The economic and energy policy environment will be influenced by the effects of the COVID-19 pandemic in the second half of the fiscal year 2019/2020. Energie AG responded to the developments of recent weeks at an early stage, introducing appropriate strategic and operational measures, such as the rapid establishment of a task force and proactive risk management by the Risk Committee, to safeguard critical infrastructure operations.
At this point in time, it is not possible to foresee the extent to which the legislative activities originally expected at the end of the first half of the year or at the beginning of the second half will be implemented by the responsible Ministry for Climate Action and the Environment. This applies in particular to the further development of the Energy Efficiency Act and the Renewable Energies Expansion Act as well as central regulatory content of the electricity market package in the Electricity Industry and Organisation Act 2010.
In terms of price expectations, the international energy markets are currently showing varying and in some cases contradictory signals. After the significant declines towards the end of the reporting period, the further course of the 2019/2020 fiscal year will also be influenced by the duration and effects of the COVID-19 actions and restrictions, and the associated economic development.
In the second half of the fiscal year, restructuring of of the sales business will be completed with the final amendments under company law. The new target structure will empower Energie AG to flexibly implement future legal and political requirements, especially in the course of the energy transition, such as providing a 100% supply of green electricity by 2030. According to initial estimates, the state of emergency prevailing in Austria and worldwide will lead to significant sales reductions in the area of business and industrial customers of the electricity and gas sectors in the second half of the 2019/2020 fiscal year. In the area of private customers, a slight increase in sales volumes can be expected due to the curfew measures and changed living conditions. The restrictions will also have an impact on acquisition and construction activities in the telecommunications sector (fibre-to-the-home/FTTH). The risks associated with the situation are being monitored, analysed and regularly reassessed. In addition, Energie AG supports the industry's goodwill arrangements for customers with financial difficulties due to the COVID-19 pandemic.
The general regulatory conditions for the Grid Segment continue to be regarded as stable for the current fiscal year. The parameters for the current electricity regulation period are fixed for five years. In terms of the general economic environment for natural gas, it can be assumed that the parameters will be fixed in the vein of the proceedings already completed for the industry and will be applied throughout the third regulatory period. The energy policy objectives from the government programme have not currently given rise to any concrete actions, but Netz OÖ is analysing the possible effects. The general conditions concerning COVID-19 continue to necessitate stable and reliable supply grids. Grid expansion and maintenance will therefore continue to push forward according to plan, although the general conditions give rise to expectations of delays, especially in the area of implementation (construction). Following completion of the smart meter roll-out, the telecommunications business area will consolidate existing areas in the second half of the fiscal year and replace the remaining analogue meters whose calibration validity is expiring.
Telekom GmbH's fibre-optic division will continue to expand its infrastructure in the second half of 2019/2020, focusing on connecting further mobile communications facilities with fibre-optic technology and on its role as a “wholesaler” for providers. The offer of further subsidy models by the government will also be relevant for Telekom GmbH's important contribution towards the continued expansion of the broadband infrastructure in Upper Austria.
In terms of the Waste Management Segment, the thermal plant at the Wels location is anticipated to continue to operate at high to very high capacity utilisation levels during the second half of the year, while a slight decline is expected at Lenzing. Declines in sales are expected, above all, at locations with a high share of commercial and industrial customers in certain sectors, and especially in the Tyrol region, where the customer portfolio includes many businesses from the tourism sector. After low prices at the end of the first half of the year, a recovery is expected in the recovered paper/cardboard sector. In the second half of the year, in addition to the measures being taken against the Coronavirus crisis, the focus will be on planning the reconstruction of the plastics sorting plant.
The objective for the Czech Republic Segment for the second half of the 2019/2020 fiscal year is to intensify cooperation between the water and heating companies. A further focus will be the integration of VAK Zapy s.r.o., which was acquired on 6 December 2019. In addition, several major concession bidding procedures are pending outside the regions currently covered; the Energie AG Bohemia group of companies and one of its subsidiaries will participate in these. The extent to which the COVID-19 pandemic will affect the course of these tenders cannot yet be assessed. This also applies to the short- and medium-term effects on current business. As far as can be seen so far, a shift or decline in service business is likely. The effects on heating and drinking water sales and wastewater generation cannot yet be reliably assessed. The anticipated trend is one towards a decline in the production sector, which could to some degree be compensated by increasing domestic demand.
During the second half of the 2019/2020 fiscal year, Energie AG's focus will continue to be on reliable performance of system-critical tasks, especially guaranteeing supply reliability for customers, while at the same time ensuring the highest possible levels of health protection for the workforce. The previous strategic goals in the areas of customer orientation, environmental protection, decarbonisation, digitalisation and cost management will remain unchanged.
From today's perspective, the COVID-19 lockdown is expected to have an impact on the Group's operating result, for example, due to a reduction in energy consumption by customers or price developments on international markets. However, the structural optimisation in Energie AG's sales and electricity procurement business, which is now fully effective for the first time, should partially compensate for these effects.
Reliable forecasts are extremely difficult and therefore exposed to a high degree of uncertainty under certain conditions. Assuming that the economy recovers quickly, Energie AG is optimistic, for the 2019/2020 fiscal year, of being able to achieve a positive development in earnings compared to the previous year's result, which was burdened by one-off special effects.
Linz, 29 May 2020
The Management Board of Energie AG Oberösterreich
Chief Executive Officer
DDr. Werner Steinecker MBA
Chairman of the Management Board
Dr. Andreas Kolar
Member of the Management Board
Dipl.-Ing. Stefan Stallinger MBA
Member of the Management Board