Water Segment

General Conditions in the Water Sector

The intensified drought of the last two years is increasingly causing problems for communities that are supplied from local resources. In the supply area of Energie AG's Water Segment, only a few municipalities were affected, and these were supported with emergency supplies. With regard to the low rainfall associated with climate change, however, initial studies are being carried out to develop new resources, strengthen supraregional supplies and network supply systems.

There were no material changes in the 2017/2018 fiscal year as part of the annual adjustment of the price regime for calculating water and waste water tariffs in the Czech Republic, which focuses on the appropriate profit of operating and infrastructure companies.

On a political level in the Czech Republic, the re-municipalisation of drinking water supply and sewage disposal was again discussed in the period under review. However, numerous tenders for concessions are still a sign of acceptance of the operator model. The introduction of an independent regulator for the Czech water industry was also discussed in the 2018 election dispute.

According to forecasts, the Czech Republic will see a phase of high economic activity in 2018/2019. However, the shortage of personnel can be seen as a bottleneck in the further development of the economy. The challenges facing the subsidiaries are therefore to fill vacant positions at competitive conditions.

Business Development in the Water Segment

The Water Segment generated sales revenues of EUR 137.8 million in the 2017/2018 fiscal year. Despite the disposal of Group companies WDL GmbH and Komunala ODTOK d.o.o. (formerly VARINGER d.o.o.) which have been attributed to the Waste Management Segment since 1 October 2017, this is equivalent to 1.4% growth compared to the previous year's sales in the amount of EUR 135.9 million.

EBIT in the Water Segment grew from EUR -8.1 million in the previous year to EUR 9.3 million. While the disposal of the operating activities of WDL GmbH and Komunala ODTOK d.o.o. reduced earnings compared with the previous year, one-off effects from impairments at WDL GmbH and CEVAK a.s. in the previous year had reduced EBIT. In operational terms, growth in the core business area of drinking water supply and waste water disposal, as well as in the service sector, was achieved in the reporting period. Further positive effects on EBIT in the Water Segment are attributable to the strengthening of the Czech koruna against the euro. In addition, a new acquisition at the end of the previous year was responsible for EBIT growth.

In fiscal year 2017/2018, a total of 46.3 million m³ drinking water and 43.8 million m³ of wastewater were invoiced in the Water Segment. The drinking water volumes were down by 12.3% on the previous year's level and can be attributed to the disposal of WDL GmbH. Adjusted for the volumes of WDL GmbH, an increase of 5.0% was achieved for drinking water. Waste water volumes were slightly higher than in the previous year, by 0.7% (adjusted: 1.2%).

In the Water Segment, around 915,000 inhabitants were supplied with drinking water as of 30 September 2018. Waste water disposal was carried out for around 708,000 customers.

Stable Development in the Czech Republic

VODOSPOL s.r.o., which was acquired towards the end of the last fiscal year, was integrated into the commercial and operational processes in the Water Segment and assigned as a subsidiary to the geographically adjacent ČEVAK a.s.

In Kolín, the wholesale department was spun off from VODOS s.r.o. and has operated as an independent entity named VODOS Velkoobchod s.r.o. since 1 October 2017. The object of the company is the wholesale of water materials (e.g. pipes, fittings) associated with the drinking water and waste water business, where the intent is to establish a better position, on the external market in particular, as a result of organisational realignment.

Service sales revenues on the Czech market developed to above the previous year's level. Again growth was achieved in construction assembly services and in wholesale revenues.