13. May 2011 | MVV

MVV Energie committed to "energy turnaround"

Mannheim energy company posts stable half-year earnings - full-year forecast confirmed: sales and earnings to match previous year's figures

The Mannheim-based energy company MVV Energie (WKN: A0H52F, ISIN: DE000A0H52F5) has clearly underlined its commitment to the "energy turnaround" in Germany. Upon the presentation of the financial report for the 1st half of the current 2010/11 financial year (1 October 2010 - 31 March 2011) in Mannheim on Friday, company CEO Dr. Georg Müller stressed that "renewable energies and energy efficiency will gradually become the key pillars of a sustainable energy supply in the coming years". The exit from nuclear energy was therefore irreversible. "Nuclear energy is not a useful stop-gap, but a thing of the past." MVV Energie was already on course towards a new energy future and had acted early to lay strategic foundations for expanding its use of renewable energies and environmentally-friendly cogeneration in conjunction with district heating. At the same time, the company was consistently investing in the profitable growth of its environmental energy and energy-related services subsidiaries and was further expanding its successful nationwide energy sales. The CEO of the publicly listed group of companies called on the Federal Government to present a convincing new energy concept, rather than a rehash of the previous one. Dr. Müller: "The world is a different place post-Fukushima. We need more than just statements of intent."

In the first six months of its current financial year, the energy company increased its sales year-on-year by 3 percent from Euro 1.84 billion to Euro 1.90 billion, with a slight reduction in adjusted operating earnings (adjusted EBIT) to Euro 204 million (previous year: Euro 210 million). In the first quarter, cooler weather conditions in the months from October to December compared with the previous year had led to substantial sales and earnings growth. In the quarter under report, however, this factor was almost entirely offset by the unusually mild winter months of January to March and the resultant loss of volumes in the district heating and gas businesses. Moreover, earnings had also been negatively affected by the year-on-year decline in generation margins, the so-called clean dark spread, and by the non-recurrence of the positive items in the gas portfolio in the previous year.

In the past six months, the Group managed to increase its electricity turnover, including trading volumes, year-on-year by a total of 9 percent to 12.5 billion kilowatt hours. Within gas turnover, whose development was largely characterised by declines in trading and portfolio management volumes, successful sales to industrial, business and secondary distribution customers enabled turnover here to be boosted by 22 percent to 3.1 billion kilowatt hours.

"Sales and Services", which includes all of the Group's sales activities and its energy-related services business, was once again the strongest reporting segment in terms of sales. With sales of Euro 1.16 billion in the 1st half of 2010/11, this segment contributed around 61 percent of the Group's total sales. The sales growth here was chiefly driven by successful nationwide electricity and gas sales to industrial and business customers, as well as by increased contracting offers in the energy-related services business.

On the other hand, sales in the "Generation and Infrastructure" reporting segment, consisting, alongside renewable energies, of conventional power plants, the energy from waste and biomass plants in the environmental energy business, and electricity, district heating, gas and water grids, amounted to Euro 160 million and were thus virtually unchanged on the previous year. At Euro 347 million, sales in the "Trading and Portfolio Management" segment reduced slightly compared with the previous year's figure of Euro 359 million. Sales in the "Strategic Investments" segment developed more positively, rising by Euro 17 million to Euro 227 million.

At Euro 74 million, earnings in "Generation and Infrastructure", the strongest reporting segment in terms of earnings, were slightly down on the previous year. The other reporting segments also reported only minor changes in their adjusted EBIT in the 1st half of 2010/11 compared with the previous year. Here, the CEO of MVV Energie was especially positive in his assessment of the balanced level of earnings contributions from the individual reporting segments, ranging from 36 percent at "Generation and Infrastructure", to 26 percent at "Sales and Services", 21 percent at "Strategic Investments" and 15 percent at "Trading and Portfolio Management". Taken together with its strong links to customers in local and regional markets and the stepping up in the cooperation within the Group, MVV Energie had thus proven significantly less susceptible to macroeconomic fluctuations than had other companies in the sector.

Annual target confirmed

Given the turbulent developments in the energy sector in recent months, the company expects the underlying framework to be unstable and energy markets to remain volatile in the 2nd half of its cur-rent 2010/11 financial year as well. Following very mild temperatures in April too, it remains to be seen how the weather factor will impact on the financial year as a whole. From a current perspective, however, MVV still expects to be able to match the high previous year's figures in terms of both sales (Euro 3.4 billion) and adjusted EBIT (Euro 239 million). This earnings target is nevertheless subject to the assumption that there are no further negative factors, such as any further narrowing in generation margins, further reduction in prices in the waste business or intensification in the regulatory or competitive climate.

MVV Energie relying on onshore wind power

With regard to the plans on the part of the Federal Environment Ministry to reduce the subsidies paid for onshore wind power plants, Dr. Müller has spoken out in favour of maintaining the current level of subsidy. "Any reduction in subsidies for onshore plants accompanied by preferential treatment for wind farms out at sea would send the wrong signal", stressed MVV Energie's CEO. "We must draw on the advantages offered by onshore wind farms to help in the speedy implementation of the energy turnaround."

Compared with offshore wind farms, which require massive expansion in transmission grids to bring the electricity generated at sea to consumers, onshore plants actually reduce grid expansion requirements. Dr. Müller: "Onshore wind power is a proven, economical technology. The electricity is produced where it is consumer." MVV Energie is therefore pushing for a reform of the subsidies paid for onshore wind power plants. Financial support is currently limited to a period of 20 years. Less profitable wind power locations receive extended initial compensation. Due to this time limit, however, it was often not possible to benefit from the full subsidy. Dr. Müller therefore proposes including the entire 20-year subsidy volume in the initial compensation by working with a qualified compression model. "That way, additional market potential could be accessed at costs close to the market."

Note: the complete financial report for the 1st half of the 2010/11 financial year can be found on the internet in the download section of our investor relations site at

www.mvv-investor.de

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Key Figures of the MVV Energie Group 1 October 2010 to 31 March 2011
    
Euro million2010/112009/10% change
    
Sales excluding electricity and natural gas taxes 1 8961 843+ 3
Adjusted EBITDA1275280- 2
Adjusted EBITA1204210- 3
Adjusted EBIT2204210- 3
Adjusted EBT2,3173166+ 4
Adjusted net surplus2,3117112+ 4
Adjusted net surplus after minority interests2,398104- 6
Adjusted earnings per share2,3 in Euro1.491.57- 5
Cash flow before working capital and taxes269282- 5
Cash flow before working capital and taxes per share in Euro4.094.28- 4
Free cash flow26-29-
Adjusted total assets (at 31.3.2011 / 30.9.2010) 43 5633 457+ 3
Adjusted equity (at 31.3.2011 / 30.9.2010)41 3661 233+ 11
Adjusted equity ratio (at 31.3.2011 / 30.9.2010)438.4 %35.7 %+ 8
Investments6790- 26
Employees (at 31.3.2011 / 31.3.2010)5 9096 006- 2

 

 

1 excluding non-operating IAS 39 derivative measurement items and including interest income from finance leases (previous year's figure adjusted)
2 excluding non-operating IAS 39 derivative measurement items and restructuring expenses and including interest income from finance leases (previous year's figure adjusted)
3 impact of expiry of Kiel put option
4 excluding non-operating IAS 39 derivative measurement items