VERBUND Analysts Day 2013 Introduction Andreas Wollein Head of Group Finance and Investor Relations VERBUND AG London, June 12, 2013
Agenda
Agenda 1.10-2.10 pm Robert Slovacek, Board member VERBUND Trading AG Developments in the international trading and electricity markets 2.10-3.10 pm Gerhard Christiner, Board member Austrian Power Grid AG Developments in the high voltage grid in Austria and Europe 3.10-3.30 pm Break 3.30-4.30 pm Wolfgang Anzengruber, CEO & CFO VERBUND AG Strategy 4.30-5.30 pm Andreas Wollein, Head of Group Finance and Investor Relations Financials Page 4
Agenda 5.30-6.00 pm Wolfgang Anzengruber, CEO & CFO VERBUND AG Guidance 6.00-6.30 pm Q&A Session from 6.30 pm Cocktail & Canapes Page 5
Disclaimer The following presentations contain forward-looking statements that involve risks and uncertainties. These forward-looking statements are usually accompanied by words such as believe, intend, anticipate, plan, expect and similar expressions. Actual results may differ materially from those anticipated in these forward-looking statements as a result of a number of factors. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results or outcomes to differ materially from those expressed in any forward-looking statement.
VERBUND Analysts Day 2013 Energy trading as part of the energy transition Robert Slovacek Board member VERBUND Trading AG London, June 12, 2013
Macroeconomic base Page 3
Marcoeconomic base Economic trend EU-27/ % (GDP real, changes compared to previous year) Prices of primary energy sources/ /unit 140 0.5 2.1 1.6-0.2 0.0 1.3 120 100 80 60 Brent crude oil ( /bbl) Coal API#2 Front Year ( /t) Electricity Base Front Year ( /MWh) -4.2 2008 2009 2010 2011 2012 2013E 2014E Source: IMF as of 4/2013 Demand of end consumers EU-27/ TWh 2,862 2,721 2,826 2,758 2,758 2008 2009 2010 2011 2012 Source: IHS CERA as of 11/2012 40 20 Austrian Importgas Front Year ( /MWh) 0 1/08 1/09 1/10 1/11 1/12 Source: EEX, Reuters, Platts, ECX, Statistik Austria as of 25/04/2013 Shrinking of the EU-economy again in 2013 (Source: IMF) Critical factors for future development Sustainable economic growth while consolidating the state budgets International cooperation in energy, finance, international trade, environment and security Change from fossil to renewable energy sources Page 4
Electricity prices Wholesale prices (Spot)/ /MWh 120 100 80 Peak 60 40 20 Base 0 1/1/08 1/1/09 1/1/10 1/1/11 1/1/12 1/1/13 Spot Start of decline at the end of 2008 Since then continuous sideways movement Short-term peaks due to extreme weather situations Wholesale prices (Futures)/ /MWh 120 100 Peak 80 60 40 20 Base 0 1/1/08 1/1/09 1/1/10 1/1/11 1/1/12 1/1/13 Source: EPEX Spot, EEX as of 21 May 2013 Futures Start of decline at the end of 2008 Slight increase in 2011 due to Fukushima Since then continuous reduction again Prices have came back to 2005 levels Page 5
Wholesale electricity prices Wholesale prices / /MWH /Cal14 Base Q2/2013 38 64 48 46 41 39 * Local prices which are still burden with grid fees for exports (GR 5 /MWh, RO rd. 11 /MWh, BG 17,52 /MWh) Source: Platts, VTR for CEE/SEE 44 41 41 51 63 40 47 46 46 40 46 46 46 46 47 47* 43* 38* Page 6
Energy Transition Page 7
Medium term risk concerning security of supply Page 8
Merit order effect Merit Order Germany/Austria 2014 / /MWh; GWe Minimum load Average load Maximum load Availability: Thermal: 80 % Hydro: 40 % Wind: 25 % Solar: 10 % Forward market prices 2013/1/31 SRMC = 71,8 /MWh SRMC = 38,7 /MWh SRMC = 24,8 /MWh Meeting electricity demand at minimal production costs Page 9
No investment incentive for flexible power plants Pumpspread / /MWh Difference 1,500 highest to 2,000 lowest hourly prices Clean spark spread peak / /MWh Market-indexed gas contract; average values; as of 30.4.2013 Fixed and capital costs* 50 46 39 40 41 41 42 43 44 45 46 46 47 32 28 24 22 21 21 21 22 19 24 25 26 27 27 Fixed costs** 27 28 29 29 30 30 31 32 27 20 16 9 5 1 2 3 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 * typical ~400 MW storage power plant ** typical ~800 MW CCGT power plant Page 10
Energy Only Market + VERBUND position 1. CO 2 market reform 2. Integration of renewables 3. Phase out of market constraints 4. Increasing price elasticity 5. Opening balancing energy markets 6. Further development of the power grid Page 11
1) CO 2 market reform Current situation Certificate prices at record low no steering effect towards low-co 2 -technologies Despite having the highest CO 2 -emissions, coal power plants are currently the most economically viable thermal power plants Proposal for back loading failed in the European Parliament uncertain EU climate protection policy in future CO 2 price and substitution rate / /t average values as of 30.4.2013 20 14 15 11 21 14 41 8 49? Substitution rate (variable costs) 46 39 39 5 5 5 6 2010 2011 2012 2013 2014 2015 2016 2017 VERBUND position CO 2 market should be the control system to achieve energy transition and to support the development of renewable and low-co 2 energies Implementation Permanent set-aside of excess certificates Implementation of an automatic CO 2 -volume mechanism taking into account: Further development of renewables Increase in efficiency Development of electricity demand Page 12
2) Integration of renewables Current situation Renewables expansion in the EU does not follow geographical potential, but follows highest subsidy tariff (loss of efficiency of 174 bn until 2020*) More than 100 different subsidy tariffs in Europe Preferred feed-in of renewable energies into the grid no contribution to grid control Installed solar-capacity 2012 / kwh/m 2 GW VERBUND position Integration of renewable power plants in the competitive market as soon as possible with the same rights an obligations as other power plants. Implementation Harmonised European subsidies for renewables Investment grants as support for market integration Green certificates could be medium term solution Source: IHS CERA *Source: Energiewirtschafltiches Institut Köln (EWI) Page 13
3) Phase out of market constraints Current situation European wholesale market for electricity does not send the correct price signals Different degrees of market opening Regulating activities or subsidy programmes contradict each other European energy maket designs Capacity market Capacity payment Strategic reserve Capacity mechanism proposed/under consideration VERBUND position Strengthening market powers and full liberalization of wholesale markets for primary energy sources and electricity as well as end consumer markets in all EU member states. Implementation Cancellation of all existing price limits (acceptance of high price spikes) No further increase in regulation (keyword: capacity markets) Removal of non market conform, long term, oil price indexed gas delivery contracts Coordinated energy taxes and subsidy programmes in Europe Removal of regulated end consumer tariffs Page 14
4) Increasing price elasticity Current situation Increasing demand for system flexibility Possibility of offering load shedding currently only on the German balancing energy market Merit order integration of DSM Extension of the supply curve due to load shedding VERBUND position Supporting security of supply in times of low power plant availability and high demand through reduction of customer consumption Implementation Integration of demand side management (DSM) in price fixing (particularly load shedding options for industry) Page 15
5) Opening balancing energy markets Current situation Growing renewable share which leads to an increased need for balancing energy Increasing need for optimal cross border utilisation of flexible generation units Balancing energy requirements GER / MW Tertiary control power Secondary control power + 73% + 58% VERBUND position Opening balancing energy markets beyond the national market Implementation Standardised rules for cross border commercialisation of services Year Source: r2b energy consulting GmbH Page 16
6) Further expansion of the grid Current situation Load distant generation increases with further development of renewables Grid extension or expansion in GER requires roughly 4.000 km Extension projects for the high voltage grid in Europe in the scope of roughly 52.300 km in the next 10 years according to ENTSO-E The energy roadmap of the EU calculates cumulated grid investments of about EUR 1,5-2,2 trillion in the period from 2011 to 2050 (the higher the investments in renewables the higher the need for grid investments) GER Development of Regional Balance System / MW Conventional power plants VERBUND position Need for further grid development to ensure security of supply Implementation Prompt permission procedures need to be in place Grid projects require prioritisation Establishing attractive and stable regulatory framework NPP Decommissioning Source: RWE Load (MW) Page 17
Implications for VERBUND Page 18
Hedging strategy review Asset hedging strategy straight forward Hedging strategy based on optimization (storage, CCGT, coal) and natural inflow (run of river) Main products: Base, Peak Yearly products: 1/6 year n-2; 5/6 of the quantities in year n-1 Additionally: quarterly/monthly products Extended Strategy Extended hedging in case of defined exceedance / undercutting of trigger prices: Hedging of high prices: Three upper price levels with associated quantities When price levels are exceeded, production up to the maximum size (block size, available volume) is sold at highest possible speed according to market depth Hedging against falling prices: One lowest price level with corresponding volumes When prices fall below this level up to one half of the remaining volume is sold as soon as possible according to market depth, the other half is hedged with put-options Page 19
Resource planning and dispatching Improvement of forecasting know-how Hydrological and hydrodynamic models for inflow-forecasts Pricing models Wind forecast models Establishing of a 24/7 Intraday trading team Cross border marketing of control reserve in answer to the increasing cross border merging of national balancing energy markets. Virtual storage power plants offers for virtual storage power plants characterized by fixed pumpage and turbine output, virtual storage and defined efficiency. Combined power-/gas-call-options Page 20
Risks & opportunities from a market perspective Opportunities Marketing of flexible products Virtual power plants Intraday trading Portfolio management for smaller producers Centralization and bundling of volumes produced by households Marketing of renewables Service for sales activities Risks Continuously low base prices Continuous decline of base-peak spreads for pump storage Low spark spreads Establishment of capacity markets/increasing regulation Low CO 2 prices Page 21
Developments in the high voltage grid in Austria and Europe Gerhard Christiner 12.06.2013
Austrian Power Grid AG Key Facts APG is a fully unbundled company according to the requirements of the 3 rd legislative energy package of the EC. APG is a regulated enterprise: Sales revenues*: 536 million Total Assets*: 1436 million Yearly Investments: ~200 million APG is solely responsible for secure and reliable system operation grid enforcement and development market facilitation and integration forecast of Renewable Energy Production AUSTRIAN POWER GRID AG VERBUND`s Analyst Day 2013 APG is a full and active member of ENTSO-E, the European Network of Transmission System Operators for Electricity. 2 * Figures from 2012 Annual Report.
Electricity system has to be considered as a whole Challenges Goals AUSTRIAN POWER GRID AG VERBUND`s Analyst Day 2013 3
Grid operation is becoming more challenging Remote control of Circuit length 6,800 km (380kV, 220kV, 110kV) 61 substations Ring Management of the control area Providing ancilliary services Demand Handling of Import/Exportprogrammes Market Facilitator Generation AUSTRIAN POWER GRID AG VERBUND`s Analyst Day 2013 4
Developments in the electricity market AUSTRIAN POWER GRID AG 5
Currently renewables alone do not meet the demand 24:00 Wind power production 12:00 Demand characteristics 24:00 00:00 1.1. 1.6. 31.12. 24:00 Solar energy production 12:00 12:00 00:00 00:00 1.1. 1.6. 31.12. power as % of maximum value 80...100% 1.1. 1.6. 31.12. 60...80% 40...60% 20...40% AUSTRIAN POWER GRID AG VERBUND`s Analyst Day 2013 0...20% 6
Challenges for APG Austria s central location in Europe Increasing geographical distance between generation and consumption AUSTRIAN POWER GRID AG VERBUND`s Analyst Day 2013 7
Wind power forecast deviation on 21/03/2013 1.400 [MW] 1.200 1.000 800 600 400 200 maximum capacity of wind power real time extrapolation of wind power generation day ahead schedule for wind power generation - D G AUSTRIAN POWER GRID AG VERBUND`s Analyst Day 2013 8
Products to balance the system FCR Frequency Containment Reserves: +/- 66 MW based on weekly tenders Annual Volume: ca. 20 million FRR Frequency Restoration Reserves: +/- 200 MW based on weekly tenders Annual Volume: ca. 100 million RR Replacement Reserves: 25 MW / +150 MW based on weekly tenders Annual Volume: ca. 20 million Target: To develop a European Wide Balancing Market D D G G AUSTRIAN POWER GRID AG VERBUND`s Analyst Day 2013 9
Crucial consequences for the grid operation Forecasts on the 24/3/ for Monday 25/03/2013 Wind Solar Source: http://www.transparency.eex.com >17 GW 12:00 Source: http://www.transparency.eex.com ~14 GW Price 00,00 Day Source: www.eex.com/de/marktdaten/handelsdaten/strom weekend Lower level Day Control block APG: Thermal power plants shut down Record high reached for scheduled import from Germany (~7200MW) AUSTRIAN POWER GRID AG VERBUND`s Analyst Day 2013 10
Estimated load flow forecast for Monday 25/03/2013 Load flow situation in Europe BE NL PL 20:00 CZ Sum of Export DE: 11 GW DE SK Examples of other importing countries FR CH IT AT SL CR HU (approx.) Switzerland Hungary France Italy 2.800 MW 2.000 MW 2.000 MW 1.200 MW The consequences are wide area (European) load flows. AUSTRIAN POWER GRID AG VERBUND`s Analyst Day 2013 11
Countermeasures to stabilize the grid Increase of generation in Austria & Poland Decrease of generation in Germany 12:00 + 17:00 10:45 14:00 Emergency-Redispatch-Request by Tennet-D (400 MW) 12:00 17:00 vpst-request by 50HzT (600 MW) 17:00 20:00 vpst-request by 50HzT (300 MW) NL DE 1000MW CZ PL SK Lack in grid capacity leads directly to high redispatch costs CH AT SL HU APG +1000MW AUSTRIAN POWER GRID AG VERBUND`s Analyst Day 2013 12
Network Optimization and Network Expansion Options for action to enable the Energiewende Optimization of operational management Grid upgrade and network optimization Network expansion Forecasting tools (TSC) Online data exchange and monitoring Coordinated redispatch Largely exhausted potential Thermal rating High-temperature conductors Upgrade 220kV to 380kV Limited potential exists, feasibility needs to be simplified New lines DE: HVDC and overlay network Great potential for further developments AUSTRIAN POWER GRID AG VERBUND`s Analyst Day 2013 13
Renewables need powerful grids Danube Hydro Power Approx. 6.000 h Full load hours / year 2020 Wind Energy Approx. 2.200 h Approx. 2.200 MW Power Approx. 4.000 MW Approx. 13,2 TWH Energy per year Approx. 8,8 TWH Need for powerful transmission grid Power is the criteria for grid expansion planning AUSTRIAN POWER GRID AG VERBUND`s Analyst Day 2013 14
European initiatives on energy infrastructure TYNDP by ENTSO-E A total of 112 projects of Pan-European Significance 52,300 km of new or refurbished Extra High Voltage routes E I P INFRASTRUCTURE- DIRECTIVE Infrastructure Package Need for Investments in Electricity Grids: 140 billion until 2020 Projects of Common Interest (PCI) Grids > 220-kV Faster Permit Granting Procedures Competence at local authority level Austria submitted 7 projects as PCIs Autumn 2013: European Parliament / Decision of PCIs AUSTRIAN POWER GRID AG VERBUND`s Analyst Day 2013 PROJECT BONDS INITIATIVE CONNECTING EUROPE FACILITY 9,1 billion until 2020 INNOVATIVE FINANCIAL INSTRUMENTS 15
Austria as a future electricity hub Slavetice CZ Sokolnice Pump storage Wind Altheim Simbach Pleinting Pirach Dürnrohr Bisamberg Sarasdorf SK Solar D Neuötting Ranshofen Salzach St. Peter Salzach Neu Hausruck Ybbsfeld WIEN SÜDOST Neusiedl Györ Györ Obermooweiler Obermooweiler Energie AG Weißenbach Steweag-Steg Steweag-Steg Ternitz Winkeln Zell am Ziller Pongau Hessenberg Südburgenland CH Westtirol Steweag-Steg Steweag-Steg Oststeiermark H Pradella Lienz Kainachtal Soverzene Podlog Maribor IT SLO AUSTRIAN POWER GRID AG VERBUND`s Analyst Day 2013 16
APG-Network Development Plan 2012 until 2022 11-6 APG intends to invest 2.5 billion within the next 10 years 11-8 380-kV-Ring 11-2 NEP 11 NEP 12 AUSTRIAN POWER GRID AG VERBUND`s Analyst Day 2013 In realisation Planned Completed 17 projects in substations line projects
Regulatory Regime PRINCIPLES Cost-Plus regulation CAPEX: return for equity and debts OPEX: cost coverage The regulator reviews the costs annually and this leads to new tariffs costs 2012 tariffs 2014 2012 (t-2) 2013 (t-1) 2014 (t) In principle, ex-post viewing of OPEX and CAPEX Exception: ex-ante viewing of CAPEX related to the actual net development plan Regulatory account revenue cap AUSTRIAN POWER GRID AG VERBUND`s Analyst Day 2013 18
Regulatory Regime Regulatory account: revenue cap CAPEX Control of adequacy of costs Ex-ante allowance of net development plan investments WACC x RAB WACC for 2013 = 6.42% pre tax RAB for 2013 = 1,119 million OPEX Control of adequacy of costs Time-lag Cost adjustment factors Productivity factor System operator price index C2014 = C2012 * (1-Xgen) * (1+NPI) AUSTRIAN POWER GRID AG VERBUND`s Analyst Day 2013 19
Conclusion Energy politics are mainly driven by climate politics A reliable Transmission Grid is the basic requirement for the realisation of the Energiewende Public does not get the big picture about renewables and the related need for grid expansion The regulatory regime has to be improved to give investment incentives AUSTRIAN POWER GRID AG VERBUND`s Analyst Day 2013 20
Super grids Offshore Windparks E-Mobility Smart grids Solar AUSTRIAN The POWER transmission GRID AG grid is the backbone of security of supply. 21
VERBUND Analysts Day 2013 Strategy Wolfgang Anzengruber CEO & CFO VERBUND AG London, June 12, 2013
History and current situation
Development of VERBUND Strategic milestones 174 94 82 Deregulation Boom years Crisis, energy turnaround 1998 2000 2009 2013 Start of market deregulation in Europe Wholesale prices collapsed Deleveraging, cost cutting, impairments and provisions Development of VERBUND earnings/ m 57 84 115 53 155 48 Wholesale price rally Strong increase in cash flows and results Investments in new markets in Italy, France and Turkey 200 77 80 235 120 349 195 501 243 579 Declining wholesale prices (low demand, low CO 2 prices, overcapacities) Adjustment of strategy, disinvestments, cost cutting, capex cut, impairments, deleveraging 423 687 461 644 678 401 565 356 660 389-415 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Cash outflows for Capex Net income Page 4
Current market environment CO 2 -prices ( 87%) / /t 30 25 20 15 10 5 0 1/1/08 1/1/09 1/1/10 1/1/11 1/1/12 1/1/13 Source: EUA spot prices Electricity demand/ TWh 3,064 2,909 3,018 2,948 2,947 624 587 612 610 609 Development of renewable capacities in Germany/ GW 150 100 50 2012-2025: Wind +90% Solar +100% Hydro +6% 0 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 Others Hydro Wind Solar Spot gas vs. oil-indexed gas/ /MWh 50 40 30 20 Oil-indexed gas Spot gas (NCG) 10 2008 2009 2010 Austria/Germany EU 27 Source: IHS CERA, E-Control 2011 2012 0 1/1/09 1/1/10 1/1/11 1/1/12 1/1/13 1/1/14 Page 5
Development of electricity prices Spot prices/ /MWh 120 100 80 Peak 60 40 20 Base 0 1/1/08 1/1/09 1/1/10 1/1/11 1/1/12 1/1/13 Source: EPEX spot Quarterly futures/ /MWh Monthly futures/ /MWh 140 120 100 Peak 80 60 40 20 Base 0 1/1/08 1/1/09 1/1/10 1/1/11 1/1/12 1/1/13 Source: EEX Year ahead futures/ /MWh 140 120 100 80 60 40 20 0 Q1 Q3 08 08 Source: EEX Q1 09 Q3 09 Q1 10 Q3 10 Q1 11 Peak Base Q3 11 Q1 12 Q3 12 Q1 13 120 100 Peak 80 60 40 20 Base 0 1/1/08 1/1/09 1/1/10 1/1/11 1/1/12 1/1/13 Source: EEX Page 6
Challenges in the current market environment EEG costs in Germany for consumers of about 20.4 bn in 2013 Corresponds to a burden on households of 5.3 ct/kwh (compared to market price of about 4 ct/kwh) economically efficient development? Over 30,000 MW installed photovoltaic-capacity in Germany (1,000 full load hours) About 1,500 MW installed photovoltaic-capacity in Greece (2,500 full load hours) coordinated, location-optimized development in Europe? Necessary expansion of about 1,800 km transmission grid (2011: 100 km new in operation in Germany) Generation facilities 1990: 1,000 and in 2012: over 1.5mn in Germany who coordinates security of supply? Market distortions: competitive vs. regulated zones Power plants with secured capacity under economic pressure can the electricity market design continue in its current form? Phase out of nuclear power in Germany from 30/6/2011 Increase in CO 2 emissions in Germany 2012: +2% Energy turnaround: Good thinking poor design? Sources: BDEW; BSW Solar; CERA; Umweltbundesamt Page 7
VERBUND Strategy Technologies Focus on hydropower but investments into new plants only with premium on profitability Expansion of wind power investments into regulated renewables Restructuring of thermal power plants no further investments into thermal power plants Expanding the regulated grid business investments into high voltage grid, no disposal Markets xxx Key markets Austria/Germany expansion of consumer base Italy restructuring of Sorgenia in a minority position France Evaluation of measures to reduce cash outflows of the 2 CCGTs Turkey Highly profitable exit Efficiency programme Further reduction of growth capex by 300m Further disposal potential of 70m Cost savings of about 130m until 2015 Retail market Expansion of retail volumes in Austria and Germany from 9.5 TWh to 11.1 TWh in 2018 Positioning VERBUND as a green industrial electricity provider Offering new services like energy management and e-mobility Maintain the A rating Page 8
Technologies
Hydropower Our DNA 125 hydropower plants (incl. purchase rights) 104 run-of-river power plants (4,395 MW) 16 storage power plants (1,297 MW) 5 pumped storage power plants (2,034 MW) Average yearly output of 28,681 GWh Average age and costs of hydropower plants 17% > 60y, 62% 30-60y, 21% < 30y Full costs: r-o-r 21 /MWh Opex: r-o-r 14 /MWh Investments into hydropower plants until 2017 Investments of around 160m for the finalisation of Reißeck II and Kalsdorf Modernizations, refurbishments and efficiency improvements of about 155m Further projects in pipeline, realisation dependend on market environment Costs for run-of-river / /MWh 66 21 14 Peakload price ( 49/MWh) Baseload price ( 39/MWh) Old hydropower plants highly competitive, but no investment signals for new plants Newly built full costs VERBUND full costs VERBUND opex Page 10
Wind power Expansion 10 wind farms in operation or close to COD (250 MW) 1 wind farm in Romania (99 MW) 3 wind farms in Austria (49 MW) 1 wind farm in Bulgaria (16 MW) 5 wind farms in Germany (86 MW) Tariff schemes Romania: certificate / quota system Austria: feed-in tariff for 13 years Germany: feed-in tariff for up to 20 years Bulgaria: feed-in tariff Current tariffs/ /MWh Investments into wind farms until 2017 (184 MW) Investments of around 304m for 3 wind farms in Austria (57 MW) 2 wind farms in Romania (127 MW) Wind power is still strongly subsidised expansion of on shore wind power 140 Romania 95 Austria 93 Germany 70 Bulgaria Peakload price ( 49/MWh) Baseload price ( 39/MWh) Page 11
Thermal power Restructuring 5 thermal power plants 3 CCGTs 1 in Austria, 2 in France (1,690 MW) 2 coal power plants in Austria (651 MW) Indirect gas exposure of 1,875 MW (pro-rata) in Italy through Sorgenia Restructuring Reduction of cash outflows Gas contract renegotiations or cancellations Ongoing optimization of plants to more flexible market requirements Further evaluation of different options Sale of power plants Mothballing Dismantling Reduced seasonal availability No new investments into thermal power Gas exposure of VERBUND Assets Equitystake MW (100%) MW (prorata) Austria 76% 848 645 France 100% 842 842 Italy 46%* 4,106 1,875 VERBUND 5,763 3,300 * VERBUND shareholding in Sorgenia; MW (pro-rata) take into account 39% shareholding of Sorgenia in Tirreno Power Page 12
High voltage grid Regulated business 3,500 km transmission grid Operated by subsidiary APG Benefiting from central location in Europe Interconnections to neighboring markets Stable earnings and cash flows Cost-Plus regulation CAPEX: return for equity and debt OPEX: cost coverage Supportive for rating Investments Network development plan with 40 projects until 2022 Investments until 2017 of about 700m Tariff scheme 2010 2011 2012 2013 WACC 6.16% 6.32% 6.08% 6.42% RAB in m 901.6 932.1 1,050.0 1,119.3 Investments into regulated high voltage grid Page 13
Markets
Austria/Germany Future key markets Uniform market determined by EEX and similar regulation Historically strong position as wholesaler and trader Stable electricity demand Sufficient transmissioncapacities Green certificates high attractiveness of renewable energy generation Predictable political and financial environment Expansion of consumer base Expansion of renewable generation Page 15
German power market offering attractive medium-term upside German power generation market will be short significant volumes by 2020 Generation gap is projected to further increase beyond 2020 Run of river hydro provides baseload generation and is defensively placed in the merit order with significant cash flow generation even in the currently difficult market environment Hydro is the only renewable source able to provide stable baseload power compared to volatile renewables Attractive merit order position vis-à-vis coal and especially CCGT, which are and will remain under pressure German short generation position (GW) 100 80 60 40 20 0 8 19 27 31 33 38 42 2011 2015 2020 2025 2030 2035 2040 2045 2050 Nuclear Coal Oil Renewables Yearly high incl. 10% security Lignite Gas Storage Gap (of secure generation) Source: Prognos Study Bedeutung der thermischen Kraftwerke für die Energiewende dated November 7, 2012 Despite merit order shift hydro always profitable 0 Merit-Order effect Merit-Order without addl. renewables Merit-Order with addl. renewables Increasing renewables 20,000 40,000 60,000 80,000 100,000 120,000 140,000 MW Source: Prognos Study Bedeutung der thermischen Kraftwerke für die Energiewende dated November 7, 2012 Page 16
Italy 46% interest in Sorgenia Expansion plan finished 4,500 MW in operation Electricity and gas market environment and recession affects profitability High indebtedness of Sorgenia Strategic targets: Disposal programme Gas contract renegotiations Efficiency programme Restructuring measures Page 17
Other markets France 2 CCGTs Pont-sur-Sambre and Toul (842 MW) Enhancing competitiveness through termination of the gas supply contract by court decision for CCGT in Pont-sur-Sambre since April 2012 October 2012: full consolidation of the two CCGTs Evaluation of measures to reduce cash outflows Turkey Exit of the Turkish market with value realisation Others Romania: 99 MW wind farm in operation Further 127 MW wind power capacities under construction Bulgaria:16 MW wind farm in operation Albania: 53 MW hydropower plant Ashta: COD of second stage in 2013 Fixed feed-in tariff from public distributor KESH Page 18
Efficiency programme
Growth capex 2013 2017: 1.2bn Hydropower Investment volume 160m 430 MW 1 pumped storage power plant Reißeck II (COD: 2014) 19 MW 1 run of river power plant Kalsdorf (COD: 2013) Efficiency increase measures 155m (part of maintenance capex) Additional 72 MW, 101 GWh Further project pipeline: 480 MW Limberg III, 89 MW Inn joint power plant, etc. ( 420m not part of the 1.2bn) Wind power Investment volume 304m 57 MW in Austria (COD: 2015) 86 MW in Germany (COD: 2013) 127 MW in Romania (COD: 2014) Grid Investment volume 700m Projects based on grid development plan Further reduction of growth capex by 300m 1 VERBUND s share of total capacity: 194 MW hydro storage; 9 MW run of river Page 20
Details to the capex plan Growth capex/ m 441 71 230 126 14 297 50 74 186 183 18 156 158 167 17 10 9 7 124 100 11 13 Hydropower Wind power Grid Others 2013 2014 2015 2016 2017 Maintenance capex/ m 139 133 142 137 135 94 91 87 80 81 1 4 5 1 41 54 40 53 50 4 Hydro Thermal Grid 2013 2014 2015 2016 2017 Page 21
Disposals Sale of 26% interest in Bavarian Inn power plants to Austrian provincial utilities Wien Energie and EVN on June 8, 2011 Sale of KRV stake to KELAG on May 5, 2012 Sale of EKG stake to Stadtwerke Klagenfurt on Nov 21, 2012 Sale of Turkish Enerjisa stake to E.ON on April 24, 2013 Additional targeted disposals in 2014 and beyond 2011 2012 2013 2014 Sale of GBK stake to Kapruner Tourismus Holding GmbH on May 30, 2012 Sale of SSG stake to E- Steiermark on Jan 18, 2013 Further disposal potential of 70m Page 22
Cost cutting project in place Benchmarking Reduction of legal entities Outsourcing of non core activities Optimisation of maintenance and administration costs Stop of hiring new personnel Early retirement programme Reduction of other operating expenses Cost savings of about 130m until 2015 Page 23
Overview of efficiency programme Cost cutting, disposals and lower cash outs Capex reduction 2013 2017 300m Disposals 2013 2015 70m Cost cutting project 2013 2015 130m Total 500m Page 24
Retail market
Focus on expansion of the sales business Increasing overall sales activities Continuous growth in the household and commercial consumers segment in Austria Further significant increases in the market share of business and industrial customers planned Targets: 400,000 private consumers and >20% market share in the business segment Expansion of product range to include new, intelligent applications (eg. e-mobility, energy management, energy services) Household and commercial consumers Austria/ GWh +45% 879 2009 5,890 993 1,082 1,128 1,171 1,249 2010 2011 2012 2013E 2014E 6,458 6,808 8,411 8,400 8,650 1,341 1,438 1,535 1,632 2015E 2016E 2017E 2018E Business- & industrial consumers Austria, Germany/ GWh +13% 8,900 9,100 9,300 9,500 2009 2010 2011 2012 2013E 2014E 2015E 2016E 2017E 2018E Increase of sales to consumers from 9.5 TWh to 11.1 TWh until 2018 Page 26