14. March 2014| MVV Energie

MVV Energie calls for bold reforms

Mannheim energy company in favour of competition-driven enhancement of Renewable Energies Act, better conditions for combined heat and power generation and the creation of a capacity market - Dip in earnings and positive outlook

The Mannheim-based energy group MVV Energie has called on the Federal Government to make "bold reforms" to ensure the success of the conversion in the German energy supply along ecological lines. "Berlin has to base its decisions on the interests of society and the economy as a whole rather than on specific interests of individual industries or stakeholders", stressed Dr. Georg Müller, Group CEO, at the company's Annual General Meeting held on Friday at the Rosengarten Congress Center in Mannheim. "For the energy industry, and thus for us as well, this means making our contribution as a company to shape the future energy system in social and ecological terms, but also so as to facilitate economic success."

The measures called for in the political arena relate above all to a competition-driven enhancement of the German Renewable Energies Act (EEG). MVV's CEO sees renewable energies as "already setting the pace" in the energy market. At the same time, with a 25 percent share of electricity generation in Germany, renewables were no longer a new industry and therefore no longer required the start-up assistance that had been suitable at the beginning. According to Dr. Müller, the current EEG legislation will distribute Euro 24 billion this year - three times more than the financial equalisation scheme between the federal and state governments (Länderfinanzausgleich). In its coalition agreement and initial discussions of draft legislation, the new Federal Government had steered the renewables expansion, previously uncontrolled, onto a course that made economic sense. This way, the government had taken a major, appropriate step towards achieving greater cost efficiency and cutting costs.

The CEO of the Mannheim energy company thus also contradicted fears that such measures might slow down the expansion in renewable energies. The position of renewables, and their acceptance within society, would rather be boosted if "technological innovation is reflected in lower production costs capable of being passed on to consumers".

Alongside EEG reform, a further key factor for MVV Energie involves enhanced support for combined heat and power (CHP) plants in conjunction with environmentally-friendly district heating and the creation of a capacity market not restricted to specific technologies. These "key cornerstones of supply reliability and energy efficiency" were indispensable for the energy system of the future. In view of this, Dr. Müller expressly welcomed the Federal Government's decision to retain the target of increasing CHP's share of electricity generation in Germany to 25 percent by 2025 and to introduce a new market design to secure the economic basis for operating conventional power plants and investing in new generation plants.

Record sales and dip in earnings
In its 2012/13 financial year (1 October 2012 - 30 September 2013), the Mannheim energy company for the first time in its history generated sales in excess of Euro 4 billion, thus surpassing the previous year's figure by 4 percent. For MVV's CEO, this "shows that we have the right strategic alignment and that our operating business is on track". On the other hand, the consistent decline seen in recent years in the margin from generating electricity has had an adverse impact on the entire energy industry, and thus also on MVV Energie. Comments Dr. Müller: "Current market developments have left their mark on our business as well". Operating earnings (adjusted EBIT) thus fell year-on-year by almost 6 percent to Euro 210 million in the 2012/13 financial year.

"This dip in earnings will continue to accompany us in the current 2013/14 financial year as well", stated Dr. Müller at the Annual General Meeting. For the current financial year, the company has affirmed its forecast of generating adjusted EBIT of between Euro 170 million and Euro 185 million. At the same time, MVV Energie expects its operating earnings to increase once again in the following 2014/15 financial year.

High pace of investment
This optimistic outlook is backed up by the persistently high pace of investment at the Mannheim energy group. By 2020, MVV Energie will invest a total of Euro 3 billion in renewable energies, energy efficiency, combined heat and power generation, generating energy from waste, expanding environmentally-friendly district heating at all locations and modernising and maintaining its grids and plants. In the first three months of the current financial year alone, i.e. between October and December 2013, MVV Energie invested a total of Euro 86 million, and thus 59 percent more than in the same period in the previous year.

Just a few days ago, the Group launched operations - via Energieversorgung Offenbach - at its latest wind farm with a total capacity of 30 megawatts close to Kirchheimbolanden (Rheinland-Pfalz) and at its second biomethane plant in Kroppenstedt (Sachsen-Anhalt). "We are already reaping initial benefits from these investments", stressed MVV's CEO. "This way, we are also limiting the negative effects of the tough market climate."

Consistent dividend
Against this backdrop, the Supervisory and Executive Boards are proposing an unchanged dividend of 90 cents per share for approval by the Annual General Meeting. The distribution total thus amounts once again to Euro 59.3 million.

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