Interview with the Management Board of Energie AG Oberösterreich

The second half of the year under review was strongly affected by the global COVID-19 crisis. What challenges has this presented for the company?

Werner Steinecker: Like the vast majority of Austrian companies, we too have had to adapt to the new environment – most notably, the labour law situation, the sales market and the heavily fluctuating commodity prices. At Energie AG, we took the health crisis seriously at a very early stage and took it as read that we would need to implement stricter measures to give our customers and employees the best protection possible. As an operator of critical infrastructure, we have an extra level of social responsibility in this context.

Stefan Stallinger: Our main focus right from the outset was undoubtedly on maintaining our electricity, gas and heating supply while ensuring a smooth waste management process. The operations rooms and control centres were placed under enhanced protection for electricity and heat generation, grid, and waste incineration activities. Every conceivable measure was taken there to guarantee smooth operations, which we also succeeded in doing across all areas. In this context, I would like to take this opportunity to give my special thanks to all our highly dedicated employees. In terms of the economic impact, we identified major differences between business and private customers – for example, while the volumes disposed of at production plants fell drastically in some cases (due to downtime), they rose sharply in the household customer segment. In many cases, the first lockdown was obviously used for “decluttering”.

“At Energie AG, we took the health crisis seriously at a very early stage and took it as read that we would need to implement stricter measures to give our customers and employees the best protection possible.” Werner Steinecker

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From a financial perspective, the 2019/2020 fiscal year was a highly successful one for the company. What would you attribute that to?

Andreas Kolar: When we compare it with the previous year, we have to note that the 2018/2019 fiscal year was significantly affected by an impairment of the electricity grid. This became necessary due to a change in measurement method. Despite this, we can look back on a highly successful fiscal year. Once again, sustainable investments in promising areas and continuing optimisation measures were the cornerstones of the past fiscal year. The energy supply and waste management industries have proven comparatively crisis-resistant, even though COVID-19 has also had significant negative impacts on us.

“The energy supply and waste management industries have proven comparatively crisis-resistant, even though COVID-19 has also had significant negative impacts on us.” Andreas Kolar

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The Austrian Federal Government has set itself the goal, via the Renewable Energy Expansion Act, of ensuring that 100% of electricity consumption comes from renewable energy sources by 2030. What challenges will this spell for Energie AG?

Stefan Stallinger: We took a clean and environmentally friendly approach to power generation from a very early stage and adopted decarbonisation as a strategic goal. Upper Austria has always been Austria’s hydroelectric power capital, but there is now very limited capacity for expansion going forwards. Through our investments in wind power facilities in Burgenland and Lower Austria as well as continuing investments in photovoltaic plants, we have already set the course for a sustainable transition to clean energy in recent years. We plan to accelerate this commitment in the coming years, which will see us clearly focussing our investments on photovoltaics and storage technologies.

Werner Steinecker: One of the effects of pursuing a significantly higher share of solar and wind energy will be that our electricity system becomes more volatile. Its characteristic features will include under- and overcapacity depending on the time of year and the time of day. Our estimates assume that across Austria, up to 10 terawatt hours of electricity storage capacity will be necessary to accommodate the need for flexibility. The most commercially viable of the storage options are pumped-storage power plants. In the medium and long term, however, there is no way around the use of other energy carriers, such as hydrogen or synthetic methane in gas storage facilities. This has the greatest capacity potential among all the storage types.

Presumably, this Austrian Federal Government target also poses financial challenges for the company as a whole?

Andreas Kolar: Of course, this will involve enormous investment challenges for us. Given our status as a public company limited by shares (Aktiengesellschaft) with the different levels of access available to all our stakeholders, it is always necessary to weigh up exactly which investments can and should be made – and when. As a capital-intensive group, however, it is quite clear that investments are necessary to guarantee security of supply in the future, as well as to ensure a sufficient focus on sustainability and to generate the necessary and desired returns. The continuation of our excellent “A (outlook stable)” rating by Standard & Poor’s in March 2020 reaffirmed the high standard of due care demonstrated to date in this regard, and the sound nature of previous and planned decisions has been externally confirmed.

“Our main focus right from the outset was undoubtedly on maintaining our electricity, gas and heating supply while ensuring a smooth disposal process for waste materials.” Stefan Stallinger

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Even in this digital age, customer focus is a key success factor. What steps is Energie AG taking to stay close to its customers?

Werner Steinecker: Maintaining an ongoing dialogue with our customers is crucially important to delivering long-term success. Through our customer communication, we are able to develop tailor-made products and perfect our services, allowing us to accommodate customer preferences. In the past fiscal year, we therefore held both physical and virtual customer forums for the first time, where we discussed ideas for future services and products with our customers. These were a resounding success and will ensure that we remain closely attuned to our customers and their needs in the future.

The launch of our Austria-wide online brand “sigi” has also seen us develop a customer-friendly second brand, in which electricity and gas prices are always below the average market price. Packaged together with various gas, electricity and telecommunications products, we can offer an extensive product range with the right solution for every customer. Another vehicle that creates added value for our customers is the Energie AG Customer Club, which enables our customers to enjoy numerous advantages and discounts with participating partners.

In the year under review, the decision was made to undertake restructuring activities at Wels Strom GmbH, in which Energie AG owns a 49% stake. What do you expect to be the benefits of that process?

Stefan Stallinger: The advantages of the reorganisation will be improved allocation of responsibilities, better leveraging of the synergy that exists, and the associated positive EBIT effects. This creates a win-win-win situation for Wels Strom GmbH (WSG) and Elektrizitätswerke Wels AG, as well as for us. At Energie AG, we will be able to make the expertise of our staff members more readily available to WSG in the future (assuming responsibility for hydroelectric power facility management). The expansion of district heat extraction from Welser Abfallverwertung (WAV) will not only mean that WSG can profit from improved heat generation in the future – it will also mean that the entire Wels urban area can be supplied with sustainable, net zero-emission heating from the “Central Heating for Wels” infrastructure.

The economic and energy policy environment will continue to be dominated by the COVID-19 pandemic in the 2020/2021 fiscal year. What challenges will this spell for the 2020/2021 fiscal year?

Andreas Kolar: Uncertain conditions at large naturally make it more difficult to plan for the future. The economic growth forecast for the first half of the fiscal year is significantly lower than in the previous year. As a result, we have to expect further adverse effects on the sales market. Long-term planning is also made more difficult by laws whose consultation phase or entry into force has been delayed or postponed due to the pandemic. The fluctuations in the commodities market are another not insignificant factor giving rise to uncertainty. However, it is evident from the key financial figures from the fiscal year under review that Energie AG has proven to be an extremely crisis-resistant company in a stable industry. We are confident that we will once again be able to expertly master the challenges that will arise in the coming months.