Austrian Utility Verbund Reports Sharp Fall in Net Profit

By Nicole Lundeen

VIENNA--Austrian gas and hydropower utility Verbund AG (VER.VI) Wednesday reported a sharp fall in its net profit for the first half of the year due to difficult trading conditions and low water levels.

Verbund said net profit for the first six months of the year slumped 86% on the year to 56.6 million euros ($76.0 million), down from EUR406.4 million in the first half of last year.

The utility attributed the fall in profits to a low water supply, which led to reduced hydropower generation, low electricity prices and several one-off expenses relating to its shut down of several of its thermal power plants. In addition, last year's earnings were positively influenced by a swap deal with German utility E.ON SE (EOAN.XE).

Revenue also suffered, falling 15% to EUR1.40 billion, while earnings before interest, taxes, depreciation and amortization dropped 56% to EUR354.8 million.

In May, Verbund announced plans to mothball or permanently shut around 2.5 gigawatts in power generation capacity due to "massive distortions in the European electricity market" that have hurt the profitability of its power stations. It is just one of many European utilities to follow this path in response to tough business environment created by government subsidies for renewable energy and cheap coal imports from the U.S., meaning turbines powered by renewable energies and coal are cheaper to run than natural gas generators.

The company confirmed its most recent outlook, last updated this month when the utility issued a profit warning. Verbund expects its 2014 group result to be around EUR70 million and 2014 EBITDA to be around EUR690 million.

Write to Nicole Lundeed at [e-mail]

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