOWER PLANT AREA, DISPOSAL OF SLUDGE FROM EXHAUST GAS CLEANING AT THE THERMAL POWER PLANTS MELLACH AND WERNDORF

47 ENVIRONMENTAL AND RESEARCH INDICATORS VERBUND SUSTAINABILITY REPORT LOCATION- AND PRODUCT-SPECIFIC CERTIFICATIONS IN VERBUND SHARE OF POWER PLANT LOCATIONS WITH EMAS CERTIFICATION 28.7 % 31.5 % 41.4 % EXCLUDING THERMAL POWER PLANTS IN RESERVE SHARE OF POWER PLANT LOCATIONS WITH ISO CERTIFICATION 57.4 % 59.5 % 80.2 % EXCLUDING THERMAL POWER PLANTS IN RESERVE SHARE OF GRID FACILITIES WITH EMAS AND ISO CERTIFICATION 75 % 100 % SHARE OF GRID FACILITIES WITH ISO 9001 CERTIFICATION % IN 2007, ONLY MAIN CONTROL CENTER (1 LOCATION) SHARE OF GRID FACILITIES WITH OHSAS CERTIFICATION 75 % 100 % SHARE OF GRID FACILITIES WITH ISO CERTIFICATION 75 % 100 % (INFORMATION SAFETY MANAGEMENT SYSTEM) LOCATION- AND PRODUCT-SPECIFIC CERTIFICATIONS IN VERBUND CERTIFICATION PLANT TYPE NO. OF CERTIFIED CERTIFIED GENERATION AVAILABLE FOR PLANTS BNC IN MW SC IN GWh/a MARKETING IN 2008 IN GWh EMAS POWER PLANTS 46 4,641 15,205 GRID SWITCHING UNITS 55 LINE LENGTH IN KM 3,373 HEAD OFFICE VIENNA 1 ISO POWER PLANTS 89 5,527 19,082 GRID SWITCHING UNITS 55 LINE LENGTH IN KM 3,373 HEAD OFFICE VIENNA 1 ISO 9001 GRID SWITCHING UNITS 55 LINE LENGTH IN KM 3,373 HEAD OFFICE VIENNA 1 ISO GRID SWITCHING UNITS 55 LINE LENGTH IN KM 3,373 HEAD OFFICE VIENNA 1 OHSAS GRID SWITCHING UNITS 55 LINE LENGTH IN KM 3,373 HEAD OFFICE VIENNA 1 TÜV 100 % HYDROPOWER POWER PLANTS 74 18,218 TÜV 100 % THERMAL POWER RENEWABLE ENERGY POWER PLANTS 8 2,563.1 CERTIFICATES SYSTEM (RECS) ÖVE POWER PLANTS ,156 LEVY EXEMPTION CERTIFICATE SYSTEM (LECS) NOTES TO THE DEVELOPMENT OF INDIVIDUAL INDICATORS IN THE ENVIRONMENT AREA Decline in thermal generation. The hard coal-fired power plant Dürnrohr was the subject of a lengthy audit process due to the conversion of the control center. The lower number of operating hours led to a reduction in the utilization of hard coal and a drop in associated emissions of SO 2, NO X, dust and CO 2, residue and cooling water volumes. GENERATION

48 44 VERBUND SUSTAINABILITY REPORT 2008 ENVIRONMENTAL AND RESEARCH INDICATORS The oil-gas power plant Werndorf II also had a lower utilization period in 2008, resulting in a drop in oil and gas consumption. CO 2 EMISSIONS The CO 2 emissions stated only refer to the direct emissions from the operation of the thermal power plants. Indirect emissions e.g. emissions from Verbund's vehicle fleet and business trips are insignificant compared to the direct emissions and are therefore not stated at this time. In the course of the annual audit in accordance with the Emission Certificate Act (Emissionszertifikategesetz EZG), the values are verified by an external auditor. This may result in minor adjustments. Specific CO 2 emissions. The specific CO 2 emissions are calculated on the basis of total generation. The decline in 2008 is attributable to the decommissioning of the lignite-fired power plant Voitsberg in 2006 and the drop in the number of operating hours of the hard coal-fired power plant Dürnrohr (for further information see Verbund's contribution to climate protection ). WATER CONSUMPTION NATURAL RESERVES ENVIRONMENTAL COSTS Demand for drinking water at hydropower plants. The value lies within the fluctuation range of the previous years and shows no significant change over the long-term. Locations in or beside natural reserves. In 2008, areas extending over a total of 25.0 ha were sold. The areas comprised 16.5 ha of forested lands and 8.5 ha of meadow lands in the Upper Drau and Graz-Werndorf areas. Some of this land was no longer needed for operational purposes and some of it was needed by the Republic of Austria for road and flood protection projects. Hydropower: The environmental costs in the hydropower area have risen significantly. More than half of the increases are attributable to the payments into the fund for the promotion of the hydropower region Upper Carinthia and the costs associated with the various environmental impact analyses. Current positions include, above all, the furnishing of hydrological evidence and management, sediment supply on the Danube, suction dredging of sediment on the Drau, the renaturalization of the power descent Kaprun and fish bypasses. Grid: 66 % of the increase in environmental costs compared to the previous year is attributable to the expansion of the computation basis to include all environmentally relevant own contributions and all the costs in the safety area. The remaining third results from renovation work carried out on buildings in NEW INDICATORS The indicators EU 27 and EU 28 from the GRI Electric Utility Sector Supplement relating to the number and duration of power failures were included in the Verbund indicators: In 2006, the total duration of the power failures was 19 minutes; in 2007 there were 2 power failures with a total duration of less than30 minutes and in 2008 there were 2 power failures with a total duration of 44 minutes. With regard to the number and duration of the power failures, it should be considered that these power cuts only occurred in individual regions and not throughout the entire supply area. The effect of a power failure in the Verbund grid can therefore only be assessed on the basis of the non-delivered megawatt hours. Example: In 2008, Verbund transported an energy volume of approx. 35,700,000 MWh. A total of 141 MWh could not be delivered. This corresponds to approx % of the total transported volume.

49 ENVIRONMENTAL AND RESEARCH INDICATORS VERBUND SUSTAINABILITY REPORT SELECTED ENVIRONMENTAL PROJECTS Verbund's contribution to climate protection. In 2008, important preliminary decisions were made with a view to curbing climate change: In accordance with the climate and energy package of the European Union, which was adopted in December 2008, greenhouse gas emissions should be reduced by 20 % by 2020 compared to Industry and the energy sector have to act faster than the other sectors and achieve a 21 % reduction by 2020 compared to the 2005 levels. In addition a further 1.7 % reduction in emissions should be achieved in each of the following years. The new regulations in the European Emissions Trading System stipulate that all allocations throughout Europe from 2013 onwards must be carried out in a uniform manner. Moreover, the electricity industry apart from the temporary regulations for existing power plants in the EU member states will no longer receive free certificates. A fundamental reorganization of energy generation and utilization to facilitate the integration of climate friendly technologies is absolutely essential. Verbund has established a solid foundation for climate-sensitive production: In 2008, Verbund generated approx. 88 % of its electricity in hydropower plants and therefore takes up a poll position among the European companies with the highest share of electricity from renewable energies. In the thermal production area, Verbund successively decommissioned coal-fired power plants with relatively high specific emission values over the last number of years and shifted production to clean power plants. This resulted in a reduction in specific emissions from 149 t/gwh in 2004 to 101 t/gwh in In Europe, similar values are only achieved by companies with a very high share of nuclear energy. The commissioning of the gas and steam turbine combination power plants Mellach (under construction) and Klagenfurt (planning phase) will lead to a further reduction in specific emissions from thermal generation. The continued expansion of generation capacities using water, wind and solar energy is also part of Verbund's strategy, which is in line with the Austrian and EU climate policies and therefore also supports the achievement of the defined goals. Construction progress at the storage power plant Limberg II. The power plant group Kaprun/Salzach will be extended through the construction of the 480 MW pumped-storage power plant Limberg II which will use the difference in altitude between the two existing annual storage reservoirs Mooserboden and Wasserfallboden. Limberg II is being implemented as a cavern power plant and extensive ecological accompanying measures are being carried out to ensure that the landscape and the sensitive alpine flora are influenced to the least possible extent during the construction phase. The two alpine storage lakes, both of which are popular destinations for excursions, can be easily accessed in the summer months, even while the construction work is still ongoing. From today s perspective it appears that given the rapid rate of construction progress, it will be possible to commission the Limberg II power plant as early as The cavern power plant will increase the capacity of the Kaprun power plant group in the peak electricity sector to 833 MW. Construction progress at run-of-river power plant Werfen-Pfarrwerfen. The construction work for the new run-of-river power plant Werfen/Pfarrwerfen commenced in 2006 in cooperation with Salzburg AG. All construction measures were discussed in detail with environmental experts prior to the implementation phase. The Salzburg Institute for Ecology and the water authorities of the provincial government in Salzburg are also involved in the ecological planning. A bicycle path will be created on the right bank of the Salzach, while fish bypasses on the left bank will ensure that the fish can migrate. From March 2009 onwards, the 16 MW power plant will generate 76.5 GWh of electrical energy per year CO 2 -free. This corresponds to the consumption requirements of 22,000 households. Construction progress on the expansion of Hieflau storage power plant. Hieflau power plant, which was commissioned in 1956, was not able to make full use of the water supply. The construction of a second pressure shaft, which will run parallel to the first, commenced in 2007 along with the installation of a 88 % FROM HYDROPOWER LOWER CO 2 EMISSIONS EXPANSION OF RENEWABLE ENERGIES LIMBERG II WERFEN/PFARRWERFEN HIEFLAU

50 46 VERBUND SUSTAINABILITY REPORT 2008 ENVIRONMENTAL AND RESEARCH INDICATORS residual water turbine. The power plant is located directly beside Gesäuse National Park and, for this reason, the construction work is being implemented in a particularly environmentally friendly manner. A bypass stream, which will allow fish and other aquatic life to conquer the 10-meter height difference, will be created at Gstatterboden weir. The Wag storage lake, a popular recreation spot for the locals of Hieflau, will be significantly improved through construction measures including the integration of a path network and the planting of the surrounding area. On completion of the project, the power plant will generate an additional 108 GWh of electrical energy per year. PERNEGG MELLACH Preservation requirements at Pernegg power plant. The decision to revitalize the Pernegg run-of-river plant was taken in autumn Measures to be completed by 2013 include the replacement of all machine units and the renovation of the upstream channel of the diversion power plant, a protected historical building. Here, special attention will be dedicated to the preservation requirements and a complete machine unit with an open-air design will be made fully accessible to the public. Commencement of construction at the gas-steam power plant Mellach. On 10 September 2008, the EIA process for the gas and steam turbine combination power plant at Mellach-Werndorf, which was planned by VERBUND-Austrian Thermal Power GmbH & Co KG, was successfully completed. Thanks to the utilization of the latest technology, the power plant meets the strictest requirements of the EU directives and therefore guarantees a high level of environmental compatibility. Construction started on 30 October 2008 and detailed planning was completed at the end of The construction measures commenced in January After a construction period of approx. 35 months, the power plant should be commissioned towards the end of On completion, it will supply the growing Styrian economy with 832 MW of electricity and 250 MW of district heating in an extremely environmentally friendly manner using state-of-the art-technology. The gas and steam turbine combination power plant Mellach will supply more than 5 billion kwh of electricity and approx. 800 million kwh of district heating each year. The power plant, which will be completed in accordance with the latest environmental and efficiency standards, will close the capacity gap in the south of Austria and is an important addition to the weather-dependent renewable energy sources. The values for the specific emissions of carbon dioxide, nitrous oxides, sulfur dioxide and dust and the specific investment costs are significantly below the corresponding values for a modern hard coal-fired power plant. Constructing of the unit on the site of the existing power plant realizes synergies, e.g. relating to the workshop, the control center and qualified personnel. The transport logistics of the fuel, natural gas, are uncomplicated and long-term supply agreements have been concluded. Thanks to a district heating connection, heat can be supplied to the city of Graz over a distance of 18 km with minimal losses. The cooling of the power plant with water from the Mur is carried out in accordance with the strict regulations governing the amount of water that can be taken and the temperature of the cooling water that is fed back into the river. One of the two power plant blocks will be equipped with a cooling tower system which uses significantly lower volumes of fresh water. This ensures the flexible utilization of the power plant in line with the changing water supply of the Mur. The investment will lead to a high level of indirect profitability in the region during the construction and periodical maintenance phases. The value creation within Austria derived directly from this project is expected to be in the region of 130 million. At peak times, between 500 and 600 workers will be employed on the construction site at Mellach and approx. 25 permanent jobs will be created in the new power plant. ALMENLAND Verbund supports climate protection in Almenland. In spring 2008, Verbund entered into an energy partnership with the Styrian region Almenland. The primary goal of this cooperation, which is under

51 ENVIRONMENTAL AND RESEARCH INDICATORS VERBUND SUSTAINABILITY REPORT the patronage of the Minister of the Environment, is to create an exemplary model region which will make an important contribution to climate protection long term thus promoting the sustainable and environmentally friendly development of the region. The cooperation is based on two pillars: Firstly, the region purchases favourably priced Verbund hydroelectricity from VERBUND-Austrian Power Sales GmbH and secondly, local small-scale hydropower plants will be constructed, modernized and revitalized. To facilitate the implementation of the second pillar, VERBUND-Austrian Renewable Power GmbH and the Almenland region founded a joint company in September 2008: Almenland Energie GmbH. Current status of the gas and steam turbine combination power plant Klagenfurt. In March 2006, the planned gas and steam turbine combination power plant Klagenfurt was submitted by Kraftwerkserrichtungs- und -betriebs GmbH (KEG) to the provincial government of Carinthia for approval in accordance with the Environmental Impact Analysis Act. KEG is a wholly-owned subsidiary of Energie Klagenfurt GmbH, which, in turn, is owned by the public utility Stadtwerke Klagenfurt AG (51 %) and Verbund (49 %). The power plant, which is located to the east of the city of Klagenfurt, will provide electricity with an average net capacity of 427 MW and up to 200 MW of district heating. The power plant will be fueled with natural gas. Following the positive zoning decision from the city of Klagenfurt on the basis of the strategic environmental analysis, one of the essential prerequisites for the project has now been met. Formal confirmation from the provincial government of Carinthia is expected in the near future. The environmental impact statement, which will serve as a basis for the verbal negotiations and the subsequent issuing of a decision, is currently being prepared by the authorities. The verbal negotiations are expected to take place in mid-2009 and the EIA decision could be issued in autumn Recycling at Dürnrohr power plant. At the hard coal-fired power plant Dürnrohr, which is owned by VERBUND-Austrian Thermal Power GmbH & Co KG, a mixture of gypsum and fly ash, known as Realit is produced during the flue gas treatment process. Since the integration of the flue gas desulphurization system, this FGD by-product has been disposed of at a plant-owned landfill. In accordance with the new Landfill Ordinance which came into effect on 30 January 2008, this landfill in Dürnrohr can now only be operated up to 30 June 2009 on account of the greatly increased requirements. For this reason, a new landfill on the power plant site was planned. The plans were submitted and subsequently approved by the authorities. Alternatively, the Realit could be transported approx. 50 kilometers to a decommissioned gypsum mine owned by Gipsbergbau-Preinsfeld Ges.m.b.H. and used as a component of a self-cementing building material which was developed by the former mine operator to stabilize the mine by filling the caverns, with the long-term aim of reducing the size of the restricted zone. The integration of this material, which is available in sufficient quantities, is viewed as being a particularly environmentally friendly solution, not least due to the short transport route and the possibility of retaining a green space at the Dürnrohr location. Protection of endangered falcons species along the Dürnrohr Slavetice line. Within the framework of the project Sustainable Route Management of VERBUND-Austrian Power Grid AG, a project that is dedicated to the protection of endangered falcon species was initiated in 2008 in cooperation with the Institute for Wildlife Ecology at the University for Veterinary Medicine in Vienna. During the implementation of the second system on the 380 kv transmission line Dürnrohr Slavetice, nesting boxes were attached to 18 pylons near the upper cross-arm. KLAGENFURT DÜRNROHR DÜRNROHR SLAVETICE LINE This project aims to increase the population of hobby and saker falcons. The saker falcon, which is on the red list of endangered animal species and is threatened with extinction in Austria, is in particular need of protection. In addition, the restoration of the original biological balance between the falcon and starling population is a further positive effect.

52 48 VERBUND SUSTAINABILITY REPORT 2008 ENVIRONMENTAL AND RESEARCH INDICATORS 380 kv SALZBURG LINE Salzburg line: Line section St. Peter Salzach. On 4 April 2008, the independent environmental tribunal of second and last instance confirmed the positive decision of the authorities of first instance, namely the provincial governments of Salzburg and Upper Austria, regarding the environmental impact analysis (EIA) for the planned transmission line from St. Peter to Salzach. Some of the parties to the procedure filed appeals against this decision to the Constitutional Court and the Administrative Tribunal. Both courts came to the decision that the correct and reliable supply of electrical energy to the population is a compelling public interest and, for this reason, a suspensive effect cannot be granted. The construction work for the 116 million project is due to commence in mid-2009 and commissioning is scheduled for the end of 2010/beginning of Thus, with the completion of the 380 kv Austria ring, Verbund will have taken yet another giant step towards meeting its goal of achieving long-term security of supply in Austria and increasing power plant capacities through the reduction of grid losses. Salzburg line: Line section Tauern Salzach neu. The line section Tauern Salzach neu has been affected by an amendment to the Salzburg Provincial Electricity Act of 12 December 2008 which regulates the minimum distances to residential areas distances which, in view of the settlement structure in Salzburg, now practically rule out the possibility of an overhead line. Several expert appraisals and decisions confirm that underground cabling in sections of the 380 kv ring would be a very risky experiment. Underground cable would require an unobstructable route the width of a six-lane highway and would also result in exorbitant investment costs. These additional costs would have to be passed on to the end consumers via their electricity bills. In accordance with its responsibilities, Verbund will make every effort to ensure that the gap in the Austrian extra-high voltage ring is closed and that the project is implemented on the basis of tried and tested overhead line technology. In the absence of investment in the grid infrastructure, it will not be possible to implement important hydropower projects either, projects which contribute significantly to the expansion of generation from renewable energy sources as well as to the enhanced utilization of wind energy. It is expected that implementable solutions can be worked out under the leadership of the EU Coordinator, State Secretary ret. Dipl.-Ing. Mag. G. W. Adamowitsch. The first results should be available in summer kv STYRIA LINE Construction of 380 kv Styria line in full swing. The construction work for the 380 kv Styria line, which extends over a total length of kilometers, commenced in October At the end of 2008, the foundation work for the 340 pylons had more or less been completed and 100 pylons had been fully erected. Cable hoisting commenced at the beginning of The construction of the East Styria substation and the plant expansion activities at the substations, Vienna Southeast, Kainachtal and Southern Burgenland are more or less completed. The electromechanical equipment was installed at the beginning of The project is subject to the close supervision of ecological and forestry experts and the water authorities before, during and after the construction phase. This supervision will ensure that all of the conditions stipulated in the EIA decision will be fully adhered to. Extensive ecological accompanying measures, including ecological balance zones with replacement biotopes, controlled felling, detailed reforestation plans, construction ban during the birds' breeding season, measures to protect plant, animal and habitat as well as the monitoring of drinking water quality ensure that the project will be implemented in an environmentally friendly manner.

53 ENVIRONMENTAL AND RESEARCH INDICATORS VERBUND SUSTAINABILITY REPORT At the end of May 2008, the project was closely examined within the framework of an EMAS audit and received a very positive evaluation. The total investment volume for the Styria line comprising the transmission line, substations and preliminary project comes to 181 million. The line is scheduled to be commissioned in mid Integrated management system in all grid areas. Through its active implementation of the integrated management system, Verbund covers all three pillars of sustainability the economic, the environmental and the social in a comprehensive manner. INTEGRATED MANAGEMENT SYSTEM An environmental management system was already introduced in some areas 10 years ago. In 2008, the quality, information safety, health and environmental management system was extended to the entire transmission grid and all plants including the headquarters of VERBUND-Austrian Power Grid AG. Hence, the grid company is the first electricity utility in Austria to have all locations and transmission lines certified in accordance with ISO 9001, ISO 14001, ISO 27001, OHSAS and EMAS. The company-wide certification has led to the establishment of an organizational framework that not only allows us to adhere to the standards, particularly in the areas of quality, environmental protection, work safety and health, but also paves the way for ongoing improvement. Promoting the development of the regional electricity market in Central-Eastern Europe. With a view to promoting the development of the regional electricity market, VERBUND-Austrian Power Grid AG and seven other transmission grid operators founded the Central Allocation Office (CAO), an auction house for cross border line capacities in Central-Eastern Europe in July Other countries involved, apart from Austria, are the Czech Republic, Germany, Hungary, Poland, Slovakia and Slovenia. ELECTRICITY MARKET CENTRAL-EASTERN EUROPE The core task of this auction house, which is located in Freising near Munich, is the coordinated allocation of line capacities to all cross-border electricity lines in Central Europe. This replaces several, partly coordinated processes previously carried out by the national transmission grid operators and numerous multi- and bilateral activities. After a Europe-wide tender, Riecado GmbH, a subsidiary of VERBUND-Austrian Power Grid AG, was awarded the contract to develop corresponding software tools and is now implementing these in collaboration with the eight transmission grid operators. The efficient allocation of scarce capacities on the borders will not only promote the further integration of a functional European electricity market but will also contribute to enhancing security of supply in all countries and grids in the region. CONTACT Mag. Jan Cupal, Tel. +43 (0) , [email protected]

54 50 VERBUND SUSTAINABILITY REPORT 2008 ENVIRONMENTAL AND RESEARCH INDICATORS RESEARCH 4.6 MILLION FOR VERBUND RESEARCH RESEARCH INDICATORS In 2008, we processed 60 application-oriented research projects, mostly in cooperation with partners. Of these, 23 were newly initiated projects and 19 were completed. The research projects have an overall investment volume of 31.3 million including the research share of the project partners over their entire duration. Verbund's share comes to 16.1 million. Of this amount, research at Verbund in 2008 accounted for 4.6 million. The project volume was further increased parallel to a drop in the Verbund share and a lowering of Verbund's annual expenses. This is attributable to the fact that a number of research projects that required a high level of investment fish bypasses, renaturalization of a power plant descent were already completed in RESEARCH INDICATORS NUMBER OF COMPLETED PROJECTS NUMBER OF ONGOING PROJECTS TOTAL PROJECT VOLUME IN Million THEREOF EU PROJECTS IN Million TOTAL VERBUND SHARE IN Million ANNUAL EXPENSES OF VERBUND IN Million OVER THE ENTIRE DURATION OF THE PROJECTS Activities within Verbund focus primarily on environmentally friendly generation, customer-oriented trade and distribution and the reliable supply of electricity using the latest technology. APPLICATION-ORIENTED RESEARCH FORUMS Our research supports the implementation of innovative yet practical ideas that are technically, ecologically and economically feasible. The projects, which focus on activities that relate to the generation of electricity from hydropower and thermal power as well as on energy transmission, are either implemented within Verbund or commissioned out to universities, research institutes and other companies. The results of our research work are published in the annual publication Environment and Research Data and in our publication series Research at Verbund as well as on the Internet. In 2008, the results were also published within the framework of two research forums entitled Efficiency enhancement measures for CO 2 reduction and approval procedures for thermal power plants and The forces of nature the growing challenge for infrastructure due to climate change. SELECTED RESEARCH PROJECTS RESEARCH PROJECTS IN THE GENERATION AREA MORE ELECTRICITY FROM THE DANUBE Hydropower. The operation of the Danube power plants is being further automated through the installation of a central control station. Following the optimization of the control systems, all of the power plants on the Danube can now be coordinated in a more optimal manner. As a result of this measure and the improved control of the guide and rotor blades, more electricity can now be generated. In addition, the more balanced water discharge also improves the navigation conditions in times of low water levels.

55 ENVIRONMENTAL AND RESEARCH INDICATORS VERBUND SUSTAINABILITY REPORT The turbines and generators at Aschach power plant are currently being replaced. In the course of the renovation work, the rotor blades were optimized, whereby a computation on the basis of an evolution strategy algorithm was first carried out. The blade profiles were subsequently further improved within the framework of model tests. Further research projects involve special material tests as knowledge relating to the condition of the facilities is essential in guaranteeing the reliable operation of the power plants. These include material stress tests on hydraulic steel structures as well as tests to analyze the fracture behavior and durability of mass concrete. At the pumped storage power plants, the surge tanks are being optimized so as to speed up the control processes. We are constructing fish bypasses at many of our power plants on the Danube, Drau and Mur. In tandem with this, the efficiency of the power plants is being examined within the framework of a detailed scientific analysis. OPTIMIZATION AT ASCHACH RELIABILITY OF MATERIALS FISH BYPASSES Thermal power. The research activities at our thermal power plants are focused on the examination of the currently defined tasks and the optimization of operation as well as on future requirements. The high temperatures and differences in pressure exert a great deal of stress on the steam pipes and therefore affect their service life. These effects are currently being examined within the framework of a research project so that precise maintenance and replacement forecasts can be made. MATERIAL STRESS The vibration behavior of components and installations is being examined in a research project on induced draft fans with a view to reducing the associated noise pollution and material stress. With a view to the future requirements, the expected CO 2 emissions and their effect on the utilization of the power plants are being examined as are the possibilities of storing district heating. CO 2 EMISSIONS RESEARCH PROJECTS IN THE TRANSMISSION AREA The continuous balancing of generation and demand through the efficient transmission of electricity from the generation units to the customer is a prerequisite for a reliable electricity supply. An adequately dimensioned high-voltage grid, which transports the electrical energy at a high voltage level and low current intensities, reduces transmission losses and therefore also helps to conserve resources. Due to the continuous increase in the demand for electricity, the high-voltage lines, which were constructed approx. 50 years ago, have now reached the limits of their capacity. Added to this are the rising generation capacities, whereby highly volatile wind power brings about rapid changes in the load flows. The research projects, in which VERBUND-Austrian Power Grid AG participates, focus on these new conditions. Projects such as these, e.g. the development of a new allocation procedure for grid capacities or the further development of methods to record the current condition of the grid in a faster and more optimal manner, are normally carried out in cooperation with European partners. One research project examines the possibilities and the anticipated benefits of smart grids, which aim to increase the participation of end customers in the electricity market through the utilization of information technology. SMART GRIDS

56 52 VERBUND SUSTAINABILITY REPORT 2008 ENVIRONMENTAL AND RESEARCH INDICATORS REGULATORY ECONOMICS COORDINATED PLANNING ROUTE MANAGEMENT The economic, legal and ecological conditions that influence grid operations have changed over the last few years. The influence of the various regulatory systems is being examined within the framework of the project Regulatory Economics, which is being carried out in cooperation with the University of Economics and Business Administration, Vienna. Planning tools, which support the coordinated planning of the European transmission grid, are currently being developed in a research project that is subsidized by the European Commission. Given that the Verbund grid is a central part of the European transmission grid, this theme is of great significance for the company. We participate in an EU-sponsored LIFE Nature project which is dedicated to providing cross-border protection for the great bustard. Other ecologically-oriented research projects focus on the theme of sustainable route management. THE VERBUND RESEARCH FORUMS In 2008, we held two research forums. The forum entitled Efficiency enhancement measures for CO 2 reduction and approval procedures for thermal power plants, which was organized by VERBUND- Austrian Thermal Power GmbH & Co KG, was held in the Vienna Museum District on 5 March In the course of the talks, the high costs for the execution of the environmental impact analysis and the approval procedure were shown using the Mellach and Klagenfurt projects as an example. Other topics included the high efficiency levels already achieved by modern gas and steam turbine combination power plants and ways in which efficiency could be further enhanced. A second research forum, which was organized by VERBUND-Austrian Power Grid AG and took place on 24 September 2008 focused on The forces of nature the growing challenge for infrastructure due to climate change. With the help of the European Severe Storm Laboratory (ESSL), the European network established to investigate extreme weather phenomena, all tornados and downbursts that occur in Europe have been recorded and documented in a coordinated manner since In the course of the forum, light was also thrown on the phenomenon that extreme weather events are noticed more today. This is partly attributable to the fact that the extent of the damage rises proportionate to the value of the damaged infrastructure. CONTACT Dipl.-Ing. Mag. Wolfgang Pell, Tel. +43 (0) , [email protected] Dipl.-Ing. Dr. Gerd Schauer, Tel. +43 (0) , [email protected]

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59 SOCIAL INDICATORS VERBUND SUSTAINABILITY REPORT SOCIAL INDICATORS Our employees are one of the most important factors for our company s success.for this reason, careful selection, fair remuneration and the individual promotion of employees are particularly important for ensuring sustainable corporate success. All employees are, of course, treated equally in accordance with the Equal Treatment Act and remunerated market-driven, or at least, in line with the collective agreement. Each employee has the option of joining a union. Numerous voluntary social benefits, a pension fund and supplementary health insurance are available for all our employees. Subsidized lunch is offered at many locations. In 2008, 197 employees were integrated into the work process in accordance with 5 of the Disabled Persons Employment Act. This exceeds the legal requirement by 86 employees. In 2008 in line with our growth strategy well-directed measures were implemented in the human resources sector. Here, the central focus lies on the facilitation and expectation of performance. To achieve this goal, it is vital that we recruit skilled employees and ensure that these skills are maintained and further developed. Qualified employees assess potential employers more and more critical. In the last years, Verbund has positioned itself as an attractive employer by implementing among other things a trainee programme, which allows new employees to familiarize themselves with several areas of the company and by offering a wide range of social benefits. To strengthen this position and improve the work-life balance even further, Verbund initiated a Career and Family Audit in It is very important for us to have healthy and satisfied employees and therefore we constantly strive to maintain a positive working atmosphere. Following the implementation of pilot projects in selected areas, an extensive group-wide employee survey, which also included a health survey, was carried out in The main focus of the derived measures to enhance the performance s are training and further education as well as executive development programmes. Since the Verbund Group is growing throughout Europe, we are continually looking for new colleagues who want to join us in creating the future of Verbund. Simultaneously, the war for talents is becoming fiercer. In line with our long-term personnel marketing strategy and to address our target groups directly, we maintain partnerships with Austrian universities of technology and economics. We sponsor the high potential programme TUtheTOP at the Technical University of Vienna. Over a period of two semesters we invite students to find out more about our company as a potential employer. The programme includes company presentations as well as a two-day excursion to our storage power plant in Kaprun. This allows the top-students to experience our corporate culture from inside. TRAINING AND PROMOTION CAREER AND FAMILY AUDIT EMPLOYEE SURVEY PERSONNEL MARKETING UNIVERSITY PARTNERSHIPS

60 56 VERBUND SUSTAINABILITY REPORT 2008 SOCIAL INDICATORS SOCIAL INDICATORS INDICATOR UNIT COMMENT NO. OF EMPLOYEES PERSONS 2,466 2,537 2,638 GROWTH POLICY ABROAD, REJENUVATION AND TIMELY ACQUISITION OF EXPERTISE IN CRITICAL POSITIONS AS WELL AS THE INVOLVEMENT IN THE AREA OF RENEW- ABLE ENERGIES ARE ALSO REFLECTED IN THE GROWING NUMBER OF EMPLOYEES (NO. OF EMPLOYEES ACCOR- DING TO LABOR LAWS AS OF EXCLUDING MANAGING BOARDS AND EMPLOYEES IN EARLY RETIREMENT) THEREOF APPRENTICES PERSONS TRAINING BEYOND OWN REQUIREMENT LEVEL NEW HIRES PERSONS INCREASE IN NEW HIRES TO SUPPORT GROWTH POLICY IN FOREIGN BUSINESS AND IN THE RENEWABLE ENERGIES AREA AS WELL AS REJENUVATION AND TIMELY ACQUISITION OF EXPERTISE IN CRITICAL POSITIONS THEREOF NEW PERSONS GOOD UTILIZATION OF OUR EDUCATION CAPACITIES APPRENTICES SHARE OF WOMEN % WOMEN BENEFIT FROM TENDENCY TO RECRUIT HIGHLY IN NEW HIRINGS QUALIFIED STAFF SHARE OF WOMEN % ACTIVITIES TO PROMOTE WOMEN ARE SUCCESSFUL SHARE OF ACADEMICS % GROWTH POLICY CALLS FOR VERY HIGHLY QUALIFIED PERSONNEL TRAINING PER EMPLOYEE HOURS STABILIZED AT HIGH LEVEL TRAINING PER EXECUTIVE HOURS DUE TO THE STREAMLINING OF THE TARGET GROUP PROGRAMME AND THE INCREASED COMMITMENT TO INFORMAL LEARNING METHODS AS WELL AS THE INTENSIFICATION OF THE TRANSFER OF EXPERTISE, THERE WAS A DROP IN THE AVERAGE NUMBER OF TRAINING HOURS PER EXECUTIVE FOR FORMAL TRAINING MEASURES. NO. OF SEMINARS SEMINARS STABILIZED AT HIGH LEVEL ATTENDED PER EMPLOYEE DIRECT EDUCATION 1,220 1,455 1,345 HIGHER COST EFFICIENCY THROUGH NEED-ORIENTED EXPENDITURE PER EMPLOYEE INDIVIDUALIZED MEASURES, COST REDUCTION DUE TO OWN TRAINING FACILITIES AVERAGE COSTS HIGHER NUMBER OF TRAINING MEASURES AT OWN PER TRAINING DAY POWER PLANT LOCATIONS, ABOVE ALL, SAFETY TRAINING, ADDITIONAL COST REDUCTION DUE TO OWN TRAINING FACILITIES NOTIFIABLE ACCIDENTS NUMBER OCCURRENCE OF ACCIDENTS IS AT A STABLE LOW LEVEL TOTAL NO. OF SICK DAYS DAYS INCREASE THROUGH LOW NUMBER OF ACCIDENTS WITH RESULTING FROM LENGTHY PERIODS OF SICK LEAVE DUE TO "OVERSIGHT, NOTIFIABLE ACCIDENTS UNFORTUNATE CIRCUMSTANCES OR "CARELESSNESS" ACCIDENT RATE (NUMBER IN SPITE OF THE HIGH HIGH LEVEL OF BLUE COLLAR OF NOTIFIABLE ACCIDENTS WORKER, THE ACCIDENT RATE STILL LIES BELOW THE PER 1,000 EMPLOYEES) VALUE OF 17 QUOTED IN THE AUVA STATISTICS FOR COMPANIES WITH EMPLOYEES ONLY ACCIDENT SEVERITY DAYS INCREASE THROUGH LOW NUMBER OF ACCIDENTS WITH (NO. OF SICK DAYS LENGTHY PERIODS OF SICK LEAVE DUE TO "OVERSIGHT, PER NOTIFIABLE ACCIDENT) UNFORTUNATE CIRCUMSTANCES OR "CARELESSNESS" FLUCTUATION RATE % LOW WILLINGNESS OF EMPLOYEES TO CHANGE IS LOW COMPARED TO OTHER COMPANIES AVERAGE AGE YEARS SLIGHT DECREASE OF AVERAGE AGE DUE TO YOUNGER OF EMPLOYEES NEW HIRES NO. OF YEARS YEARS LONG-TERM LOYALTY COMPARED TO OTHER COMPANIES WITH COMPANY APPRAISAL % NEARLY CONSISTENTLY IMPLEMENTATION, STRONG INTERVIEW QUOTA GROWTH AT HIGH LEVEL

61 SOCIAL INDICATORS VERBUND SUSTAINABILITY REPORT We also maintain long-term cooperations with the University of Economics and Business Administration of Vienna. Verbund supports, for example, a project seminar on the topic of Strategic Performance Management at the Institute of Business Management. Furthermore an intensive cooperation with the Career Center at the University of Economics and Business Administration enhances the direct contact to students and graduates. In addition, Verbund has sponsored a lecture hall at the Technical University of Graz since autumn In the course of this long-term cooperation, the lecture hall for Electrical Engineering was renamed as VERBUND Lecture Hall. We are keen to reach all of the relevant target groups at an early stage and position ourselves as an attractive and long-term employer for potential employees. For this reason the university partnerships are supplemented by cooperations with Federal Secondary Colleges of Engineering as well as a targeted apprenticeship campaign. We are also one of the main sponsors of Business School Games, a school project of the Federal Ministry for Education Art and Culture. The aim of this project is to improve the business knowledge and entrepreneurial thinking of students in high schools throughout Austria via a game called Business Master and a nationwide series of tournaments. The active advancement of women is also an important topic. This year, we participated in the Vienna Daughter s Day for the fifth time. The event gave the daughters of the Verbund employees and their friends an opportunity to learn more about technical jobs. We also present ourselves at all of the important career fairs in Austria and use these events as a communication and networking platform. With these measures we aim to improve our recognition and position Verbund as an attractive employer in the minds of students and graduates. The preliminary work for the audit Career and Family also started in The first step involved the documentation of existing family-friendly measures within the Verbund group. In a second step we will work on concrete measures and implement them. The VERBUND-Austrian Power Vertriebs GmbH was repurchased from Istrabenz in August 2007 and has now been successfully integrated in VERBUND-Austrian Power Sales GmbH. Through the merger of the two distribution companies synergy effects are created and the market share has been increased. All 19 employees of VERBUND-Austrian Power Vertriebs GmbH were taken over and employed in positions that match their expertise in the area of electricity sales. In October 2008, a further trainee programme was initiated to support and ensure the continued success of Verbund's national and international growth strategy. The trainees are deployed in different departments, which are partly selected by the trainees themselves. In addition to their activities within the company, each trainee receives an individual development plan comprising further education measures. We have put a main focus on apprenticeships during the last years. In previous years, twenty-four apprentices were recruited annually. In 2008, 32 apprentices started their careers at Verbund. In 2009, we aim to further increase the number of new apprentices up to 40. We have own training centers in Ybbs on the Donau and in Kaprun where we care for our apprentices. The duration of the apprenticeship is four years. After the basic training in the first year, a four to sixweek consolidation course takes place at these centers each year. In the final two years the apprentices are trained directly at the locations where they will later work as specialists thus ensuring that they are well prepared for their future tasks. As Verbund, in its role as an instructor, is well aware of its responsibility towards the young people, we also offers a comprehensive range of appropriate leisure activities. In addition, we pay the cost for the accomodation during the stay in our training schools. COOPERATION WITH FEDERAL SECONDARY COLLEGES OF ENGINEERING BUSINESS SCHOOL GAMES GIRLS DAY NETWORKING CAREER AND FAMILY AUDIT FULL INTEGRATION OF THE DISTRIBUTION COMPANIES TRAINEE PROGRAMME APPRENTICESHIP CAMPAIGN

62 58 VERBUND SUSTAINABILITY REPORT 2008 SOCIAL INDICATORS EMPLOYEE SURVEY In summer 2008 for the first time, an employee survey on work satisfaction and health aspects was carried out throughout the entire Verbund Group. The feedback from staff who participated in the survey reflects the good working atmosphere and the high level of motivation within the company. Income satisfaction at Verbund is also clearly above the Austrian average. This is also demonstrated by the loyalty of the employees towards the managing board and the management and their high level of commitment to the company. Moreover, the employees have confidence in the strategic orientation and economic future of the company. The management style of the immediate superiors is considered as very positive, even if it is perceived as being hierarchical at all levels. Previously implemented measures received a great deal of positive feedback. In areas with potential for improvement, measures were derived and will be implemented continously. HEALTH MANAGEMENT FITNESS & HEALTH In the personnel strategy 2008 to 2012, the aging workforce was identified as being one of the central challenges for the coming years. With this in mind special attention will have to be paid to health issues, to ensure that healthy employees can be retained in the work +process for a longer period thus facilitating a smooth transfer to the new generation and the retention of expertise that is essential for operations within the group. On this account an integrated internal health management system called Fit & Gesund im Verbund, was implemented across the Verbund group after a similar programme had been successfully tested on the basis of OHSAS at VERBUND-Austrian Power Grid AG. The entire social spectrum of Verbund, both from an employer and employee perspective, was included in the project organization to ensure that all relevant interests and views would be considered. A well-directed and efficient health management system requires a multiphase approach. Therefore, the first phase of the project started in January 2008 with an analysis which involved a fitness test, a groupwide employee survey, the expansion of the occupational health service as well as an analysis of internal data and health circles. This phase ended with the drafting of a health report for the Verbund group. On the basis of this analysis health measures will be implemented beginning in This project phase will focus on health-relevant events, talks, seminars and workshops. Moreover, an individual health programme will be initiated in coordination with the occupational health services. Topics, apart from health issues, which also affect other areas of the Verbund group will be processed within the framework of comprehensive projects. Internal health coordinators will be trained in the individual companies Additionally a group-wide central network of health coordinators will be established to ensure long-term sustainable health management within the group. The overall project will be evaluated in the third phase which will start in 2010.

63 SOCIAL INDICATORS VERBUND SUSTAINABILITY REPORT TRAINING AND FURTHER EDUCATION In 2008, the executive development was clearly in line with the corporate strategy and aimed to prepare executives for the constantly changing requirements. The individual development of each member of the managerial staff is promoted within the framework of a clear target group-oriented structure with a view to achieving the corporate goals. EXECUTIVE DEVELOPMENT The executive development programme includes issues as development-oriented leadership, the critical analysis of one's own management style, efficient execution of recruitment interviews as well as labor law. Individual coaching sessions and analysis of the current position complement the formal management development programme. Due to the internationalisation of our company, we are focusing on the intercultural competence of our employees and executives. Before colleagues are sent abroad, they are provided with an opportunity to further extend and deepen their intercultural competence for the business environment. INTERCULTURAL COMPETENCE In 2008, the main focus was on our target country Turkey and intercultural workshops were held in Istanbul and Vienna. Further programmes concentrate on the optimal preparation of our employees for their activities in a new environment and an intercultural hotline has been set up to deal with urgent issues. Following the compilation and implementation of a group-wide guideline on fair business practices, in particular, against corruption and bribery, a comprehensive information and training programme was initiated in All employees have been involved in the area-specific training which is offered in all areas of the company. Technical innovations require that the qualifications of our technical workers is extended on an ongoing basis. In order to improve the qualifications of our technical workers in the shortest time possible and in taking their various shifts into consideration we developed an internal mechatronics training together with the Viennese Mechatronics Guild and an external institute. This training combines structured modules, on the job training as well as a professional exchange of experiences. Six of the seven participants have already completed the training with distinction. In 2008, a special development programme for master was initiated in cooperation with four large industrial enterprises in Austria. The training focuses on looking outwards, learning from the best and exchanging experience. The programme consists of three workshops, the results of them will be presented to the executive managers of the individual companies in a final presentation. Three employees from Verbund are currently participating in this programme. ANTI CORRUPTION TRAINING IN MECHATRONICS TRAINING FOR MASTER In addition, the masters also receive internal support by the Verbund programme Master Workshop. This training consists of four workshops on the topics of leadership, management techniques, labor law and safety. Each of these workshops is linked to skill transfer tasks for the participants. Additional modules which allow the participants to further deepen their know how are also offered. Our customer service representatives at VERBUND-Austrian Power Sales GmbH at are not only the first contact for questions relating to switching the electricity supplier, but also represent our company. A multi-stage recruitment programme and a modular training programme ensure, that the best applicants are identified and equipped with the required expertise. The first phase focuses on strengthening the employee s social competence while the second phase prioritises specific technical skills of the company to ensure that our customer service representatives get an overall understanding of the internal procedures. This is a pre-requisite for professional customer service and the ongoing enhancement of customer satisfaction. CALL CENTER TRAINING

64 60 VERBUND SUSTAINABILITY REPORT 2008 SOCIAL INDICATORS SAFETY For the purpose of the Employee Protection Act, special attention in the range of safety is paid to the observance of the statutory and internal requirements, guidelines, organizational changes and work instructions. Therefore safety is focal point in training and further education measures. Special interest is paid to trainings for work at high altitudes, working with a chainsaw and hazardous materials. SAFE USE OF ELECTRICITY In October 2007, VERBUND-Austrian Power Sales GmbH introduced the series Safe use of electricity in its monthly newsletter. These articles have the purpose to inform electricity customers about the dangers and risks involved in the day-to-day use of electricity. The safety advices range from simple devices to protect children to helpful explanations regarding product safety. In addition, CO 2 issues are addressed and customers are motivated to use electricity sparingly. WORKPLACE SAFETY AND PREVENTION OF ACCIDENTS The prevention of accidents within the context of workplace safety involves the implementation of precautionary measures which help to avoid undesired events such as work-related accidents and their consequences. In Austria, workplace safety is regulated by laws and directives, some of which have a framework character. In practice there is, however, little scope for implementation as efficient protection measures must meet a series of requirements. Potential sources of danger must therefore be reduced to an acceptable minimum, the protection measures must reach all of the respective employees, they must be accepted by these employees and, last but not least, they must remain financially feasible. PREVENTION OF ACCIDENTS Effective prevention of accidents requires a lot of experience and a great deal of planning. Accident prevention not only involves the physical protection of the employees but also extends to protecting executive managers from failing in their duty of care and the protection of assets. Management views workplace safety as being an important corporate goal. A group of highly experienced safety experts play an instrumental role in this context. They advise employees and are also involved in the organization and supervision of measures in the power plants and grid facilities. This is essential with respect to complex electro-mechanical and special construction measures or hydraulic steel structures projects. Special attention is paid to fire protection measures and measures that help to avoid falls. We also require and check that our contractors act in a safety conscious manner in accordance with the statutory requirements. Each employee from an external company receives safety instructions before his commencement of work and is also advised with regard to the key issues within the company pertaining the prevention of accidents and safety. The positive effect of these measures is already proved. Accident prevention highlights in 2008 included the group-wide implementation of the directives Noise and Vibration and Explosive Environments as well as rules relating to the implementation of the Act on the Coordination of Construction Works (Bauarbeitenkoordinationsgesetz BauKG). Moreover, employees received training in the handling and transportation of hazardous substances.

65 SOCIAL INDICATORS VERBUND SUSTAINABILITY REPORT Measueres which are regulated by law, for example employer and employee advisory service, visits to workplaces, determination and evaluation of dangers, definition of measueres to avoid accidents, committee meetings of the workplace,safety team, training of accident prevention experts, etc., were carried out. The safety experts at Verbund also cooperate with external committees such as the Standardization Committee, the Safety committee and the working group Safety engineers of Austrian energy provider both projects of the Austrian Association of Electricity Companies (VEÖ). NUMBER OF EMPLOYEES SICK DAYS ,466 2,537 2, NO. OF EMPLOYEES UNDER LABOR LAW NUMBER OF SICK DAYS DUE TO NOTIFIABLE ACCIDENTS For the interpretation of the occurrence of accidents, the absolute number of accidents cannot be used; instead the absolute figures have to be set in relation to reference values. Consequently, the accident parameters used here are the accident rate and accident severity. The accident rate reflects the number of accidents per year in relation to the headcount. The accident severity describes the average severity per accident. OCCURRENCE OF ACCIDENTS IN THE GROUP 1 UMSTELLUNG DER BERE DADURCH ERGIBT SICH E ACCIDENTS ACCIDENT RATE ACCIDENT SEVERITY NUMBER OF NOTIFIABLE ACCIDENTS ACCIDENT SEVERITY = SICK DAYS PER ACCIDENT (> 3 DAYS) ACCIDENT RATE = ACCIDENTS (> 3 DAYS) PER 1,000 EMPLOYEES UMSTELLUNG DER DADURCH ERGIBT The number of accidents within the Verbund group lies at a stable, low level and corresponds to the very good values recorded for accident rate and accident severity last year. The accident characteristic data within the Verbund group largely correspond to the average value of the Austrian energy provider (source: Accident statistics of the Association of Austrian Electricity Companies VEÖ). The statistics of the Austrian Social Insurance for Occupational Risks (Allgemeine Unfallversicherungsanstalt AUVA) can be used as a further benchmark. Approximately 170,000 claims are used as a basis for this statistic. In the AUVA accident statistics, the characteristic data value for the accident rate for workers is 69. The corresponding value for employees is 17. Despite the high share of operational employees within the Verbund group, the value for the accident rate within Verbund amounts to 16 and therefore lies even below the value of the AUVA statistics for employees only. This also shows the high level of work safety within the Verbund-group.

66 62 VERBUND SUSTAINABILITY REPORT 2008 SOCIAL INDICATORS ACCIDENTS PER CATEGORY NUMBER SERIOUS ACCIDENTS (MORE THAN 45 SICK DAYS) MODERATE ACCIDENTS (20 TO 45 SICK DAYS) SMALL ACCIDENTS (4 TO 19 SICK DAYS) MINOR ACCIDENTS (0 TO 3 SICK DAYS) We are pleased to report that, due to the organizational and technical measures that we have implemented, falls and electricity related accidents could have been maintained at a particularly low level. The fact that no sick days whatsoever were booked as a result of organizational shortcomings clearly shows that the workplace safety measures were implemented satisfactorily. 50 %, or 406 sick days, of the total number of sick days were a result of only five serious accidents within the Verbund group. These five accidents were caused by slipping or stumbling and are attributable to own carelessness or oversight, unfortunate circumstances. The accidents resulted, however, in lengthy periods of sick leave of between 68 and 105 days, above all, due to injuries of tendons and ligaments. The prevention measures that were implemented and the applied understanding of safety at the workplace clearly shows positive effects, but further steps must be taken in the future to sharpen the self-perception and safety awareness of each individual employee. Through the implementation of corresponding programmes, training measures and the provision of information, the Safety team and its safety experts will focus on further improving the accident figures within the Verbund-group. SUPPLY CHAIN MANAGEMENT ACTS RESPONSIBLE In addition to attaching great importance to sustainability in our own area, we also require that our business partners practice sustainability within the three dimensions of economy, environment and social equity. Suppliers are therefore obliged by our general terms and conditions, to adhere to our ethics and environmental protection standards. To check this, we have developed a supplier monitoring system which we use to evaluate our most important suppliers, i.e. suppliers who supply more than 70 % of the total supply volume. The monitoring system contains the parameters price/performance, product quality, adherence to schedules and service, whereby the criterion product quality focuses on the ecological, social and safety-relevant qualities of the product. The results of the evaluation are discussed in detail with the suppliers to ensure that the quality of their performance will be improved in a continuous and sustainable manner. Moreover, each supplier must ensure that the ethical principles of Verbund are also adhered to by its employees, subcontractors and suppliers. The implemented monitoring system is checked regularly to ensure that it is up to date and also to facilitate the efficient integration of modified indicators regarding environmental, social and safety issues. In this way, we also make a contribution to the promotion of sustainable development through our procurement activities.

67 SOCIAL INDICATORS VERBUND SUSTAINABILITY REPORT CORPORATE CITIZENSHIP Verbund has commited itself to social corporate responsibility activities the main focus lies on the topics culture and children. In 2008, we again supported the large classical open-air concert of the Vienna Philharmonic Orchestra at Schlosspark Schönbrunn. CLASSICAL OPEN-AIR CONCERT We contracted a long-term partnership with the Wiener Konzerthaus (Concert Hall Vienna) and have been the main sponsor of this renowned cultural institution since September We also continued the initiative Saturday for free at the MAK in 2008: As the sponsor of the Museum for Applied Arts in Vienna (MAK), we provide visitors with free access to the exhibitions on Saturdays. We also supported The Vienna Children's Theatre, which represents a link between the two key areas of art and children,. In summer 2008, the management and employees of VERBUND-Austrian Renewable Power GmbH invested time and manpower to paint the common rooms in a Caritas home for asylum seekers in Vienna. Donations in kind were distributed among the children in the home and a donation check was presented. In this way, we were able to pass on a little of our personal wealth to some of the less advantaged members of society. In 2008, Verbund also participated in the campaign A letter to the stars, which provided pupils with an opportunity to deal with the events of the Holocaust at an individual and very personal level within the framework of the project Denk.Mal. SATURDAY FOR FREE AT THE MAK VIENNA CHILDREN'S THEATRE REDECORATION AND CHILDREN'S LAUGHTER DENK.MAL At the zoo Schönbrunn is a new attraction waiting for children. The 200 m 2 HydroPowerPlayground, which was co-financed by Verbund and completed at the end of May 2008, teaches children in a fun way about the fascination of water and its significance in the production of energy. We also continued our long-term sponsorships of SOS Children's Village in Hinterbrühl (since 1957) and the Hans Radl School for physically handicapped children (since 1989). In winter 2007/2008, Verbund participated in the campaign A Spark of Heat, which is organized by Caritas in cooperation with Kronen Zeitung. In this campaign, people who cannot afford their heating costs are provided with financial support. The Austrian Mountain Rescue Service received financial aid to purchase state-of-the art equipment: Joint activities that focus on the prevention of accidents and an information campaign will contribute to enhance the safety in the alpine region. When selecting our partners, we endeavor to ensure that their value systems are in line with those of the Verbund Group. Therefore we are very pleased that our partner in Turkey, the Sabanci Group, is according to a study carried out by the market research institute GfK the leading company by far in the area of Corporate Social Responsibility in Turkey. SOS CHILDREN'S VILLAGE AUSTRIAN MOUNTAIN RESCUE SERVICE RESPONSIBLE PARTNERS CONTACT Mag. Dr. Georg Westphal, Tel. +43 (0) , [email protected]

68 64 VERBUND SUSTAINABILITY REPORT 2008 AUDITOR S CERTIFICATE AUDITOR S CERTIFICATE THIS SUSTAINABILITY REPORT MEETS THE REQUIREMENTS OF GRI G3 APPLICATION LEVEL A+. ETA Umweltmanagement GmbH, Sustainability Auditors, was commissioned, to evaluate the Sustainability Report 2008 on the basis of the underlying data, systems and procedures; to check that the published data is correct and that it reflects the performance of Verbund in a comprehensive manner; to critically analyze the scope, balance and interpretation of the information presented and certify the Sustainability Report. We have based our audit on the developing standards for sustainability report auditing. These are: The AA1000 Assurance Standard (AA1000:2003), published by Accountability, the code of practice of the European Federation of Accountants, FEE, Providing Assurance on Sustainability Reports and the auditing criteria of the Global Reporting Initiative (GRI application levels for version G3). Our audit encompassed: an interview with those responsible for the data and information in the Sustainability Report as well as random testing of the underlying management systems and procedures, ETA UMWELTMANAGEMENT WAS COMMISSIONED AS THE INDE- PENDENT AUDITING ORGANIZATION. ETA UMWELTMANAGEMENT GMBH SUSTAINABILITY AUDITORS MOHSGASSE 32/40, 1030 VIENNA, AUSTRIA TEL / [email protected] / REGISTER NUMBER: AT-V-0001 an evaluation of the correct, balanced and consistent portrayal of the sustainability aspects and data as well as an analysis of the systems employed for data acquisition and the evaluation of the performance ratios in the economic, social and environmental areas. In our assessment, that data and information in the Sustainability Report is comprehensive, balanced and presented in an appropriate manner with regard to ecological, social and economic aspects of sustainability and is not in conflict with other information or evidence furnished by the company. Detailed recommendations for the further development of the Sustainability Report were submitted to the management in an internal report. ETA IS THE ORGANIZATIONAL STAKEHOLDER (OS) OF THE GLOBAL REPORTING INITIATIVE (GRI) AND SUPPORTS THE MISSION OF GRI. Vienna, 25 March 2009 Dr. Christine Jasch Chief Auditor, Chartered Certified Accountant Dr. Stefan Gara Chief Auditor, Manager

69 ^ ^ ^ ^ ^ ^ ^ VERBUND SUSTAINABILITY REPORT CERTIFIED POWER PLANTS OF VERBUND RUN-OF-RIVER PLANT > 4 MW STORAGE POWER PLANT JOINT-VENTURE POWER PLANT PARTICIPATING INTEREST OF VERBUND HYDROPOWER PLANT UNDER CONSTRUCTION OR IN PLANNING PHASE THERMAL POWER PLANT Passau-Ingling THERMAL POWER PLANT OUT OF COMMISSION OR LEASED Schärding-Neuhaus THERMAL POWER PLANT UNDER CONSTRUCTION Egglfing-Obernberg OR IN PLANNING PHASE Ering-Frauenstein Environmental management system pursuant to EMAS and ISO Environmental management system pursuant to ISO Braunau-Simbach CH INN km I D SALZACH INN Paternion Jochenstein DONAU Villach Kellerberg Rosegg-St. Jakob Feistritz-Ludmannsdorf Aschach Ottensheim-Wilhering Abwinden-Asten St. Pantaleon Mühlrading Staning Garsten-St. Ulrich Rosenau ENNS Ferlach-Maria Rain MUR Wallsee-Mitterk. SLO CZ Greifenstein Altenwörth Korneuburg Melk Losenstein Ybbs-Persenbeug Großraming Edling Annabrücke Lavamünd Schwabeck Dürnrohr Spielfeld Nußdorf Weyer Ternberg Schönau Nußdorf Klaus Altenmarkt Landl Oberaufdorf-Ebbs Werfen/Pfarrwerfen Salza Krippau Dionysen Kreuzbergmaut Bischofshofen Sölk Hieflau Funsingau St. Johann Pernegg Urreiting Leoben Schwarzach Triebenbach Laufnitzdorf Gerlos Zeltweg Rabenstein St. Veit Mandling Fisching Peggau Mayrhofen Limberg II Wallnerau Graz St. Georgen Friesach Häusling Weinzödl Bösdornau Kaprun- Bodendorf-Paal Kaprun- Hauptstufe Neudorf-Werndorf 2 Oberstufe Neudorf-Werndorf 1 Mellach Roßhag Reißeck II Reißeck-Kreuzeck Malta-Oberstufe Bodendorf-Mur Mellach St. Martin Malta-Hauptstufe Lebring Mellach II Arnstein Gralla St. Andrä Gabersdorf Malta-Unterstufe Obervogau DRAU Freudenau DONAU SK H CERTIFIED GRID FACILITIES Winkeln Meiningen Bürs CH 380 kv TRANSMISSION LINE PLANNED 380 kv TRANSMISSION LINE 220 kv TRANSMISSION LINE 110 kv TRANSMISSION LINE GRID SWITCHING STATION IN THIRD-PARTY PLANTS SUBSTATION OWNED BY THIRD PARTY SUBSTATION PLANNED SUBSTATION TRANSPORT RIGHTS OF VERBUND ON THIRD-PARTY LINES Obermooweiler Pradella Memmingen Leupolz Westtirol Bösdornau Roßhag km I D Zell am Ziller Funsingau Mayrhofen Hausling Neuötting Integrated management system in accordance with EMAS, ISO 14001, ISO 9001, ISO and OHSAS Grid region west Grid region north Grid region east Grid region south Jochenstein Passau ^ Schär- Pirach Aigerding Pleintingding Altheim Antiesenhofen Ering Simbach Egglfing Braunau St. Peter Ranshofen Salzach Bisamberg Arthurwerk Pongau TAUERN Schwarzach Kaprun Hauptstufe Soverzene Lienz Salzach Neu Energie AG Altenwörth Aschach Abwinden/ Dürnrohr Ottensheim Hütte Ybbs-Persen- Linz Chemie OstAsten Melk ^ ^ KW Dürnrohr Greifen-Korneuburstein Linz Mauthausen ^ ^ EnnsWallseebeug Wien Wegscheid Industrie Bergern Etzersdorf West Kledering WIEN Sattledt ERNSTHOFEN Ybbsfeld SÜDOST Rosenau Ebreichsdorf Klaus Ebenfurth Großraming Neustadt Wr. Neudörfl Pyhrn Hausruck Weißenbach Steweag-Steg Hessenberg Zeltweg Steweag-Steg Steweag-Steg Kainachtal SLO Ternitz Südburgenland Oststeiermark Maribor Slavetice CZ Bad St. Steweag-Steg Reißeck Leonhard Wolfsberg Malta Hauptstufe OBER- Malta St. Andrä SIELACH SteinfeldUnterstufe Kamering Landskron Klagenfurt markt Schwabeck Völker- Rosegg Bleiburg Lavamünd Feistritz Edling Podlog Sokolnice Sarasdorf Neusiedl SK H Györ Györ IMPRINT: PUBLISHED BY: ÖSTERREICHISCHE ELEKTRIZITÄTSWIRTSCHAFTS-AKTIENGESELLSCHAFT (VERBUND), AM HOF 6A, 1010 VIENNA. VERBUND SUSTAINABILITY OFFICER: MAG. RENATE PRETSCHER, [email protected]. EDITED BY: MAG. KARIN KICHLER, [email protected] COMMUNICATIONS: MAG. BEATE MCGINN, [email protected]. INVESTOR RELATIONS: MAG. ANDREAS WOLLEIN, [email protected] PRINTED BY MANZ CROSSMEDIA GmbH & Co KG, 1051 VIENNA, CONCEPT: VERBUND/AHA PUTTNER REDCELL WERBEAGENTUR GmbH DESIGN: AHA PUTTNER REDCELL WERBEAGENTUR GmbH PHOTOS: VERBUND, APA, GETTYIMAGES, ISTOCKPHOTO