General Economic Conditions 1)Sources: IHS (Institute for Advanced Studies): Press release 5 October 2018. WIFO (Austrian Economic Chamber): Monthly reports 04/2018 and 09/2018 as well as WIFO economic data, URL: https://www.wifo.ac.at/daten/wifo-wirtschaftsdaten, 05 October 2018. WKO (Austrian Federal Economic Chamber): Economic Situation and Forecast Release 10/2018 as well as Foreign Trade Update Czech Republic 10/2018.
The positive development of Energie AG's economic environment continued in the 2017/2018 fiscal year (1 October 2017 to 30 September 2018).
GDP Growth and Inflation
YoY real change (in %)
After a strong increase in the volume of world trade in the previous year, the global economic dynamic has weakened increasingly in recent months. New tariff restrictions and trade conflicts as well as the uncertainty in the context of Brexit combined with the sharp decline in exchange rates in many emerging markets since the beginning of 2018 have had a negative impact on foreign trade activities. Economic growth in the Euro zone is expected to be restrained but nevertheless stable, with forecasts of 2.0% to 2.3% for 2018 and 1.6% to 2.0% for 2019.
Despite a noticeable slowdown in the Austrian economy's growth rate in the second half of the reporting period, GDP growth of 2.7% to 3.0% is likely to be achieved for 2018 as a whole, and is thus at least at the level of the previous year. For 2019, economic experts expect a decline to between 1.7% and 2.0%. The downside risks of these forecasts have increased since spring, with the nature of Brexit and the threat of trade conflicts also posing potential risks here.
The medium-term forecasts for Austria up to 2022 assume an average increase in economic growth of 2.1% per year and are thus a quarter of a percent point above the expected development of the Euro zone.
The forecast for the Czech market, which is important for Energie AG, is above the EU average in forecasts for calendar year 2018, with an increase in real GDP of 3.3% (2017: 4.4%). This development was mainly driven by private household consumption and corporate investment. For 2019, average growth of 3.1% is forecast for the Czech Republic.
Energy Policy Framework
During the reporting period, the EU winter package “Clean Energy for All Europeans” was developed further. A political agreement was reached on the Building Efficiency Directive, which must be adopted into national law by March 2020. Following the political agreement on the Energy Efficiency Directive, the Renewable Energies Directive and the Governance Regulation, further steps were taken towards a decarbonised energy system in July 2018. Under the “Electricity Market Design” banner, discussions are currently underway on a new internal electricity market directive and regulation. The Austrian EU Presidency aims to reach an agreement by the end of 2018.
The ambitious goals of Germany's coalition government, such as phasing out nuclear energy by 2022, the plans for phasing out coal, increasing the share of renewable energy sources in electricity consumption to 65% by 2030 and implementing diesel vehicle driving bans, will have a decisive impact on the pan-European development of the energy market and on mobility.
The reform of the EU Emissions Trading Scheme (EU ETS), which is intended to make a material contribution to the efficient achievement of the EU-wide CO2 reduction target of at least 40% by 2030, was finalised in November 2017. The reform is intended to ensure an increase, from 1.7% to 2.2%, in the annual CO2 reduction path and significantly reduce the surplus allowances that are transferred to the market stability reserve.
In May 2018, the Ordinance on Effort Sharing in Non-Emissions Trading (ETS) and the Ordinance on the Incorporation of Emissions and Reduction of Greenhouse Gases from Land Use, Land Use Change and Forestry (LULUCF) were adopted. Both regulations are intended to ensure that the EU achieves its target of reducing CO2 emissions by at least 40% by 2030. To comply with the new Effort Sharing Ordinance, Austria must reduce its emissions in the non-ETS sector by 36% compared with 2005 until 2030.
The EU General Data Protection Regulation (GDPR) entered into force on 25 May 2018. In the first half of the fiscal year, precisely defined work packages prepared all relevant GDPR requirements for timely implementation in the Energie AG Group. The adjustments of the business processes for implementing the statutory requirements were subsequently completed in the reporting period and resulted in considerable additional expenses for all areas of the Group.
On 1 October 2018, the joint electricity price zone between Austria and Germany was separated. The reason for this were congested power lines between the generation areas in northern Europe and the southern consumer centres. Due to the restriction of tradable volumes, an increase in wholesale electricity prices in Austria compared with the German market was already expected in advance.
The European Court of Justice (ECJ) has granted comprehensive party status and judicial review rights for NGOs and neighbours in water law proceedings in the case “Protect Natur-, Arten- und Landschaftsschutz Umweltorganisation” (“Protect Nature, Species and Landscape Protection Environmental Organisation” C-664/15 dated 20 December 2017). The Austrian legislator has taken action in response to the need for action and has submitted proposals in the form of an Aarhus Participation Act. A resolution has not yet been passed.
In its ruling C-329/17 of 07 August 2018, the ECJ equated line route deforestation areas with genuine deforestation areas and thus significantly extended the scope of application of the Austrian EIA Act 2000. The EIA authorities now have to re-examine whether or not the 110 kV Almtal-Kremstal electricity supply project of the Group's own grid company Netz Oberösterreich GmbH (Netz OÖ) requires an EIA. Netz OÖ has decided to suspend construction work for the time being.
In December 2017, the “Government Programme 2017–2022” was presented by the new Austrian Federal Government. The Federal Government's Climate and Energy Strategy was subsequently published at the end of May 2018. Under the “#mission2030” banner, the reduction of greenhouse gas emissions and the expansion of renewable energies in Austria is being promoted through ambitious interim targets and a consistent decarbonisation path up to the year 2050 laid down. Most of the legal implementation will be taking place in 2019.
In November 2017, the Ministry of Economic Affairs issued an amendment to the Smart Meter Introduction Ordinance (IME Ordinance). The main point of this amendment is a new roll-out schedule, which gives grid operators more flexibility in equipping metering points with smart metering devices. According to the amended IME Ordinance, a degree of roll-out of 80% must be achieved by the end of 2020 and a degree of roll-out of 95% by the end of 2022. In practical terms, this will allow a deadline extension of up to 3 years for the grid operators to equip their systems with smart meters. The scope of functions of the meters for opt-out customers has also been clarified.