Outlook

With regard to the energy policy environment and the corresponding opportunities and risks for the individual business models, the composition of the future federal government in Austria and the national implementation of the EU Clean Energy Package will be relevant for the 2019/2020 fiscal year. On the other hand, further energy policy activities in neighbouring Germany will also have a significant impact on the economic environment of Energie AG.

Based on current analyses, weakening of the growth dynamic is anticipated for the economic environment. This will have a corresponding impact on the development of the raw material markets, which represent a fundamental basis for price formation in the electricity and natural gas sectors.

Prices on the power futures market continued to fall after the end of the fiscal year 2018/2019. The year ahead base has slipped to its lowest level since the beginning of June 2019. Lower primary energy prices and the economic outlook are dampening expectations for the power futures market. In the event of an economic downturn, demand for electricity could fall considerably, putting prices under pressure. Traders therefore see further downward potential. In addition to electricity demand and primary energy prices, the uncertain price development of CO₂ emissions certificates, which will be influenced by a number of political decisions, remains a key influencing parameter. For the gas market, the existing oversupply situation is expected to continue. Assuming that other fundamental influencing parameters remain the same, it can be projected that prices will continue to stay at the current low level.

Vertrieb GmbH intends to keep electricity and natural gas retail prices for private and commercial customers constant in the next fiscal year. The decisive factor for Vertrieb GmbH will be the extent to which the general political conditions will enable it to position itself more strongly as an energy service provider.

Energie AG's electricity production capacities from Group-owned thermal power stations continue to be highly significant for providing grid reserve management. The CCGT power plants of Energie AG will again be available to transmission system operators for national grid support in the 2019/2020 fiscal year.

The coming fiscal year's business activities in the Grid segment will again be characterised by the advancement of major projects, particularly those associated with the “Electricity Grid Master Plan Upper Austria 2028” (Stromnetz-Masterplan Oberösterreich 2028), as well as the consistent continuation of priority programmes in the grids for natural gas and electricity. The general economic conditions for the natural gas grid in the third regulatory period were defined on 1 January 2018. However, the decision on the objections filed by the Austrian Federal Economic Chamber and the Federal Chamber of Labour is still outstanding. The design of the fourth electricity regulatory period was completed without any objections in the current year, so that, viewed holistically, a stable economic environment for the grid sector can continue to be assumed. As intended, the smart meter roll-out will continue according to schedule with the aim of achieving a roll-out quota of over 99.5% by the end of 2019.

For the coming fiscal year, the Waste Management segment still anticipates good capacity utilisation at its thermal plants. The protection of the plants against contaminant input and the search for new, innovative disposal solutions for these contaminants remain important issues. Price developments on the waste disposal market, such as for commercial waste, continue to be positive for the coming fiscal year, while those for scrap metal and waste paper/cardboard are still viewed as difficult.

Given that in the Czech Republic segment several of the water and heating companies operate in the same or neighbouring regions, a synergy project has been launched. The objectives for the fiscal year 2019/2020 are to further optimise market activities, push forward with organisational development, and intensify cooperation between water and heating companies. No significant changes are expected in the contract portfolio.

The strategic focus for the 2019/2020 fiscal year will be, on the one hand, on further increasing customer orientation in the combined sales division for electricity, natural gas, heating and telecommunications. On the other, the focus will be on further leveraging synergies on the basis of organisational optimisation. The topics of environmental protection and decarbonisation, and in particular the requirements of the EU Winter Package, and the future federal government will continue to play a decisive role in the activities of Energie AG. The ongoing implementation of the digitalisation strategy and consistent cost management in all areas of the Group complement the strategic orientation. Against the backdrop of the challenges posed by the energy policy environment, the competitive market situation and the general regulatory conditions, a positive development in earnings is expected for the 2019/2020 fiscal year.

Linz, 3 December 2019

The Management Board of Energie AG Oberösterreich