35.Management of risks and opportunities

STRATEGIC OPPORTUNITIES | RISKS

+ |− Strategic opportunities | risks due to

• Changes in general climatic conditions
• Extreme events and their consequences (periods of heat | drought, flooding, storms, hail, forest fires, avalanches)
• Long-term changes in climatic and ecological conditions (precipitation frequency/volume, increase in average temperatures)
• Changes in the general energy policy and energy market environ­ment
• Changes in technological developments, in the market environment, in customer needs …

Measures:

• Continuous intensive monitoring of markets, competitors, customers, the climate and technologies
• Participation in research projects, …
• Early and intensive monitoring of strategic opportunities|risks

PROJECT OPPORTUNITIES | RISKS

+|− Project opportunities | risks

High, long-term investment costs, projects with a high level of complexity

• Underruns and overshooting of the planned values in terms of timing schedule, project costs and quality
• (Energy) policy uncertainty

Measures:

• Project management
• Risk management methods in the entire project cycle
• Optimised contract arrangements

SUSTAINABILITY OPPORTUNITIES | RISKS

In the medium term – in our 5-year planning horizon – we assume that climate-related opportunities|risks will remain within the statistical range of the past few years, and these have been taken into account in our (opportunities|risks) scenarios.

Potential long-term climate-related risks and opportunities beyond this have been taken into account in strategic decision-making.

For more information on opportunities|risks that may affect questions of sustainability as a result of Energie AG's business activities, see Sustainability Opportunities and Risks.

+|− Market price changes (electricity, gas, biomass and emission allowance prices)

Measures:

• Bundled management of commodity price risks by Energie AG Trading
• Risk strategies geared for the market environment
• Leveraging of internal synergies within the Group

+|− Electricity generated from

Hydroelectric power influenced by development of weather/climate

Measures:

• Optimised management of generation portfolio

+|− Electricity production from thermal power plants

Measures:

• Bundled management of commodity price risks by Energie AG Trading
• Long-term contracts
• Leveraging of internal synergies within the Group
• Risk strategies geared for the market environment

+|− Electricity, gas, heat and telecommunications services sales volumes

influenced by development of weather/climate, competition, economy, policy, …

Measures:

• Bundling of sales organisations
• Price guarantee
• Service and subsidy offerings
• Focus on digitalisation
• Positioning as an energy service provider

+|− Market price and volume changes in waste management

Recycling materials, industrial waste, domestic waste, delivery prices, thermal, …

• Increased competition from pretreatment plants and industrial co-incinerators
• Increased re-municipalisation efforts of municipal waste management associations

Measures:

• Long-term indexed contracts with defined delivery volumes and prices
• Focused market activities
• Intensification of cooperation with the public sector
• Further development of the digitalisation projects

+|− Contractual losses|gains and contract changes in the water|wastewater sector

Measures:

• Synergy projects
• Ongoing participation in (concession) tenders

− Facility risks

Impairment of the availability of facilities due to

• Technical malfunctions, sabotage, …
• Natural disasters such as storms, flooding, …

Measures:

+|− Physical weather-related risks

such as periods of heat | drought, flooding, storms, hail, forest fires, avalanches and their impact on third parties

Measures:

• Structural (flood) protection measures
• Strategy programmes “Replacing overhead medium-voltage lines that are particularly susceptible to disruption with underground cable”, “Replacing low-voltage lines”, consistent expansion of grid automation
• Crisis and contingency management
• Insurance

− Risks from information security, cyber-security and data protection

Measures:

• Optimised insurance strategy
• Comprehensive technical measures
• Management systems for information security and data protection

− Personnel risks

• Health and safety risks for company staff and temporary employees
• Loss of expertise and practical knowledge

Measures:

• Safety training courses for employees
• In-house health management project energy@work
• Apprentice|trainee education
• “Human Resource Management”, “Management by Objectives” and “Management Academy” Group policies

+|− Changes in the statutory environment

for the electricity and gas grids

Measures:

• Intensive and constructive dialog with the regulatory authorities
• Cooperation with interest groups

+|− Legal risks

from pending legal disputes

Measures:

• Legal support
• Provisions in the balance sheet
• Out-of-court settlements

+|− Political and statutory environment

• EU climate policy provisions and their implementation in Austria
• Statutory environment for project development and implementation
• Changes to subsidy regime

Measures:

• Intensive and constructive dialog with authorities and politicians
• Cooperation with interest groups

− Compliance risks

• Antitrust and corruption risks
• Financial market compliance

Measures:

• Group policies “Compliance Management System” and “Anti-Corruption”, “Handling on Insider Information”, “ICT Information Security Management”
• In-person training and e-learning courses

− Data protection infringements

• Accidental or unlawful destruction, loss, alteration or disclosure of data
• Hacker attacks

Measures:

• Group policies “Data Protection Management System” and “Data Protection Compliance Policy”
• In-person training and e-learning courses

+|− Recoverability

• Impairment reversals and impairment of assets, procurement rights, investments
• Impairment of receivables
• Creation of provisions for impending losses

Measures:

• Ongoing monitoring, sensitivity analyses
• Long-term contracts
• Counterparty risk management

+|− Changes in interest rates

Measures:

• Long-term fixed interest agreements

+|− Foreign exchange risk

Primarily from the transaction and translation risks of the Czech Group companies

Measures:

• Ongoing monitoring
• Currency hedging, where necessary

+|− Price changes in financial assets (securities, funds)

resulting from fluctuations in market value on the capital markets

Measures:

• Conservative investment policy
• Consistent monitoring
• On-going quantification of share price risks

+|− Opportunities|Risks from investments

• Fluctuations in the returns on investments
• Fluctuations in dividends received
• Changes in the impairment of participating interests

Measures:

• Ongoing monitoring

+|− Changes in the discount rate for provisions

The present value of provisions decreases at a higher discount rate and increases at a lower discount rate

Measures:

• Ongoing monitoring

− Counterparty risks

Complete or partial failure of counterparties

Measures:

• Ongoing monitoring
• Credit limit systems
• Hedging instruments
• Targeted strategy of diversification of business partners
• COVID-19 counterparty task force

− Liquidity risk

Measures:

• Centralised, forward-looking liquidity planning
• Sufficient liquidity reserves
• Open, partially committed credit lines