Annual Report 2018 TIWAG looks back on a successful fiscal year 2018.

Posting profits before tax in the amount of € 78.4 million, TIWAG-Tiroler Wasserkraft AG remains a profitable company­­­ in spite of difficult conditions and is well prepared for the challenges ­­­that lie ahead.

Mag. Dr. Erich Entstrasser

Dipl.-Ing. Thomas Gasser Dipl.-Ing. Johann Herdina Report of the 95th fiscal year of TIWAG-Tiroler Wasserkraft AG from January 1 to December 31, 2018 ISO 14001:2015 No.03003/0 Table of contents

6 Year-on-year comparison 7 Company boards 8 Foreword by the Management Board

MANAGEMENT REPORT FOR THE COMPANY AND THE GROUP 13 The cornerstones of TIWAG’s business 13 Business model 18 Corporate strategy and corporate goals 19 Management accounting and controlling system 20 Research and development 21 Economic situation 21 Framework conditions 24 Course of business 33 Financial position, cash flows and profit or loss (separate financial statements) 40 Financial position, cash flows and profit or loss (consolidated financial statements) 48 Financial performance indicators 50 Non-financial performance indicators 53 Forecast, risks and opportunities 53 Forecast 53 Risks and opportunities 56 Overall assessment of risks and opportunities 56 Outlook

FURTHER INFORMATION ON THE FISCAL YEAR 61 Our customers 62 Our employees 66 Operation and maintenance of power stations 68 TINETZ-Tiroler Netze GmbH – system management and operation of the distribution network 74 Electricity trading 84 Other activities

FINANCIAL STATEMENTS FOR THE COMPANY AND FOR THE GROUP 94 Balance sheet as at December 31, 2018 96 Income Statement 2018 98 Consolidated balance sheet as at December 31, 2018 100 Consolidated income statement 2018 102 Development of consolidated equity as at December 31, 2018 103 Consolidated cash flow statement 2018

105 Notes 149 Audit opinion – Report on the Financial Statements 152 Audit opinion – Report on the Consolidated Financial Statements 155 Proposal for the appropriation of profits 155 Report of the Supervisory Board 156 Power source identification 6 Overview

Year-on-year comparison

TIWAG-Tiroler Wasserkraft AG 2013 2014 2015 2016 2017 2018

Electricity sales (in GWh) 17,236.0 17,727.1 17,456.9 16,534.6 18,874.5 16,743.9

Sales revenue (in € million) 1,048.9 968.7 948.0 806.7 808.5 931.4

Cash flow (in € million) 153.8 177.0 204.4 101.4 152.3 150.1

Profit before taxes (in € million) 121.4 108.2 124.3 75.0 75.8 78.4

Additions tangible assets (in € million) 114.3 120.3 123.6 91.0 87.8 96.9

Group

Sales revenue (in € million) 1,352.4 1,274.3 1,282.5 1,071.3 1,099.1 1,238.7

Cash flow (in € million) 204.8 221.3 245.6 151.7 226.4 190.0

Consolidated profit before taxes (in € million) 173.5 133.4 126.8 69.3 92.4 86.8

Additions tangible assets (in € million) 165.3 174.0 236.1 205.0 256.3 215.0 Overview 7

Company boards

Supervisory Board

Dr. lic.oec. Reinhard Schretter (Chair)

Patrizia Zoller-Frischauf (1st Deputy Chair), Member of the Provincial Government

Mag. Manfred Pletzer (2nd Deputy Chair)

Mag. Hartwig Röck

Univ.-Prof.in Dr. Hannelore Weck-Hannemann

Mag.a Julia Lang

Appointed by the Works Council:

Ing. Stefan Mark, Chair of the Central Works Council

Bernhard Paßler

Friedrich Vogt

Management Board

Mag. Dr. Erich Entstrasser (Chair)

Dipl.-Ing. Thomas Gasser

Dipl.-Ing. Johann Herdina 8 Foreword by the Management Board

Foreword by the Management Board

The TIWAG Management Board: Chairman Mag. Dr. Erich Entstrasser (center), Dipl.-Ing. Thomas Gasser (left) and Dipl.-Ing. Johann Herdina (right)

ved economic environment but, on the other hand, our achievement is also based on an efficient corporate structure, a diversified sales strategy, streamlining mea- sures and, in particular, the clear and strategic orienta- tion of TIWAG group.

Our central task as regional energy supply company for Tyrol is to ensure secure energy supply at compe- TIWAG looks back on a successful fiscal year 2018: With titive prices for Tyrol’s people and businesses. For us, a consolidated net income before taxes in the amount the most fundamental premise for fulfilling this task is of € 86.8 million, we were able to strengthen our posi- to act in a sustainable, socially viable way, ensuring a tion as a high-yield business and as the most profitable minimum impact on the environment. TIWAG group thus company owned by the Tyrolean government, despite guarantees secure, high-quality, clean and sustainable a challenging framework. By investing about € 215.0 electricity, gas and heat supply for Tyrol and will conti- million in our existing power stations, the expansion of nue to do so in the future. By making responsible use of hydropower capacities in Tyrol, our electricity, gas and local hydropower to generate sustainable electricity and heat systems and also in further corporate divisions, we by implementing energy efficiency measures, we also made an important contribution not only to safeguarding support European and national energy goals and are a and strengthening Tyrol’s attractiveness as a place of driving force behind ecological change in Tyrol. business but also to ensuring supply security and thus a high quality of life in the region. A large part of our success is due to our about 1,400 employees, who we would like to thank at this point. The flawed implementation of the so-called energy tran- They stand out due to their high level of commitment, sition in Germany caused significant distortions in the professional competence and, not least, a high service (Central) European energy industry system. In combi- orientation vis-à-vis our customers. It is, in particular, nation with low electricity prices, strong competition, the willingness of our employees to continuously adapt differentiated customer expectations and increased de- to new challenges and to keep evolving that needs to be centralization and digitalization in the energy sector in highlighted. general, these distortions have led to a decline in sales To promote this, our company sets great store on revenue and marginal income, both at the parent com- extensive­­­ education and training in accordance with in- pany and within the group as a whole. We were faced dividual talents and required tasks, which prepares our with a further challenge when the joint electricity pricing employees for the evolving requirements and enables zone between Austria and Germany, which had existed them to tackle such challenges joyfully and have confi- since 2002, was split up as per October 2018, which ulti- dence in their own capabilities. mately resulted in higher market prices in Austria. TIWAG group offers attractive and secure jobs in a motivating environment which encourages personal Despite these conditions in a difficult industry, we were strengths and appreciates respectful cooperation. able to not only stabilize the consolidated profit but to even strengthen our position on the market in the year In 2018, we passed major milestones on our way towards­­­ under report. On the one hand, this is due to an impro- a sustainable energy future. In addition to taking over Foreword by the Management Board 9

the shares of Verbund AG in the joint power plant on sustainable growth and a positive contribution to value the Inn river, where TIWAG now has a shareholding of added, the use of group-wide synergy effects and the 86%, the construction of this large-scale project could related strict cost management, efficient structures and be continued despite difficult conditions. The progress the continuous improvement of control and risk tools and of construction work related to the expansion and refur- management systems. bishment of the Kirchbichl power station proceeded as planned, and the Kühtai power station will be brought up We will continue to steer this course despite the difficult to the latest state of the art in the context of an intense economic environment – for the benefit of our custo- development program spanning several years. Owing to mers for whom we will remain a reliable and trustworthy extensive support packages dedicated to, for instance, local­­­ partner, and to ensure a safe and environmentally installing heat pumps, building photovoltaics stations friendly energy supply for all Tyroleans. and enhancing awareness, we also made progress in terms of energy efficiency. We once more confirmed our TIWAG – we make a contribution to protecting the role of pioneer in Tyrol in the field of e-mobility, mainly by c l i m a t e ­­­! pushing the expansion of e-charging stations in line with demand across the whole region in connection with an Innsbruck, June 2019 extensive roaming package and by increasing our fleet of e-vehicles. By using 100% green electricity for our charging stations, we make a valuable contribution to The Management Board the local reduction of greenhouse gas emissions. Mag. Dr. Erich Entstrasser All those measures are essential steps towards Tyrol’s electricity autonomy and also help protect the climate. Dipl.-Ing. Thomas Gasser Dipl.-Ing. Johann Herdina In line with the ongoing investments of our subsidiaries TINETZ and TIGAS in the expansion and maintenance of the electricity, gas and heat systems, it will be possi- ble for us to ensure sustainable supply security, also for future generations.

To enhance our presence in the market economy, we fundamentally revised the corporate design of the entire group of companies to create a uniform corporate image with a high brand recognition value.

The years to come will remain challenging for TIWAG group from an economic point of view; however, we feel confident about the sustainability of our course towards maintaining the value and profitability of the company, taking into account ecological as well as social aspects: concentrating on our core business, where we strive for

MANAGEMENT REPORT FOR THE COMPANY AND THE GROUP

13 The cornerstones of TIWAG’s business 13 Business model 18 Corporate strategy and corporate goals 19 Management accounting and controlling system 20 Research and development 21 Economic situation 21 Framework conditions 24 Course of business 33 Financial position, cash flows and profit or loss (separate financial statements) 40 Financial position, cash flows and profit or loss (consolidated financial statements) 48 Financial performance indicators 50 Non-financial performance indicators 53 Forecast, risks and opportunities 53 Forecast 53 Risks and opportunities 56 Overall assessment of risks and opportunities 56 Outlook 12 Management report for the company and the group

Thanks to investments in the expansion of infrastructure and the environmentally friendly and sustainable use of local hydropower resources in line with demand, TIWAG ensures a secure energy supply and sustainable value generation in Austria. Management report for the company and the group 13

The fiscal year 2018

I. THE CORNERSTONES OF (2) Value Propositions: TIWAG’S BUSINESS Customers use energy in a multitude of ways, from heating homes to generating high temperatures in pro- 1. BUSINESS MODEL duction processes, from ensuring mobility to powering electric­­­ engines, from using IT to providing lighting. As a vertically integrated energy company, we cover the entire energy industry value chain across all sectors, in- Our value propositions comprise classic electricity, gas cluding power station construction, trading, grids, and and heat supply to our customers, along with add-on distribution. We are Tyrol’s leading electricity, gas and products and innovative services. What our customers remote heating provider, with operations in other Aus- expect from us is supply security and grid stability, com- trian provinces as well as in Germany and South Tyrol. petitive pricing, innovative green electricity solutions, bespoke contracts, and transparent billing. More and Elements of our business model more customers are keen to benefit from more efficient (1) Customer Segments: ways to use energy as well as from the opportunities We ensure secure, high-quality, clean and sustainable afforded by digital transformation. supply with electricity, gas and heat for all of our custo- mers. Customer group allocation is based on our being We offer our retail customers electricity, gas and heat at present at all levels of the value chain and our ability competitive prices, professional customer service, and to flexibly generate electricity from hydropower sources. easy-to-understand tariff plans. We provide added value On the end-customer market, we segment our custo- for business and commercial customers that are forever mers by volume sold, consumption structure, load pro- on the lookout for streamlining and savings potentials files and metering technology on the one hand, and by by offering secure and high-quality one-stop-shop so- geographical location on the other hand – customers lutions. Key accounts can benefit not only from certified in Tyrol (our core market) and customers outside Tyrol. electricity from hydropower sources, but also from rela- In the retail customer segment, we supply our products ted services, extreme flexibility, and attractive product to household customers where billing is annual, in the combinations including different energy sources. The monthly usage segment, we deliver certified zero-emis- growing trend for digitalization and the upgrading of our sion electricity to industrial and commercial customers grid infrastructure generate novel and innovative energy as well as to multi-site customers. Key account custo- solutions with added benefits. Our digital services inclu- mers are broken down into specific segments based on de various online offerings for household customers, a customer structure, purchasing history, and volumes broad range of e-mobility charging solutions featuring sold. In the distributors segment, we deliver electricity uniform and transparent pricing, smart metering, sophis- to regional utility companies in Tyrol to enable them to ticated integration of prosumers’ photovoltaic systems supply their own customers. We are also present as a in our distribution system, and a bidirectional link-up of reliable trading partner on the electricity and gas who- other decentralized entities to our energy transmission lesale markets and engage in trading on national and system. international energy exchanges, both in spot and fu- tures markets. Trading, which is subject to strict rules (3) Channels: and regulations, provides us with fundamental data that The various customer segments have different needs are crucial for decision-making. Our energy generation and requirements. Favorable pricing, flexible contract portfolio enables us to offer flexible capacities and to terms, supply security, energy quality, and expert tech- supply our transmission system customers with different nical advice are factors we combine specifically for types of control energy. Through our regulated energy each of our customers. These varying criteria determine distribution systems, we offer our grid customers non-­ which sales, distribution and communication channels discriminatory access, supply security and a high quality will be used, regardless of whether it is existing cus- of service. tomers or new customers in new markets that we are 14 Management report for the company and the group

dealing with. In line with reach, scope of product range, framework in force. A geographical breakdown shows and level of customer advisory service, we differentiate that revenue is generated primarily in our core market, between traditional and innovative marketing channels, Tyrol, but the out-of-area share keeps growing. Gas re- breaking down activities further by key account manage- venue obtained in Austria, Italy and Germany amounts ment, regional retail and commercial customer support, to 17.9% (previous year: 18.6%) of group-wide sales service center, and internet. In operating our marketing revenue, coming mainly from regulated natural gas dis- channels, we cooperate with partner companies in a bid tribution and non-regulated natural gas sales. Key reve- to simplify processes and pool demand. Entry barriers nue drivers in the non-regulated gas segment include to trading on energy wholesale markets and energy ex- temperatures measured in heating degree dates and changes or participating in control energy market auc- price trends on international gas markets. tions are high. The relevant distribution and communi- cation channels are highly standardized and structured. (6) Key Resources: Electricity, gas and heat are distributed via grid-bound To be able to make our value propositions to customers energy systems. Electricity and gas grids are structu- in the various customer segments, we need to have red vertically, in transmission and distribution systems. appropriate key resources at our disposal. Capital- What is more, they are subject to government regulation, intensive­­­ tangible assets are of key importance to in- with grid access, charges, and the provision of system tegrated energy suppliers that offer grid-based energy services being regulated by public authorities. (electricity, gas and heat). Relying on our power stations, we are able to generate electricity from hydropower in (4) Customer Relations: a sustainable manner, offering our customers both free With competition becoming heavier and customer ex- access to the grid and secure energy supply based on pectations on the rise, it is extremely important for us to our electricity, gas and heat distribution systems. Finan- ensure customer satisfaction and customer loyalty. Both cial resources are just as important to companies with a result mainly from personal contact and from the fact that vast range of plant and equipment. TIWAG group funds TIWAG has a strong regional base and generates value its assets at roughly 50% each based on existing equi- for Tyrol. We use a well-known market research institute ty and borrowed capital with adequate maturity dates. to survey customer satisfaction and customers’ percep- As hydropower capacities in Tyrol are being expanded tion of TIWAG at regular intervals. The questions asked and digitalization is on our doorstep, raising the required cover an extensive range, from satisfaction with energy amount of capital is becoming a more and more import- suppliers, origin of electricity, supply security, ecologi- ant issue. Being a technology company that operates on cal responsibility to importance for the region. These national and international markets, we depend to a large surveys show not only what parameters and criteria are extent on having key human resources at our disposal important for customers in assessing performance, but – without expertly trained and highly motivated staff, we also help us to shape customer relationships, segment are unable to deliver on the promises we make to our our customer base in line with demand, and work out customers. tailored solutions. (7) Key Activities: (5) Revenue Streams: With value-chain levels having become unbundled, new TIWAG group generates the greater part of its revenue markets have come into existence which are linked to from electricity sales. In 2018, its share stood at 78.8%, one another and require a flexible marketing approach. up 0.8% from the preceding year. Electricity revenue is Coordinating these markets calls for professional tra- made up of regulated and non-regulated components. ding, which is ensured by our Energy Trading and Ener- In the non-regulated segment, revenue is driven by the gy Industry unit. We have our own trading capacities, amount of electricity we generate from renewables and which we use as a sales channel for our own output and by electricity market prices, while revenue in the regu- as a purchasing channel for covering supply obligations, lated segment is pre-ordained based on the regulatory optimizing our own energy generation and making pro- Management report for the company and the group 15

fits on margin trading. While the challenges currently A reliable infrastructure is a basic necessity for us to presenting themselves on the market come with great ensure supply security through our secure, high-perfor- opportunities, they also require powerful management mance systems. Partnerships with suppliers and IT pro- systems for profitability, risk and incentive control. viders are crucial for operation planning, grid expansion and congestion management. Another key activity apart from trading and trading-rela- ted portfolio and risk management is focusing on attrac- (9) Cost Structure: tive customer segments. With a view to implementing Cost structure comprises all the costs we incur in imple- our market strategy, we not only develop products, but menting our business model. As an integrated energy also suitable communication concepts for selling them. company, we build power stations, generate energy, and transport energy, both self-generated and procured, to Managing our flexible power station portfolio in close our customers. Secure energy supply is possible only alignment with our corporate strategy is pivotal for our with skilled staff, the use of generation and distribution success as a company. As a hydropower-based electri- facilities, and risk-optimized energy procurement. Given­­­ city producer, we manage both the technical and orga- the tasks we have to perform, our major cost items in- nizational aspects of power station operation. With such clude energy procurement and personnel. The large operation mainly driven by the market, rising volatility in amount of plant and equipment we need also entails a electricity prices leads to our power stations being used bulk of fixed cost. to a much greater extent. This results in increased on- going maintenance and standstills due to revision acti- Organizational structure vities. In conducting our operating business, we rely on inde- Planning and building new power stations requires key pendent legal entities, as well as on internal reporting expertise, expertise our company has plenty of, especi- units structured by function. Electricity business activi- ally when it comes to hydrological and facility planning. ties not subject to regulation come within the purview of Where grid operation is concerned, the major issues to TIWAG-Tiroler Wasserkraft AG; the distribution system, address are of a regulatory nature. Key activities apart which is subject to regulation, is run by TINETZ-Tiroler from regulatory management include grid planning and Netze GmbH; natural gas activities come within the sco- smooth grid operation, based on concepts for system pe of TIGAS-Erdgas Tirol GmbH, and heat-generating management, congestion management and procure- activities are taken care of by several group companies. ment of system services. Alongside the operational im- plementation of construction, maintenance and repair As the group parent, TIWAG-Tiroler Wasserkraft AG not tasks in the distribution system, energy data manage- only manages the group, but also provides group-wide ment is another key pillar of grid operation management. services, such as financing, treasury, IT, energy data management, management accounting and controlling, (8) Key Partners: legal, taxes, internal audit, business development and We source different resources form business partners HR management. outside the organization, for activities in different fields. The primary concern here is to balance the interests of The Management Board of TIWAG-Tiroler Wasserkraft various groups, such as shareholder, customers, em- AG has three members. Management Board chairman ployees, politicians, NGOs, local residents, the media, Erich Entstrasser is in charge of commercial opera- public institutions, cooperation and business partners, tions, which comprises various corporate functions as and suppliers. well as management of equity investments. In charge of Our business model works only with the help of a network energy industry issues and power station management, of suppliers and strategic partners. To build, expand and Management Board member Thomas Gasser’s respon- maintain our power stations, we need a large number of sibilities include energy efficiency, power generation, specialized suppliers over long periods of time. energy trading and energy industry as well as group 16 Management report for the company and the group

sales­­­ and electricity sales. All construction and enginee- ring-related issues, such as the planning and construc- tion of hydropower stations and plants, technical facility management and central procurement are in the hands of Management Board member Johann Herdina. The second top-management tier – the managing direc- tors of the major group companies as well as heads of segments and some departments – is responsible for earnings in their respective fields of business and works hand in hand with the Management Board. In addition, various specialized departments provide support and assistance to the Management Board.

The reporting units in the non-regulated electricity segment, which comprise Power Generation, Energy Trading­­­ and Energy Industry as well as Electricity Sales, are organized along the energy industry value chain.

Power Generation includes the power stations plus all corresponding operating and facility management ac- tivities, maintenance and hydrography, while Energy Trading and Energy Industry comprises dispatching, portfolio­­­ management, trading, energy management, contract management and monitoring. Group Sales in- cludes sales management, marketing and electricity sales. TINETZ-Tiroler Netze GmbH, which is in charge of regu- lated electricity business, operates our state-of-the-art, reliable energy systems. The functions – technical customer management, sys- tem management, grid secondary technology, grid facility­­­ management, project planning/construction and installation/ servicing – are organized along the lines of similar tasks in an effort to optimize division of labor and specialization. The company’s management is in charge of coordinating the functions with a view to overarching corporate goals. Specialized staff units – Administration/ Coordination, Security, and Environmental Protection – assist the management in preparing and reviewing de- cisions.

In addition to Natural Gas System and Natural Gas Trading, TIGAS-Erdgas Tirol GmbH also has units for Remote Heating, CNG Filling Stations, Energy Facility Management, Biogas Activities and Electricity Sales to Germany. Management report for the company and the group 17

In the reporting year, the efforts initiated in prior years for streamlining the group’s organizational and operatio- nal structures were vigorously continued.

Segments The group is subdivided into three operating business areas – Electricity (unregulated), Electricity (regulated), and Gas and Heat. Other activities are shown under Investments­­­ and Miscellaneous.

The segment definitions applicable within TIWAG group are based on internal reporting structures which serve as the basis for management decisions. Segments are formed based on products, such as elect- ricity, gas and heat, and regulatory aspects, such as re- gulated and non-regulated fields of business. Currently, we have four reporting segments.

Gas and Heat Electricity Electricity Equity Investments Segments Non-Regulated Non-Regulated Regulated and Miscellaneous and Regulated

Legal TIWAG- TINETZ- TIGAS- entities Tiroler Wasserkraft AG Tiroler Netze GmbH Erdgas Tirol GmbH

▪ Reporting units ▪ Power Station Construction ▪ Electricity ▪ Natural Gas System ▪ Equity Investments ▪ Power Generation Distribution System ▪ Natural Gas Trading ▪ Service and Cross- ▪ Energy Trading / Energy ▪ Remote Heat Cutting Matters Industry ▪ CNG Filling Stations ▪ Group and Electricity Sales ▪ Energy Facility Management ▪ Biogas

At Power Station Construction, we plan our power sta- tions and manage construction projects up to the point where the facilities are taken into operation. With the help of our technical departments, we not only build new plants, but also keep existing ones operational and compliant with the latest state of the art.

At Power Generation, our focus is on efficiently and cost-effectively producing electricity, all while respecting environmental requirements. We have an extensive port- folio of power stations which we continue to expand and optimize. In the reporting period, we invested € 156.7 million in our existing power generation plants (including­­­ pro-rata share of electricity procurement rights). 18 Management report for the company and the group

Energy Trade and Energy Industry is tasked with cont- remains the property of the parent company, all relevant rolling and optimizing energy procurement and delivery investments are recorded in TIWAG’s annual financial and with managing the power generation portfolio, while statements, with depreciation being passed on to the also safeguarding generation and sales positions over subsidiary TINETZ by way of lease payments. the long term. Locations Group Sales, which covers all types of energy, and Elec- Geographically, our main presence is in the Austrian tricity Sales handle the selling of energy to our custo- federal province of Tyrol, due to the special locational mers. Our Sales units develop innovative products and factors inherent in hydropower-based power generation. solutions to meet customer demand as best possible. Given the relevant hydrological and topographic requi- Our subsidiary TINETZ-Tiroler Netze GmbH acts as rements, our key power station sites include Kaunertal, electricity system operator for TIWAG group. In the Imst, Silz, Kühtai, Achensee, Kirchbichl, Langkampfen, reporting­­­ period, the Electricity Distribution System seg- Amlach, and Kalserbach. ment invested € 55.3 million in upgrading and expanding our systems, which cover a total of 11,885 km. 2. CORPORATE STRATEGY AND The core business in the Gas and Heat segments is CORPORATE GOALS taken care of by the Natural Gas System and Remote Heat units. This is where the bulk of the funding provi- Our corporate strategy has three cornerstones: ded by TIGAS-Erdgas Tirol GmbH goes. In the reporting period, this TIWAG subsidiary invested a total of € 27.2 (1) TIWAG group guarantees the secure, top-quality, million, mainly in natural gas and remote heat systems, clean and sustainable provision of electricity, gas with a focus on ramping up the infrastructure in line with and heat in the Tyrol. growing demand. (2) TIWAG group supports European and national energy goals and is a driving force behind eco- Legal set-up of the group logical change in Tyrol’s electricity, gas and heat A stock corporation under Austrian law, TIWAG-Tiroler s u p p l y ­­­. Wasserkraft AG is registered in the commercial register (3) TIWAG group is committed to commercial success of the Innsbruck regional court under number 44133 b and to reliable and trustworthy partnership with our and has its registered address in Innsbruck. The com- customers, employees and business partners. pany’s share capital amounts to € 300 million, divided into 30,000 no-par value bearer shares held exclusively The strategy underlies the corporate goals defined by by the Province of Tyrol. TIWAG is the parent company the Management Board: of TIWAG group. It holds shares of subsidiaries such as TINETZ-Tiroler Netze GmbH (100%) and TIGAS-Erdgas (1) We are the backbone of supply security in Tyrol, Tirol GmbH (86% directly and 6.99% indirectly via Inns- guaranteeing a high quality of life for residents of Tyrol, brucker Kommunalbetriebe AG). as well as promoting the region as a business location. For more details on the consolidated group and the sub- We rely on our hydropower energy generation portfolio, sidiaries, associated companies and investors and in- which enables us to offer bespoke products for national vestees, refer to the statement of equity investments in and international energy markets, and our high-perfor- the Notes. TIWAG has a lease agreement, a personnel mance electricity, gas and heat supply systems, which secondment agreement and a profit and loss transfer guarantee secure energy supply for our core market, agreement with TINETZ. As the system infrastructure Tyrol­­­. We aim to position ourselves as an efficient elec- Management report for the company and the group 19

tricity-from-hydropower supplier that covers the entire partner and to have long-term business relations based value chain and is able to ensure reliable and safe ope- on trust. Such trust is underpinned by pro-active and ration of all plants and systems. open communication with all stakeholders.

(2) Our hydropower capacities are a sine qua non in cli- Based on TIWAG group’s strategy, the corporate goals mate-friendly power generation. for the year under report were discussed and laid down In line with our goals, TIWAG group invests into renewa- at a management retreat held at the beginning of the ble energies, with a significant competitive edge ensu- year. Special focus areas in 2018 were sector coupling, red by efficient plant operation. the split of the Austrian-German market and the related In an energy universe geared more and more towards management of storage power stations, as well as the energy efficiency and digitalization, we offer our custo- leveraging of synergies within the group. mers bespoke solutions and continue to both enhance our quality of service and expand our sustainable mo- bility solutions. Key goals in terms of climate and en- 3. MANAGEMENT ACCOUNTING AND vironmentally friendly power generation include careful CONTROLLING SYSTEM use of domestic hydropower resources, high levels of residents’ acceptance for the operation of our facilities, Value growth is pivotal for our company. We use a plan- and the continuous improvement of our environmental ning and controlling system which provides detailed and management system processes. timely insights into the current and expected develop- ment of our financial position, cash flows and profit or (3) Our goals in terms of business success include posi- loss. On the basis of the targets set by the Management tioning ourselves as market leader in Tyrol, achieving Board and the forecasts for business development, we profitable and sustainable growth in all segments, as prepare annual medium-term plans, budgets for the up- well as financial stability and a high level of profitability. coming fiscal year, and target figures for subsequent Key prerequisites for achieving these goals are optimi- years. The Management Board then submits the plans zing power station usage in energy management terms, to the Supervisory Board for approval. Over the course marketing our own output on the European electricity of the year, the forecasts are updated based on interim market, and applying strict cost management. financial statements. For our customers, we want to be a reliable and prefer- red partner that generates added value. We aim to high- The key ratios we use in controlling our operating busi- light the USP of our products and bank on strengthening ness include earnings before taxes, earnings before customer loyalty by being a reliable local partner. With interest and taxes (EBIT) and earnings before interest, a focus on energy-related services, we plan to improve taxes, depreciation and amortization (EBITDA), both at our offers in terms of decentralized power generation company and group level. and storage as well as sustainable mobility and energy efficiency solutions for our customers.

We want to offer safe and attractive jobs to our commit- ted staff, we train apprentices and do everything we can to minimize accident rates. We have business relations with many different partners – private households, other companies, organizations and public entities. We strive to be a reliable business 20 Management report for the company and the group

Financial performance indicators Separate financial statements Consolidated financial statements

2018 2017 2018 2017 in € 1,000 in € 1,000 in € 1,000 in € 1,000

EBIT 46,097.7 64,598.1 69,614.1 81,653.6

EBITDA 114,253.6 129,490.8 160,535.4 178,018.6

Earnings before taxes 78,401.0 75,794.4 86,777.9 92,388.1

Other important indicators are capital structure on the 4. RESEARCH AND DEVELOPMENT one hand, measured based on shareholders’ equity ratio and net debt to EBITDA, and, on the other hand, finan- We conduct numerous research and development pro- cial strength, determined based on cash flows, avail­able jects to explore ways to operate our power stations as liquid funds, as well as amount and structure of debt environmentally friendly and cost-efficiently as possible, financing­­­. to find solutions for integrating decentralized units into our supply system, and to develop products and services These financial indicators are part of our balanced that help our customers to use energy more efficiently, score­card, a strategic controlling instrument. improving quality of life and/or adding value. In our inno- Apart from financial indicators, this instrument provides vation efforts, we partner up with research institutions the Management Board with measures for processes, and universities. markets and employees which serve to translate our In the reporting period, we once again implemented, or corporate strategy into clearly measurable targets. Our participated in, various research projects focusing on balanced scorecard features four perspectives overall, sediment research and management, water-level fluc- as the financial perspective alone does not provide a tuations, and limnological monitoring programs, fish comprehensive enough view. protection and fish migration, as well as monitoring for potential damage analysis in tunnel structures. The market perspective presents the markets and market The exploitation of renewable energy sources, in com- segments where the companies operate. Performance bination with modern decentralized systems, will lead indicators in this area are market prices, interest rates, to an increase in the share of decentralized systems in market shares and energy efficiency savings potentials. energy generation and controllable loads. The process perspective covers critical internal pro- cesses which are of key importance for the companies. We plan to turn several pilot projects into a viable overall Major indicators here include the number of customer project for integrating renewables into our supply sys- contacts, registrations at the customer portal as well as tem. utilization of investment and maintenance projects. The employee perspective includes factors such as number The results of these pilot projects will be used to develop of employees and HR cost per head being reported to new products and services. decision-makers. Management report for the company and the group 21

II. ECONOMIC SITUATION Industry-specific conditions The joint electricity pricing zone between Austria and 1. FRAMEWORK CONDITIONS Germany, which had existed since 2002, was split up as per October 1, 2018 and replaced with congestion Macroeconomic conditions management capped at 4,900 MW. This has made an The continuing upswing comes on the back of stronger unobstructed exchange of electricity between the two international trade and rising investments. However, the countries impossible, with the effect that new markets risks underlying these forecasts have also increased with new pricing mechanisms are coming into being, and markedly; escalating trade tensions between the US on efficiency and liquidity on existing markets are declining. the one side and China and the EU on the other side have Separate futures contracts for the German and Austrian a dampening effect on external trade. In the eurozone, markets were set up on the electricity exchange already growth experienced a surprisingly strong setback in the more than a year ago. The new Phelix-DE future has qui- third quarter of 2018, with domestic demand providing ckly become the benchmark in European electricity tra- support, while external trade caused a slowdown. The ding, while the volume traded under the new Phelix-AT European Commission and the OECD expect growth in Future is marginal. Settlement pricing for the two newly the eurozone to slow down to about 1.75% until 2020. issued futures has changed as well. As of September Nevertheless, the labour market situation in Europe 24, 2018, trading in short-term Phelix-DE/AT futures keeps improving, and inflation, which was driven largely was discontinued, and from October 1, 2018, prices by the oil price, rose to above 2%. for Phelix-­AT futures have been determined based on Austria’s economy is in the late cycle of a strong ups- current market spreads against the corresponding Phe- wing. Recording values above the long-term average, lix-DE futures. As cross-border capacities were not all- the growth dynamics provided the basis for sustained ocated directly to the market participants, the market high growth for the year as a whole. The macroecono- split entails implicit auctions. Based on the bids made mic forecasts of the Austrian Central Bank (OeNB) for and the capacity available at the border stations, the ex- 2018 see growth in Austria come to 2.7%. In the cur- change determines and minimizes the price differences rent economic cycle, this is backed by strong domestic between the two market areas. On October 1, 2018, a demand alongside solid exports. Growth is forecast to total of 552,502 MWh was traded at an average price of fall to below 2% in the period 2019 to 2021, in paral- € 61.24/MWh on the Epex spot market for the market lel with the slowdown of international economic activity. area Germany-Luxembourg, and 85,383 MWh at an The Austrian economy has thus passed the peak and is average price of € 63.1/MWh on the Austrian market. slowly entering a robust growth trajectory. The number of people in payroll employment has grown significant- Germany is witnessing a market consolidation among ly. The national unemployment rate in accordance with large-scale energy suppliers. Under an asset swap, the Eurostat definition came to 4.9% and is expected to E.ON is taking over RWE’s entire distribution and retail decrease further, down to 4.5% over the next few years. supply business in exchange for RWE acquiring E.ON’s Inflation was stable at 2.1%, more or less mirroring the entire renewables power generation, in addition to an eurozone rate. The main drivers of rising prices are in- equity share in E.ON. We expect that this breaking up creases in energy product prices. The country will see of the value chain will increase specialization and thus a balanced budget in the reporting year and expects to have an indirect impact on the whole industry. close with a slight surplus in the years to come, as the debt ratio is declining. The ECB is steadily cutting back Energy policy and regulatory framework on the special monetary policy measures under its asset In 2018, the Austrian government presented #missi- purchase program. On October 25, 2018, the ECB Go- on2030, its new integrated climate and energy strategy. verning Council decided that the key interest rates would With due consideration of the headline objectives – eco- remain unchanged. logical sustainability, supply security, competitiveness, 22 Management report for the company and the group

and affordability – the plan is to reduce greenhouse gas The European Commission had already previously pre- emissions by 36% from 2005 levels, to 36 million tons of sented the Clean Energy Package, an energy legislation carbon equivalent; to raise the share of renewables in package comprising four proposals for regulations and gross final energy consumption to 45 – 50% by 2030; to directives. cover up to 100% of total electricity consumption (natio- The negotiations between Commission, Parliament and nal balance) from national renewable energy sources by Council on the second part of the package will take until 2030; and to improve primary energy intensity by 25 – 2019 to complete. Major results on the first part of the 30% compared to 2015. These ambitious targets requi- package achieved already in summer 2018 will result in re measures to be taken by all stakeholders at different amendments being made to the Energy Performance levels. We proceed on the assumption that the move of Buildings Directive, the Energy Efficiency Directive, away from fossil fuels will require massive investments the Governance Regulation, and the Renewable Energy in renewables as well as in a high-performance grid, that Directives­­­. Negotiations on the remaining rules – a direc- the heat transition will drive up power consumption, and tive and a regulation on electricity market design, on risk that industrial energy applications will foster sector cou- preparedness in the electricity sector, and for the Agen- pling. #mission2030 comprises ten flagship projects that cy for the Cooperation of Energy Regulators (ACER) provide for concrete actions. Among them, the projects – were continued under the Austrian EU presidency in E-mobility offensive, Thermal building renovation, Re- the legislative trilogue procedure. Each Member State newable heat, 100,000 roof-mounted photovoltaics and must implement the Clean Energy Package directives in small-scale storage program, Renewable hydrogen and national­­­ law within 18 months from their entry into force. biomethane are particularly relevant for TIWAG. It still remains to be seen to what extent such implemen- Tyrol’s government program for 2018 –2023 states in tation will affect TIWAG group’s operating business. its Energy chapter that the provincial government is committed to the Energy Autonomy for Tyrol by 2050 EU Regulation No 2016/679 on the protection of natural strategy. Under this strategy, energy demand is to be persons with regard to the processing of personal data halved by 2050, while the share of renewables is to be and on the free movement of such data and repealing gradually increased. The provincial government also Directive 95/46/EC was published on May 4, 2016 and endorses the plans for a further expansion of regional became applicable on May 25, 2018, following expiry of hydropower capacities. The water management frame- a two-year deadline. The General Data Protection Re- work plan for the Tyrolean uplands adopted by the Fe- gulation (GDPR) is directly applicable in all EU member deral Ministry of Agriculture, Forestry, Environment and states and provides uniform rules for the processing of Water Management underpins our ongoing projects in personal data by private companies and public entities this area. Further energy policy priority issues include within the European Union. Its key elements include the expansion of the electricity grid in line with demand, more responsibility on the par t of processors, more rights including integrating decentralized power generation fa- for data subjects, new information duties, improved data cilities into the system, with a view to maintaining supply security, compulsory appointment of data protection of- security and ensuring prompt recovery after a blackout ficers, and higher penalties for non-compliance. Even by setting up stand-alone operations. Additional goals though the GDPR is directly applicable, implementation are stronger linkups between electricity, heat and gas in national law was required in many areas, which is why systems, particularly in more densely populated areas, Austria made major changes in domestic data protec- and consolidation of heat, gas and biogas supply sys- tion law by way of the Data Protection Amendment Act tems in line with demand. An unequivocal commitment 2018. Implementing the new set of rules within TIWAG to e-mobility and to promoting full-scale coverage with required adjustments to be made to organizational and e-charging stations rounds out the highly ambitious go- business processes. vernment program. Austria implements the Aarhus Convention by way of the Aarhus Participation Act 2018 (Federal Law Gazette I Management report for the company and the group 23

no. 73/2018). The new legislation gives recognized en- up to more than € 80/MWh, but due to excellent wind vironmental organizations a right to judicial review befo- forecasts and low demand over the holidays, prices then re a national court in cases where environmental rights took a turn into negative territory, as expected. Even have been violated. though futures trading was hardly impacted by the sum- mertime record values, the 2019 base load saw a steep Climate and environmental policy framework rise. The price for the EEX Phelix 2019 base load started In the first half of 2018, the European Parliament and out the year at about € 36/MWh, climbing to more than the Council of Ministers agreed not only on measures € 50/MWh by the end of September, with a matching to continue and strengthen climate protection, but also strong rise in peak load. Early in October, the splitting on a modification of European emissions trading for the of the German-Austrian market area became a reality. trading period starting in 2021. The reform of the emis- The prices, with two different indexes for Germany and sions trading system (ETS), which came into effect in Austria, differed widely in the beginning, entailing price April 2018, calls for the affected sectors to cut back their hikes in Austria. emissions by 43% compared to 2005. The instruments for target attainment include reducing the number of Towards the end of the year, the base load for Germany emissions allowances by a factor of 2.2% for the period stabilized at around € 50, still recording more than € 56/ 2021–2030, instead of 1.74% as applicable previously, MWh before Christmas. The EEX Phelix 2019 peak load and to ensure a more flexible meeting of supply and de- rose from about € 46/MWh in January to € 65/MWh in mand by placing more emissions allowances in the mar- September before fluctuating in a range between € 60/ ket stability reserve. This bundle of measures will make MWh and € 65/MWh towards the end of the year. it possible to significantly cut back the number of existing allowances in the future. As a result, many carbon emit- In the reporting year, the long-term electricity market ters stocked up on emissions allowances early on, with was driven mainly by the price of coal and the price of European Union Allowance (EUA) prices recording a carbon allowances. Prices for emissions allowances marked rise as a consequence. We regard this is a signal started out at about € 8/t before shooting up to € 25/t that the reform has restored trust in emissions trading. due to the supply shortage caused by the market stabi- lity reserve. Developments calmed down from mid-Sep- On December 15, 2018, the 24th UN Climate Change tember, with prices falling to € 16/t. Towards the end of Conference (COP24), which took place in Katowice in the year, emissions trading experienced another hike up Poland, adopted a rulebook for implementing the world to the € 25/t mark in the wake of the UN Climate Change climate agreement finalized three years ago in Paris. Conference in Katowice. The coal price also experien- The participating countries agreed on ways to limit glo- ced a remarkable development. The API#2-2019 coal bal warming to 1.5 degrees above pre-industrial levels contract almost hit the USD 100/t mark in September and collected sizable amounts for climate reliefs funds. before dropping to below USD 83/t towards the end of Even though the rules adopted in Katowice are not com- the year. pulsory, naming and shaming is to ensure that the stan- dard will be complied with. 2018 also witnessed the return of price volatility on the gas market. Front-year prices for natural gas were hig- Energy price trends her than in 2017. Gas prices were matching the rise in The market environment for renewable energy produ- oil prices already at year-end 2017. January being much cers was highly favorable in 2018, with wholesale prices warmer than usual resulted in a temporary easing. Until for electricity recording a strong rise. The prolonged heat March, prices followed a sideways trend, with significant wave entailed massive price hikes on the spot markets. hikes to more than € 23/MWh over the summer, in spite Early September 2018 saw prices peak at € 70/MWh, of no bottlenecks being discernible on the demand side. after which the day-ahead continued to decline. At the Towards year-end, gas prices dropped to below € 21/ end of November, lack of wind drove spot market prices MWh. 24 Management report for the company and the group

In 2018, the oil market failed to indicate any clear directi- 2. COURSE OF BUSINESS ons. The price for Brent crude oil recovered at the begin- ning of the year on the back of production cuts by OPEC TIWAG’s business development was positive in 2018, and Russia. In spring and summer 2018, the announce- not least due to the improved economic environment. At ment of US sanctions against Iran and production cut- € 81.0 million, consolidated profit after taxes was more backs in Venezuela had prices rise to more than USD or less the same as in the previous year. 80/barrel. Towards year-end, the price for Brent oil fell to almost USD 50/barrel, due to oversupply, declining Significant events demand and the slowdown of economic activity. The oil In the first half of 2018, Verbund AG unilaterally enforced price did not rise again until the members of OPEC deci- a contract for the assignment of shares and the transfer of ded on production cutbacks in January 2019. contracts in respect of its shares in Gemeinschaftskraft- werk Inn GmbH. 10% of the shares in Gemeinschafts- As of January 1, 2019, we will adjust electricity prices for kraftwerk Inn GmbH were assigned to TIWAG, and Ver- the household segment in response to trends on inter- bund AG’s remaining rights and obligations under the national energy markets and to the separation of the partner and electricity procurement right contracts were German-Austrian electricity price zone. The increase transferred to TIWAG. Since the start of the second half of the net energy price for a standard household with of 2018, TIWAG has thus held more than 86% of the an annual consumption of 3,500 kWh amounts to 0.97 shares in Gemeinschaftskraftwerk Inn GmbH. cents per kilowatt hour. Taking into account changes in system charges and taxes, the total electricity price will As at July 1, 2018, TIWAG group’s corporate design was rise by about 2 percent, which translates into less than overhauled in a bid to ensure that TIWAG’s external pre- one euro per month and household. sence is as uniform as possible throughout the group, with a high brand recognition value. TIGAS will likewise adjust natural gas prices as of January­­­ 1, 2019. Prices for gas tariff products will be rai- The Kaunertal agreement, which had been in effect sed by 0.42 cent/kWh (incl. VAT). An average household since 1961 and was scheduled to expire in 2019, was customer with an annual gas consumption of 15,000 terminated early with effect from September 30, 2018, kWh will see the total gas price increase by around 6%. as of which date TIWAG took over the sole management and use of the Kaunertal power station. According to the 2018 electricity price analysis con- ducted by Oesterreichs Energie, an organization repre- The splitting of the German-Austrian price zone as of senting the interests of the Austrian electricity industry, October 1, 2018 entailed higher market prices in Austria, the monthly costs for energy and grid use of an ave- as had been expected. rage Austrian household with an annual consumption of 3,500 kWh amounts to € 35.6. Including taxes and At the end of 2018, the Supreme Administrative Court charges, the average electricity bill thus came to € 687, overturned the federal administrative court’s decision on which is equivalent to € 57.3 per month. The share of the the Kühtai expansion project. The Supreme Administra- supplied energy in the total price amounted to only 32.2 tive Court pointed out that the wording used for the ad- per cent in 2018, i.e. less than a third, with grid use costs ditional measures imposed by the lower-instance court making up 28.7%, and taxes and charges 39.1%. Elec- for the creation of compensatory moor areas had been tricity prices for households in Austria are in the middle too vague. The proceedings were referred back to the range by comparison with the rest of the EU, while elec- second-instance court for a new decision. tricity prices for industrial enterprises are significantly below the EU average. Management report for the company and the group 25

Electricity (non-regulated) In the reporting year, we further optimized our marke- Electricity production and procurement ting activities and further developed our diversified sa- Electricity production and procurement is comprised of les strategy. Electricity sales continue to be faced with power generated in our own (pumped) storage, run-of- a challenging competitive environment. In our core mar- river and threshold power stations, bartering, and elect- ket, Tyrol, electricity sales in 2018 came to 4,135.9 GWh, ricity purchased from other suppliers. We are the largest which is 2% or 84.3 GWh less than in the same period hydropower producer in Tyrol. In 2018, the volume gene- in the previous year. 61.1 GWh of this reduction is at- rated in our own plants increased by 34.1 GWh to 3,049.8 tributable to household customers. In the industrial and GWh, in spite of the dry summer and overly warm fall, business customers segment, the market environment is while the total volume of electricity produced and pro- competitive, too, with the requirements imposed by the cured over the same period amounted to 16,743.9 GWh Energy Efficiency Act making matters even more com- (previous year: 18,874.5 GWh). The extraordinary dry plicated. In the commercial customers segment, acqui- period did not negatively impact total electricity produc- sition activities are doorstep-based, via intermediaries, tion because reservoir levels were high. while online marketing is the tool of choice for the retail segment. Our run-of-river and threshold power stations, along with our flexible storage and pumped storage power Long-standing business relationships as well as new stations, provide an optimal power generation structure. customers won by the sales teams mainly outside Tyrol­­­ Our power ­­­stations, which in total have a nominal out- have helped us strengthen our market position. Our 2018 put of 1,551 MW, enable us to optimally adapt to ener- sales campaign succeeded in increasing the volume of gy market conditions. The ability to adjust the output of out-of-area electricity sales. our storage and pumped storage power stations at short notice­­­ makes it possible to create flexibility products and According to the electricity labeling scheme under the provide system services. In the event of a blackout, the Electricity Industry and Organization Act 2010 (ElWOG), blackstart capabilities of our power stations ensure they we supply electricity from solely renewable energy can supply the power that is needed to resume grid ope- sources; in addition, we also offer – through our sub- ration and restore regular power supply. sidiary Ökoenergie Tirol – highly ecologically-minded customers­­­ green electricity that is 100% hydropower-­ The majority of electricity purchased from other sup- generated. The relevant electricity labeling can be found pliers comes via Austrian and foreign electricity exchan- on customers’ bills. ges as well as OTC markets, with due consideration of optimized procurement structures. Investment/Maintenance Investments help us future-proof our business. Electricity consumption Ever since our company was founded in 1924, we have Electricity sales in the period January to December been investing in expanding hydropower capacities and 2018, which include all trading, distribution and barter ensuring supply security. activities, were lower than in the same prior-year period. In the reporting year, consumption amounted to 16,743.9 In the year under report, we continued to work on our GWh (previous year: 18,874.5 GWh). projects, investing a total of € 186.5 million into exis- ting power stations, into expanding hydropower capaci- The changes on the energy markets raise the stakes and ties in Tyrol, into the distribution grid, into information require flexible and short-term marketing and optimized technology and other areas. Our high equity ratio and power station management. We operate on national and well-­balanced financing structure enable us to keep the international futures markets and on spot markets, enga- level of investments high also going forward. An exten- ging in day-ahead and intraday trading. sive revitalization program will bring the Kühtai power 26 Management report for the company and the group

station up to the latest state of the art, involving the re- In the reporting period, TIWAG made investments in the newal of many electrical and mechanical engineering amount of € 89.8 million. com­ponents, such as control and protection systems, energy transmission, spherical valves, turbines, and va- The Kühtai storage power station project supplements rious dam facilities. The Kühtai power station renewal the existing Sellrain-Silz group of power stations. The program, which is scheduled to run from 2017 to 2021, new Kühtai 2 pumped storage power station and the new was launched in October 2017 and comprises a total of Kühtai reservoir make it possible to be flexible in terms 50 individual measures, with total cost estimated at ab- of when renewable energy is generated, while also out € 66 million. providing interim storage for electricity generated from Major property protection measures for individual pow- other­­­ renewable sources. er stations were implemented within the scope of the The project was approved by the provincial government TIWAG ­­­property protection scheme. of Tyrol by way of an EAI decision issued on June 24, The Kirchbichl power station project was launched on 2016. Several stakeholders appealed this decision; on July 3, 2017, as another step towards increasing hydro- August 4, 2018, the federal administrative court dismis- power capacities. Calls for tender and contract awards sed the complaint, imposed additional requirements, for major parts of the work have already taken place. and thus confirmed the EAI decision. Further complaints Key construction activities, such as work to widen the and appeals against this decision were lodged with the Inn river­­­ and the process water return flow, as well as Constitutional Court and with the Supreme Administrati- pouring concrete for the fish pass and the water catch­ ve Court. In its decision of March 14, 2018, the Constitu- ment plant, were carried out in the year under report. tional Court rejected being seized with the complaint; on November 22, 2018, the Supreme Administrative Court Expanding hydropower capacities in Tyrol repealed the decision by the federal administrative court The joint Inn river power station being built along the and referred the proceedings back to this court, as the Upper Inn river on the border between Austria and Supreme Administrative Court held that the wording Switzer­land is a new run-of-river power station. Once used for the additional compensatory measures imposed completed, the power station project, which has under- by the federal administrative court had been too vague. gone in-depth review both in Austria and Switzerland, The unresolved issues are to be resolved by the courts will generate more than 400 GWh of electricity from hy- shortly. Nevertheless, we now think that project imple- dropower sources a year. mentation will be delayed by another one or two years.

Construction work on the Ovella weir system had to be The project for the expansion of the Kaunertal power suspended for several weeks for safety reasons, due station provides for the current power station to be tur- to heavy snowfall and the resulting danger of avalan- ned into a group of power stations, supplemented by an ches. Once the rockfall protection netting, which had upper stage on the Gepatsch reservoir, a second lower been badly damaged by the snow, had been restored, stage in Prutz and an addition to the existing power sta- construction work on the weir was resumed in early May tion in Imst. 2018. Geological faults impacted excavation work on In 2016/17, the power station project was assessed by the pressure tunnel, causing several disruptions. The the International Hydropower Association (IHA) for sus- new power station is scheduled to be completed in the tainability in terms of the social, environmental and eco- course of 2021. The new time schedule and the geo- nomic impact of the changes entailed by the planned logical problems have also made it necessary to adapt construction work and performed well on this score. construction cost forecasts, with total investment costs The application for approval under the EIA Act was filed increasing from € 532.5 million to now € 604.9 million. on July 4, 2012. As proceedings are pending on con- Management report for the company and the group 27

flicting project applications concerning the Gurgler Ache Financing river, the project was adapted in the summer of 2017 with As we need to have access, at any given time, to a va- respect to water catchment at the Gurgler Ache river. riety of sources of funding on different markets to ensure The revised documentation was submitted to the public liquidity in the face of our large-scale investments, we authority by the end of 2017. observe and evaluate the developments on the money The second proceedings on conflicting project applica- and capital markets on an ongoing basis. Interest levels tions concerning the Venter Ache river are still pending and refinancing costs have a major impact on our finan- with the Federal Ministry for Sustainability and Tourism. cial position, cash flows and profit or loss. The expansion of the existing Kirchbichl power station takes account of the legal requirements for ensuring Strong cash flow from operating activities, unused lines that fish can pass the facility and that habitats remain of credit, excellent credit standing and group-wide cash interconnected, while also contemplating construction of pooling are the mainstays of our liquidity support. a new additional power house and a water catchment plant immediately below the existing weir. Cash flow from operating activities amounted to € 190.0 million as at December 31, 2018. Construction work started following the coming into final legal effect of the EIA decision in May 2017. The fish We use rolling liquidity planning to determine how much pass was completed on time in December 2018, and the cash is needed at any given time and short-term flexible water catchment plant is scheduled to take up opera- financing instruments, such as cash advance facilities, tions in February 2019. Work on the concrete structures to cover such demand. in the power house area has already started. Construc- tion work is proceeding according to schedule and will With risk mitigation in mind, we rely on broadly diver- probably be completed by December 2020. sified financial instruments to cover the high level of The Tauernbach-Gruben power station has been plan- financing needs for our investments. TIWAG centrally ned as a diversion-type power station with water intake handles external financing for the whole group, passing and power house. The project was submitted for envi- funding on within the group as needed. This approach ronmental impact assessment on January 9, 2013. Fol- strengthens our negotiating position vis-à-vis banks and lowing revision and amendment as well as public pre- business partners, enabling us to centrally control and sentation of the project, the corresponding hearing took monitor financial risks. In addition to a high level of in- place from June 4 –7, 2018. While the public authority ternal financing power and own resources, TIWAG can has announced the completion of the proceedings, the draw on a financing portfolio of bonds, loans and cash decision is still pending. advance facilities. Given our continuously high invest- ment volume, we stepped up our cash advance facilities In the Tyrolean uplands, construction of a diversion- in the reporting year and drew further tranches of the in- type power station is planned at Imst-Haiming which will vestment loan with the European Investment Bank (EIB) re-use the water already used by the Prutz-Imst power in the amount of € 60 million. As at December 31, 2018, station. financial liabilities stood at € 560 million, € 110 million The project was submitted for environmental impact as- attributable to bonds, € 230 million to long-term bank sessment with the Office of the Provincial Government loans, € 140 million to cash advance facilities, and € 80 of Tyrol in 2015. Following additional exploration mea- million to long-term insurance loans. € 2 million in long- sures, the project was modified, and the documents for term loans were repaid in the fiscal year. In the course revision 1 were re-submitted in October 2018 and are of our business activities, we entered into contingent currently being examined for completeness by the Office liabilities and other financial liabilities the amounts and of the Provincial Government of Tyrol. structure of which are shown in the Notes. 28 Management report for the company and the group

Electricity (regulated) Investments The regulated distribution grid constitutes a stable basis A well-functioning distribution grid guarantees a reliable for TIWAG group’s development. TINETZ-Tiroler Netze and stable energy supply. The increase in renewables GmbH acts as independent system operator (ISO) of capacities comes with a transformation of grid systems TIWAG’s­­­ electricity distribution system, using the parent and a significant rise in the requirements power distribu- company’s resources on a lease basis. tion systems have to meet. In the reporting period, we As certified grid operator, TINETZ underwent a surveil- carried on with upgrading and expanding our distribution lance audit in the reporting period based on the techni- grid, building new substations as well as renewing and cal safety management certification standard. The final consolidating switching facilities and lines in high, me- feedback provided in this context certified the process dium and low voltage systems. orientation and structured approach of both the compa- Investments in system infrastructure, which came to ny and its employees. € 52.8 million in the reporting year, were made by the From January to December 2018, 5,001 GWh were parent ­­­company in its role as lessor. supplied via the distribution grid (previous year: 5,013 The main drivers of our investment program are large-­ GWh). The system utilization charge for transporting this scale projects for substations and 110kV lines, as well as volume of electricity came to € 128.6 million. Including the roll-out of smart meters as stipulated by law. Cons- all surcharges, taxes, and one-off special effects, sales truction work on the first approval stage in the Tyrolean revenue in the regulated electricity segment amounted lowlands grid plan started in July 2018. Routes were ex- to € 323.3 million (previous year: € 218.0 million). panded by 25 km in 2018, taking the total to 11,321 km. All in all, the system boasts 11,885 km (previous year: Regulatory framework 11,861 km). The purpose of regulation is to impose public service obligations on system operators, such obligations inclu- On December 15, 2017, the Federal Ministry for Digital ding cost-efficient system operation, ensuring supply and and Economic Affairs published the amendment to the system security, and non-discriminatory system access. Intelligent Metering Ordinance (IME-VO), which provides for a roll-out rate for smart meters of 80% in total by The System Charges Ordinance 2018 (SNE-VO 2018) 2020 and 95% by 2022. Within the scope of the introduc- sets out the principles for determining the amount of tion of smart meters in our distribution grid, the central system charges. In the year under report, the regulato- systems, grid segments and grid plan are in the process ry authority carried out a check to determine the 2019 of being implemented, while the contract award process cost base, using the figures for 2016 as a reference. The for the procurement of public mobile communications costs thus ascertained served as input for the decision has been completed. As soon as smart meter ICT secu- on the system charges for 2019, which was issued at the rity is guaranteed, TINETZ will start the roll-out process. end of October 2018. The applicable system rules were adjusted for the fourth regulatory period (2019 to 2023). Supply security Changes include the efficiency level defined in the TINETZ is responsible for the secure operation of the benchmarking process, the reduction of the inefficiency distribution grid. In spite of a major disruption of supply elimination period from 10 to 7.5 years, the replacement due to natural causes, power supply availability stood of the investment factor with capital cost reconciliation, at almost 100% in the reporting year. From October 29 and the introduction of a system of efficiency-related ra- to November 2, 2018, overhead lines suffered massive tes of return and a mark-up on the financing cost rate storm damage, and flooding occurred in East Tyrol. In for investments, starting from the fiscal year 2019. The North Tyrol, the upper Inn valley, Steinach am Brenner, WACC (Weighted Average Cost of Capital) has been up- Trins, Kramsach, Reith im Alpbachtal and Kitzbühel dated, with 4.88% before taxes being applicable for the were affected, as was the whole district of East Tyrol. year under report and 5.20% for new investments from During said period, we recorded 59 malfunctions at a 2019. total of 76 locations, 9 of which in North Tyrol, 67 in Management report for the company and the group 29

East Tyrol, affecting 280 transformer stations and 9,084 users. These exceptional events increased statistical 4,000 3,500 non-availability to 22.6 minutes, and non-availability 3,000 due to malfunctions over the whole year to 43.8 minutes 2,500 2,000 (previous year: about 26 minutes). 1,500 1,000 500 Gas and heat (non-regulated and regulated) 0 In the current fiscal year, we continued our efforts to 11 12 13 14 15 16 17 18 consolidate the natural gas supply. Third-party deliveries Other special rate customers Standard rate Special rate customers – energy customers supply companies While gas sales in the reporting period grew from € 204.2 million to € 220.0 million, TIGAS’ profit before taxes drop- Natural gas sales (network) – by customer groups (in GWh) ped from € 23.1 million to € 17.1 million, the main reasons being extreme fluctuations in temperature during the cold spell at the end of February / beginning of March and the Natural gas and heat sales related high prices for short-term procurement, as well In the reporting period, natural gas sales through the as the cuts in system tariffs at system levels 2 and 3. We TIGAS­­­ grid came to 3,978 GWh, which is 2.5% less than rely on our equity investments – 49% in Südtirolgas AG in the previous year. Industrial and commercial enterpri- and 81.6% in SELGAS GmbH – to handle our gas busi- ses (special rate customers) account for a total of 1,649 ness in South Tyrol. The former is in charge of natural GWh, household customers (tariff customers) for 2,092 gas distribution, while the latter is active in selling natural GWh, the remainder being attributable to TIGAS’ own gas. Revenue from gas sales includes sales revenue ob- plants. Natural gas sold to customers in Tyrol came to tained by SELGAS GmbH in the amount of € 24.4 million. 3,874 GWh, while customers outside Tyrol accounted for 1,865 GWh. Natural gas and heat generation and procurement By the end of the reporting year, 1,585 new tariff custo- By further diversifying our procurement structures, we mers were being newly supplied with natural gas, so that were able to improve procurement conditions in Natural the total number of customers in this segment had risen Gas Trading. Optimization in procurement and ongoing to 51,318 as per December 31, 2018. efficiency improvements in all operational processes help us safeguard our position as an affordably priced Totaling all markets, TIGAS supplied an aggregate of and competitive energy provider. In the year under re- 5,739 GWh (previous year: 5,572 GWh). port, we introduced the Risk Management Gas instru- The year was characterized by extreme weather conditi- ment on the basis of the Risk Management in the Gas ons. The cold spell at the beginning of the year and the Business Manual, which we use to control risk in the very mild conditions experienced in the fall had a major value chain and monitor trading activities to ensure impact on sales. In addition to our core market Tyrol, we cost-optimized procurement for sales. successfully supply natural gas also in the other mar- ket areas in Austria (Vorarlberg and East) as well as in Under the biogas heading, our activities include upgra- Germany (NCG and Gaspool) at competitive terms and ding biomethane to natural gas quality in our treatment conditions. While the competitive situation in the core plant in Schlitters and feeding it into the natural gas grid. market has tightened due to new market entrants, the To generate and procure heat in Tyrol’s central residenti- growth in the number of customers in Vorarlberg, Eas- al and industrial area, which lies between Innsbruck and tern Austria and Germany, which surpassed our expec- Wattens, we combine different energy resources such tations, has had a positive effect. as industrial waste heat, heat from CHP facilities partly operating on biogas, from biomass plants and natural Since the beginning of the year, we have been offering gas boiler plants. both household and commercial customers the new 30 Management report for the company and the group

TIGAS Best Flex product, which is directly linked to We continued to ramp up our remote heating business exchange­­­ price trends. Furthermore, we have special activities by expanding the remote heating system on an promotional programs in place for new customers which ongoing basis. The primary aim was to complete remo- are designed to promote efforts to improve energy ef- te heating system coverage in Tyrol’s central residen- ficiency and reduce emissions – efforts that are called tial area, from Wattens to Innsbruck. We entered into for both in the interest of the national economy and in promising agreements and distribution partnerships with environmental and energy policy terms. several cooperation partners in a bid to integrate so far As the forward prices 2019 on the natural gas procure- unused industrial waste heat in the cycle. ment markets were markedly higher than in the previ- ous year and competitive pressure kept mounting, we Investments effected a linear increase in tariff customer prices by Following the nearly completed establishment of the 0.42 cents/kWh (incl. VAT) in all zones as per January basic structure of the natural gas supply system for 1, 2019. Tyrol’s­­­ central residential and industrial areas, invest- ment will now focus on consolidating and strength­ening Natural gas and heat systems the natural gas systems in line with demand and in The third regulatory period for gas distribution sys- terms of capacity. Regions with a lot of tourist activity tem operators, which will apply from January 1, 2018 remain high on the agenda for selective capacity expan- to December 31, 2022, came into effect on January 1, sion. We invested € 23.3 million in further consolidating 2018. The new regulation scheme provides for different and expanding the system. 2018 saw projects for sys- WACCs depending on the growth over time of the capital tem reinforcement, continued construction of lines bet- base subject to interest. Likewise, the cost adjustment ween Kössen-Schwendt-Kirchdorf and between Telfs- factor impacts more and more strongly on the amount of Mieming-Obsteig-Nassereith-Tarrenz-Imst, the construc- recognized system costs the longer the incentive regu- tion of two reducing stations in Ellmau and St. Johann, lations apply. and the extension of the branch line in the Ötztal valley. The old system charges calculation scheme was retai- ned in its basic structure, with a few parameters being Overall, we laid some 71 km of regional supply lines, adjusted. The regulator reduced the WACC (Weighted 25 km of which were last mile connections. Taking into Average Cost of Capital) before taxes for gas distributi- account regional branch lines, our distribution grid grew on system operators from 6.42% to 4.88%, such reducti- by 84 km to approx. 3,658 km in total. on being applicable in general. In addition, an individual WACC is calculated for each company, which is geared In the year under report, we also invested € 4.3 million in towards the company’s efficiency and is applied to the remote heating capacity expansion. financing cost base. Return on investments made from 2018 onwards was increased by a mark-up of 5.2%. Equity investments and miscellaneous As a consequence of the first-time application of the At the annual general meeting of Verbund AG held on efficiency-dependent return on investment system, the April 23, 2018, a resolution was passed to distribute a investment factor is replaced by annual capital cost re- dividend of € 0.42 per no-par value share. In the previ- conciliation. ous year, the dividend amounted to € 0.29 per no-par Other parameters that have been changed include a re- value share. The dividend received in the year under duction of the depreciation periods as recognized by the report thus came to € 12 million (previous year: € 8.3 regulator, as well as a reduction of the productivity factor million). The Verbund share performed extremely well to 0.67% p.a. from January­­­ to December 2018. At the beginning of the Management report for the company and the group 31

year, one share was traded for about € 20, with prices then rising to more than € 44 per share and ending the year at € 38 per share.

At the annual general meeting of Innsbrucker Kommu- nalbetriebe AG held on June 25, 2018, a resolution was passed to distribute € 15.5 million from net retained pro- fit. TIWAG, which uses the equity method to account for this investment, received a dividend of € 7.6 million. The change in the value accounted for using the equity met- hod came to € 11.2 million as recognized in profit and loss.

In the fiscal year 2017/18, Energie AG Oberösterreich generated the second-best result in the company’s his- tory. A special dividend was distributed in December 2018 in addition to the usual dividend, with € 6.5 million going to TIWAG. 32 Management report for the company and the group Management report for the company and the group 33

3. FINANCIAL POSITION, CASH FLOWS AND PROFIT OR LOSS (SEPARATE FINANCIAL STATEMENTS)

Profit/loss(separate financial statements) In fiscal year 2018, sales revenue rose by € 122.8 million to € 931.4 million. The reasons for this development were above all costs in the regulated electricity sector that had been incurred over several years and have now been recognized by the competent authority in an official de- cision. Based on a contractual agreement, the sales re- venue recognized by TINETZ was passed on to TIWAG, where it was recorded under other sales revenue.

On the operating side, it was above all the electricity business and cost savings that made a positive contri- bution, while special effects in personnel had a strong adverse effect on our result. In the year under report, a number of key calculation parameters for personnel provisions changed at the same time: changes in morta- lity tables, declining actuarial interest rates and negative pension fund results had a massive negative impact on the profit for the year. Cumulatively, all of these effects caused an increase in personnel expenses by € 120.6 million. On the back of the improved financial result, profit before taxes rose by € 2.6 million to € 78.4 million year-on-year, helping us to reach are targets for profit before taxes.

Sales revenue presents as follows:

2018 2017 Change against the previous year in € million in € million in € million in %

Electricity sales 678.0 662.8 15.2 +2.3

Income from grid leasing 113.0 125.8 -12.8 -10.2

Other sales revenue 140.4 19.9 +120.5 >100

TOTAL Sales revenue 931.4 808.5 +122.9 +15.2

In spite of lower trading volumes, electricity sales re- venue was above the previous year’s level, with rising electricity prices also being reflected in higher sales re- venue. 34 Management report for the company and the group

The rise in other sales revenue is attributable to special effects in the context of compensation for cumulative pri- or-year cost items in the regulated electricity segment. The amounts charged on, which totaled € 119.3 million, have been recognized in other sales revenue. In the reporting year, 56% of sales revenue comes from Austria, while 44% was generated abroad.

In 2018, operating expenses developed as follows:

2018 2017 Change against the previous year in € million in % in € million in % in € million in %

Expenses for electricity procurement 515.2 56.0 483.5 62.2 31.7 +6.6

Personnel expenses 276.2 30.0 155.6 20.0 120.6 +77.5

Depreciation, amortization and impairments 68.2 7.4 64.9 8.3 3.3 +5.1

Other expenses 60.0 6.6 73.4 9.5 -13.4 -18.3

TOTAL Operating expenses 919.6 100.0 777.4 100.0 +142.2 +18.3

Expenses for electricity procurement rose by € 31.7 million­­­ to € 515.2 million, while personnel expenses in- creased by € 120.6 million to € 276.2 million. This hike was caused above all by valuation effects in connection with adjustments to mortality tables, interest rate chan- ges and negative pension fund performance. Deprecia- tion and amortization is roughly at the same level as in the previous year. Adding impairments in the amount of € 3.8 million, the total rose from € 64.9 million to € 68.2 million in the reporting period.

Other operating expenses decreased by € 13.4 million to € 60.0 million in the wake of stringent cost-cutting mea- sures.

All in all, net operating income was characterized by ad- verse one-off affects in the past fiscal year. While the charged-on severance amounts resulted in positive con- tributions, the changes in calculation parameters in per- sonnel matters impact expenses for old-age provisions. These two special effects more or less canceled each other out. Management report for the company and the group 35

2018 2017 Change against the previous year in € million in € million in € million in %

Income from investments 44.7 31.7 +13.0 +41.0

Other investment and interest income 8.7 8.2 +0.5 +6.1

Expenses related to financial assets -3.4 -9.8 -6.4 -65.3

Interest expenses -17.7 -18.9 -1.2 -6.3

TOTAL Net finance income 32.3 11.2 +21.1 >100.0

Net finance income benefited above all from higher in- come from investments. Expenses related to financial assets were € 6.4 million less than in the previous year, when this item included a loss transfer in the amount of € 9.7 million. Due to generally low interest levels, interest and similar expenses declined by € 1.2 million in spite of higher financial liabilities for investments.

Profit/loss items 2018 2017 Change against the previous year in € million in € million in € million in %

Net operating income 46.1 64.6 -18.5 -28.2

Net finance income 32.3 11.2 +21.1 >100.0

Profit before taxes 78.4 75.8 +2.6 +3.4

Net income for the year 76.6 70.1 +6.5 +9.3

Profit before taxes reflects the improvement in net finan- ce income. Income taxes declined due to the changes in deferred taxes. Overall, net income for the year increa- sed by 9.3% or € 6.5 million year-on-year. 36 Management report for the company and the group

Financial position (separate financial statements) The asset and capital structure developed as follows in the year under report:

Asset structure 2018 2017 Change against the (separate financial statements) previous year in € million in % in € million in % in € million in %

Non-current assets

Fixed assets 2,482.6 89.8 2,344.3 94.1 +138.3 +5.9

Non-current receivables and assets 117.8 4.3 6.5 0.3 +111.3 >100

Deferred tax assets 6.3 0.2 0.0 0.0 +6.3 >100

Current assets

Inventories 4.1 0.1 4.7 0.2 -0.6 -12.8

Current receivables and assets 123.0 4.5 109.4 4.4 +13.6 +4.9

Cash and cash equivalents 31.6 1.1 26.3 1.0 +5.3 +20.2

TOTAL assets 2,765.4 100.0 2,491.2 100.0 +274.2 +11.0

As at the balance sheet date, total assets amounted to € 2,765.4 million, up € 274.2 million from the previous year. On the assets side, non-current assets increased to € 2,606.7 million. Major changes were recorded above all in advance payments­­­ for the electricity procurement right in the joint Inn river power station, with a rise from € 260.4 million to € 374.9 million.

Tangible assets also recorded an increase by € 31.0 million, above all due to advance payments made and assets under construction. This concerns mainly the ex- pansion of the Kirchbichl power station and the renewal of components in the Kühtai power station. Current assets rose by € 18.3 million to € 158.7 million. The € 13.6 million rise in current receivables is the result of profit/loss carry-overs from subsidiaries. As at the ba- lance sheet date, cash and cash equivalents amounted to € 31.6 million, an increase of € 5.3 million over the previous year. Management report for the company and the group 37

The capital structure provides information about capi- tal origin and components as well as capital nature and maturity­­­. TIWAG’s capital structure is as follows:

Capital structure 2018 2017 Change against the (separate financial statements) previous year in € million in % in € million in % in € million in %

Non-current funding

Equity 1,301.0 47.0 1,245.0 50.0 +56.0 +4.5

Investment grants and contributions to construction costs 173.6 6.3 167.9 6.7 +5.7 +3.4

Non-current provisions 241.5 8.7 228.4 9.2 +13.2 +5.7

Non-current liabilities 504.5 18.3 452.1 18.1 +52.4 +11.6

Current funding

Current provisions 227.9 8.2 114.5 4.6 +113.4 +99.0

Current liabilities and deferrals and accruals 316.9 11.5 283.4 11.4 +33.5 +11.8

TOTAL assets 2,765.4 100.0 2,491.2 100.0 +274.2 +11.0

We succeeded in further boosting our equity in the year under report, which came to € 1,301.0 million as at the balance sheet date, an increase by € 56.0 million. In re- lation to total equity and liabilities of € 2,765.4 million (previous: € 2,491.2 million), the equity ratio stood at 47.0 % as at December 31, 2018, as a result of the positive net income for fiscal 2018. Non-current provisions and liabilities increased by € 65.6 million to € 746.0 million compared to the prior-year balance sheet date. Our am- bitious efforts to expand hydropower capacities and the extensive investments made in 2018 result in a rise in liabilities to banks, translating in an increase of non-cur- rent financial debt by € 58.0 million to € 418.3 million.

The increase in non-current provisions is mainly the result ­­­of higher provisions for social capital. 38 Management report for the company and the group

Borrowed capital (incl. provisions) Contributions to construction costs Social capital*) Equity (incl. untaxed reserves)

1,073 2,500

2,000

226 1,500 165

1,301 1,000

500

0 12 13 14 15 16 17 18

*) Provisions for severance payments, pensions and anniversary bonuses

Capital performance (in € million)

Current provisions rose by € 113.4 million, coming to a total of € 227.9 million.

This development was largely attributable to the insuffi- cient performance shown by the pension fund. Current financial debt rose by € 20.5 million, mainly be- cause of higher cash advance facilities, coming to a total of € 142.7 million.

Cash flows (separate financial statements) Cash flows and cash and cash equivalents developed as follows in the reporting year:

Cash flow statement 2018 2017 Change against the previous year in € million in € million in € million in %

Cash flow from operating activities 150.1 152.3 -2.2 -1.4

Cash flow from investing activities -207.7 -184.1 -23.6 +12.8

Cash flow from financing activities 61.3 50.8 +10.5 +20.7

Cash and cash equivalents as at the balance sheet date 31.6 26.3 +5.3 +20.2

The rise in net income for the year before taxes resulted in a cash flow from operating activities of € 150.1 million, following adjustment for non-cash income and expenses and net non-operating income. Management report for the company and the group 39

The € 2.2 million drop was due to various changes in operating assets and liabilities, the most noticeable effects ­­­generated by higher allocations to provisions.

Cash flow from investing activities is characterized by strong investment activity in the year under report, in par- ticular additions for advance payments for an electricity procurement right and the construction work to expand the Kirchbichl power station. Cash flow from investment activities increased by € 23.6 million year-on-year. Cash flow from investing activities rose by € 10.5 million to € 62.9 million, mainly because of the net borrowing as already mentioned.

Economic net debt breaks down as follows:

2018 2017 in € million in € million

Cash and cash equivalents 31.6 26.3

Non-current securities 81.3 94.3

112.9 120.6

Liabilities to banks -370.9 -292.5

Private placements -110.1 -110.1

Other financial liabilities -80.0 -80.0

Financial liabilities -561.0 -482.6

Net financial position -448.1 -362.0

Pension provisions -157.2 -152.1

Depreciation, amortization and impairment 68.2 64.9

Economic net debt -537.1 -449.2

Net operating income 46.1 64.6

TOTAL Debt service coverage ratio 11.6 7.0 40 Management report for the company and the group

4. FINANCIAL POSITION, CASH FLOWS AND PROFIT OR LOSS (CONSOLIDATED FINANCIAL STATEMENTS)

Profit/loss(consolidated financial statements) The consolidated sales revenue breaks down as follows:

2018 2017 Change against the previous year in € million in % in € million in % in € million in %

Revenue from electricity sales 978.6 79.0 858.1 78.1 +120.5 +14.0

Revenue from gas sales 219.9 17.8 204.2 18.6 +15.7 +7.7

Revenue from heat sales 15.0 1.2 14.8 1.3 +0.2 +1.2

Other sales revenue 25.2 2.0 22.0 2.0 +3.2 +14.3

TOTAL Sales revenue 1,238.7 100.0 1,099.1 100.0 +139.6 +12.7

In fiscal 2018, electricity sales revenue stood at € 978.6 million, up € 120.5 million from the previous year’s value of € 858.1 million, which translates into a 14.0% rise. Higher futures and spot market prices had a positive ef- fect.

Revenue from electricity sales includes grid sales reve- nue in the amount of € 321.3 million, including the € 119.3 million special effect (previous year: € 218.0 million). In terms of volume, a total of 5,001 GWh were trans- ported in the distribution grid in 2018, almost as much as in the previous year (5,013 GWh). The system usage charges included in grid sales revenue remained more or less the same and came to € 128.6 million in the year under report.

Revenue from gas sales increased by € 15.7 million to € 219.9 million, and revenue from heat sales by € 0.2 million to € 15.0 million.

Other operating income rose from € 15.5 million to € 17.8 million, primarily because the figures for 2017 included higher proceeds from the disposal of land and higher Management report for the company and the group 41

proceeds from insurance in connection with the fire in the Imst power station. The reversal of provisions de- veloped in the opposite direction. In the period under review, provisions in connection with insurance benefits were reversed in the amount of € 2.2 million, resulting in a € 2.3 million increase of the item in total.

The consolidated operating expenses present as follows for 2018:

2018 2017 Change against the previous year in € million in % in € million in % in € million in %

Expenses for materials 704.6 58.2 648.3 61.5 +56.3 +8.7

Personnel expenses 289.3 23.9 165.8 15.7 +123.5 +74.5

Depreciation, amortization and impairments 90.9 7.5 96.4 9.1 -5.5 -5.7

Other expenses 125.1 10.4 144.5 13.7 -19.4 -13.4

TOTAL Operating expenses 1,209.9 100.0 1,055.0 100.0 +154.9 +14.7

Expenses for the procurement of electricity, gas and heat increased by € 56.3 million to € 704.6 million. Electricity production and procurement in total dropped by 2,131 GWh to 16,744 GWh. In fiscal 2018, average procurement prices rose by comparison to 2017.

Personnel expenses increased by € 123.5 million as compared to the previous year. In spite of wages and salaries having been raised by 3% under the collective bargaining agreement, current payroll expenses are de- clining because of the cost-cutting measures that were implemented. By contrast, expenses for pensions rose by € 116.5 million. Provisions of € 120.1 million were re- cognized in the reporting period for potential obligations to make supplementary contributions to the pension fund. Provisions for the same period in 2017 came to a total of € 46.9 million. With respect to pension obligati- ons as recorded on the balance sheet, the calculation parameters led to € 5.3 million having to be recognized in profit and loss. 42 Management report for the company and the group

Depreciation, amortization and impairment of tangible and intangible fixed assets decreased by € 5.4 million year-on year. A total of € 90.9 million was recognized for depreciation, amortization and impairment, € 21.1 of which in the gas segment.

The cost-cutting measures introduced led to a significant decline in other operating expenses, by € 27.5 million­­­ to € 115.4 million.

2018 2017 Change against the previous year in € million in € million in € million in %

Net income/loss from associated companies +12.7 +11.4 +1.3 +11.4

Other income from investments +19.5 +13.3 +6.2 +46.8

Other income from securities +0.1 +0.1 0.0 0.0

Interest and similar income +5.9 +7.8 -1.9 -24.4

Interest and similar expenses -17.7 -18.9 -1.2 -6.3

Expenses related to financial assets -3.3 -3.0 +0.3 +10.0

TOTAL Net finance income +17.2 +10.7 +6.5 +60.7

By comparison with the previous year, income from investments rose from € 13.3 million to € 19.5 million. The main reason for this was the higher dividend paid by Verbund­­­ AG and Energie AG. In 2018, Verbund AG distributed € 12.0 million, as compared to € 8.3 million in 2017, and Energie AG contributed € 6.5 million to this year’s income from investment as compared to € 4.4 mil- lion in the previous year.

Interest and similar income fell from € 7.8 million to € 5.9 million. In the previous year, this item had still con- tained additional income from the cancellation of the CBL grid transaction in the amount of € 0.8 million, as well as interest on loans made to Bayerngas Norge in the amount of € 0.9 million. In 2017, this item also included the proceeds from the sale of the shares held in Bayerngas Norge GmbH in the amount of € 2.2 million.

Net income from associated companies accounted for using the equity method improved from € 11.4 million to € 12.7 million. Management report for the company and the group 43

In spite of a higher share of financial liabilities, the cor- responding expenses have declined by € 1.0 million due to the low interest rates prevalent on the capital markets.

In 2018, consolidated net income before taxes came to € 86.8 million, down € 4.6 million from the previous year. The result was impacted by one-off effects in the current reporting period.

In 2018, these effects were caused on the one hand by the cumulated severance amounts recognized by the competent authority, and on the other hand by higher personnel expenses in the wake of a change in accoun- ting principles for social capital. What is more, there was a significant improvement in net finance income.

Taking into account the income tax expenses in the amount of € 5.8 million, which comprises current income taxes of € -12.2 million (previous year: € -16.0 million) and the change in deferred taxes of € +1.6 million (pre- vious year: € -5.9 million), consolidated profit decreased from € 81.3 million to € 81.0 million. Adjusted for the shares of other shareholders, consoli- dated net income for the year amounted to € 78.7 million (previous year: € 78.3 million).

Financial position (consolidated financial statements) The asset and capital structure developed as follows in the year under report:

Balance sheet structure 2018 2017 Change against the (consolidated financial statements) previous year in € million in % in € million in % in € million in %

Non-current assets

Fixed assets 2,653.0 89.4 2,530.6 92.8 +122.4 +4.8

Non-current receivables and assets 117.8 4.0 6.5 0.2 +111.3 >100

Deferred tax assets 3.9 0.1 0.0 0.0 +3.9 na

Current assets

Inventories 5.4 0.2 5.2 0.2 +0.2 +3.9

Current receivables and assets incl. deferrals and accruals 150.8 5.0 151.7 5.6 -0.9 -0.6

Cash and cash equivalents 36.8 1.3 33.5 1.2 +3.3 +9.9

TOTAL assets 2,967.7 100.0 2,727.5 100.0 +240.2 +8.8 44 Management report for the company and the group

In total, non-current assets increased by 237.6 million. Additions to tangible and intangible fixed assets within the group came to € 221.8 million, while amortization, depreciation and impairment amounted to € 90.9 million in the reporting period. Key addition items were attribu- table to investments in hydropower capacity expansion. In the reporting period, € 89.9 million was invested for the electricity procurement right in the joint Inn power station, and another € 23.9 million in the expansion of the Kirchbichl power station. The electricity grid accoun- ted for investments of € 52.2 million.

The current assets remained more or less unchanged.

Capital structure 2018 2017 Change against the (consolidated financial statements) previous year in € million in % in € million in % in € million in %

Non-current funding

Equity 1,336.9 45.0 1,278.5 46.9 58.4 +4.6

Investment grants and contributions to construction costs 284.0 9.6 300.1 11.0 -16.1 -5.4

Non-current provisions 245.9 8.3 234.7 8.6 +11.2 +4.8

Non-current liabilities 504.7 17.0 450.6 16.5 +54.1 +12.0

Current funding

Current provisions 252.5 8.5 146.1 5.4 +106.4 +73.0

Current liabilities and deferrals and accruals 343.7 11.6 317.6 11.6 +25.5 +8.0

TOTAL assets 2,967.7 100.0 2,727.5 100.0 +240.2 +8.8

Group equity increased by € 58.4 million in total, as a result of the consolidated net income for the year in the amount of € 81.0 million, and intra-group equity-reducing distributions in the amount of € 22.6 million. Non-current debt rose by € 65.3 million due to the ambitious invest- ment program. Construction cost grants declined by € 16.0 million, while investment grants remained more or less unchanged. Management report for the company and the group 45

As a result of the takeover of the share in Gemeinschafts- kraftwerk Inn GmbH, construction costs of € 39.0 million incurred by Verbund AG up to the time of transfer had to be reimbursed on a pro-rata basis, which led to the construction cost grants made decreasing accordingly. Due to consistently high investments in the context of the cross-border power station project on the Inn river, further tranches in a total amount of € 60 million were drawn under the financing agreement with the European Investment Bank. Non-current liabilities to banks rose by a total of € 78.4 million, current provisions by € 106.8 million to € 252.9 million, and current cash advance faci- lities by € 20.0 million to € 140.0 million.

Cash flows (consolidated financial statements) Within the group, cash flows and cash and cash equiva- lents developed as follows:

2018 2017 Change against the previous year in € million in € million in € million in %

Cash flow from operating activities 190.0 226.4 -36.4 -16.1

Cash flow from investing activities -208.8 -232.0 -23.2 -10.0

Cash flow from financing activities 22.0 -8.0 +30.0 na

Cash and cash equivalents as at the balance sheet date 36.8 33.5 +3.3 +9.9

Cash flow from operating activities dropped by € 36.4 million in the reporting period.

Cash flow from investing activities was € 23.2 million lower ­­­than in the prior-year period, consisting mainly of investments in intangible and tangible assets, while the change in cash flow from financing activities came to € +30.0 million. Current and non-current financial liabilities stood at € 78.4 million, dividend distribution amounted to € 22.6 million. The distribution ratio stood at 27.9%, with refe- rence to consolidated profit. 46 Management report for the company and the group

The net debt of TIWAG group breaks down as follows:

2018 2017 in € million in € million

Cash and cash equivalents 36.8 33.5

Non-current securities 82.0 95.0

118.8 128.5

Liabilities to banks -370.9 -292.5

Private placement -110.1 -110.1

Other financial liabilities -80.0 -80.0

Financial liabilities -561.0 -482.6

Net financial position -442.2 -354.1

Pension provisions -195.1 -153.9

Depreciation, amortization and impairment 90.9 96.4

Economic net debt -546.4 -411.6

Net operating income 69.6 81.7

TOTAL Debt service coverage ratio 7.9 5.0 Management report for the company and the group 47 48 Management report for the company and the group

5. FINANCIAL PERFORMANCE INDICATORS

Financial performance indicators (separate financial statements)

2018 2017 in € million in € million

Income status – key figures

Revenue from electricity sales 678.0 662.8

Income from grid leasing 113.0 125.8

Other sales revenue 140.4 19.9

931.4 808.5

Net operating income 46.1 64.6

Net finance income 32.3 11.2

Profit before taxes 78.4 75.8

Return on sales in % 5.0 8.0

Return on equity in % 6.0 5.8

Total return on capital in % 3.8 3.9

Financial position – key figures

Net current assets (working capital) -268.1 -250.9

Equity ratio in % 47.0 50.0

Cash flow – key figures

Cash flow from operating activities 150.1 152.3

Net cash flow from investing activities -207.7 -184.1

Net cash flow from financing activities 61.3 50.8 Management report for the company and the group 49

Financial performance indicators (consolidated financial statements)

2018 2017 in € million in € million

Income status – key figures

Revenue from electricity sales 978.6 858.1

Revenue from gas sales 219.9 204.2

Revenue from heat sales 15.0 14.8

Other sales revenue 25.2 22.0

1,238.7 1,099.1

Net operating income 69.6 81.7

Net finance income 17.2 10.7

Consolidated profit before taxes 86.8 92.4

Return on equity in % (consolidated) 6.4 6.8

Financial position – key figures

Net current assets (working capital) -285.4 -266.7

Equity ratio in % (consolidated) 45.0 46.9

Cash flow – key figures

Cash flow from operating activities 190.0 226.4

Net cash flow from investing activities -208.8 -232.0

Net cash flow from financing activities +22.0 -8.0 50 Management report for the company and the group

6. NON-FINANCIAL PERFORMANCE Employees with a permanent employment contract can INDICATORS opt to join a private savings plan in addition to the statut- ory pension system. Employees TIWAG group is one of the largest employers in Tyrol. Voluntary contributions top up the contributions paid by Together with our employees, we are committed to en- the employer. suring a secure and sustainable energy supply, to gene- rating electricity in a way that is compatible with both Our HR work focuses on developing our staff with a view climate and environment, to achieving stable and pro- to preparing them for the future. We offer numerous in- fitable growth in all segments as well as good relations house and external continued professional development with customers and business partners alike. options in a bid to provide a shared knowledge base. Personnel development meetings help us to assess In the year under report, TIWAG employed 1,256 person each employee’s skills and need for further develop- on average, the group 1,415 persons, down 18 from the ment, with tailored programs being developed in line previous year. The average TIWAG employee is aged with demand. The information thus gained feeds into our over 45, with an average of service years working for long-term development and succession planning. the company exceeding 22 years. Female employees account for about 13.6% of the total. A major reason for Top-notch apprenticeship training is on the top of our the small percentage of women working in the energy in- agenda. Having won the federal award for companies dustry is the low level of interest shown by them in STEM providing excellent apprenticeship training as well as (science, technology, engineering and mathematics) ca- the great place to work for apprentices in Tyrol award reers. In spite of this fact, we strive to raise the share of multiple times is an incentive for us to carry on with our women working in our company. Collaboration in a spirit successful approach. of partnership has a long-standing tradition at TIWAG and is part of our corporate culture. Job security and health and safety at work have top prio- rity for us; we do everything we can to prevent accidents. A central works council and several regional works Our safety and security center as well as our safety and councils represent the interests of our employees, with security officers contribute their expertise in helping us special representation and participation rights for un- meet these requirements. A comprehensive set of ru- der-age apprentices. les has been developed to describe safety and security The TIWAG Supervisory Board includes three members risks, with the safety and security officers providing ad- appointed to represent employee interests. vice to staff and monitoring compliance with guidelines. A competitive work environment also comes with attrac- We also have an e-learning offering that covers all mat- tive remuneration and benefits. What our employees ters relevant for health and safety. earn depends on the position they fill and is based on the collective bargaining agreement, the work they per- As occupational health is very important to us, we provi- form, and the qualifications they have, regardless of de in-house health services. Occupational health physi- gender. Following the annual negotiations on the col- cians provide competent advice on all health-at-work is- lective bargaining agreement, wages and salaries were sues and offer support to employees within the scope of raised by 3.0% with effect from February 1, 2018. In worker protection rules. Measures offered include health addition to wages and salaries, the benefits under the checkups, vaccinations, eye and hearing tests, as well company pension plan are a key part of total remunera- as healthy eating plans. The company also sponsors a tion and have always been considered highly important. broad range of in-house sports and fitness programs The pension plan is a major cornerstone of retirement within the works sports club. provisions and helps strengthen loyalty to the company. Management report for the company and the group 51

Sustainability built according to stringent specifications imposed by Sustainability is an integral part of our mission state- the competent authorities and complying with strict limit ment. Striking a balance between profitability and re- values is a major contribution towards attaining this goal. sponsibility towards society is crucial for garnering sup- What is more, our extensive investments in sustainable port and acceptance for the operation of our facilities. renewables equally support the region’s energy strategy. We rely on our ISO 14001-certified environmental ma- nagement system to identify relevant tasks and activi- In the year under report, our efforts to support the ener- ties, which are classified based on seven environmental gy transition as laid down in the Tyrolean energy strate- aspects: impact on water resources; regional aspects; gy focused on issues that are closely related to our core impact on the biological system; energy relevance, ma- business. We designed and carried out projects aimed terials and supplies; waste management; and impact on at improving the trade-off between growth and ecology the atmosphere. Responsibility for the effectiveness of – the 2018 energy efficiency package, a pilot project on the environmental management system lies with the Ma- sector coupling, and the creation of sustainable mobility nagement Board, which is in charge of both laying down solutions. our mission statement and determining our environmen- tal policy. Relying on the environmental management Energy efficiency officer and further specifically appointed functions, the Improving energy efficiency is a necessity for society Management Board ensures that these requirements as well as for the economy that will entail competitive are enshrined in all business processes. We analyze advantages through cost reductions. Less demand for and evaluate all aspects on a process-oriented basis energy raw materials and less dependence on imports and take measures to control identified environmental contribute to improving supply security and climate pro- impacts. The core environment team takes care of envi- tection. On the one hand, energy efficiency supports ronmental aspects that are amenable to direct influence, local value generation by substituting imported energy while requirements in terms of planning, procurement sources with improved drive, measurement and control and operation are used to control environmental aspects technology, on the other hand it reduces energy poverty which cannot be influenced directly. and promotes social justice.

Special teams regularly evaluate environmental aspects From a business point of view, energy efficiency measu- and environmental effects in the company, using an ABC res help cut energy costs and create new sales opportu- analysis that takes account of past, current and plan- nities for innovative products. ned activities for each location. Following environmental With our annual energy efficiency packages, we make aspects evaluation, the core environment team draws up considerable investments in a bid to specifically focus an annual environmental program to submit to the ma- efforts on improving energy efficiency on the one hand nagement for approval. The program features specific and make a genuine contribution to efficiency and sus- measures to take and indicates who is responsible for tainable energy use in Tyrol on the other. target attainment. The core environment team, internal As this initiative has proven successful in the past, it will audits, and management assessment jointly ensure that be continued. target attainment is monitored. The annual package is broken down into four segments: Legal and regulatory requirements are recorded in a energy counselling/awareness raising; mobility/infras- special environmental legislation register, which is being tructure; photovoltaics; and heat pumps. updated on an ongoing basis. The energy counselling/awareness raising segment in- cludes counseling services for private individuals, com- TIWAG group is a driving force behind ecological panies and local authorities, both on site and via tele- change in Tyrol’s electricity, gas and heat supply. Sus- phone through our service center. We sponsor “Energie tainable electricity generated from hydropower stations Tirol”, an association founded to promote environmen- 52 Management report for the company and the group

tally friendly energy use, and fund workshops to raise Within the scope of our dedicated action program, we energy awareness at schools throughout Tyrol. continue to grow the charging infrastructure for electric cars in Tyrol in line with demand. As Tyrol’s largest char- Furthermore, we offer a one-off investment grant for PV ging network operator, we support and launch charging facilities with a maximum output of 5 kWp, with partners infrastructure projects by providing charging systems benefiting further from being able to use the solar power and ensuring interoperability with other operators’ char- they generate for their own purposes, while we will pur- ging stations. chase any surplus volumes at market prices. Projects in the year under report included setting up the 2018 also saw a continuation of the heat pump grant first TIWAG fast-charge station directly at the motorway schemes we sponsor to support the use of ambient heat, exit ramp near Kufstein, as well as promoting e-mobility which is energy-efficient and makes ecological sense. in the Stubaital area. Grants apply for installation of electrically operated heat pumps in single- or multi-family homes, large-scale resi- TIWAG's standard charging stations feature four sockets dential housing projects, and non-residential buildings. with a maximum output of 22.2 kW for use by mobility customers. Sector coupling At TIWAG charging stations, TIWAG mobility customers Traditionally, sectors such as indoor climate, mobility, benefit from low-cost billing based on kWh charged. production, lighting, and communications have most- The free-of-charge TIWAG e-mobility app, combined ly been regarded separately from one another, even with the e-roaming product TIWAG-mobil-plus, enables though a holistic view across all sectors would without users to charge their vehicles at more than 20,000 char- doubt result in a better and more favorable overall sys- ging stations operated throughout Europe by different tem. Sector coupling makes it possible to use surplus service providers. electricity available in the grid system from volatile wind and solar generation to heat homes, store heat in remo- Mobile terminals or mobility cards are used to activate te heating systems, and charge the batteries of electric charging operations. The electricity supplied at our own vehicles. charging stations is 100% green electricity, enabling While electricity is easy to transport, but expensive users to make an important contribution towards climate to store, heat is easy to store, but difficult to transport and environmental protection. In the year under report, across longer distances. Using technologies such as we enlarged our electric vehicle fleet, replacing conven- power-­to-gas, power-to-heat, power-to-mobility and tionally operated vehicles from our existing stock. CHP, it is possible to combine the advantages offered by each of these sectors. Flood control As our power stations and dams increase water retenti- In the year under report, we launched or continued in- on in power generation areas, they also serve flood con- frastructure projects on sector coupling. We reduce our trol purposes and play a major role in preventing flood ecological footprint by expanding and consolidating our damage. Up-to-date water level data and water passage highly efficient remote heating system, thus cutting back measurements at gauges provide valuable insights for on the use of non-renewable fuels. improving flood control in Tyrol.

E-mobility Branch establishments E-mobility is a pivotal element when it comes to redu- TIWAG-Tiroler Wasserkraft AG does not have any cing carbon emissions and increasing the level of Tyrol’s branch establishments. energy autonomy. Management report for the company and the group 53

III. FORECAST, RISKS AND 2. RISKS AND OPPORTUNITIES OPPORTUNITIES Opportunities 1. FORECAST We are called upon to identify and seize opportunities early on, and recognize and adequately counteract Austria’s economy is on a growth trajectory. While the risks. Being present at all stages of the value chain (from economy is expected to perform well in 2019, growth is generation to transport and distribution, trading and sa- anticipated to fall below 2%. les) not only in the electricity segment, but also in the As of October 1, 2018, the planned splitting of the Ger- gas and heat segments, is one of our key strengths and man and Austrian energy markets was completed, a will remain a cornerstone of our profitability in the future, move that had, and is also bound to continue having, helping us to preserve the value of our company. far-reaching repercussions for our electricity business. Relying on adaptable power stations that allow reducing Where the grid is concerned, the fourth regulation peri- or ramping up output, and providing load management od, which will cover 2019 to 2023, will start in 2019. The and energy storage facilities are the measures we can regulatory regime has basically remained the same; the use to cover the demand for increased flexibility and sto- return on investment allowed by the regulator is lower rage capacities needed to integrate decentralized ge- than in the previous years. neration from solar and wind facilities. Pumped storage is the only electricity storage technology that is already The continually low level of electricity wholesale prices being used on a large scale today and that is economi- in the past few years has been a blow to established cally viable. energy suppliers, with rates of return plunging. Given our business model which relies on local hydropower for Risk management system base load generation, the shifting of generation surplu- We have a risk management system as well as an inter- ses, and the provision of control energy to ensure supply nal control system in place which are subject to ongoing security, TIWAG group basically stands to benefit from further development and monitoring as well as regular the foreseeable transformation of the European energy reviews by the group’s internal audit function. industry towards a more sustainable, lower-carbon and increasingly decentralized system, but the uncoordina- From an institutional point of view, it is the Management ted expansion of wind and solar capacities along with Board that sets the risk strategy, with the Supervisory massive structural interventions in the electricity market, Board being informed about the company’s risk situa- above all in Germany, continue to adversely affect the tion at regular intervals. Various risk committees control system as a whole. risks in the group’s key value chains, process and edit relevant controlling information as needed and report In view of these projections, we expect a stable result in to the relevant decision-makers. Moreover, these units 2019 even in a difficult market environment. are tasked with developing suitable risk strategies and providing support and assistance in risk management In the coming year, we will continue to make major in- matters to those in charge in terms of financial results vestments in the growth, modernization and maintenan- and organizational matters. ce of our power stations and transmission and distribu- tion systems. The main objective of the system is to identify, analyze and assess opportunities as well as recognize negative trends early on and propose, in good time, measures that help ensure the company’s future success on all levels. 54 Management report for the company and the group

The key element of our risk management process, which is checked by the Internal Audit function on a randomi- is based on the COSO model, is a standardized softwa- zed basis. re-assisted process that guarantees transparency and verifiability of information. At least every quarter, the va- Below is a brief description of the risks TIWAG group is rious organizational units identify individual risks, record exposed to, grouped by risk categories. them locally and submit them for centralized statistical consolidation. Different methods and tools are used in Strategic and business risks: Power stations and trans- risk assessment to determine the fluctuation range of mission and distribution systems may be subject to unfo- earnings before tax, which is a key risk indicator. reseeable interruptions of operation due to disruptions, damage and consequential damage, which might nega- Internal control system (ICS) tively affect the company’s financial position, cash flows The purpose of the internal control system is to ensure and profit or loss. The planning and building of new ca- correct, complete and transparent financial reporting as pital-intensive facilities is likewise fraught with risk. We well as compliance with the group Management Board’s address these business risks by means of high security operational and strategic directions in a bid to mitigate standards, contractual safeguards, regular servicing as and eliminate controllable risks in business processes. well as quality and maintenance inspections. Moreover, adequate insurance cover has been obtained for busi- The accounting-related ICS ensures compliance with ness risks. statutory requirements, which include the generally ac- cepted accounting principles, the provisions of the Aus- Strategic risks result mainly from a misjudgment of futu- trian Business Code, the Austrian Stock Companies Act re market developments. To counteract such risks, we and regulatory requirements. Internal measures include continuously monitor both markets and competitors. application of the dual-control principle, a strict separa- tion of functions, and time schedules for the preparation Market, quantity and price risks: The market environ- of quarterly reports, separate financial statements and ment depends on general economic activity and, in the consolidated financial statements plus management re- short term, on energy, environmental and consumer port. protection policy decisions. New market participants in the gas and electricity sectors step up competition and The financial statements are prepared centrally, with increase competitive pressure. Financials and Accounting relying on an integrated en- Weather conditions, too, are key market factors, as they terprise resource planning system (ERP system). Strict impact both the demand and the supply side. user authorization rules apply to prevent unauthorized access to data and systems. Separate and consolidated Water availability has a direct impact on how much elec- financial statements are then audited by the statutory tricity is generated. In dry years, that quantity will be auditor and the audit committee before being approved lower­­­ than in wet years. Optimized marketing, based on and published by the Supervisory Board. the current price forward curve, relies on our book struc- ture, which makes it possible to measure performance The risk-related ICS analyzes and documents all key and risks in a transparent manner and to put risk control business processes and records all controllable risks. mechanisms into place. Identified risks are first located in terms of where in the organizational and operational structures they occur and We are faced with continuous competition on prices. then eliminated as best possible through separation of In order to minimize this risk, we rely on the electricity functions and adequate controls. The system relies on generated by our own power stations as well as on de- internal rules and instructions the effectiveness of which rivatives with physical delivery and financial settlement. Management report for the company and the group 55

The hedges concluded serve the purpose of ensuring ging instruments include appropriate contract design price stability, system optimization, and load balancing. and a tight system of claims management (monitoring) The risk team, which also includes the member of the which defines limits and adjusts them in a timely manner. Management Board competent for this subject matter, Where required, cash collateral or bank guarantees are controls the risk guidelines provided by the company‘s demanded. Where financing and energy trading are con- management. The operational risk management team cerned, TIWAG primarily concludes credit transactions monitors applicable limits. Trades are concluded accor- with banks and trading partners with high credit ratings, ding to applicable best practice regulations and based which are likewise subjected to regular monitoring. on framework agreements as published by the Euro- pean Federation of Energy Traders (EFET). We have assumed a contractual obligation to make sup- plementary contributions to the pension fund for defi- Personnel risks: We need highly qualified experts and ned benefit retirement plans. The risk of such payment managers. Where staff is not available in sufficient num- having to be made may become effective when, on the bers and cannot be enticed to commit to the company balance sheet date, the capital necessary to provide for the long term, this may cause major disadvantages coverage­­­ – calculated based on actuarial principles – is to the group. As some of the holders of key manage- not matched by corresponding assets. Such a shortfall ment positions are set to retire in the course of the next may be caused, for instance, by changes in biometric few years, we will have to fill the resulting vacancies. calculation principles, by a change in legal provisions We mitigate this risk through appropriate measures in or by a lower-than-expected performance of asset ma- hiring, personnel development and performance-based nagement in the pension fund. pay and incentives. In-house healthcare offerings also serve to minimize this risk. External audits by the financial authorities may give rise to additional claims based on different views of the facts. Financial risks: Fluctuations in interest rates, exchange rates and stock prices have a major impact on earnings. Liquidity risk arises when cash and cash equivalents are These risks are monitored and managed by central insufficient to meet the company’s financial obligations Group Treasury. Appropriate instruments are used whe- in a timely manner. In order to remain solvent, TIWAG rever necessary to hedge both currency and interest relies on appropriate liquidity planning, a strong cash rate risks. The risks and opportunities arising from chan- flow from operating activities, and unused lines of credit. ges in the value of securities are addressed by means of professional fund management. In the reporting period, Legal and regulatory risks: Changes in the legal and existing cross-border leasing transactions were mana- political framework can significantly influence the com- ged as per the relevant contracts. pany’s future earnings. Pro-active regulatory and cost management is used to counteract the regulatory risk Risks related to equity investments include risks resul- of cost items not being accepted. There is a risk in con- ting from fluctuating investment income, impairment of nection with the implementation of the European Water investments, insufficient proceeds from disposal in dis- Framework Directive (WFD) which is difficult to quantify; investments, and potential liabilities following a trans- in particular, increased residual flow requirements and fer of assets. Professional management of investments changed operating rules could lead to losses in produc- makes it possible to identify potential threats early on, tion. which reduces any risks that may be involved. Congestion management was introduced at the Ger- Business relations with customers and suppliers may man-Austrian border as of October 1, 2018. Long-term give rise to supplier defaults and quality problems. Hed- transmission capacity amounts to 4.9 GW, with Austria 56 Management report for the company and the group

having to make a redispatch potential of 1.0 GW availa- IV. OUTLOOK ble (1.5 GW from October 2019). The market separation impacts our electricity business. The strategic scenario of an energy transition remains Given the reduced liquidity and the specific situation in on the agenda, which means that it will be necessary to terms of procurement and consumption, congestion ma- integrate volatile generation from photovoltaic and wind nagement resulted in rising wholesale prices for electri- power facilities into the existing system while ensuring city in Austria. supply security at the same time. Our flexible hydropow- er stations and our stable grid systems are crucial for IT security: Risk in this context relates to the availabi- this development. lity of complex systems being compromised and exis- TIWAG’s key success factor is that we operate on all ting data being falsified, destroyed or spied upon. Risk levels of the electricity, gas and heat value chain and are mitigation measures include investments in adequate thus able to provide the basis for sector coupling in the hardware and software, unified security standards, and future. It is important to retain our highly satisfied and strict enforcement of access authorizations and access loyal customer base in Tyrol as a factor guaranteeing a controls. stable future, to step up business outside Tyrol to com- pensate for any loss in customers, and to make our busi- ness processes simpler, faster and more cost-efficient 3. OVERALL ASSESSMENT OF RISKS by carrying out ambitious streamlining and cost-cutting AND OPPORTUNITIES programs that leverage the advantages of digitalization. Relying on the general energy policy decision of the pro- There have been no material changes in TIWAG group’s vincial government of Tyrol, we will continue to expand risks and opportunities. We see opportunities above all domestic hydropower capacities to ensure the secure in the almost 100% focus on sustainable and renewable supply of the region with clean energy at stable cost also hydropower generation with high- and highest-quality going forward. products from (pumped) storage power stations. Our sound balance sheet situation and excellent liquidity Our operating result shows that we are well positioned in also have a risk-mitigating effect. a challenging environment. To be able to adequately re- spond to changes in markets, competition and legal and The political, economic and legal framework conditions regulatory conditions, we update our corporate strategy under which the national and international energy indus- on an ongoing basis. try operates entail considerable uncertainties as well as risks to earnings. The legal situation concerning appro- In 2019, we are set to take our ambitious investment pro- vals for the construction of new large-scale power stati- gram further, with excellent balance sheet ratios to un- ons and the operation of existing power stations poses derpin the risk-optimized financing we will need for this particular risks. purpose.

From the Management Board’s point of view, there are The strategic focus areas in our work in 2019 will be the no indications that there was a going concern risk in the continuation of hydropower capacity expansion, step-by- period under review or that there could be such a risk step and subject to a reassessment of risks under appro- going forward. val proceedings; the safeguarding of group funding; and Management report for the company and the group 57

the risk-optimized leveraging of our storage power stati- ons on the European electricity market. Further items on the agenda include appointments for key management positions, stepped up development of customer loyalty instruments and use of intra-group synergy potentials, the sector coupling pilot project, the further expansion of e-charging infrastructure in line with demand, and the optimization of sediment management in reservoirs.

Our outlook for 2019 is optimistic. In spite of fierce com- petition, we expect stable earnings before taxes on the back of the favorable development of wholesale prices. We see our market share in Tyrol declining slightly, while both sales volumes and revenue outside Tyrol will grow significantly.

Innsbruck, April 1, 2019

The Management Board

Mag. Dr. Erich Entstrasser

Dipl.-Ing. Thomas Gasser Dipl.-Ing. Johann Herdina

FURTHER INFORMATION ON THE FISCAL YEAR

61 Our customers 62 Our employees 66 Operation and maintenance of power stations 68 TINETZ-Tiroler Netze GmbH – system management and operation of the distribution network 74 Electricity trading 84 Other activities 60 Further information on the fiscal year

Thanks to our responsible use of local hydropower resources, we are a driving force behind the ecological change in Tyrol’s energy supply and thus support energy transition and climate protection. Further information on the fiscal year 61

Our customers As one of Tyrol’s energy supply companies, TIWAG has been reliably supplying its customers with electricity from 100% renewable resources, making a valuable contribution to value creation in Austria. The company’s top priority is customer satisfaction which is being constantly monitored and improved.

Service and customer satisfaction when renovating residential, commercial and industrial In 2017, we started to continuously measure customer buildings. satisfaction and feedback, and carried on with this task With a view to increasing the use of heat pumps, TIWAG,­­­ also during the reporting year. In spite of our customers’ together with the Province of Tyrol, Energie Tirol and satisfaction remaining stable at a high level, we keep Tyrol’s Economic Chamber, founded the Network Heat up working on our objective to optimize our products in Pump Tyrol (Netzwerk Wärmepumpe Tirol) which is to accordance with our customers’ needs and to further serve as the main go-to place in this respect. Since improve our customer service. Thus, in the fall of the February­­­ 1, 2018, final consumers interested in using reporting­­­ year, we introduced a newsletter which was heat pumps can find comprehensive information on this very well received. topic on the new website www.nwwp.tirol. The project’s partners are all of Tyrol’s energy supply Another important focus is to support Tyroleans in in- companies, domestic and foreign heat pump manufac- creasing energy efficiency in their households or busin- turers and qualified plumber businesses domiciled in esses. Our offer ranges from energy consulting on the Tyrol. In addition to links to the project’s partners, inte- phone and face-to-face consulting on site to consulting rested parties can also find current subsidy programs, sessions as part of our many trade fair appearances. a heating cost comparison calculator as well as a lot of information on heat pump technology on said website. Customer retention and customer loyalty High customer retention and loyalty is what makes Christmas initiative continued TIWAG’s­­­ success possible, and is thus being further pro- Bearing in mind the objectives of environmental protec- moted by customer relationship activities such as prize tion and sustainability, and based on the strong appro- competitions and events. For example, key account cus- val on the part of our customers, in 2018, too, TIWAG’s tomers were invited to information events taking place electricity sales unit donated a considerable amount in the TIWAG visitor center at Silz and in the Kirchbichl instead of sending out Christmas cards. The donation power station. During both events, an expert from Volks- to Rote Nasen Clowndoctors in the amount of € 10,000 wagen group provided our guests with the latest news allows the organization to attend to ten Tyrolean health- concerning the level of development in the field of e-­ care facilities ­­­(hospitals and rehab centers) for several mobility. In addition, in Kirchbichl the customers had the weeks, supporting more than 600 big and small patients chance to participate in a guided tour of the construction with the power of humor. site and gain interesting insights into the progress of the power station construction work. Business and commer- cial customers were invited to the TIWAG-Business Talk at Lake Achensee. All our activities put special empha- sis on living up to our motto “TIWAG-100% Tyrol”.

Network Heat Pump Tyrol The heat pump constitutes a key technology with a view to completing the energy transition in Tyrol. Thanks to the rapid technological development, already today the Management Board member Thomas Grasser (c.) along with Philipp Hiltpolt­­ air source heat pump is absolutely competitive – not only (General Management Group Sales, l.) and Johannes Steinlechner (Head of Electricity Sales, r.) presented a donation in the amount of € 10,000 to in everyday use but also with respect to acquisitions Christina Matuella (Tyrol coordinator of Rote Nasen Clowndoctors, l.) and costs – and can be used not only in new builds but also clown Herta (Tanja Rainalter). 62 Further information on the fiscal year

Our employees

The uncertainty of overall conditions in the energy industry, the difficult situation on the energy market both in Austria and internationally as well as the growing competitive and regulatory pressure call, more than ever, for flexibility in personnel matters.

An absolute prerequisite for attaining our ambitious stra- PERSONNEL DEVELOPMENT tegic goals is professional cooperation of management on all levels. To ensure sustainable success for our Current challenges in the industry and growing de- company­­­ in such a difficult environment, we need, above mands in terms of leadership and collaboration make all, dedicated employees who show an entrepreneurial it necessary ­­­ to provide training and further education mindset and fully support the necessary improvements on a continuous basis and in alignment with corporate in efficiency. strategy. ­­­ Furthermore, investments in personnel de- velopment are crucial in the face of growing competition. The number of persons employed decreased slightly They provide a sustainable contribution to a promising against the previous year. long-term development of the company.

Persons employed 2018 2017 2016 TIWAG staff and employees hired out to TINETZ-Tiroler Netze GmbH Headcount FTEs* Headcount FTEs* Headcount FTEs*

As at: December 31 (excluding Management Board members)

Salaried employees 1,123 1,088.8 1,133 1,096 1,142 1,109

Wage earners 141 134.5 138 132 146 139.5

Wage earners – apprentices 24 24 34 34 46 46

Salaried employees – apprentices 5 5 8 8 7 7

1,293 1,252.3 1,313 1,270 1,341 1,301.5

Men 1,117 1,111.4 1,138 1,132 1,167 1,161.9

Women 176 140.9 175 138 174 139.6

1,293 1,252.3 1,313 1,270 1,341 1,301.5

Average age** (in years) 45.8 45.5 45.5

Average time with the company** (in years) 22.6 22.4 22.5

* Part-time employees converted to full-time equivalents ** Excluding apprentices Further information on the fiscal year 63

In 2018, development measures were focused above 24 high-potential candidates were nominated by the all on “staff opinion survey”, “support program (junior) Management­­­ Board and the respective managers. The key employees”, “continued professional development” program was launched in November 2016 and started and “apprenticeship training” (see “Projects” for more with a business simulation game – the development details). center. Subsequently, the participants of 2017 and 2018 worked on three core topics within the scope of In the reporting period, TIWAG invested some € 670,000 a team project, a project report and a reflection paper. in training and further education offered to its staff The (junior­­­) key employees evaluated TIWAG’s mission members­­­ by external service providers. Additionally, statement and strategy, worked on TIWAG’s business TIWAG’s­­­ employees benefited from approximately 3,400 model in the context of a project assignment and ad- training days or approximately 26,500 hours. dressed the existing management guidelines. The par- ticipants mainly worked independently on possible so- lutions for the assigned tasks and, as a result, reached ACCIDENT STATISTICS 2018 joint proposals. The program ended with a presentation of the achieved results in the course of the closing event In the reporting period, a total of 36 accidents were re- in November 2018. ported involving employees of TIWAG and TINETZ. This is the lowest number on record, the previously lowest Staff opinion survey 2018 number of accidents – 38 – was recorded in 2017. For years, the staff opinion survey has been part and Among those 36 reported accidents, 16 were insurance-­ parcel of corporate communication and control at relevant accidents involving sick leave. In comparison TIWAG ­­­Group. As in 2006, 2008, 2011 and 2014, anot- to the total of 1,296 employees (annual average), this her staff opinion survey has been conducted between results in a rate of accidents as low as 12.3‰ or 1.23 10 and 23 September 2018. All employees of TIWAG, percent­­­. The last lethal work accident was reported in TINETZ and TIGAS were surveyed. For the first time, 2000. the entire survey was conducted online. The average participation rate of all three companies was 72% and thus slightly below the so far highest rate achieved in PROJECTS the year 2014. As about two thirds of the questions had been modified, a direct qualitative comparison with 2014 From among the major projects on corporate culture and was only possible in part. First results were initially pre- personnel management carried out in the reporting year, sented on 19 October 2018 on an employee day at the the following deserve special mention: Kirchbichl power station in front of about 500 employees of TIWAG group. Starting from mid-November, all three Support program (junior) key employees companies began to process the results and develop Due to upcoming retirements, key positions at TIWAG, measures for improvement. TINETZ and TIGAS will have to be filled in the next few years. For this reason, a support program was establis- “TIWAG in brief: Introducing the group hed, the aim of which is to help (junior) key employees to new employees”: develop an understanding of management and strategy In the reporting period, some 30 new employees joined as well as common values and principles, and to help the group. Ten new colleagues attended the two-day them build a good network. seminar “TIWAG in brief: Introducing the Group to new employees” held in April. 16 managers from various or- 64 Further information on the fiscal year

ganizational units provided the new group employees as electrical engineering, metalworking, information with concise information on the most important aspects technology, electronics, design, structural and technical of their relevant areas of responsibility. The participants drafting, and office management. were also provided with background and context infor- mation about the company, its organization, and the The high quality of the apprenticeship training provided core competencies of the group companies. Visits to by TIWAG has been impressively demonstrated in vari- power stations and operational facilities of TIWAG and ous competitions in which apprentices repeatedly took TINETZ complemented the program. part in recent years. The excellent training provided to these young people is a forward-looking investment which will allow TIWAG to cover its future demand for APPRENTICES AND TRAINEES technical experts. 36 of a total of 45 apprentices passed their final exams with excellent results, four with good re- Having received the “Ausgezeichneter Tiroler Lehrbe- sults. In competitions at regional level, two apprentices trieb (2011–2019)” (Great place to work for apprenti- won the gold performance award and two apprentices ces in Tyrol) award and a federal award as a company obtained the silver performance award. Six apprentices providing excellent apprenticeship training (Staatlich completed their final apprenticeship exams with excel- ausgezeichneter Ausbildungsbetrieb), TIWAG offers lent results, four with good results. apprenticeship training for various technical and com- mercial trades at an in-depth and high-quality level. In Early in 2018, Simon Neururer, a second-year apprentice­­­ 2018, TIWAG trained a total of 45 apprentices. In order in electrical engineering, was chosen as apprentice of to recruit the best young talents, TIWAG places parti- the month December 2017. The province of Tyrol uses cular emphasis on a professional selection procedure. this award to create awareness of the exceptional com- The WIFI Institute for Economic Promotion supports us mitment of young people. Apprentices learning the in conducting a standardized potential analysis with the skilled trade of electrical engineer and related trades young people applying for an apprenticeship. Once se- receive­­­ their practical training together with the appren- lected, apprentices at TIWAG are provided with sound tices of Innsbrucker Kommunalbetriebe AG, within the vocational training in future-oriented professions, such context of our joint voluntary training partnership.

A tour of TIWAG's Amlach power station was part of this year’s Apprentice Day program. Further information on the fiscal year 65

To reward its diligent and excellent apprentices, TIWAG to re-enter the workforce when returning from parental organizes an annual Apprentice Day with a diverse pro- leave­­­ after the birth of a child. gram. The apprentices enjoyed this day in East Tyrol in the presence of their trainers. After visiting the Amlach Medical care and safety power station, the apprentices participated in a challen- TIWAG has been cooperating with Wellcon Ges.m.b.H., ging rafting tour taking them to a joint barbecue. Already a company specializing in prevention and occupational in April 2018, the apprentices spent an interesting day medicine, already for a number of years. Apart from in a high rope course under the motto “team building”. carrying out preventive medical examinations and che- ckups, job-specific pre-employment medical examinati- Currently, eleven apprentices are taking part in the new ons and relevant training courses, Wellcon also contri- “Lehre mit Matura” program (apprenticeship with uni- butes to safeguarding the overall quality of workplace versity-entrance secondary education diploma). In ad- safety measures. In addition, TIWAG group offers a dition to better career and promotion perspectives, this broad­­­ range of safety training courses with a view to training­­­ model allows young people to move on to a uni- a c c i d e n t ­­­ prevention. versity or a university of applied sciences after they have completed their training with TIWAG. Retired staff As at the balance sheet date, contractual and volunta- Traineeships ry pension benefits were being paid out to 1,475 former In the reporting year, TIWAG also gave about thirty staff members and their surviving dependents. “would-be” apprentices an opportunity to gain first-time experience with the apprenticeships offered by TIWAG in the course of special taster days. OUTLOOK

In 2018, 22 adolescents were given the opportunity to TIWAG will firmly pursue its chosen course of profes- gain hands-on insights into day-to-day work within the sional recruitment and personnel development. Given scope of school-imposed traineeship programs. In total, increasing cost and efficiency pressures, the company’s TIWAG offered 57 traineeships and vacation work pla- management attaches great importance to a competitive­­­ cements. cost structure in HR, always within the limits defined by collective bargaining agreements.

SOCIAL WELFARE MEASURES

Day care services TIWAG, together with three partner companies, offers child care for employees’ children in a day care service center, thus closing the childcare gap between the end of parental leave and the child’s enrollment in nursery­­­ school – a step to help employees strike a better life-work balance. What is more, TIWAG grants employees a day care allowance. This family-friendly, voluntary social benefit­­­ specifically aims at reducing the financial - bur den of young families and makes it easier for employees 66 Further information on the fiscal year

Operation and maintenance of power stations

In 2018, the power stations of TIWAG-Tiroler Wasserkraft AG generated some 3,050 GWh, a volume 7.3% or 242 GWh below the values of an average water year.

IMPORTANT PROJECTS AND Power Generation unit alone. The work and services MEASURES IMPLEMENTED as performed by the employees of the Technology and Power Generation units in relation to planning, overhaul/ Overhaul and investment projects production and assembly feature among the core com- concerning power stations petencies of TIWAG.

Silz power station: Investment and maintenance projects 2018 (as per project size) Procurement of two replacement runners The turbine runners of the Silz power station are still among the most heavily stressed Pelton runners in the world. Over the last few years, developments including 209 projects changes in dispatching have caused the annual hours (€ 6,600,000) 6 projects (€ 9,800,000) of operation to almost double while downtimes related to runner service intervals were reduced by half. Con- tinuously increasing sediment levels also contribute to 49 projects (€ 13,900,000)

over € 1,000,000 € 0 to 100,000 € 100,000 to 1,000,000

To ensure the safe operation of the generation facilities, more than 270 single projects for the maintenance of TI- WAG’s power stations, involving a budget volume of over € 30 million, were implemented in 2018. These projects accounted for some 84,000 hours of work provided by TIWAG group, of which 56,000 are attributable to the A Pelton runner at the Silz power station

the runners wearing out faster. Currently, operational safety and availability of the plant can be ensured by the alternating use of several runners and by regularly performing comprehensive refurbishment. To be able to compensate for periods of refurbishment coinciding with downtimes and prevent possible availability issues also in future, it was decided to procure one further runner. The production of a second runner will be finished only after at least one year’s experience in the operation of the first runner. Mechanical work on a Francis runner at the Imst workshop Further information on the fiscal year 67

Kühtai power station: budgeted amount of some € 66 million and the whole Upgrading program 2017–2021 project will be completed in 2021 as scheduled. The upgrading program at the Kühtai power station started in October 2017 is progressing smoothly. In the Leiersbach power station: course of the extensive maintenance and renewal mea- Landslide near the supply conduit sures, the turbine, the generator, the spherical valve and In April 2018, it was found that another landslide had the 10kV and 20kV switching systems of machine set 1 occurred at the level of the supply conduit (as had also were updated to reflect the latest state of the art. The happened in 2010), almost exposing the supply condu- contract awarding and ordering required for the renewal it. Maintenance action was taken immediately to relieve of the gas-insulated 245kV system of both machine sets the conduits from possible slope pressure and to prevent which is scheduled to take place in 2020 also proceeded downslope movements of more masses of earth and the as planned. ensuing complete exposure of the conduits, as well as The first of many extensive single tests preparing the any consequential damage. To secure the construction machine set for resuming operation were carried out as area and the access path, a wooden retaining wall of early as in July 2018. Unfortunately, putting into opera- some 90m length was anchored downslope of the supply tion was interrupted for approximately eleven weeks be- conduit. The construction work has been fully completed, cause of the partial renewal required due to damage to a there was no negative impact on the energy industry. heat exchanger of the oil coolers. Consequently, the start of the trial operation of the ma- chine set had to be postponed from January to April 2019. Following termination of trial operation, the ma- chine set is available for unrestricted network operation again.

The affected area in May, before the maintenance action, ...

Lifting in the generator rotor at Kühtai power station

Currently, preparations for the structural maintenance works scheduled for 2019 and 2020 are under way. Ex- tensive official permits and approvals are required for the works at the Finstertal and Längental reservoirs. Both reservoirs are scheduled to be emptied in 2020. From today’s perspective, total costs will not exceed the ... and in November 2018, after its completion 68 Further information on the fiscal year

TINETZ-Tiroler Netze GmbH – system management and operation of the distribution network

General ven advantageous that TINETZ always had one of its The distribution network operated by TINETZ-­Tiroler employees ­­­on the crisis management team of the dis- Netze GmbH currently features 11,885 km of low-, trict commission to support the coordination of quickly medium­­- and high-voltage lines, 47 electrical substa- restoring­­­ wide-scale power supply. tions, 4,000 transformer stations and some 235,000 The System Average Interruption Duration Index (SAIDI)­­­ m e t e r i n g ­­­ p o i n t s . of unplanned events (supply disruptions) for the year 2018 is 43.8 minutes. This index clearly shows how relia- Network load ble the TINETZ distribution network is overall – despite a Energy supplied through the network operated by major malfunctioning – and to what high degree TIWAG TINETZ­­­ amounted to around 5,001 GWh in 2018, down ensures supply security. by about 0.2% from the comparable value of the previ- ous year. In accordance with continuously high capaci- New customers ty requirements, it is necessary to further expand the In the reporting year, TINETZ connected 1,614 customer medium- and low-voltage network as well as the maxi- systems with a connected load of 39,544 kW to the dis- mum- and high-voltage network as the backbone of a tribution network. Additionally, the capacity of existing reliable power supply, both for the population of Tyrol customer systems was expanded by 22,070 kW. The and its businesses. load demand to be covered by the TINETZ distribution network has thus risen by 61,614 kW. In the reporting Supply disruptions year, 491 new stations, mainly photovoltaic stations, System management of the distribution grid operated started to feed electrical energy into the TINETZ dis- by TINETZ throughout Tyrol saw a low percentage of tribution network (which is about 8.4% fewer stations malfunctions in 2018. The exception were the last days and about 0.5% less output than in 2017). In total, 5,456 of October and the first days of November. From Octo- photovoltaic stations with an overall bottleneck capacity ber 29 until November 2, 2018, severe storms occurring of 68,672 kW were connected to the distribution network throughout Europe also had a major impact on the power until the end of 2018. supply in the Tyrolean grid: The low-pressure storm front “Vaia” resulted in massive storm damage to overhead Roll-out of smart meters in the lines, caused by falling trees in North and East Tyrol, TINETZ supply area and also in massive floods up until the high-water mark Within the scope of the EU’s Third Energy Package, the of a 100-year flood in East Tyrol. The areas most sever- EU Internal Market in Electricity Directive calls for the in- ely affected were parts of the upper Inn valley (Oberes troduction of intelligent metering systems. The Austrian Gericht), the Sellrain valley, the Brenner region and the parliament and the competent administrative authorities Jochberg region in North Tyrol, as well as basically all have issued a number of legal provisions on this subject. of East Tyrol. The Electricity Industry and Organization Act 2010 defi- Up to 10,000 customers were affected by an average ned the legal basis for the introduction of smart meters failure duration of nearly twelve hours. More than 140 in Austria. employees of TINETZ were involved in the troubleshoo- The new metering devices will make it possible to record ting process. the energy consumption of all customers in real-time in Thanks to the close and timely communication between the future. Customers will thus be able to directly obser- TINETZ, authorities and emergency services and the ve their energy consumption and to take better account intense troubleshooting activities of TINETZ, power of energy efficiency and environmental aspects in their supply could be restored as fast as possible. It has pro- consumer behavior. Meter readings on site will no longer Further information on the fiscal year 69

be necessary for customers, and registration and de-­ and the development of operational processes for roll- registration will also become easier, for instance when out and regular operation. A special focus was the inter­ moving house. operability of devices and sub-systems of the different­­ In this context, TINETZ launched a large-scale project solution providers and producers, to keep the smart in 2014. In 2015, a cooperation agreement for the joint metering­­­ system open in terms operation, maintenan- procurement of metering devices was entered into with ce and further development and thus also low-priced. Vorarlberger­­­ Energienetze GmbH (VNE), Innsbrucker “Security­­­ and Privacy by Design” – i.e. data security and Kommunalbetriebe AG (IKB AG) and Salzburg Netz data protection for our customers as the most important GmbH, in order to bundle know-how and to strengthen basis for the solution design – can thus be realized as our position on the market. Furthermore, TINETZ directly prerequisite for this important area in the energy sector. cooperates with IKB AG in the operation of central sys- As these complex systems (metering devices, commu- tems for smart meter roll-out and smart meter operation. nication technology from the meters to the centers, IT In addition to electricity, the smart metering system has systems for managing and processing the data, down been designed to include further networks (natural gas, to the billing systems) were and are newly developed by water, remote heating) as and when the need arises­­­. all producers based on the imposed requirements, it is The key points in the project program include the necessary to carry out extensive tests in laboratories successful­­­ implementation of all centralized IT systems and plants and – following the installation – also at the and the necessary telecommunications solution, from network operators before a mass roll-out can be started. the meters to the transformer stations and the central Under this cooperation agreement, the competition-­ IT systems, the procurement of the metering devices, based tender proceedings for the supply and implemen- 70 Further information on the fiscal year

tation of metering devices and communication techno- The measures taken for energy efficiency also relate logy were successfully completed in the year under to the thermal upgrading of the company buildings. In report. The intense work for implementing the central IT this context, the final work for the thermal upgrading of systems, which was started in 2015, will be completed a company building was completed in the year under in 2019. r e p o r t ­­­. The first smart metering devices are expected to be But also other modernization measures such as impro- delivered in mid-2019. Installation of the smart meters ved protective walls for flood control, new surface water is likely to be launched at the end of 2019, in the form channel systems and refurbishments in the logistics and of a pilot project on a smaller scale, and to be widely storage area (e.g. lifting equipment) were taken in 2018. implemented­­­ in subsequent years. According to the current­­­ project status, equipping the customer systems Moreover, the sustainability strategy implemented by with smart metering devices will be completed in 2023. TINETZ­­­ also leads to innovation which is particularly positive for the environment (e.g. extensive LED equip- General Data Protection Regulation 2018 ment in terms of lighting). On 25 May 2018, the General Data Protection Regula- tion entered into force, establishing new standards with Increase in supply security – respect to data collection and data storage as well as line refurbishments and construction access to data. Two important projects aiming at increasing supply TINETZ manages data from more than 235,000 clients, security­­­ in Tyrol are the “Lowlands network concept” and had started to adapt its internal processes with a and the “Wipptal valley group of projects – 110 kV line view to the new requirements even long before the Steinach-Wilten”. General­­­ Data Protection Regulation entered into force. Under the “Lowlands network concept”, the existing 110 The master data, settlement data and operating data, kV line between the substations Kramsach and Kirch- which have already been managed in a very secure bichl, which was built in 1938, will undergo radical refur- manner, were compared to a revised security concept bishment with new structures being built to replace the and thus the relevant system standards were aligned old ones. The purpose of this project is to continue the with the legal requirements. line upgrading already carried out in 2009 on the section The quantity of stored data was also reduced to the between the Jenbach and Kramsach substations within legally­­­ admissible extent and existing IT systems were the scope of the “110 kV Zillertal valley line” project. adapted to these requirements. Thus, TINETZ created Apart from the priority objective of ensuring long-term all conditions for legal conformity under the General secure and reliable network operation in the region, the Data Protection Regulation with respect to handling line upgrade also aims to find the best possible solution data. in terms of environmental and land-use compatibility. The future power line is intended to trace the track of Modernization of the TINETZ infrastructure the existing 220 kV line from Kirchbichl to Strass as far In 2018, TINETZ put its focus also on equipping all away from settlements as possible and relying on alrea- TINETZ­­­ facilities with electric charging stations; these dy existing and developed structures. are also needed because more and more electrically The project breaks down into three approval stages and operated motor vehicles become part of the TINETZ four construction stages. All construction stages require vehicle fleet. Based on a standardized billing system, it extensive approvals from public authorities as well as is now possible to also charge the e-cars of employees agreements with the relevant land owners. against payment. Further information on the fiscal year 71

Construction work on the first approval stage (construc- ever, it has already been confirmed by the authorities in tion stage 1) started in July 2018, the first stage was put the meantime. All approvals for implementing the project into operation in December 2018 as planned. have already been obtained. The decision with respect to the assessment under The expansion of the substations Vill and Steinach am high-voltage routing regulations concerning the second Brenner is underway as planned, the planned construc- approval stage (construction stages 2 and 4), which was tion period for the line is early March until the end of rendered mid-year, was appealed. The Tyrol Administra- October 2019. tive Court has not scheduled a hearing yet. We expect the hearing to be take place in 2019. Electricity for the construction of the The start of construction for the second construction Brenner base-level tunnel stage (area of municipality of Breitenbach) is scheduled The electricity consumed at the construction site and for mid-2019. auxiliary electricity for the Brenner base-level tunnel In the third approval stage (construction stage 3), the are supplied in stages through a substation to be cons- detailed­­­ route mapping is currently being finalized and tructed by Innsbrucker Kommunalbetriebe AG (substa- the relevant submissions are being filed with the autho- tion Ahrental­­­). This substation will be connected to the rities for the approval proceedings. TINETZ network through the substation Vill. The con- From today’s perspective, the earliest possible date for nection to the 110-kV network will be ensured through a the start of construction work on the third construction 110-kV overhead line. TINETZ had to apply for a cons- stage falls in 2020, while the fourth and last construc- truction and operating license under high-voltage routing­­­ tion stage (a part planned in parallel with the existing regulations. This license was granted and has final legal connection ­­­to the Kundl substation) cannot be expected effect now, and approval under forest law has also be to be commenced before 2021. obtained. A license under the Nature Conservation Act has not been applied for yet. Under the “Wipptal valley group of projects”, the existing Progress in this project is made according to schedule. 110 kV line spanning about 21 km between the Wilten From today’s perspective, it can be assumed that the and Steinach substations (“Brenner line”) is being rene- system connecting the planned substation Ahrental wed. As the major part of the Brenner line’s 80 towers will be constructed ready for operation by mid-2019, as were built in 1945, the system needs restoration and a g r e e d ­­­. renewal. Due to technical requirements, the height of some of the existing towers needs to be raised. Increase in supply security – Most preparatory work for the required construction new distribution facilities work started already in 2016. In addition to functioning cables and wires of a grid, To ensure the refurbishment of the 110 kV line between supply ­­­ security is also dependent on the supply of the Vill and Steinach substations, the technical details distribution­­­ facilities meeting actual requirements. The for the provisional structures required to raise tower task of these distribution facilities mainly consists of heights as well as the relevant land use requirements transforming higher voltage into lower voltage. were further prepared, and private-law negotiations with The most important projects of TINETZ in the year under the relevant land owners were started or continued, report were the substations in Matrei, East Tyrol (joint already ­­­in 2017. project with Austria Power Grid AG), Reith bei Seefeld, The decision with respect to the assessment under Steinach am Brenner, Vill, Fiss, Zell as new stations re- high-voltage routing regulations was appealed. How­ placing the old ones, as well as expansions and renewals­­­ 72 Further information on the fiscal year

in Prutz and Kufstein, and also finishing work in Gerlos. The project was completed within the scope of the pro- These projects are currently in different planning or im- ject amount of € 4.4 million. TINETZ invested a total of plementation phases: Some of the projects are still in € 7.6 million in supply security at the Seefeld Plateau. In the planning phase or the property procurement phase addition to constructing the new substation, the 110-kV (substation Fiss), and some of the substations are nearly supply line Zirl – Seefeld was refurbished. complete (substation Vill, substation Steinach and sub- station Zell). From today’s point of view, these projects In the medium-voltage range, 51 transformer stations will probably be completed in 2019 or 2020. were successfully completed and put into operation in the TINETZ network in 2018. Substation Reith bei Seefeld was completed and put into operation in the year under report. The facility was successfully taken into operation on November 6, 2018 before the start of the winter season, as planned. This has made it possible to not only ensure long-term supply security for the Seefeld area and ease the burden on the neighboring substations but also to provide the reques- ted increase in performance at the Seefeld Plateau for the 2019 Nordic Ski World Championships. Further information on the fiscal year 73 74 Further information on the fiscal year

Electricity trading

In 2018, the electricity market saw the upswing of electricity prices continue in the wake of carbon prices tripling and commodity prices rising further. The split-up of the joint German-Austrian price zone into two national market areas taking effect on October 1, 2018 was the most important event, from the Austrian perspective.

Based on the experience gained so far, which no doubt around 29% above the prior-year figure. Compared to is still short, the regulatory limitation of the cross-zonal 2016, when the average price was as low as € 14/MWh, transmission capacity between Austria and Germany prices even rose by 58%. has resulted in prices on the spot market (EPEX) going up 14%, or € 7/MWh, on average in Austria (October 1 Internationally, the 2018 gas market was characterized to October 31, 2018). The Austrian futures market is still by more LNG infrastructure and a sharp rise in Chine- in its infancy and there has been little liquidity so far. se demand. Waging the “war on smog”, China seems Regarding the auctions of transmission rights by way to have re-oriented its energy policy and to be replacing of so-called FTRs (financial transmission rights), the coal by gas. average ­­­ price from the three monthly auctions taking The International Energy Agency (IEA) sees three major place in 2018 was € 3.46/MWh while the price at the trends currently: 2019 annual auction was € 3.33/MWh. ▪ Asian gas consumption is going to increase consi- There is progress in promoting renewable sources of derably, and China will become the world’s largest energy, especially wind power plants and photovol- importer ­­­of gas; consumption in the Middle Kingdom taics stations. The digitalization of the energy industry is expected to grow by 60% (!). leads to the integration of more and more decentralized ▪ The USA is going to massively expand (shale) gas small-scale facilities, which represent a growing poten- production and gas exports; China is already buying tial of entities equipped for providing control energy. American LNG and, from a forward-looking perspec- Concerning the Austrian market area, energy trading tive, these mutual interests supposedly will intensify. prices were up 35% on the spot market and 28% on So the gas market appears to play a special role in the the futures market compared to the previous year, on trade conflict. an annual­­­ average. The markets in primary energy ▪ The industrial sector is going to replace gas-fired sources recorded marked price rises for natural gas, power­­­ stations as the main driver of demand; this while foreign­­­ currency effects (EUR stronger than USD) should cause a tendency towards fewer seasonal made it possible­­­ to compensate for the price increase fluctuations­­­ in the demand for gas. for hard coal. The growth in LNG import and export capacity should provide for a closer linking of the previously continental PRIMARY ENERGY SOURCES markets and cause an approximation of prices. Current- ly, gas supplies in Europe are pipeline-focused, but the Even in times of growing market shares for renewables, economic area has large LNG storage capacities, which prices on the electricity market have so far been impac- are currently underutilized and would gain in importance ted mainly by the cost of electricity generation in thermal in the outlined market environment. Roughly speaking, power stations. These are, in turn, largely dependent on the level of European gas prices is around double that of carbon prices as well as world market prices for coal and the American prices and approximately 25% lower than natural gas. in the Asian area. It remains to be seen whether, on an international gas market, the European prices will move Natural gas closer to the high- or low-price zone. In the year under report, prices on the European gas markets again increased significantly; at € 22/MWh, the Figure 1 shows the European TTF gas price quotation annual average price for the front month product was for next-month and next-year (2019) in €/MWh. Further information on the fiscal year 75

The European TTF gas (front month) quotation started the US sanctions on Iran, the mood cooled down in the into 2018 at € 19/MWh and then quickly dropped as de- fourth quarter, and the price of natural gas dropped just mand was below average due to the temperatures and as quickly to a (still high) level of around € 24/MWh. For the supply situation was good. February saw a cold spell the rest of the year, the gas price fluctuated around this in Europe, which increased the need for heating and, mark, with a minor spike being caused only for a short in the second half of the month, also drove up the gas while by the onset of cold weather in November. price. At the spot market, the extremely low tempera- tures caused top prices of up to € 58/MWh for the day-­ The TTF gas front-year quotation basically followed the ahead product, and the front month product also felt the price movements of the one month product at a price impact. From April to June, the TTF quotation rose more gap of € 1–2/MWh and, of course, without fully pricing than 25%, to € 23/MWh. The gas price rally appears to in its short-term market developments. be driven by the crude oil market, as the US sanctions policy on Iran gave rise to price fantasies on the oil mar- Hard coal ket, which caused bullish movement not only on the gas In 2018, the average front-month price of hard coal was but also on the coal market. In June, production commit- near € 78/ton, i.e., some € 5/ton up from the prior-year ments by OPEC and Russia curbed the upward trend figure. The front-year product was quoted at € 74/ton on and the commodity price remained at the level then rea- average, but the price increase compared to the previ- ched. As per August, the price rally continued and the ous year, amounting to € 9/ton, is almost twice as much. European (front month) gas quotation rose – within an environment of high coal and Asian gas prices and soa- A large part of trading on the coal market is bilateral (out- ring carbon prices – to € 29/MWh in September. Amidst side of exchanges), which makes coal prices compara- plummeting oil prices caused by a surprise relaxation of tively non-transparent. While coal consumption goes

TTF-Gas front-month [€/MWh] TTF-Gas front-year [€/MWh]

31 31

29 29

27 27

25 25

23 23

21 21

19 19

17 17

15 15 Jan 18 Feb 18 Mar 18 Apr 18 May 18 Jun 18 Jul 18 Aug 18 Sep 18 Oct 18 Nov 18 Dec 18

Figure 1: European TTF gas price quotation (front-month and front-year) 76 Further information on the fiscal year

down in Europe and the US, high demand can be expec- The slump was followed by a boom, with the European ted to continue in Asia. China, which accounts for half of API#2 coal quotation (front month) rocketing to € 89/ the global coal demand, continues to have a major in- ton by mid-year. Summer temperatures far exceeding fluence on prices. Given the existing air pollution levels, average values not only caused Europeans to groan but however, China is vigorously trying to counteract and also resulted in high cooling needs and corresponding has made cutting down coal consumption a major ele- demand in China and Japan. ment of its “Make the sky blue again” strategy. Overall, Asia is highly dependent on energy imports and for the time being no reduction in consumption is foreseeable. GREENHOUSE GAS EMISSIONS

Figure 2 shows the API#2 hard coal quotation for next- In addition to coal and gas prices, the prices of Euro- month and next-year deliveries in €/ton. pean certificates for carbon emissions (EU-ETS) are a key input variable for the electricity generation costs Starting at a high prior-year level of some € 80/ton, the of thermal power stations and thus for electricity prices API#2 coal quotation (front month) soon dropped to re- themselves. The emission allowances are in their third ach its lowest value, of some € 62/ton, by the end of trading period, which lasts from 2013 to 2020. Given the the first quarter. Market participants explained that ini- low prices in the previous years, the intended steering tially this was due to the price reduction seen in the oil effect for the market towards more low-carbon techno- market and to prices following temperatures, as eviden- logies was rather limited. 2018, in turn, saw a veritable ced by the price peaks during the cold spell. The further rally of the carbon prices. drop was related to below-average demand from China In principle, the carbon price makes generation in ther- ensuing from restrictions of consumption due to smog. mal power stations more expensive, even more so for

Coal API#2 GFI front-year [€/t] Coal API#2 GFI front-month [€/t]

95 95

85 85

75 75

65 65

55 55 Jan 18 Feb 18 Mar 18 Apr 18 May 18 Jun 18 Jul 18 Aug 18 Sep 18 Oct 18 Nov 18 Dec 18

Figure 2: API#2 hard coal quotation Further information on the fiscal year 77

those with higher specific carbon emissions, such as in increased coal consumption going along with more lignite-fired power stations, followed by hard coal-fired greenhouse gas emissions. In a system featuring a cap power stations. All other factors being equal, the follo- on emissions, this leads to more allowances being used wing applies: the higher the carbon price, the higher the (putting a limit to their supply) and thus to an increase in generation costs of coal-fired power stations as compa- carbon prices. In addition, we suppose that speculative red to gas-fired power stations, but also by comparison investors (hedge funds) identified market opportunities with hydropower stations and renewables. The carbon and pushed carbon prices even more. price thus plays a pivotal role in the future course of the What is more, the price hike seems to have also moti- energy transition. vated electricity producers and industrial consumers to cover their demand early in order to avoid having to buy In 2018, the price for European emission allowances additional allowances at higher prices later. Despite the more than tripled, rising from some € 8/ton to more than steep rise in price for carbon certificates, the electricity € 25/ton. On average, the 2018 carbon price was € 16/ generation costs of gas power stations remained above ton, i.e., far above the prior-year level of € 6/ton. those of hard coal-fired power stations all in all, due to the higher gas prices. It is not entirely clear what caused the carbon price hike as there is a variety of reasons. First, reference is Figure 3 shows the EEX spot market prices of emission made to the reform of the European emissions trading allowances (EUAs) for the third trading period for the system where a market stability reserve was introduced year 2018, expressed in €/ton. to diminish­­­ the number of surplus allowances and thus reduce the excessive supply. Second, gas became more expensive in relation to hard coal prices, and this results

Carbon spot prices EUA EEX [€/t]

30 30

25 25

20 20

15 15

10 10

5 5

0 0 Jan 18 Feb 18 Mar 18 Apr 18 May 18 Jun 18 Jul 18 Aug 18 Sep 18 Oct 18 Nov 18 Dec 18

Figure 3: Spot market prices of emission allowances for the third trading period for the year 2018 78 Further information on the fiscal year

DAY-AHEAD AND INTRADAY MARKETS As per October 1, 2018, the previously joint German-­ Austrian market area was split up and thus there will be The spot price on the EPEX SPOT SE (EPEX) for next- different electricity price levels in the two countries in day delivery (day-ahead) for the market area Austria future. At € 7/MWh on average, the Austrian mark-ups (Germany/Austria until September 30, 2018; Austria as from the German prices surpassed market expectations from October 1, 2018) was quoted at an annual average in the first three months (October 1 through December of some € 46/MWh in 2018, thus 35% above the prior-ye- 31, 2018). The great differences in prices are due to ar level of € 34/MWh. The corresponding futures market the fact that the transmission capacity actually availa- price for 2018, i.e., the price expected in 2017 for the ble between Germany and Austria is often lower than annual baseload for 2018, amounted to only € 38/MWh. the agreed value of 4,900 MW announced to the market The higher price level on the spot market is mainly due participants within the scope of the flow-based market to the higher carbon prices, but other factors contributed coupling. as well. These include, in particular, the split-up of the Austrian-German market and the unexpected increase Figure 4 shows the price development at the EPEX ener- in the cost of transporting hard coal. With extremely dry gy exchange for the market area Austria in the year 2018, periods in 2018 causing low river water levels, transport- illustrated by the average daily price on the spot market ing hard coal on inland waterways in Germany was se- (Phelix AT base) and the average monthly price in €/MWh. verely aggravated and became much more expensive because the vessels could not be loaded to full capacity The fact that the spot market was volatile in 2018 is any more. This additional cost resulted in higher produc- yet another clear indication of the influence of renewa- tion costs for the hard coal-fired power stations, which in ble energy production on pricing mechanisms, given turn affected electricity prices. that even with prices aggregated to daily averages as

EPEX AT spot market day av [€/MWh] EPEX AT spot market month av [€/MWh]

100 100

75 75

50 50

25 25

0 0

-25 -25 Jan 18 Feb 18 Mar 18 Apr 18 May 18 Jun 18 Jul 18 Aug 18 Sep 18 Oct 18 Nov 18 Dec 18

Figure 4: Price development at the EPEX (European Power Exchange) in the year 2018 Further information on the fiscal year 79

depicted­­­ here, prices quite frequently tend to double INTRADAY MARKET or halve as compared to the previous day. When pow- er consumption is low, usually on Sundays and bank Intraday trading covers the delivery period between holidays, while wind and/or solar generation is high, day-ahead and control energy deliveries with one-hour electricity prices tend to plummet. In 2018, the Austri- and 15-minute products and has expanded owing to the an day-ahead market recorded a total of 108 hours (or increasing use of unreliable forms of production from re- 1% of all hours) where electricity prices were negative. newable resources. The split-up of the German-­Austrian On New Year’s Day (January 1, 2018), the daily average market, however, meant a significant setback for intra- price hit a significant low at € -25/MWh. day trading in Austria, while trading volumes on the At a level of € 80/MWh (November 23, 2018), the highest German­­­ intraday market continue to develop satisfac- daily price was clearly lower than in the previous year as torily. As relatively ­­­low volumes are traded in the small there were no phases of very low temperatures coinci- market area Austria, a liquid market is not available in ding with low wind feed-in. In January 2017, a very cold every time unit. spell accompanied by weak wind feed-in had resulted in The price fluctuations on the intraday market mainly ref- a daily price of € 102/MWh. lect intraday surplus or shortage situations. At € 744/ The monthly prices recorded in 2018 also underline how MWh, the year’s highest price of a one-hour product on very much the weather has come to influence the elect- the German-Austrian intraday market was obtained on ricity markets. In contrast to the usual seasonal fluctuati- August 3, 2018. The lowest price was recorded in Sep- ons of the electricity prices, this year saw the lowest price tember, at € -498/MWh. The price band between daily for electricity, € 29/MWh, in January. Furthermore, the maximum and minimum prices amounted to € 108/MWh figure for November (€ 57/MWh) exceeded the monthly­­­ on average and was thus a little more than twice the price recorded for August (€ 56/MWh) only slightly. day-ahead spot price level, which underlines the value

EPEX AT intraday market [€/MWh daymin – daymax]

300 300

200 200

100 100

0 0

-100 -100

-200 -200

-300 -300 Jan 18 Feb 18 Mar 18 Apr 18 May 18 Jun 18 Jul 18 Aug 18 Sep 18 Oct 18 Nov 18 Dec 18

Figure 5: Price development on the intraday (hour) market at the EPEX in the year 2018 80 Further information on the fiscal year

potential of this market segment. The price band is on While in the past few years the electricity balancing mar- the same level as in 2017, but it has clearly narrowed ket was characterized mainly by increased competition since the market was split up on October 1, 2018. due to more participants, it was two regulatory changes that materially affected the market situation in 2018. In Figure 5 shows the price development on the EPEX in summer, the mixed-price procedure was introduced as the year 2018 as minimum and maximum daily values on a new award criterion for the secondary control reserve the intraday (hour) market for the market area Austria, market. After the capacity charge (availability) had been expressed in €/MWh. the primary award criterion in the calls for tenders for many years, now a combination of the capacity charge Intraday products are traded on the energy exchanges (availability) and the energy charge for the activation of 24/7, all year round. The intraday market offers opportu- the reserve is decisive for being awarded the contract. nities especially to traders with flexible means of produc- Then, in the fall, the split-up of the German-Austrian tion, enabling them to generate revenue even at times price zone also affected the characteristics of the acti- when market and economic conditions are unfavorable. vation of the control reserves as the creation of separa- TIWAG, with its array of reservoir and pumped storage te price zones also meant a restriction of the exchange power stations, is virtually predestined for this market of control reserves between the German and Austrian segment. transmission system operators. From a technical perspective, 2018 saw an even stron- ger trend towards decentralized facilities of relatively low CONTROL ENERGY output, such as photovoltaic/storage battery systems or heat pumps in households, which offer an increa- To warrant the stability of the electricity grid, generation sing technical potential of additional, flexibly modifiable and consumption must be at the same level at all times facilities­­­. TIWAG is taking an active part in this develop- because, although it is possible to store limited volumes ment and addresses the integration of those flexible in (pumped) storage power stations or minimal volumes resources­­­ into the electricity markets by way of internal in batteries, no electricity can be stored in the grid itself. and external research projects. Unscheduled fluctuations in generation or consumption are offset by the operators of the transmission system providing balancing services (the so-called control reser- FUTURES TRADING ve). Balancing services can be made available by means of flexible generation and consumption facilities and must Wholesale energy trading with futures products, i.e., be contracted by the transmission system operators using relating­­­ to months, quarters and years in the future, is processes based on market economy principles. As its subject to the pricing mechanisms of spot trading as well high-performance power stations enable TIWAG to provi- as to other factors. Futures trading attracts a larger circ- de balancing services at short notice, we have for many le of traders, including those who do not have production years been a reliable partner of the transmission system facilities of their own, and pricing in futures trading is not operators and successfully been doing business on vari- only influenced by objective fundamental criteria (e.g., ous electricity balancing markets. Apart from making this economic development, futures prices of commodities major contribution to system stability from its own power or emission allowances) but also by the opinions and stations, TIWAG also provides its partners in a pool of expectations, often driven by pure speculation, of the balancing service providers with the opportunity to place market participants. their power stations on the electricity balancing market. Further information on the fiscal year 81

Prices for front-year delivery 2019 base in the illiquid Figure 6 shows the electricity trading prices (futures), Austrian market area recorded a marked hike in 2018. expressed in €/MWh, as published by European Energy­­­ The price moved sideways until the end of March be- Exchange AG (EEX), for the delivery 2019 base and fore starting a long upward trend which in September peak for the market area Austria in the trading year 2018. culminated in prices exceeding € 58/MWh. Since then, we have been experiencing an unusually volatile pha- The market split-up on October 1, 2018 also gave rise se with price changes of several Euro per megawatt to a new electricity product, so-called FTRs (financial hour within one day almost becoming the general rule. transmission rights), by means of which the difference After even the mark of € 60/MWh had been surpassed in prices between Austria and Germany can be traded for a short while, the Austrian front-year prices 2019 of in financial terms. This is a purely financial product. It some € 59/MWh recorded at the end of the trading year is not possible to acquire physical transmission rights. were close to the high, while German front-year closed Acquisitions are made at an auction and are limited to at € 55/MWh, i.e., € 4/MWh below the Austrian price base products for front-years and front-months. Thus, level. The Austrian peak product for 2018 developed the variety of products and hedging options available in analogous­ly to base, with the absolute price increase this context is far smaller than for electricity forwards. being a bit steeper as the peak-to-base ratio remained Moreover, as a matter of principle, FTRs can be bought almost constant. However­­­, given the lack of liquidity on only once. There is not really any secondary (trading) the wholesale market, price quotations for Austria – as market where transmission rights could be resold; nor is opposed to those­­­ for the market area Germany and for it possible to short sell them. the joint market area of Germany and Austria existing The first auction results obtained on the Joint Alloca- until October 1, 2018 – are in most cases indicative and tion Office (JAO) platform created for this purpose by not tradable. the transmission system operators clearly demonstrate

EEX electricity front-year AT Base [€/MWh] EEX electricity front-year AT Peak [€/MWh]

75 75

65 65

55 55

45 45

35 35 Jan 18 Feb 18 Mar 18 Apr 18 May 18 Jun 18 Jul 18 Aug 18 Sep 18 Oct 18 Nov 18 Dec 18

Figure 6: Electricity trading prices (futures) for the delivery 2019 base and peak for the market area Austria in the trading year 2018 82 Further information on the fiscal year

the uncertainty prevailing on the market regarding the market price risks is carried out on an ongoing basis differences in prices. For October 2018, the auction held by the operational risk management team in charge of in September resulted in a price mark-up of € 0.88/MWh trading­­­ and, after that, by group-wide risk management. for Austria compared to Germany; in the final analysis, this is far below the actual result on the spot market whe- In the reporting year, TIWAG undertook further efforts to re the recorded difference in prices was € 8.55/MWh. integrate third-party facilities in the control energy pool. However, in November 2018, the JAO auction result had Another focus was on optimizing the use of our flexible risen to as much as € 5.75/MWh while the result on the power stations in short-term and intraday trading. spot market was only € 5.14/MWh. In December, the spot market differences in prices, recorded at € 8.22/ 2018 was characterized by a long period of hot weather MWh, were again over the JAO result of € 3.82/MWh. with little precipitation, which caused below-average in- The first annual auction for delivery year 2019 yielded a flows to the run-of-river power stations; thanks to ample price mark-up of € 3.33/MWh for Austria. supply from the glaciers, however, inflows to the storage power stations were above average. All in all, we even had an above-average year in terms of water supply, with ELECTRICITY TRADING BY TIWAG- water availability at 2% above the long-term average. TIROLER WASSERKRAFT AG

The electricity trading activities of TIWAG-Tiroler REGULATORY ENVIRONMENT Wasser­kraft AG span several areas: On the one hand, TIWAG engages in portfolio trading in order to ensure the 2018 was marked by the continuation of the package of price and risk-optimized coverage of its Tyrolean custo- measures proposed by the European Commission un- mers’ needs through a mix of own generation, long-term der the slogan “Clean Energy for All Europeans” alrea- purchase rights, and barter agreements, as well as sup- dy in 2016, which is better known as the Clean Energy ply from electricity traders. On the other hand, TIWAG is Package­­­ or Winter Package. This is aimed at securing also active in position trading and margin trading. the EU’s competitiveness in the course of the global energy transition by further increasing energy efficiency, In this field of activity, we are, among other things, ex- having consumers benefit from simplification, and taking posed to financial risks, which we counteract with a risk on the role of global pioneer in the field of renewable management structure modeled on the banking system. energy. For this purpose, the Energy Performance in TIWAG’s risk committee, which includes the member of Buildings Directive, the Renewable Energy Directive, the Management Board competent for this area, is re- the Energy Efficiency Directive and the Regulation on sponsible for ensuring compliance with the risk-relevant the Governance of the Energy Union were discussed, standards specified by the management. Continuous amended and adopted in 2018. Given the present sta- monitoring of the limits with respect to counterparty risks tus of negotiations between the Commission, Parlia- (e.g., payment default, replacement and sales risks) and ment and Council and the existing political accordance Further information on the fiscal year 83

concerning the adaptation of the Energy Market Direc- tive and Energy Market Regulation, the Regulation on Risk-preparedness in the Electricity Sector and the revi- sion of the ACER Regulation, these may be expected to be adopted in 2019. This should serve to reach the two new targets of a 30% share of renewable energy in elec- tricity production and procurement and of 32.5% energy efficiency by 2030 and to ensure compliance with the obligations under the Paris Agreement. In Austria, many laws and ordinances will be adapted as a consequence of the revisions of the EU rules. On December­­­ 5, 2018, the cabinet resolved to draft the 2020 Renewables Promotion Act (Erneuerbaren-­ Ausbau-Gesetz 2020), an important milestone towards providing Austria with a sustainable, secure, innovative, competitive and affordable energy system. The 24th UN Climate Conference was held in Katowice (PL) from November 2 to December 15, 2018. It had been intended as the summit where implementing measures for the Paris Agreement, mainly limits to the tempera- ture rise, would be adopted. Although eventually a final declaration ensued from hard negotiations, the agreed rules shall have effect on a “naming and shaming” basis only, i.e., no sanctions mechanisms at all have been pro- vided for. This caused criticism, especially on the part of environmental organizations. 84 Further information on the fiscal year

Other activities

PROJECTS FOR EXPANDING DOMESTIC Construction of the Imst-Haiming power plant (IH) HYDROPOWER CAPACITIES On June 01, 2015 the project was filed with the EIA authority along with an application for an environmental Construction of the Tauernbach-Gruben impact assessment. The deadline set out by the authori- power station (TG) ty for submitting the improved documents (first revision) On January 09, 2013, TIWAG submitted its Tauernbach-­ was December 31, 2018. The deadline resulted mainly Gruben project to the relevant authority for environ- from the requirement of carrying out additional research mental impact assessment. The environmental impact regarding "Geology, hydrogeology and natural hazards”. assessment authority requested a total of four improve- In order for the authority to be able to continue with the ments. In late 2016, the fourth revision was submitted to approval procedure, the corrected documentation to the EIA authority and declared complete in early 2017. be submitted (first revision) was transmitted even befo- A mudflow affecting the Petersbach river in August 2017 re the official deadline, namely on October 09, 2018. A required changes to the planning, which resulted in the workshop with the authority and the experts preparing sixth revision of the project. The hearing took place in the assessment ­­­report took place already in November May 2018; a decision by the first-instance authority is 2018. expected in 2019. Construction of the Kühtai storage The Tauernbach-Gruben power plant is designed as a power station (SKW) diversion power plant with a water intake in the area of With EIA approval having become final, preparatory work the Schildalm mountain huts and a powerhouse direct- was started in 2017 to establish a basis for obtaining the ly below the transalpine oil pipeline (TAL). The water decision to commence construction work in mid-2020 intake will be built below the Schildalm mountain huts as envisaged and for subsequently commencing the shortly before the steep section. The headrace channel main part of the work in Kühtai in 2021. Preparations will consist of two sections: a pressure tunnel in the up- include, but are not be limited to, tender proceedings per section ­­­(approx. 2 km) and a buried penstock from and the related detailed specification of the technical the end of the tunnel to the powerhouse (approx. 6 km). and ecological­­­ planning, as well as negotiations on the The headrace channel will need to cross under the acquisition­­­ of third-party rights and/or land. transalpine­­­ oil pipeline and the Tauernbach River. After In September, the EIA approval-based construction of completion, the power plant is envisaged to supply the the two test reservoirs for the tailwater reservoir began region with an average of 85 GWh of electricity per year. in Stams. The purpose of the test reservoirs is to extensi-

The new powerhouse will be built directly below the pumping station of the transalpine oil pipeline. After completion, two turbines will produce an average­­­ of 85 GWh of electricity per year. This corresponds to the energy supply for 20,000 households. Further information on the fiscal year 85

vely test the working methods of the actual re-regulation reservoir. The basins were lined with geosynthetic clay liners (bentonite clay mats), with various sensors and measurement equipment (pore water pressure sensors) being installed under the lining to measure groundwater pressure and other parameters. The later re-regulation reservoir will mitigate hydropeaking on the Inn river cau- sed by water discharged from the Silz hydropower plant. Hydropeaking impacts will be reduced by channeling the water from the hydropower plant into the re-regulation reservoir before it flows into the Inn river.

Construction works on the test reservoirs were comple- On-site inspection at the weir system of the new water catchment plant: ted still in 2018. TIWAG Management Board member Johann Herdina (2nd f.l.) and pro- ject manager Johann Neuner (r.) together with the mayors Josef Haaser and Herbert Rieder, as well as Thomas Bodner (2nd f.r.) and Wilfried Ecological refurbishment and capacity Geppert (l.) representing the involved construction companies. expansion of the Kirchbichl power station (KE) Construction work related to the refurbishment and capacity­­­ expansion of the existing Kirchbichl power sta- tion began in July 2017. In 2018, among other things, the work on the water catchment plant continued and work related to the fish pass was concluded. In the spring of 2019, the water catchment plant went operational. With regard to the new power house, preliminary work for the

Many people stopped by at the open day at Kirchbichl power station.

excavation of the construction pit related to foundation engineering was completed. In addition, a new bridge for accessing the plant was constructed and put into opera- tion. This entire project – in which TIWAG invested € 110 million – will be completed in late 2020. Many visitors took the opportunity to get an idea of the In December, project manager Martin Pfennig, deputy provincial gover- ongoing construction work related to the refurbishment nor Ingrid Felipe, TIWAG Management Board member Johann Herdina and plant manager Othmar Obrist together inspected the completed fish and capacity expansion of the Kirchbichl power station pass. (f.l.) when it hosted an open day in October 2018. 86 Further information on the fiscal year

Progress of construction work on the joint ruptions in the excavation process at the beginning of power plant on the Inn river (GKI) last year, as both tunnel boring machines got stuck in The joint power plant on the Inn river (GKI) on the the rock. Following their release and the implemen- Swiss-Austrian border is currently the largest run-of-­ tation of some adaptation measures, the two tunnel river power station being built in the Alps. After its com- boring machines’ performance has been very satisfac- pletion, the power station – having an installed capacity tory ever since excavation work was resumed in May of 89 MW – will be producing some 400 GWh of clean 2018. Breakthrough of the tunnel leading towards Prutz electricity from hydropower per year. The investment was in April 2019; breakthrough of the tunnel towards volume­­­ in the amount of € 604.6 million related to the Ovella is forecast for summer 2019. Subsequently, final joint power plant is one of the largest investments the injection works and finishing work in the tunnel will take Tyrolean uplands have seen in decades. place. In the spring of 2018, TIWAG further increased its share­ holding by taking over shares held by Verbund (which There is good news about the progress of construction has recently been holding a mere 10%) and thus now work related to the Prutz/Ried power house. Here, the owns 86% of the company’s shares. Based on the Swiss main construction works on the under- and overground share in electricity generation, the 14% shareholding structures and the installation of key machinery were held by Engadiner Kraftwerke remains unchanged. At completed by fall 2018. Remaining completion work was the same time, the electricity share due to TIWAG is in- finished in the spring of 2019. creased by another 40 GWh. In the outdoor area of the power house, the main part Also in the reporting year, work on the joint power plant of which is located under ground, and along the cov­ construction site, which had begun in 2014, was running ered downstream channel, recultivation measures were at full speed. Work on and around the reservoir in the taken­­­. The green areas were planted with old varieties of border area near Martina, i.e., providing the embank- fruits, among other things. ment and elevating approximately 350 m of the cantonal road running along the left bank of the Inn river, was completed in the reporting year. Construction work on the Ovella weir system had to be suspended for several weeks for safety reasons, due to heavy snowfall in the winter of 2018. This led to delays which cannot be caught up on completely. Nevertheless, it was possible to complete the steel lining and concrete works on the weir system, including the subsequent re- direction of the Inn river still in fall of 2018. Thanks to the Inn river being redirected through the weir system, cons- truction work related to the headrace intake, the water catchment plant and the fish passage aid could begin along the right bank of the Inn river.

In the past, the construction of the 23.2 km headrace channel proved very challenging due to massive geo- In spite of the difficult working conditions, the work on the Ovella weir logical difficulties. There were also considerable inter- system was making good progress. Further information on the fiscal year 87

tomers, confirms the constantly growing importance of regionality­­­ and sustainability. Sustainability means the new and better “eco” and customers appreciate high-quality offers. In August 2017, Ökoenergie Tirol was awarded the TÜV Austria Certificate “100% green electricity from Austria” which reassures the customers of our electricity’s quality and confirms that the electri- city delivered to them is produced in a resource-saving manner.

An Austrian brewery can be named as an example of a customer placing particular emphasis on environmental protection and responsible handling of natural and re- gional resources, with regard to both their own business and their suppliers: Under the brand name “Zillertal­­­ Bier”, Tyrol’s oldest family-owned business has been following

In fall 2018, landscaping near the power house was at an advanced the path of sustainability for years. In the reporting year, stage. they chose Ökoenergie Tirol as their supplier of 100% green electricity from Tyrol-based small-scale hydro­ Given the delays in excavation work and at the weir buil- power stations, thus taking a further step towards living ding site in Ovella, it is currently estimated that the first up to our responsibility vis-à-vis future generations­­. year of full operation of the joint power plant on the Inn river will be 2022.

ÖKOENERGIE TIROL

Ökoenergie Tirol GmbH was established in 2010 as a TIWAG ­­­ group company and has since become well-­ established on the market. Within the scope of the over- haul of TIWAG group’s corporate design in 2018, this TIWAG subsidiary got a new logo, and optimized and modernized its presence, in particular, the company website.

Customer development, in particular in the segment of Martin Lechner (l.) of Zillertal Bier receives a certificate of 100% green medium and large-scale business and industrial cus- energy use from customer advisor Johannes Spielmann. 88 Further information on the fiscal year

2018 ENERGY EFFICIENCY PACKAGE

In 2018, TIWAG group invested an amount of € 4.6 mil- lion in promoting energy efficient measures within the scope of its annual energy efficiency package. Grants for heat pumps were a key element of the package. The heat pump constitutes a key technology with a view to increasing energy efficiency. It gains heat from soil, groundwater and the surrounding air and is ideally sui- ted for both heating and cooling. In line with the energy strategy of the Province of Tyrol, which aims at genera- ting 21 GWh of energy from environmental heat per year, TIWAG announced to launch a heat pump initiative for TIWAG Management Board Chairman Erich Entstrasser (r.) and Andreas Burger (control system and new technologies department) in front of the Tyrol; this was implemented with sizeable grants such charging station taken into operation in July next to the leisure center as an energy credit amounting to 3,000 kWh. In addition, “StuBay” in Telfes/Stubaital. together with the Province of Tyrol, Energie Tirol and Ty- rol’s Economic Chamber, TIWAG founded the Network In addition, TIWAG made available an amount of Heat Pump Tyrol (Netzwerk Wärmepumpe Tirol) which € 1 million for the promotion of new and already existing is to serve as the main go-to and support place in this photovoltaics stations and storage facilities. Further­ respect. more, within the scope of a total of 200 workshops energy consultants of TIWAG and Energie Tirol visited E-mobility, too, was granted a prominent place in the schools in Tyrol and taught children how to use electrical energy efficiency package. TIWAG set itself the goal to appliances in a resource-saving manner. increase the number of publicly available charging stati- Another measure within the scope of the energy efficien- ons supplied with clean green electricity to more than 70 cy package was taken by TIGAS which, as in previous in all of Tyrol. In this context, further TIWAG fast-charge years, promoted heating systems transitions to natural stations were set up, inter alia, in Niederndorf at the Ger- gas by granting a boiler exchange efficiency premium. man border and in the area of the Reschen Pass located in the Tyrolean uplands.

Energy workshops organized at Tyrol’s schools constituted a key element of the TIWAG 2018 energy efficiency package: TIWAG Management TIWAG set up a fast-charge station directly at the motorway exit ramp Board member Thomas Gasser and deputy provincial governor Josef Niederndorf. Geisler with pupils from Axams primary school. Further information on the fiscal year 89

DONATION TO LEBENSHILFE TIROL HIGH DISTINCTION FOR ACHENSEESCHIFFAHRT The cycling marathon in Ötztal (Ötztaler Radmarathon) is one of the most prestigious races in the entire Alpine­­­ region, with thousands of cycling enthusiasts participa- ting each year. Being one of the main sponsors, in July TIWAG auctioned two of the highly demanded starting spots. TIWAG doubled the revenue from this online auction­­­ to a total amount of € 1,800 which was then donated ­­­to Lebenshilfe Tirol.

The ASG team received the Event-Trophy Gold in the presence of TIWAG-Management­ Board Chairman and owner representative Erich Entstrasser (r.).

In November of the reporting year, Achenseeschiffahrt GmbH (ASG) – a TIWAG subsidiary – was honored with a very special award: in the Casino Innsbruck, ASG received the Event-Trophy Gold, a summer award honoring­­­ particularly successful tourist destinations. The prize was awarded by Internationaler Skiareatest for the 20th time. Numerous different events, the boats’ elegance and the professionalism of the crew members were the relevant factors that convinced the testers who have been anonymously examining tourist destinations TIWAG-Management Board Chairman Erich Entstrasser (r.) handing over the check to Georg Willeit, managing director of Lebenshilfe Tyrol GmbH, in the Alpine region for years. in the premises of Tivoli Office in Innsbruck.

FINANCIAL STATEMENTS FOR THE COMPANY AND FOR THE GROUP

94 Balance sheet as at December 31, 2018 96 Income Statement 2018 98 Consolidated balance sheet as at December 31, 2018 100 Consolidated income statement 2018 102 Development of consolidated equity as at December 31, 2018 103 Consolidated cash flow statement 2018

105 Notes 149 Audit opinion – Report on the Financial Statements 152 Audit opinion – Report on the Consolidated Financial Statements 155 Proposal for the appropriation of profits 155 Report of the Supervisory Board 156 Power source identification 92 Financial statements for the company and for the group Financial statements for the company and for the group 93

TIWAG – Your reliable partner, on site. 94 Financial statements for the company and for the group

BALANCE SHEET AS AT DECEMBER 31, 2018

Assets Dec. 31, 2018 Dec. 31, 2017 € in € 1,000 A. Fixed assets I. Intangible assets 1. Licenses, industrial property rights and similar rights and advantages as well as licenses derived therefrom 5,939,335.38 5,956.0 2. Goodwill 1,363,990.61 1,573.8 3. Prepayments made 376,749,390.81 261,896.1 384,052,716.80 269,425.9 II. Tangible assets 1. Land, rights equivalent to land and buildings, including buildings on third-party land 508,852,227.13 515,183.2 2. Machinery and electrical plants 171,800,455.74 165,103.8 3. Line systems 211,892,839.65 212,494.6 4. Other fixtures, fittings, tools and office equipment 8,302,337.63 8,727.8 5. Prepayments and construction in progress 180,040,006.85 149,064.7 1,080,887,867.00 1,050,574.1 III. Financial assets 1. Investments in affiliates 195,140,012.34 195,089.6 2. Loans to affiliates 190,049,999.98 183,683.3 3. Equity investments 544,923,453.02 544,923.5 4. Non-current securities (book-entry securities) 81,278,326.75 94,300.7 5. Other loans 6,245,727.42 6,350.8 1,017,637,519.51 1,024,347.9 Fixed assets 2,482,578,103.31 2,344,347.9

B. Current assets I. Inventories 1. Raw materials and supplies 2,914,882.36 3,119.1 2. Finished goods and merchandise 74,922.21 76.0 3. Services not yet chargeable 1,042,026.99 1,522.2 4,031,831.56 4,717.3 II. Receivables and other assets 1. Trade receivables 59,793,764.84 53,323.5 with a remaining term of more than 1 year 6,470,796.39 6,493.9 2. Receivables from affiliates 151,278,716.20 37,112.0 with a remaining term of more than 1 year 111,309,925.09 0.0 3. Receivables from other long-term investees and investors 3,353,752.46 3,682.7 4. Other receivables and assets 22,767,752.06 17,611.2 237,193,985.56 111,729.4 III. Cash in hand and at bank, checks 31,613,432.81 26,275.1 Current assets 272,839,249.93 142,721.8

C. Deferred expense 3,693,011.38 4,201.2 D. Deferred tax assets 6,269,823.77 0.0 TOTAL Assets 2,765,380,188.39 2,491,270.9 Financial statements for the company and for the group 95

Equity and liabilities Dec. 31, 2018 Dec. 31, 2017 € in € 1,000 A. Equity I. Share capital 300,000,000.00 300,000.0 II. Retained earnings 1. Statutory reserve 30,000,000.00 30,000.0 2. Other reserves (uncommitted reserves) 966,812,937.00 893,813.0 996,812,937.00 923,813.0 III. Net retained profit 4,187,199.53 21,209.2 thereof carried forward 609,245.62 75.8 Equity 1,301,000,136.53 1,245,022.2

B. Investment grants 8,296,654.42 8,001.9 C. Contributions to construction costs 165,279,445.04 159,901.4 D. Provisions 1. Provisions for severance payments 56,306,132.36 51,059.6 2. Provisions for pensions 157,172,810.53 152,069.3 3. Tax provisions 0.00 237.4 4. Other provisions 255,910,595.63 139,552.0 469,389,538.52 342,918.3

E. Liabilities 1. Bonds 110,121,244.44 110,121.2 with a remaining term of up to 1 year 121,244.44 121.2 with a remaining term of more than 1 year 110,000,000.00 110,000.0 2. Liabilities to banks 370,913,247.65 292,459.5 with a remaining term of up to 1 year 142,657,827.34 122,191.4 with a remaining term of more than 1 year 228,255,420.31 170,268.1 3. Prepayments received for orders 891.00 11.6 with a remaining term of up to 1 year 891.00 11.6 4. Trade payables 45,931,602.14 44,829.5 with a remaining term of up to 1 year 45,226,242.14 44,124.1 with a remaining term of more than 1 year 705,360.00 705.4 5. Liabilities to affiliates 66,171,036.48 65,747.6 with a remaining term of up to 1 year 66,171,036.48 65,747.6 6. Liabilities to other long-term investees and investors 340,863.30 33.7 with a remaining term of up to 1 year 340,863.30 33.7 7. Other liabilities 158,653,489.07 147,166.4 with a remaining term of up to 1 year 61,647,810.21 50,469.2 with a remaining term of more than 1 year 97,005,678.86 96,697.2 of which taxes 30,226,842.56 26,559.1 of which social security 2,356,767.29 2,314.7 752,132,374.08 660,369.5

F. Deferred income 69,282,039.80 75,057.6 TOTAL Equity and liabilities 2,765,380,188.39 2,491,270.9 96 Financial statements for the company and for the group

INCOME STATEMENT 2018

2018 2017 € in € 1,000 1. Sales revenue 931,402,887.09 808,533.4 2. Increase or decrease in inventories of finished goods and work in progress and of services not yet chargeable -480,137.88 1,426.7 3. Other own work capitalized 21,816,643.22 18,893.8 4. Other operating income a) Income from the disposal of and write-ups to fixed assets excluding financial assets 1,470,317.69 4,986.6 b) Income from reversal of provisions 8,800,128.31 4,359.3 c) Sundry 2,671,807.74 3,802.8 12,942,253.74 13,148.7 5. Cost of materials and other purchased manufacturing services a) Cost of materials -513,542,485.29 -480,149.6 b) Cost of purchased services -1,620,284.11 -3,345.2 -515,162,769.40 -483,494.8 6. Personnel expenses a) Wages -6,180,515.38 -6,379.1 Salaries -90,419,265.24 -87,093.4 -96,599,780.62 -93,472.5 b) Expenses for social benefits -179,640,285.73 -62,142.8 of which expenses for pensions -148,350,679.89 -34,228.0 aa) Expenses for severance payments and payments for employee provision funds -7,685,251.33 -3,784.4 bb) Expenses for statutory social security and payroll-related contributions -22,636,552.38 -23,103.2 -276,240,066.35 -155,615.3 7. Depreciation, amortization and impairments a) of intangible fixed assets and of tangible fixed assets -68,155,835.18 -64,892.7 of which impairment of fixed assets -3,799,758.09 0.0 8. Other operating expenses a) Taxes not included in item 18 -477,221.55 -555.1 b) Sundry -59,548,006.60 -72,846.6 -60,025,228.15 -73,401.7 9. Subtotal items 1 to 8 (net operating income) 46,097,747.09 64,598.1 10. Income from investments 44,662,596.39 31,707.6 thereof from affiliates 17,755,868.35 12,598.6 11. Income from other securities and loans 2,785,598.75 3,405.1 thereof from affiliates 2,714,769.58 3,336.5 12. Other interest and similar income 1,977,637.79 3,021.4 thereof from affiliates 29,374.55 41.3 13. Income from disposals of and write-ups to financial assets and current securities 3,944,675.36 1,789.3 14. Expenses related to financial assets and current securities -3,405,238.84 -9,835.3 of which amortization and impairments -3,077,431.27 -60.0 of which expenses related to affiliates -327,807.57 -9,775.3 15. Interest and similar expenses -17,662,020.74 -18,891.8 of which interest portion social capital -6,670,183.14 -7,536.8 16. Subtotal items 10 to 15 (net finance income) 32,303,248.71 11,196.3 17. Profit before taxes 78,400,995.80 75,794.4 18. Income taxes -1,823,041.89 -5,661.0 19. Profit after taxes 76,577,953.91 70,133.4 20. Net income for the year 76,577,953.91 70,133.4 21. Allocations to retained earnings -73,000,000.00 -49,000.0 22. Profit carried forward from previous year 609,245.62 75.8 23. TOTAL Net retained profit 4,187,199.53 21,209.2 Financial statements for the company and for the group 97

2018 2017 € in € 1,000 1. Sales revenue 931,402,887.09 808,533.4 2. Increase or decrease in inventories of finished goods and work in progress and of services not yet chargeable -480,137.88 1,426.7 3. Other own work capitalized 21,816,643.22 18,893.8 4. Other operating income a) Income from the disposal of and write-ups to fixed assets excluding financial assets 1,470,317.69 4,986.6 b) Income from reversal of provisions 8,800,128.31 4,359.3 c) Sundry 2,671,807.74 3,802.8 12,942,253.74 13,148.7 5. Cost of materials and other purchased manufacturing services a) Cost of materials -513,542,485.29 -480,149.6 b) Cost of purchased services -1,620,284.11 -3,345.2 -515,162,769.40 -483,494.8 6. Personnel expenses a) Wages -6,180,515.38 -6,379.1 Salaries -90,419,265.24 -87,093.4 -96,599,780.62 -93,472.5 b) Expenses for social benefits -179,640,285.73 -62,142.8 of which expenses for pensions -148,350,679.89 -34,228.0 aa) Expenses for severance payments and payments for employee provision funds -7,685,251.33 -3,784.4 bb) Expenses for statutory social security and payroll-related contributions -22,636,552.38 -23,103.2 -276,240,066.35 -155,615.3 7. Depreciation, amortization and impairments a) of intangible fixed assets and of tangible fixed assets -68,155,835.18 -64,892.7 of which impairment of fixed assets -3,799,758.09 0.0 8. Other operating expenses a) Taxes not included in item 18 -477,221.55 -555.1 b) Sundry -59,548,006.60 -72,846.6 -60,025,228.15 -73,401.7 9. Subtotal items 1 to 8 (net operating income) 46,097,747.09 64,598.1 10. Income from investments 44,662,596.39 31,707.6 thereof from affiliates 17,755,868.35 12,598.6 11. Income from other securities and loans 2,785,598.75 3,405.1 thereof from affiliates 2,714,769.58 3,336.5 12. Other interest and similar income 1,977,637.79 3,021.4 thereof from affiliates 29,374.55 41.3 13. Income from disposals of and write-ups to financial assets and current securities 3,944,675.36 1,789.3 14. Expenses related to financial assets and current securities -3,405,238.84 -9,835.3 of which amortization and impairments -3,077,431.27 -60.0 of which expenses related to affiliates -327,807.57 -9,775.3 15. Interest and similar expenses -17,662,020.74 -18,891.8 of which interest portion social capital -6,670,183.14 -7,536.8 16. Subtotal items 10 to 15 (net finance income) 32,303,248.71 11,196.3 17. Profit before taxes 78,400,995.80 75,794.4 18. Income taxes -1,823,041.89 -5,661.0 19. Profit after taxes 76,577,953.91 70,133.4 20. Net income for the year 76,577,953.91 70,133.4 21. Allocations to retained earnings -73,000,000.00 -49,000.0 22. Profit carried forward from previous year 609,245.62 75.8 23. TOTAL Net retained profit 4,187,199.53 21,209.2 98 Financial statements for the company and for the group

CONSOLIDATED BALANCE SHEET AS AT DECEMBER 31, 2018

Consolidated assets Dec. 31, 2018 Dec. 31, 2017 € in € 1,000 A. Fixed assets I. Intangible assets 1. Licenses, industrial property rights and similar rights and advantages as well as licenses derived therefrom 6,589,757.43 6,545.5 2. Goodwill 3,114,194.21 3,542.8 3. Prepayments made 1,837,969.85 1,501.6 11,541,921.49 11,589.9 II. Tangible assets 1. Land, rights equivalent to land and buildings, including buildings on third-party land 554,650,314.79 553,488.0 2. Machinery and electrical plants 196,895,777.57 190,392.9 3. Line systems 662,287,162.15 660,601.7 4. Other fixtures, fittings, tools and office equipment 9,408,664.34 9,934.1 5. Prepayments and construction in progress 617,571,393.71 494,963.8 2,040,813,312.56 1,909,380.5 III. Financial assets 1. Investments in affiliates 1,341,400.00 1,316.4 2. Investments in associated companies 118,756,558.35 114,577.6 3. Equity investments 392,321,694.36 392,323.0 4. Non-current securities (book-entry securities) 81,961,587.12 94,984.0 5. Other loans 6,255,753.82 6,383.4 600,636,993.65 609,584.4 Consolidated fixed assets 2,652,992,227.70 2,530,554.8

B. Current assets I. Inventories 1. Raw materials and supplies 3,134,609.44 3,235.9 2. Finished goods and merchandise 1,640,955.89 1,058.9 3. Services not yet chargeable 690,597.99 882.1 5,466,163.32 5,176.9 II. Receivables and other assets 1. Trade receivables 113,768,868.78 110,811.0 with a remaining term of more than 1 year 6,470,796.39 6,493.9 2. Receivables from affiliates 125,643.20 84.7 3. Receivables from other long-term investees and investors 5,870,901.41 11,739.9 4. Other receivables and assets 144,502,919.94 30,503.9 with a remaining term of more than 1 year 111,309,925.09 0.0 264,268,333.33 153,139.5 III. Cash in hand and at bank, checks 36,769,769.75 33,539.4 Consolidated current assets 306,504,266.40 191,855.8

C. Deferred expense 4,311,303.64 5,092.6 D. Deferred tax assets 3,907,236.93 0.0 TOTAL Consolidated assets 2,967,715,034.67 2,727,503.2 Financial statements for the company and for the group 99

Consolidated equity and liabilities Dec. 31, 2018 Dec. 31, 2017 € in € 1,000 A. Equity I. Share capital 300,000,000.00 300,000.0 II. Retained earnings 915,927,855.50 858,229.6 III. Consolidated net income for the year 78,717,282.65 78,297.7 IV. Minority interests 42,298,562.85 41,980.0 Consolidated equity 1,336,943,701.00 1,278,507.3

B. Investment grants from public funds 19,002,749.24 19,122.6 C. Contributions to construction costs and grants 265,013,458.21 280,996.8 D. Provisions 1. Provisions for severance payments 58,144,577.36 52,610.2 2. Provisions for pensions 159,136,369.58 153,885.7 3. Tax provisions 0.00 2,566.9 4. Other provisions 281,112,967.50 171,687.7 498,393,914.44 380,750.5

E. Liabilities 1. Bonds 110,121,244.44 110,121.2 with a remaining term of up to 1 year 121,244.44 121.2 with a remaining term of more than 1 year 110,000,000.00 110,000.0 2. Liabilities to banks 370,913,361.66 292,461.0 with a remaining term of up to 1 year 142,657,941.35 122,192.9 with a remaining term of more than 1 year 228,255,420.21 170,268.1 3. Prepayments received for orders 4,253,435.62 4,374.1 with a remaining term of up to 1 year 4,253,435.62 4,374.1 4. Trade payables 105,877,752.25 103,120.2 with a remaining term of up to 1 year 105,172,392.25 102,414.8 with a remaining term of more than 1 year 705,360.00 705.4 5. Liabilities to affiliates 861,453.03 748.8 with a remaining term of up to 1 year 861,453.03 748.8 6. Liabilities to other long-term investees and investors 1,898,240.79 9,899.7 with a remaining term of up to 1 year 1,898,240.79 9,899.7 7. Other liabilities 180,734,337.47 166,630.1 with a remaining term of up to 1 year 83,728,658.61 69,932.9 with a remaining term of more than 1 year 97,005,678.86 96,697.2 of which taxes 33,817,174.07 31,908.4 of which social security 2,611,020.77 2,558.9 774,659,825.26 687,355.1

F. Deferred income 73,701,386.52 80,770.9 TOTAL Consolidated equity and liabilities 2,967,715,034.67 2,727,503.2 100 Financial statements for the company and for the group

CONSOLIDATED INCOME STATEMENT 2018

2018 2017 € in € 1,000 1. Sales revenue 1,238,672,334.92 1,099,125.0 2. Increase or decrease in inventories of finished goods and work in progress and of services not yet chargeable -447,195.94 1,457.9 3. Other own work capitalized 23,592,914.12 20,510.7 4. Other operating income a) Income from the disposal of and write-ups to fixed assets excluding financial assets 3,924,306.85 5,017.4 b) Income from reversal of provisions 10,072,436.92 5,277.7 c) Sundry 3,768,186.55 5,178.8 17,764,930.32 15,473.9 5. Cost of materials and other purchased manufacturing services -704,584,153.41 -648,260.2 6. Personnel expenses a) Wages -8,406,357.71 -8,618.3 b) Salaries -96,120,834.31 -92,449.4 -104,527,192.02 -101,067.7 c) Expenses for social benefits -184,809,990.64 -64,722.9 of which expenses for pensions -151,071,484.89 -34,610.6 aa) Expenses for severance payments and payments for employee provision funds -8,025,096.15 -3,943.1 bb) Expenses for statutory social security and payroll-related contributions -24,629,729.02 -25,018.5 -289,337,182.66 -165,790.6 7. Depreciation, amortization and impairments a) of intangible fixed assets and of tangible fixed assets -90,921,333.06 -96,365.0 of which impairment of fixed assets -3,799,758.09 -8,495.2 8. Other operating expenses a) Taxes not included in item 19 -1,164,096.72 -1,599.0 b) Sundry -123,962,102.84 -142,899.0 -125,126,199.56 -144,498.0 9. Subtotal items 1 to 8 (consolidated net operating income) 69,614,114.73 81,653.7 10. Income from investments 19,462,113.60 13,293.9 thereof from affiliates 0.00 0.0 11. Income from other securities and loans 77,665.96 74.3 thereof from affiliates 0.00 0.0 12. Other interest and similar income 2,000,411.25 3,895.6 thereof from affiliates 0.00 0.0 13. Income from disposals of and write-ups to financial assets and current securities 3,944,675.36 3,987.6 14. Expenses related to financial assets and current securities -3,328,618.05 -3,060.0 of which amortization and impairments -3,078,399.69 -3,060.0 of which expenses related to affiliates -250,218.36 0.0 15. Net income from associated companies 12,658,022.54 11,420.0 16. Interest and similar expenses -17,650,532.58 -18,876.9 17. Subtotal items 10 to 16 (consolidated net finance income) 17,163,738.08 10,734.5 18. Consolidated profit before taxes 86,777,852.81 92,388.2 19. Income taxes -5,757,330.02 -11,130.2 20. Consolidated profit after taxes 81,020,522.79 81,258.0 21. Net income for the year 81,020,522.79 81,258.0 22. Other shareholders’ shares in the income for the year -2,303,240.14 -2,960.3 23. TOTAL Consolidated net income for the year 78,717,282.65 78,297.7 Financial statements for the company and for the group 101

2018 2017 € in € 1,000 1. Sales revenue 1,238,672,334.92 1,099,125.0 2. Increase or decrease in inventories of finished goods and work in progress and of services not yet chargeable -447,195.94 1,457.9 3. Other own work capitalized 23,592,914.12 20,510.7 4. Other operating income a) Income from the disposal of and write-ups to fixed assets excluding financial assets 3,924,306.85 5,017.4 b) Income from reversal of provisions 10,072,436.92 5,277.7 c) Sundry 3,768,186.55 5,178.8 17,764,930.32 15,473.9 5. Cost of materials and other purchased manufacturing services -704,584,153.41 -648,260.2 6. Personnel expenses a) Wages -8,406,357.71 -8,618.3 b) Salaries -96,120,834.31 -92,449.4 -104,527,192.02 -101,067.7 c) Expenses for social benefits -184,809,990.64 -64,722.9 of which expenses for pensions -151,071,484.89 -34,610.6 aa) Expenses for severance payments and payments for employee provision funds -8,025,096.15 -3,943.1 bb) Expenses for statutory social security and payroll-related contributions -24,629,729.02 -25,018.5 -289,337,182.66 -165,790.6 7. Depreciation, amortization and impairments a) of intangible fixed assets and of tangible fixed assets -90,921,333.06 -96,365.0 of which impairment of fixed assets -3,799,758.09 -8,495.2 8. Other operating expenses a) Taxes not included in item 19 -1,164,096.72 -1,599.0 b) Sundry -123,962,102.84 -142,899.0 -125,126,199.56 -144,498.0 9. Subtotal items 1 to 8 (consolidated net operating income) 69,614,114.73 81,653.7 10. Income from investments 19,462,113.60 13,293.9 thereof from affiliates 0.00 0.0 11. Income from other securities and loans 77,665.96 74.3 thereof from affiliates 0.00 0.0 12. Other interest and similar income 2,000,411.25 3,895.6 thereof from affiliates 0.00 0.0 13. Income from disposals of and write-ups to financial assets and current securities 3,944,675.36 3,987.6 14. Expenses related to financial assets and current securities -3,328,618.05 -3,060.0 of which amortization and impairments -3,078,399.69 -3,060.0 of which expenses related to affiliates -250,218.36 0.0 15. Net income from associated companies 12,658,022.54 11,420.0 16. Interest and similar expenses -17,650,532.58 -18,876.9 17. Subtotal items 10 to 16 (consolidated net finance income) 17,163,738.08 10,734.5 18. Consolidated profit before taxes 86,777,852.81 92,388.2 19. Income taxes -5,757,330.02 -11,130.2 20. Consolidated profit after taxes 81,020,522.79 81,258.0 21. Net income for the year 81,020,522.79 81,258.0 22. Other shareholders’ shares in the income for the year -2,303,240.14 -2,960.3 23. TOTAL Consolidated net income for the year 78,717,282.65 78,297.7 102 Financial statements for the company and for the group

DEVELOPMENT OF CONSOLIDATED EQUITY AS AT DECEMBER 31, 2018

Share Retained Consolidated Minority Total capital earnings net income interests for the year in € 1,000 in € 1,000 in € 1,000 in € 1,000 in € 1,000

As at Jan. 1, 2017 300,000.0 803,543.7 58,324.5 41,207.1 1,203,075.3

Consolidated net income for the year 0.0 0.0 78,297.7 2,960.3 81,258.0

Dividend distribution 0.0 0.0 -4,000.0 -2,187.4 -6,187.4

Allocation to retained earnings 0.0 54,324.5 -54,324.5 0.0 0.0

Other 0.0 361.4 0.0 0.0 361.4

As at Dec. 31, 2017 = as at Jan. 1, 2018 300,000.0 858,229.6 78,297.7 41,980.0 1,278,507.3

Consolidated net income for the year 0.0 0.0 78,717.3 2,303.2 81,020.5

Dividend distribution 0.0 0.0 -20,600.0 -1,958.7 -22,558.7

Allocation to retained earnings 0.0 57,697.7 -57,697.7 0.0 0.0

Other 0.0 0.6 0.0 -26.0 -25.4

As at Dec. 31, 2018 300,000.0 915,927.9 78,717.3 42,298.5 1,336,943.7 Financial statements for the company and for the group 103

CONSOLIDATED CASH FLOW STATEMENT 2018

2018 2017 in € 1,000 in € 1,000 Net cash flow from operating activities: Net income for the year 81,020.5 81,257.9 + Amortization, depreciation and impairment of tangible/intangible assets 90,921.3 96,413.6 + Impairments of investments and other financial assets 3,077.4 3,060.0 - Reversal of impairments of intangible/tangible assets -2,356.0 0.0 - Reversal of impairments of investments and other financial assets 0.0 -1,789.3 -/+ Change in deferred taxes -6,474.0 -4,874.7 + Adjustment to net income retained from associated companies -4,179.0 -4,270.8 +/- Change in social capital 13,745.5 -11,617.3 +/- Change in contributions to construction costs and grants 18,281.7 39,003.0 +/- Change in investment grants -119.9 572.1 +/- Change in the reserve for the reversal of impairment losses -4,192.4 -3,102.3 - Gains from the disposal of tangible/intangible fixed assets -216.6 -1,915.0 - Gains from the disposal of investments and other financial assets -1,104.0 -2,198.2 + Losses on the disposal of tangible/intangible assets 216.2 439.6 - Sundry non-cash earnings -1,537.8 -1,537.8 Net cash flow from net income 187,083.0 189,440.8 -/+ Change in inventories -289.5 -761.3 -/+ Change in trade receivables -2,957.8 4,239.5 -/+ Change in receivables from affiliates (from operating activities) -40.9 -31.7 -/+ Change in receivables from other long-term investees and investors 5,869.0 -3,536.7 -/+ Change in other assets (including deferred expense) -113,217.7 -790.2 +/- Change in trade payables 2,757.6 -6,912.6 +/- Change in liabilities to other long-term investees and investors -8,001.5 -534.3 +/- Change in advance payments made by customers -120.7 568.4 +/- Change in tax provisions and other current provisions 106,464.6 42,214.3 +/- Change in other current liabilities 13,795.6 0.0 (including deferred income) -1,339.2 2,488.6 Net cash flow from changes in working capital 2,919.6 36,944.0 Net cash flow from operating activities 190,002.6 226,384.8 Net cash flow from investment activities: - Investments in intangible/tangible assets -221,770.6 -259,128.4 + Proceeds from the disposal of intangible/tangible assets 1,820.9 2,865.2 - Investments in equity holdings and other financial assets -212.0 -25.0 -/+ Change in loans 0.0 19,562.7 + Proceeds from the disposal of investments and other financial assets 11,364.9 4,723.2 Net cash flow from investment activities -208,796.8 -232,002.3 Net cash flow from financing activities: - Dividend distribution -22,558.7 -6,187.3 +/- Change from contract transfer -34,290.5 0.0 +/- Change in non-current financial liabilities 57,969.0 88,022.0 +/- Change in current financial liabilities 20,446.9 31,453.5 +/- Change in liabilities to affiliates 112.7 -162.4 +/- Change in other debts relevant to financing 326.8 -121,156.2 Net cash flow from financing activities 22,006.2 -8,030.4

TOTAL Changes in in liquid funds 3,212.0 -13,647.9

NOTES

107 General explanatory notes 107 Accounting principles 113 Consolidated group 114 Consolidation principles 115 Notes to the balance sheet (separate financial statements) 118 Development of fixed assets (statement of fixed assets) 128 Notes to the income statement (separate financial statements) 132 Notes to the balance sheet (consolidated financial statements) 136 Notes to the income statement (consolidated financial statements) 138 Development of consolidated fixed assets (consolidated statement of fixed assets) 142 Other disclosures 144 Financial statements pursuant to section 8 of the Austrian Electricity Industry and Organization Act (ElWOG) 106 Financial statements for the company and for the group

TIWAG group’s own production and network infrastructure ensures high supply security in Tyrol, also for generations to come. Financial statements for the company and for the group ▪ Notes 107

I. GENERAL EXPLANATORY NOTES The items of the separate and consolidated financial statements were recognized with due consideration of The separate and consolidated financial statements for the economic substance of the relevant transactions or the fiscal year ended on December 31, 2018 were drawn arrangements and the principle of materiality in terms of up in conformity with generally accepted accounting presentation and disclosure. standards as well as in accordance with the accoun- ting rule of providing a true and fair view of the financial Balance sheet items were measured on a going-concern position, cash flows and profit or loss of the company, basis, and assets and liabilities were valued on an item- in conformity with the provisions of sections 189 et seq. by-item basis as at the balance sheet date. The principle of the Austrian Business Code (Unternehmensgesetz- of prudence was taken into account in particular by re- buch, UGB), the supplementary provisions of the Aus- cording only profits and gains realized as at the balance trian Stock Corporation Act (Aktiengesetz, AktG) and sheet date and by taking account of all discernible risks any other applicable special legal provisions as amend­ and impending losses as well as impairments. Likewise, ed. TIWAG-Tiroler Wasserkraft AG qualifies as a large the principle of continuity was adhered to. corporation­­­ within the meaning of section 221 (3) UGB. Where values could not be determined other than by In an effort to avoid duplication of both texts and figures, estimation­­­, the principle of reliable estimates was com- the notes to the consolidated financial statements were plied with. merged with the notes to the separate financial state- ments. The accounting principles applied to the previous separate­­­ and consolidated financial statements were Industry specifics were taken into account by expanding retained. For details on adjustments see the section on and subdividing line items. The income statement in the provisions. separate financial statements and consolidated financial statements is prepared applying the “total cost” format Intangible assets (breakdown by type of expenditure). The reporting cur- Intangible fixed assets that were acquired for a consi- rency is the Euro; all figures for the previous year are deration are measured at cost and – provided they are given in thousands of euros (€ 1,000). amortizable – factoring in amortization. Amortization is The summation of rounded amounts and percentages linear; a period of 10 to 20 years is set as the basis for the may result in rounding differences due to the use of estimated useful life of electricity purchase rights, rights automatic ­­­calculation aids. of shared use of radio relay and transmission systems­­­ and easements. A period of 3 to 5 years applies to IT programs and patents. Where an asset is expected to be II. ACCOUNTING PRINCIPLES impaired on a lasting basis, its value will be written down to its fair value as at the balance sheet date. Goodwill The separate and consolidated financial statements the useful life of which cannot be reliably estimated is were drawn up in conformity with generally accepted amortized on a straight-line basis over a ten-year period. accounting standards as well as in accordance with the accounting rule of providing a true and fair view of the Tangible assets financial position, cash flows and profit or loss of the Tangible assets which are designated to serve business company. operation purposes on a lasting basis and the useful life The separate and consolidated financial statements of which is limited are measured at cost less deprecia- were prepared in compliance with the principle of com- tion. Cost comprises both direct cost and overhead or pleteness and non-offsetting. indirect cost. There was no need for eliminating exces- 108 Financial statements for the company and for the group ▪ Notes

sive indirect cost due to obvious unabsorbed overhead. From among the expenditures within the meaning of section 203 (3) penultimate sentence UGB, only part of the voluntary social security contributions is included, while directly attributable interest on borrowed capital is not recognized.

Tangible assets are depreciated on a linear basis over a period of 4 to 66.7 years from the date of taking into operation­­­. Additions made in the first six months of the year are subject to full-year depreciation, additions made in the second six months to half-year depreciation. No residual value is recognized in calculating depreciation.

The span of estimated useful life in the individual asset categories is as follows:

Buildings: 10 (huts) to 66.7 years

Hydraulic structures: 33 1/3 to 50 years

Mechanical and electrical equipment: 10 to 35 years

Line systems: 10 to 40 years

Other fixtures, fittings, tools and office equipment: 4 to 10 years

Low-value assets: 4 to 5 years

The periods of estimated useful life are based on the unified depreciation rates for the electricity industry approved by a decree of the Federal Ministry of Finan- ce. Low-value fixed assets in a negligible amount were recognized and fully depreciated in the year of acqui- sition (section 204 (1a) UGB). The option of immediate depreciation is exercised only if it does not run counter to the general principle of presenting fairly, in all material respects, the company’s net assets, financial position, and the results of its operations. Where a fixed asset is expected to be impaired on a lasting basis, its value will be written down to its lower fair value as at the balance sheet date.

In the reporting year, the separate financial statements included write-downs in the amount of € 3,799,758.09 (previous year: in € 1,000: 0.0) and the consolidated Financial statements for the company and for the group ▪ Notes 109

financial­­­ statements in the amount of € 3,799,758.04 Services not yet chargeable are recorded at cost. Part (previous year: in € 1,000: 8,495.0). Where the reasons of the voluntary social security contributions is included for write-downs no longer apply, the amount of such in the calculation of production costs. Directly attribu- write-­down will be written up in the extent in which its table interest on borrowed capital is not recognized. In value has increased, with due consideration of any de- the case of contracts that will take longer than twelve preciation that would have been necessary in the mean- months to complete, no commensurate parts of the re- time, with depreciated cost of acquisition or production spective administration and distribution costs are recog- forming the upper limit. nized in the current fiscal year. If, from an economic point of view, a contracted activity has been completed for the Financial assets customer, the amount will be recognized as a receivable. Investments in affiliates and investments which serve business operation purposes on a lasting basis and the Receivables and other assets useful life of which is not limited are recognized at the Receivables and other assets are recognized at cost lower of cost or fair value (section 189 a (3) UGB). Im- (nominal amount) as at the time of unilateral acceptance pairments that are merely temporary are not recognized. of contractual obligation. If it turns out that the reasons for a write-down due to impairment no longer apply, the write-down will be re- On the balance sheet date, the fair value, viz. the versed in the extent in which the value has increased. amount that can be reasonably expected – based on an en­trepreneurial assessment – to be obtained, is determi- Non-current securities and book-entry securities which ned and, if specific risks can be identified, an impairment serve business operation purposes on a lasting basis loss will be recognized. are recognized at cost. At the balance sheet date, the Receivables in foreign currencies are measured at the lower fair value (section 189 a (4) UGB) is recognized. lower of the exchange rate prevailing upon acquisition or Impairments that are merely temporary are not recogni- the bid price as at the balance sheet date. zed. Listed stocks are impaired if their fair value is less than the weighted average price. Receivables from the Cash in hand and at bank, checks provision of capital to third parties with a remaining term Along with liquid means in the narrowest sense, i.e. of more than one year are recognized as loans under checks, cash in hand and at bank, cash also includes financial assets and measured at their nominal amount. short-term investments that can be converted into cash Loans bearing low interest or no interest at all are amounts at any time. discounted ­­­and recognized at their present value. Deferred expense Inventories Deferred expense shows expenditure incurred before Raw materials and supplies as well as finished goods the balance sheet date to the extent it represents expen- and merchandise which are not designated to serve se attributable to a specific period after said date. business operation purposes on a lasting basis are measured at cost, applying the lower-of-cost-or-market Current and deferred income taxes principle­­­. Similar inventory items are grouped together The subsidiaries TIGAS-Erdgas Tirol GmbH, TINETZ- and recognized based on the average value method. Tiroler­­­ Netze GmbH, Achenseeschiffahrt-GesmbH, If the fair value as at the balance sheet date is lower, Stadtwärme Lienz Produktions- und Vertriebs-GmbH they will be written down to that value. Inventory risk and Ökoenergie Tirol GmbH were included in group arising­­­ from length of storage or obsolescence are taken tax­ation with TIWAG-Tiroler Wasserkraft AG as the tax account of in the form of appropriate reductions in value. group parent. In addition, Bioenergie Kufstein GmbH 110 Financial statements for the company and for the group ▪ Notes

was included in group taxation via a shareholding con- fair value. This item is reversed starting from the date of sortium. The profit or loss of the group members under taking into operation of the relevant assets, based on the tax law is attributed to the group parent which, subse- useful life in accounting terms of the assets for which the quently, pays group-wide corporate income tax to the grant was given. fiscal authority. With regard to tax allocation, profit and loss transfer Contributions to construction costs agreements have been concluded with TINETZ-­Tiroler This line item on the Equity and Liabilities side shows Netze GmbH, Achenseeschiffahrt-GesmbH, Stadt- the connection charges levied, construction cost contri- wärme Lienz Produktions- und Vertriebs-GmbH, and butions and grants received, which are reversed in line Ökoenergie Tirol GmbH, in the case of the remaining with the contract duration or period of use of the assets companies, taxes are allocated in accordance with the for which they were paid. Contributions to construction stand-alone method. costs made by subscribers from the fiscal year 2000 Deferred taxes are accounted for using the temporary onwards are reversed over a period of 20 years. As of difference approach. In the event of a future tax burden, the fiscal year 2007, the contributions to construction the differences between the valuations of assets, pro- costs collected by TINETZ-Tiroler Netze GmbH have visions, liabilities and deferred income/expenses under been passed on to TIWAG as the parent company of corporate and tax law are recognized as deferred tax lia- the group, as TIWAG is obliged to make the investments bilities and, in the event of a future tax relief, as deferred pursuant to the existing lease contract. The amounts tax assets. Deferred tax assets resulting from tax loss reversed­­­ are shown in sales revenue. carryforwards are not recognized. Upon initial recogni- tion of goodwill (section 198 (10) (1) UGB), no deferred Provisions taxes will be taken into account. In the previous fiscal years, TINETZ-Tiroler Netze GmbH The differences are measured based on expected tax and the regulatory authority E-Control conducted nego- burdens and reliefs for subsequent fiscal years determi- tiations on compensation for the burden arising from ned with sufficient probability and a corporate income changes in mortality tables and the low level of inter- tax rate of 25%. est in regulated system tariffs. These negotiations were As tax liabilities or tax assets are with the same taxing completed in the fiscal year 2018, with an administrative authority, deferred tax assets and liabilities are offset. decision being issued. The calculations underlying the Difference amounts are not discounted. Movements in decision take into account current market interest rates. recognized deferred taxes are shown separately in the As the employees hired out by TIWAG-Tiroler Wasser- income statement under Income taxes. The provisions of kraft AG to TINETZ-Tiroler Netze GmbH form a signi- section 198 (9), (10) UGB as amended by RÄG 2014 had ficant share of the entire staff of TIWAG, the actuarial to be applied for the first time to fiscal years starting after interest rate was changed in fiscal 2018, from an aver­ December 31, 2015. The difference between the amount age value to current market interest rates for all emp- resulting from first-time application at the beginning of loyee-related provisions in all group companies. the fiscal year and the amount shown in the preceding financial statements amounted to € 34,866,894.39. This Provisions for severance payments were calculated amount will be distributed over a five-year period under based on actuarial principles, using the Projected Unit the transition provisions set out in section 906 (34) UGB. Credit ­­­Method and applying the principles for the calcu- The portion of this difference amount not yet accounted lation of pension insurance (“AVÖ 2018-P – Rechnungs- for by December 31, 2018 amounts to € 13,946,757.76. grundlagen für die Pensionsversicherung”). Entitlement to severance payments is based on the collective bargai- Investment grants ning agreement for energy supply companies in Austria. Non-refundable investment grants received from public Calculations are made in conformity with the statutory coffers are shown in a special line item on the Equity and transition provisions as set out in the Budget Implemen- Liabilities side of the balance sheet and are measured at tation Act 2011 (Budgetbegleitgesetz) and the Federal Financial statements for the company and for the group ▪ Notes 111

Constitutional Law on Age Limits (BVG-Altersgrenzen, pension­­­ fund, the amounts of which are derived from the Federal Law Gazette 832/1992). A 2% adjustment for in- provision recognized by the pension fund for such obli- flation and, for the first time, an actuarial interest rate ba- gation, are deducted from the overall pension obligation. sed on the yields of high quality corporate bonds (1.16% If the overall pension obligation exceeds the provision p.a. as at December 31, 2018) are applied in measuring recognized for such obligation by the pension fund, a severance payment obligations. No discount for staff provision is recognized in the amount of such difference. turnover was recognized. The average remaining term of existing arrangements has been estimated at 8.45 Provisions for anniversary bonuses are recognized for years. Movements in severance payment provisions are employees who, until the estimated end of term of their recognized in Personnel expenses under Expenses for employment, will have accumulated the years of service severance payments. For all employment relationships necessary to claim such bonuses. The amount of bonus starting after December 31, 2002, the employer pays, is set out in the collective bargaining agreements. on a monthly basis, 1.53% of the wage or salary into Provisions for anniversary bonuses are determined an employee provision fund which invests the relevant based on actuarial principles. Calculations are based amounts on an account for each employee. on the statutory transition provisions as set out in the Budget Implementation Act 2011 (Budgetbegleitge- Existing guidelines and employer/works council agree- setz) and the Federal Constitutional Law on Age Limits ments provide for an obligation, under certain circum­ (BVG-­Altersgrenzen, Federal Law Gazette 832/1992). stances, to make payments to employees or their survi- A 2% adjustment for inflation and, for the first time, an vors under company pension or survivors benefits plans. actuarial interest rate based on the yields of high quality The amounts recognized as pension provisions were corporate bonds (1.26% p.a. as at December 31, 2018; calculated in accordance with actuarial principles and previous year: 2.29%) are applied in measuring anniver- applying the principles for the calculation of pension in- sary bonuses­­­. The average remaining term of existing surance (“AVÖ 2018-P – Rechnungsgrundlagen für die arrangements has been estimated at 8.45 years. Move- Pensionsversicherung”). In 2017, the principles for the ments in the provision for anniversary bonuses were calculation of pension insurance “AVÖ 2008-P – Rech- recognized in Personnel expenses under Expenses for nungsgrundlagen für die Pensionsversicherung – Pagler pensions. & Pagler” were applied. With direct obligations, the overall pension obligation Provisions for payments of benefits in kind are calcula- for current pensions is calculated as the present value ted based on actuarial principles and using the princip- of future pensions payments, and for vested claims the les for the calculation of pension insurance “AVÖ 2018-P amount is determined using the Projected Unit Credit – Rechnungsgrundlagen für die Pensionsversicherung”. Method. A pension trend value of 1.5% or 2.5% was used An actuarial interest rate based on the yields of high in calculating expected pension payments; no discount­­­ quality corporate bonds (1.92% p.a. as at December 31, for staff turnover was recognized. 2018; previous year: 2.86%) is, for the first time, applied The determined amount is discounted using an actuarial to discounting. interest rate based on the yields of high quality corporate No discount for staff turnover is recognized. The aver­ bonds (1.16% p.a. as at December 31, 2018; previous age remaining term of existing arrangements has been year: 2.29%). Average remaining terms were estimated estimated at 16.26 years. Movements in the provision at 8.39 years and 16.34 years for outsourced obligati- were recognized in Expenses for pensions. ons. Movements were recognized in Personnel expen- ses under Expenses for pensions. As for the measurement of other provisions, all identi- fiable risks were taken into account and assessed at a In respect of outsourced pension obligations, provisi- settlement value based on the best possible estimate. ons are recognized insofar as such outsourcing does Provisions with a remaining term of more than one year not comprise all risk components. Assets held by the are discounted using an adequate interest rate. The 112 Financial statements for the company and for the group ▪ Notes

remaining­­­ term is the period between the balance sheet Langkampfen, Leibnitzbach, Leiersbach, Schmirnbach, date and the time such provision is expected to be used. Sidan, Urgbach and Brennerwerk power stations conti- The effects resulting from the change in discount rate or nue to apply. the estimated remaining term are shown in Net finance income. Under these leasing transactions, rights of use regar- ding certain assets (power stations) are granted to US Liabilities trusts, while these assets are simultaneously leased Liabilities are recognized with their agreed settlement back. The trusts are set up for the benefit of institutio- amount, i.e. the amount that has to be made available nal investors resident in the US. Legal ownership of the to redeem a liability. If the settlement amount is higher assets ­­­remains unchanged under Austrian law. on the balance sheet date, this amount will be recogni- zed under the higher of cost or market principle. Pension The total net present value benefit of the still existing obligations are recognized at the present value of future transactions hereunder amounted to € 60.1 million (pre- payments. vious year: € 60.1 million). The inflow resulting therefrom has been recorded on the balance sheet as deferred in- If the settlement amount for a liability is higher, at the come. It will be reversed over the term of the underlying time of its recognition, than the amount actually paid out, lease contracts. the difference is added to deferred expense on a man- datory basis and reported separately. This amount will As the closing date payment received under each trans- be distributed over the facility’s term and recognized on action was used to make payments under the payment an accrual basis under interest expense. Foreign curren- undertaking agreements and provides sufficient funds cy liabilities are measured at the higher of cost upon first to pay all scheduled obligations under the lease, there recognition or the exchange rate at the balance sheet are no assets or liabilities on the part of TIWAG-Tiroler date. Wasserkraft AG if one applies a substance over form Major foreign currency exposures are hedged through approach. Furthermore, there is no interest income or corresponding hedging transactions. The balance sheet interest expense attributable to TIWAG-Tiroler Wasser- records units of account if, on the one hand, currency, kraft AG. Upon conclusion of these cross-border leasing maturity and amount are identical and, on the other transactions, payment undertaking agreements and ag- hand, the hedge is deemed effective. reements on hedging instruments had been concluded with financial institutions with excellent credit ratings. Deferred income Deferred income shows income received before the To achieve further optimization, the payment underta- balance ­­­ sheet date to the extent it represents income king agreements for various CBL transactions were attributable to a specific period after said date. This also terminated and replaced with US treasuries as an equity includes items pursuant to section 906 (32) UGB. repayment vehicle.

Cross border leasing Derivative financial instruments In the fiscal years 2001, 2002 and 2003, several cross- In order to market the energy to be produced from border leasing transactions were concluded; those for a hydropower­­­ and to cover the gap between physical pro- part of the Sellrain-Silz group of power stations, for the duction in its own hydropower stations and customers’ Financial statements for the company and for the group ▪ Notes 113

electricity demand, TIWAG-Tiroler Wasserkraft AG also The consolidated group was determined based on the relies on energy sector (electricity) derivative finan- provisions of sections 247 and 249 UGB. cial instruments (commodity forwards). A book struc- As at December 31, 2018, seven Austrian and two ture is used to differentiate between different types of foreign­­­ subsidiaries and TIWAG-Tiroler Wasserkraft AG c o m m o d i t y ­­­ f o r w a r d s . as parent company (previous year: seven Austrian and two foreign subsidiaries) are included in the consolidated Under this system, derivative financial instruments are financial statements as fully consolidated companies. only recognized as such when the forwards are alloca- Two subsidiaries (previous year: 2) were not included in ted to the “business on own account” book. “Business the consolidated financial statements given non-mate- on own account” is considered a separate portfolio, riality and were shown under Investments in affiliates. which includes arbitrage transactions and transactions concluded for speculative purposes. As at the balance The following subsidiaries are included in the consoli- sheet date, the “business on own account” book is mea- dated financial statements by way of full consolidation: sured at fair value. The valuation amount resulting from ▪ TINETZ-Tiroler Netze GmbH the offsetting of negative and positive changes in value ▪ TIGAS-Erdgas Tirol GmbH is measured based on the imparity principle. If the result ▪ Achenseeschiffahrt-GesmbH is negative, a provision for contingent losses is repor- ▪ Gemeinschaftskraftwerk Inn GmbH ted. Commodity derivatives which serve the purpose of ▪ Ökoenergie Tirol GmbH structured procurement and marketing are allocated to ▪ Stadtwärme Lienz Produktions- und Vertriebs-GmbH the “own use” book. In this case, the definition of de- ▪ TIWAG-Italia GmbH (in liquidation), and rivative financial instruments does not apply; such trans- ▪ SELGAS GmbH actions are recognized, measured and reported based on the general accounting principles for executory con- Four associated companies are included based on the tracts. equity method (previous year: 4). TIWAG’s equity invest- Short-term contracts concluded on the spot markets ment in Innsbrucker Kommunalbetriebe Aktiengesell- (over the counter/OTC or electricity exchanges) to avoid schaft (IKB AG) as well as TIGAS’s equity investment differences between planned electricity provision and in Südtirolgas AG (formerly: SELGAS NET AG) are in- existing energy quantities are not counted as derivative cluded as associated companies pursuant to section financial instruments, as they lack the characteristics of 263 (1) UGB. Two (previous year: 2) companies have futures contracts. not been included as associated companies for lack of materiality pursuant to section 263 (2) UGB.

III. CONSOLIDATED GROUP The companies not fully consolidated pursuant to sec- tion 249 (2) UGB and not measured using the equity The consolidated financial statements of TIWAG-Tiroler method pursuant to section 263 (2) UGB present the Wasserkraft AG for the fiscal year ending on Decem- following ratios: ber 31, 2018 were prepared in compliance with sections 244 –267 of the Austrian Business Code as amended and effective at the balance sheet date. 114 Financial statements for the company and for the group ▪ Notes

Not fully consolidated Not measured using the equity method (section 249 (2) UGB) (section 263 (2) UGB) compared to the group (in %) compared to the group (in %)

Fixed assets 0.06 0.21

Current assets 0.46 0.33

Equity 0.17 0.13

Debts 0.05 0.51

Sales revenue 0.23 0.43

Net profit/loss -0.31 0.52

IV. CONSOLIDATION PRINCIPLES

The consolidated financial statements and the financial statements of the companies included in the consolida- ted financial statements were prepared as at December 31, 2018.

Fully consolidated subsidiaries The separate financial statements of the subsidiaries included in the consolidated financial statements of TIWAG-Tiroler Wasserkraft AG were prepared in ac- cordance with the applicable laws and regulations and applicable accounting and valuation standards. Recon- ciliations (balance sheet adjusted for consolidation pur- poses) were made as far as necessary. The carrying-amount-based purchase method was used for the first-time consolidation of those subsidiaries that were included in the consolidated financial statements before January 1, 2016 (section 906 (35) UGB). Subsi- diaries that were included in the consolidated financial statements after January 1, 2016 were measured based on their fair value. The capital of subsidiaries was offset as at the time of acquisition of the shares or the time of first-time inclusion in consolidation. A balancing item for the shares of the other companies is reported separately under consolidated equity, in m i n o r i t y ­­­ interests. Financial statements for the company and for the group ▪ Notes 115

Associated companies Tangible assets Material investments in associated companies are With regard to additions to tangible assets, shown separately in the consolidated balance sheet. € 42,242,479.99 (previous year: in € 1,000: 37,005.8) The shares in associated companies are recognized at are accounted for by power generation, € 52,162,507.76 their carrying amounts upon initial recognition. (previous year: in € 1,000: 47,711.8) by transforma- The effective date for the inclusion of IKB AG based on tion and distribution, € 662,398.05 (previous year: in the carrying-amount-based purchase method was De- € 1,000: 359.5) by counting and metering devices, and cember 31, 2002, for the share purchased in 2002, and € 2,46 6,356.01 (previous year: in € 1,0 0 0: 3,719.7) by ad- December 31, 2006, for the share purchased in 2006. ministration and other items. Losses through disposal­­­ of Because of the special contractual situation, the IKB se- tangible assets amount to € 176,853.84 (previous year: parate financial statements are used as a basis for using in € 1,000: 369.1); of which € 38,268.18 (previous year: the equity method. in € 1,000: 78.7) come from sales. Profit from the sale of tangible assets amounts to € 118,623.36 (previous year: The amounts determined upon first-time consolidation in € 1,000: 1,884.2). The item Land, rights equivalent will be increased or decreased accordingly in subse- to land and buildings, including buildings on third-party quent years by the amount of proportional changes in land includes land valued at € 50,174,599.85 (previous equity. The profit distributions attributable to the invest- year: in € 1,000: 49,606.7). ment are deducted. As at the balance sheet date, no major obligations exis- Consolidation of debt was effected by offsetting mutual ted from the use of tangible assets not shown in the receivables, loans, provisions and payables as well as balance­­­ sheet under lease and hire-purchase agree- mutual contingent liabilities. In line with the principle of ments. materiality, no intra-group profits/losses had to be elimi- nated between the companies included in the consolida- For a detailed breakdown of fixed assets and movements ted financial statements. In the course of the consolida- in fixed assets in the course of the reporting period, refer tion of expenses and income, intra-group expenses and to the statement of fixed assets. income were eliminated in accordance with the principle of materiality. Financial assets Compared to the previous year, the carrying amount of financial assets decreased by a total of € 6,710,365.69 V. NOTES TO THE BALANCE SHEET to € 1,017,637,519.51 (previous year: in € 1,000: (SEPARATE FINANCIAL STATEMENTS) 1,024,347.8). The statement of equity investments pro- vides an overview of shares held, equity and profit/loss Intangible assets of the last fiscal year for which financial statements are Intangible assets in the amount of € 384,052,716.80 available. (previous year: in € 1,000: 269,425.8) mainly include electricity procurement rights, IT programs, goodwill Loans totaling € 454,419.80 (previous year: in € 1,000: and similar rights. Goodwill accounts for € 1,363,990.61 459.1) will become due within one year. Non-current (previous year: € 1,000: 1,573.8). Amortization in the securities­­­ with a carrying amount of € 81,060,473.22 reporting period amounted to € 1,806,479.56 (previous (previous year: in € 1,000: 94,082.8) are being used to year: in € 1,000: 1,742.0). The increase in this balance cover pension provisions. sheet item is attributable mainly to advance payments made for the share in the electricity procurement rights in the joint Inn river power station. 116 Financial statements for the company and for the group ▪ Notes

EQUITY INVESTMENTS AS DEFINED BY SECTION 238 (1) (4) OF THE AUSTRIAN BUSINESS CODE (UGB) (STATEMENT OF EQUITY INVESTMENTS)

Company Commercial Nominal capital Share of Share of Last Share capital in last Profit/loss of last register as at Dec. 31, 2018 Nominal capital Nominal capital financial fiscal year 1) fiscal year 2) number in % statements

Investments in affiliates

1. TIGAS-Erdgas Tirol GmbH, Innsbruck 3) 8) FN 33547 i € 65,915,000.00 86.000 € 56,686,900.00 2018 € 323,212,131.01 € 13,300,202.98

2. Achenseeschiffahrt-GesmbH, Eben 3) 4) 8) FN 40405 w € 37,000.00 100.000 € 37,000.00 2018 € 746,734.77 € -288,034.90

3. Ökoenergie Tirol GmbH, Innsbruck 3) 7) 8) FN 45176 k € 38,000.00 100.000 € 38,000.00 2018 € 516,225.20 € -77,589.21

4. TINETZ-Tiroler Netze GmbH, Innsbruck 3) 4) 8) FN 216507 v € 500,000.00 100.000 € 500,000.00 2018 € 5,991,514.00 € 0.00

5. TIWAG-Italia GmbH in liquidation, Bolzano 3) 10) 02359610215 € 90,000.00 100.000 € 90,000.00 2018 € -458,604.00 € -94,135.00

6. TIWAG Beteiligungs GmbH, Innsbruck FN 238803 g € 100,000.00 100.000 € 100,000.00 2018 € 261,447.33 € -1,390.95

7. Wasser Tirol - Wasserdienstleistungs-GmbH, Innsbruck 7) FN 236070 m € 500,000.00 100.000 € 500,000.00 2018 € 2,018,427.41 € -250,218.36

8. Stadtwärme Lienz Produktions- und Vertriebs-GmbH, Lienz 3) 7) 8) FN 195282 f € 4,545,000.00 100.000 € 4,545,000.00 2018 € 8,375,775.05 € 5,218,552.19

9. Gemeinschaftskraftwerk Inn GmbH, Landeck 3) FN 277806 p € 200,000.00 86.000 € 172,000.00 2018 € 266,336.11 € 6,282.11

10. SELGAS GmbH, Bolzano 3) 6) 02319210213 € 245,000.00 81.633 € 200,000.00 2017 € 2,158,718.00 € 1,181,332.00

Equity investments

1. Energie AG Oberösterreich, Linz FN 76532 y € 88,779,655.00 8.272 € 7,344,000.00 2017/2018 € 834,936,647.34 € 63,132,510.70

2. Bioenergie Kufstein GmbH, Kufstein 8) FN 226474 a € 2,350,000.00 50.000 € 1,175,000.00 2017 € 3,544,837.43 € 1,021,319.07

3. VERBUND AG, Vienna FN 76023 z € 347,415,686.00 8.218 € 28,549,755.00 2017 € 1,000 2,197,351.30 € 1,000 -167,079.20

4. Innsbrucker Kommunalbetriebe AG, Innsbruck 5) FN 90981 x € 10,000,000.00 49.999 € 4,999,900.00 2017 € 337,537,586.77 € 22,334,358.63

5. VERBUND Hydro Power GmbH, Vienna FN 84438 z € 139,791,918.00 0.221 € 308,460.00 2017 € 1,000 1,555,020.30 € 1,000 149,773.10

6. Südtirolgas AG, Bolzano 5) 6) 08284030155 € 16,400,000.00 49.000 € 8,036,000.00 2017 € 44,268,603.00 € 3,042,993.00

7. Bayerngas GmbH, Munich 6) HRB 5551 € 90,695,150.00 10.000 € 9,069,550.00 2017 € 209,235,900.15 € 9,556,796.90

8. AGGM Austrian Gas Grid Management AG, Vienna 6) FN 212990 x € 500,000.00 2.000 € 10,000.00 2017 € 1,645,993.93 € 538,940.92

9. Bioenergie Schlitters GmbH, Schlitters 6) FN 281941 w € 41,000.00 48.780 € 20,000.00 2017 € 22,235.83 € 118,399.30

10. APCS Power Clearing and Settlement AG, Vienna 9) FN 196976 x € 2,200,000.00 5.000 € 110,000.00 2017 € 3,857,659.54 € 788,659.54

11. CISMO Clearing Integrated Services and Market Operations GmbH, Vienna 9) FN 197614 i € 400,000.00 2.500 € 9,999.40 2017 € 2,811,012.61 € 2,011,012.61

12. OeMAG Abwicklungsstelle für Ökostrom AG, Vienna 9) FN 280453 g € 100,000.00 12.600 € 12,600.00 2017 € 5,990,662.80 € 500,890.66

13. Ötztaler Wasserkraft GmbH, Umhausen 11) FN 353576 s € 100,000.00 25.000 € 25,000.00 2017 € 203,434.21 € -102,921.54

1) Shareholders’ equity as defined by section 224 (3)(A) of the 6) Shares held by TIGAS-Erdgas Tirol GmbH. Austrian Business Code 7) A profit and loss transfer agreement was entered into for the reporting year. 2) Net income (+)/loss (-) for the year 8) Included in group taxation. 3) Full consolidation as defined by sections 254 –261 of the 9) Interest is held by TINETZ-Tiroler Netze GmbH. Austrian Business Code 10) In liquidation; opening balance sheet for liquidation as at June 9, 2010 4) A profit and loss transfer agreement was concluded with the company. 1 1 ) Interest is held by TIWAG Beteiligungs GmbH. 5) Associated company Financial statements for the company and for the group ▪ Notes 117

Company Commercial Nominal capital Share of Share of Last Share capital in last Profit/loss of last register as at Dec. 31, 2018 Nominal capital Nominal capital financial fiscal year 1) fiscal year 2) number in % statements

Investments in affiliates

1. TIGAS-Erdgas Tirol GmbH, Innsbruck 3) 8) FN 33547 i € 65,915,000.00 86.000 € 56,686,900.00 2018 € 323,212,131.01 € 13,300,202.98

2. Achenseeschiffahrt-GesmbH, Eben 3) 4) 8) FN 40405 w € 37,000.00 100.000 € 37,000.00 2018 € 746,734.77 € -288,034.90

3. Ökoenergie Tirol GmbH, Innsbruck 3) 7) 8) FN 45176 k € 38,000.00 100.000 € 38,000.00 2018 € 516,225.20 € -77,589.21

4. TINETZ-Tiroler Netze GmbH, Innsbruck 3) 4) 8) FN 216507 v € 500,000.00 100.000 € 500,000.00 2018 € 5,991,514.00 € 0.00

5. TIWAG-Italia GmbH in liquidation, Bolzano 3) 10) 02359610215 € 90,000.00 100.000 € 90,000.00 2018 € -458,604.00 € -94,135.00

6. TIWAG Beteiligungs GmbH, Innsbruck FN 238803 g € 100,000.00 100.000 € 100,000.00 2018 € 261,447.33 € -1,390.95

7. Wasser Tirol - Wasserdienstleistungs-GmbH, Innsbruck 7) FN 236070 m € 500,000.00 100.000 € 500,000.00 2018 € 2,018,427.41 € -250,218.36

8. Stadtwärme Lienz Produktions- und Vertriebs-GmbH, Lienz 3) 7) 8) FN 195282 f € 4,545,000.00 100.000 € 4,545,000.00 2018 € 8,375,775.05 € 5,218,552.19

9. Gemeinschaftskraftwerk Inn GmbH, Landeck 3) FN 277806 p € 200,000.00 86.000 € 172,000.00 2018 € 266,336.11 € 6,282.11

10. SELGAS GmbH, Bolzano 3) 6) 02319210213 € 245,000.00 81.633 € 200,000.00 2017 € 2,158,718.00 € 1,181,332.00

Equity investments

1. Energie AG Oberösterreich, Linz FN 76532 y € 88,779,655.00 8.272 € 7,344,000.00 2017/2018 € 834,936,647.34 € 63,132,510.70

2. Bioenergie Kufstein GmbH, Kufstein 8) FN 226474 a € 2,350,000.00 50.000 € 1,175,000.00 2017 € 3,544,837.43 € 1,021,319.07

3. VERBUND AG, Vienna FN 76023 z € 347,415,686.00 8.218 € 28,549,755.00 2017 € 1,000 2,197,351.30 € 1,000 -167,079.20

4. Innsbrucker Kommunalbetriebe AG, Innsbruck 5) FN 90981 x € 10,000,000.00 49.999 € 4,999,900.00 2017 € 337,537,586.77 € 22,334,358.63

5. VERBUND Hydro Power GmbH, Vienna FN 84438 z € 139,791,918.00 0.221 € 308,460.00 2017 € 1,000 1,555,020.30 € 1,000 149,773.10

6. Südtirolgas AG, Bolzano 5) 6) 08284030155 € 16,400,000.00 49.000 € 8,036,000.00 2017 € 44,268,603.00 € 3,042,993.00

7. Bayerngas GmbH, Munich 6) HRB 5551 € 90,695,150.00 10.000 € 9,069,550.00 2017 € 209,235,900.15 € 9,556,796.90

8. AGGM Austrian Gas Grid Management AG, Vienna 6) FN 212990 x € 500,000.00 2.000 € 10,000.00 2017 € 1,645,993.93 € 538,940.92

9. Bioenergie Schlitters GmbH, Schlitters 6) FN 281941 w € 41,000.00 48.780 € 20,000.00 2017 € 22,235.83 € 118,399.30

10. APCS Power Clearing and Settlement AG, Vienna 9) FN 196976 x € 2,200,000.00 5.000 € 110,000.00 2017 € 3,857,659.54 € 788,659.54

11. CISMO Clearing Integrated Services and Market Operations GmbH, Vienna 9) FN 197614 i € 400,000.00 2.500 € 9,999.40 2017 € 2,811,012.61 € 2,011,012.61

12. OeMAG Abwicklungsstelle für Ökostrom AG, Vienna 9) FN 280453 g € 100,000.00 12.600 € 12,600.00 2017 € 5,990,662.80 € 500,890.66

13. Ötztaler Wasserkraft GmbH, Umhausen 11) FN 353576 s € 100,000.00 25.000 € 25,000.00 2017 € 203,434.21 € -102,921.54 118 Financial statements for the company and for the group ▪ Notes

DEVELOPMENT OF FIXED ASSETS (STATEMENT OF FIXED ASSETS)

Balance sheet item Cost of acquisition and/or production

As at Additions Disposals Transfers As at Jan. 1, 2018 Dec. 31, 2018 € € € € €

I. Intangible assets

1. Electricity procurement rights 41,166.60 0.00 0.00 0.00 41,166.60

2. Other rights 18,133,279.61 483,512.64 0.00 0.00 18,616,792.25

3. IT programs 20,977,055.87 1,096,457.04 -238,788.29 0.00 21,834,724.62

4. Goodwill 52,561,826.54 0.00 0.00 0.00 52,561,826.54

5. Prepayments 265,524,225.28 116,283,233.08 -1,385,919.00 0.00 380,421,539.36

TOTAL I. Intangible assets 357,237,553.90 117,863,202.76 -1,624,707.29 0.00 473,476,049.37

II. Tangible assets

1. Land, rights equivalent to land and buildings, including buildings on third-party land 1,308,547,976.91 3,358,032.25 -34,730.62 9,547,890.53 1,321,419,169.07

2. Machinery and electrical plants 953,969,430.87 9,592,207.14 -1,371,623.60 14,578,295.57 976,768,309.98

3. Line systems 808,481,475.62 9,440,712.66 -240,667.99 12,601,925.07 830,283,445.36

4. Other fixtures, fittings, tools and office equipment 50,775,713.72 2,896,795.56 -2,351,307.79 31,350.81 51,352,552.30

5. Prepayments and construction in progress 153,999,326.82 71,583,596.15 -55,963.53 -36,759,461.98 188,767,497.46

TOTAL II. Tangible assets 3,275,773,923.94 96,871,343.76 -4,054,293.53 0.00 3,368,590,974.17

III. Financial assets

1. Investments in affiliates 262,881,982.45 50,413.23 0.00 0.00 262,932,395.68

2. Loans to affiliates 183,683,333.32 20,000,000.00 -13,633,333.34 0.00 190,049,999.98

3. Equity investments 635,867,714.63 0.00 0.00 0.00 635,867,714.63

4. Non-current securities (book-entry securities) 96,153,347.17 0.00 -9,944,965.86 0.00 86,208,381.31

5. Other loans 6,350,775.87 186,959.28 -292,007.73 0.00 6,245,727.42

TOTAL III. Financial assets 1,184,937,153.44 20,237,372.51 -23,870,306.93 0.00 1,181,304,219.02

TOTAL Fixed assets 4,817,948,631.28 234,971,919.03 -29,549,307.75 0.00 5,023,371,242.56 Financial statements for the company and for the group ▪ Notes 119

Balance sheet item Cost of acquisition and/or production

As at Additions Disposals Transfers As at Jan. 1, 2018 Dec. 31, 2018 € € € € €

I. Intangible assets

1. Electricity procurement rights 41,166.60 0.00 0.00 0.00 41,166.60

2. Other rights 18,133,279.61 483,512.64 0.00 0.00 18,616,792.25

3. IT programs 20,977,055.87 1,096,457.04 -238,788.29 0.00 21,834,724.62

4. Goodwill 52,561,826.54 0.00 0.00 0.00 52,561,826.54

5. Prepayments 265,524,225.28 116,283,233.08 -1,385,919.00 0.00 380,421,539.36

TOTAL I. Intangible assets 357,237,553.90 117,863,202.76 -1,624,707.29 0.00 473,476,049.37

II. Tangible assets

1. Land, rights equivalent to land and buildings, including buildings on third-party land 1,308,547,976.91 3,358,032.25 -34,730.62 9,547,890.53 1,321,419,169.07

2. Machinery and electrical plants 953,969,430.87 9,592,207.14 -1,371,623.60 14,578,295.57 976,768,309.98

3. Line systems 808,481,475.62 9,440,712.66 -240,667.99 12,601,925.07 830,283,445.36

4. Other fixtures, fittings, tools and office equipment 50,775,713.72 2,896,795.56 -2,351,307.79 31,350.81 51,352,552.30

5. Prepayments and construction in progress 153,999,326.82 71,583,596.15 -55,963.53 -36,759,461.98 188,767,497.46

TOTAL II. Tangible assets 3,275,773,923.94 96,871,343.76 -4,054,293.53 0.00 3,368,590,974.17

III. Financial assets

1. Investments in affiliates 262,881,982.45 50,413.23 0.00 0.00 262,932,395.68

2. Loans to affiliates 183,683,333.32 20,000,000.00 -13,633,333.34 0.00 190,049,999.98

3. Equity investments 635,867,714.63 0.00 0.00 0.00 635,867,714.63

4. Non-current securities (book-entry securities) 96,153,347.17 0.00 -9,944,965.86 0.00 86,208,381.31

5. Other loans 6,350,775.87 186,959.28 -292,007.73 0.00 6,245,727.42

TOTAL III. Financial assets 1,184,937,153.44 20,237,372.51 -23,870,306.93 0.00 1,181,304,219.02

TOTAL Fixed assets 4,817,948,631.28 234,971,919.03 -29,549,307.75 0.00 5,023,371,242.56 120 Financial statements for the company and for the group ▪ Notes

DEVELOPMENT OF FIXED ASSETS (STATEMENT OF FIXED ASSETS)

Balance sheet item Accumulated depreciation/amortization Carrying amounts

As at Write-ups Additions Disposals Transfers As at Carrying amount as at Carrying amount as at Jan. 1, 2018 Dec. 31, 2018 Jan. 1, 2018 Dec. 31, 2018 € € € € € € € €

I. Intangible assets

1. Electricity procurement rights 15,437.47 0.00 2,058.34 0.00 0.00 17,495.81 25,729.13 23,670.79

2. Other rights 14,386,025.22 0.00 609,574.59 0.00 0.00 14,995,599.81 3,747,254.39 3,621,192.44

3. IT programs 18,794,038.84 0.00 985,001.92 -238,788.29 0.00 19,540,252.47 2,183,017.03 2,294,472.15

4. Goodwill 50,987,991.22 0.00 209,844.71 0.00 0.00 51,197,835.93 1,573,835.32 1,363,990.61

5. Prepayments 3,628,199.58 0.00 43,948.97 0.00 0.00 3,672,148.55 261,896,025.70 376,749,390.81

TOTAL I. Intangible assets 87,811,692.33 0.00 1,850,428.53 -238,788.29 0.00 89,423,332.57 269,425,861.57 384,052,716.80

II. Tangible assets

1. Land, rights equivalent to land and buildings, including buildings on third-party land 793,364,751.25 0.00 19,233,424.09 -31,233.40 0.00 812,566,941.94 515,183,225.66 508,852,227.13

2. Machinery and electrical plants 788,865,643.74 0.00 17,420,846.08 -1,317,738.00 -897.58 804,967,854.24 165,103,787.13 171,800,455.74

3. Line systems 595,986,828.16 0.00 22,640,739.69 -237,859.72 897.58 618,390,605.71 212,494,647.46 211,892,839.65

4. Other fixtures, fittings, tools and office equipment 42,047,879.27 0.00 3,261,612.19 -2,259,276.79 0.00 43,050,214.67 8,727,834.45 8,302,337.63

5. Prepayments and construction in progress 4,934,757.04 0.00 3,792,733.57 0.00 0.00 8,727,490.61 149,064,569.78 180,040,006.85

TOTAL II. Tangible assets 2,225,199,859.46 0.00 66,349,355.62 -3,846,107.91 0.00 2,287,703,107.17 1,050,574,064.48 1,080,887,867.00

III. Financial assets

1. Investments in affiliates 67,792,383.34 0.00 0.00 0.00 0.00 67,792,383.34 195,089,599.11 195,140,012.34

2. Loans to affiliates 0.00 0.00 0.00 0.00 0.00 0.00 183,683,333.32 190,049,999.98

3. Equity investments 90,944,261.61 0.00 0.00 0.00 0.00 90,944,261.61 544,923,453.02 544,923,453.02

4. Non-current securities (book-entry securities) 1,852,623.29 0.00 3,077,431.27 0.00 0.00 4,930,054.56 94,300,723.88 81,278,326.75

5. Other loans 0.00 0.00 0.00 0.00 0.00 0.00 6,350,775.87 6,245,727.42

TOTAL III. Financial assets 160,589,268.24 0.00 3,077,431.27 0.00 0.00 163,666,699.51 1,024,347,885.20 1,017,637,519.51

TOTAL Fixed assets 2,473,600,820.03 0.00 71,277,215.42 -4,084,896.20 0.00 2,540,793,139.25 2,344,347,811.25 2,482,578,103.31 Financial statements for the company and for the group ▪ Notes 121

Balance sheet item Accumulated depreciation/amortization Carrying amounts

As at Write-ups Additions Disposals Transfers As at Carrying amount as at Carrying amount as at Jan. 1, 2018 Dec. 31, 2018 Jan. 1, 2018 Dec. 31, 2018 € € € € € € € €

I. Intangible assets

1. Electricity procurement rights 15,437.47 0.00 2,058.34 0.00 0.00 17,495.81 25,729.13 23,670.79

2. Other rights 14,386,025.22 0.00 609,574.59 0.00 0.00 14,995,599.81 3,747,254.39 3,621,192.44

3. IT programs 18,794,038.84 0.00 985,001.92 -238,788.29 0.00 19,540,252.47 2,183,017.03 2,294,472.15

4. Goodwill 50,987,991.22 0.00 209,844.71 0.00 0.00 51,197,835.93 1,573,835.32 1,363,990.61

5. Prepayments 3,628,199.58 0.00 43,948.97 0.00 0.00 3,672,148.55 261,896,025.70 376,749,390.81

TOTAL I. Intangible assets 87,811,692.33 0.00 1,850,428.53 -238,788.29 0.00 89,423,332.57 269,425,861.57 384,052,716.80

II. Tangible assets

1. Land, rights equivalent to land and buildings, including buildings on third-party land 793,364,751.25 0.00 19,233,424.09 -31,233.40 0.00 812,566,941.94 515,183,225.66 508,852,227.13

2. Machinery and electrical plants 788,865,643.74 0.00 17,420,846.08 -1,317,738.00 -897.58 804,967,854.24 165,103,787.13 171,800,455.74

3. Line systems 595,986,828.16 0.00 22,640,739.69 -237,859.72 897.58 618,390,605.71 212,494,647.46 211,892,839.65

4. Other fixtures, fittings, tools and office equipment 42,047,879.27 0.00 3,261,612.19 -2,259,276.79 0.00 43,050,214.67 8,727,834.45 8,302,337.63

5. Prepayments and construction in progress 4,934,757.04 0.00 3,792,733.57 0.00 0.00 8,727,490.61 149,064,569.78 180,040,006.85

TOTAL II. Tangible assets 2,225,199,859.46 0.00 66,349,355.62 -3,846,107.91 0.00 2,287,703,107.17 1,050,574,064.48 1,080,887,867.00

III. Financial assets

1. Investments in affiliates 67,792,383.34 0.00 0.00 0.00 0.00 67,792,383.34 195,089,599.11 195,140,012.34

2. Loans to affiliates 0.00 0.00 0.00 0.00 0.00 0.00 183,683,333.32 190,049,999.98

3. Equity investments 90,944,261.61 0.00 0.00 0.00 0.00 90,944,261.61 544,923,453.02 544,923,453.02

4. Non-current securities (book-entry securities) 1,852,623.29 0.00 3,077,431.27 0.00 0.00 4,930,054.56 94,300,723.88 81,278,326.75

5. Other loans 0.00 0.00 0.00 0.00 0.00 0.00 6,350,775.87 6,245,727.42

TOTAL III. Financial assets 160,589,268.24 0.00 3,077,431.27 0.00 0.00 163,666,699.51 1,024,347,885.20 1,017,637,519.51

TOTAL Fixed assets 2,473,600,820.03 0.00 71,277,215.42 -4,084,896.20 0.00 2,540,793,139.25 2,344,347,811.25 2,482,578,103.31 122 Financial statements for the company and for the group ▪ Notes

Inventories

Dec. 31, 2018 Dec. 31, 2017 € in € 1,000

Stock material 2,639,052.47 2,689.2

Biomass inventories 275,829.89 429.9

1. Raw materials and supplies 2,914,882.36 3,119.1

Installation materials 55,627.68 54.5

Troubleshooting materials 17,432.31 19.3

Other merchandise 1,862.22 2.1

2. Finished goods and merchandise 74,922.21 76.0

3. Services not yet chargeable 1,042,026.99 1,522.2

TOTAL Inventories 4,031,831.56 4,717.3

Receivables and other assets

Dec. 31, 2018 Stating separately Dec. 31, 2017 those with a remaining term of less than 1 year € € in € 1,000

1. Trade receivables 59,793,764.84 6,470,796.39 53,323.5

2. Receivables from affiliates 151,278,716.20 111,309,925.09 37,112.0

3. Receivables from other long-term investees and investors 3,353,752.46 0.00 3,682.7

4. Other receivables and assets 22,767,752.06 0.00 17,611.2

TOTAL Receivables and other assets 237,193,985.56 117,780,721.48 111,729.4

Under trade receivables, deductions amounting to € 663,479.00 (previous year: in € 1,000: 740.7) have been made as provisions for bad debts.

The receivables due from affiliates relate to TIGAS-­ Erdgas Tirol GmbH, TINETZ-Tiroler Netze GmbH, Wasser Tirol - Wasserdienstleistungs-GmbH, Gemein- schaftskraftwerk Inn GmbH, Ökoenergie Tirol GmbH, Stadtwärme Lienz Produktions- und Vertriebs-GmbH and TIWAG-Italia GmbH in liquidation and derive from the balance of ongoing charges for services and the Financial statements for the company and for the group ▪ Notes 123

accounting­­­ of charges within the group, as well as from profit and loss transfer in the case of companies inclu- ded in group taxation and having a profit and loss trans- fer agreement. The valuation adjustment required for this item was € 161,157.41 (previous year: in € 1,000: 151.1).

The receivables from other long-term investees and in- vestors relate mainly to goods and services provided. The valuation adjustment required for this item was € 546,496.91 (previous year: in € 1,000: 656.0).As at December­­­ 31, 2018, there were receivables in the amount of € 6,470,796.39 (previous year: in € 1,000: 6,493.8) with a remaining term of more than one year.

Cash in hand and at bank, checks Cash in hand and at bank amounted to € 31,613,432.81 (previous year: in € 1,000: 26,275.1), consisting of cash at bank in the amount of € 31,583,499.47 (previous year: in € 1,000: 26,241.6) and cash in hand in the amount of € 29,933.34 (previous year: in € 1,000: 33.4).

Deferred expense Deferred expense decreased by € 508,237.11 to € 3,693,011.38 (previous year: in € 1,000: 4,201.2).

Deferred tax assets As at December 31, 2018 deferred tax assets amoun- ted to € 6,269,823.77. In the previous year, deferred tax liabilities­­­ amounted to € 237,431.36. The key differences between the amounts under com- pany law and under tax law result from different useful lives for tangible assets, from write-downs to going con- cern value being distributed over a seven-year period for financial assets, and from interest rate differences for social capital provisions. The differences determined were measured at a tax rate of 25%.

The movements in deferred taxes throughout the course of the fiscal year were due to additional tax depreciation/ amortization/write-downs, the claiming of seventh-part amounts, adjustments in social capital provisions and the continuation of untaxed reserves recorded off the balance sheet. 124 Financial statements for the company and for the group ▪ Notes

Share capital The share capital in the amount of € 300,000,000.00 (previous year: in € 1000: 300,000.0) consists of 300,000 shares at a par value of € 1,000 each. The sole share- holder is the Province of Tyrol.

Retained earnings Retained earnings, which consist mainly of profits accu- mulated, include the statutory reserve of € 30,000,000.00 (previous year: in € 1,000: 30,000.0) and uncommitted reserves of € 966,812,937.00 (previous year: in € 1,000: 893,812.9). Net retained profit for fiscal 2018, which has not been approved yet, comes to € 4,187,199.53 (previ- ous year: in € 1,000: 21,209.24).

Investment grants

As at Additions Disposals Reversals As at Jan. 1, 2018 Dec. 31, 2018 € € € € €

Investment grants 8,001,934.52 790,889.24 0.00 -496,169.34 8,296,654.52

TOTAL Investment grants 8,001,934.52 790,889.24 0.00 -496,169.34 8,296,654.52

Contributions to construction costs

As at Additions Disposals Reversals As at Jan. 1, 2018 Dec. 31, 2018 € € € € €

1. Last mile connections 152,496,035.63 19,518,541.33 -95,307.97 -13,941,930.13 157,977,338.86

2. Remote Heat 769,287.66 63,652.73 0.00 -75,215.53 757,724.86

3. Other 6,636,070.41 400,414.81 0.00 -492,103.90 6,544,381.32

TOTAL Contributions to construction costs 159,901,393.70 19,982,608.87 -95,307.97 -14,509,249.56 165,279,445.04 Financial statements for the company and for the group ▪ Notes 125

Provisions

Dec. 31, 2018 Dec. 31, 2017 € in € 1,000

1. Provisions for severance payments (subject to tax: € 20,918,885.29; previous year: in € 1,000: 15,796.0) 56,306,132.36 51,059.6

2. Provisions for pensions (subject to tax: € 57,415,838.65; previous year: in € 1,000: 57,755.1) 157,172,810.53 152,069.3

3. Tax provisions 0.00 237.4

4. Other provisions (subject to tax: € 5,239,917.25; previous year: in € 1,000: 4,950.8) 255,910,595.63 139,552.0

TOTAL Provisions 469,389,538.52 342,918.3

Tax provisions amount to € 0.00, in the previous year, tax provisions included provisions for deferred tax liabili- ties in the amount of € 237,431.36.

In the reporting period, a provision was recognized for an obligation to make supplementary contributions for outsourced pension obligations in the amount of € 120,074,087.64 (previous year: in € 1,000: 27,723.1) and shown under Other provisions. The greater part of the changes is due to parameter adjustments.

The same line item contains the discounted provision for waste water disposal measures in connection with the Strassen-Amlach power station on the Drau ri- ver in the amount of € 1,906,485.06 (previous year: in € 1,000: 1,505.5). Other provisions also include the provision for anniversary bonuses (€ 12,392,946.51 (previous year: in € 1,000: 11,633.9), for annual leave entitlements not used (€ 6,264,600.00 (previous year: in € 1,000: 5,817.5)), for accrued flexible working hours of employees (€ 1,798,035.97 (previous year: in € 1,000: 1,203.6)) and provisions under an energy barter agree- m e nt (€ 28 ,6 41, 819. 2 9 (p r ev i o u s ye a r : i n 1,0 0 0: 31, 24 5 . 6). Moreover­­­, this item includes provisions for pension-like obligations relating to electricity allowance-in-kind com- mitments in the amount of € 15,645,920.48 (previous year: in € 1,000: 13,415.5). 126 Financial statements for the company and for the group ▪ Notes

Liabilities

Liabilities as at Dec. 31, 2018 Balance Stating separately Stating Stating sheet value those due within separately those separately those Dec. 31, 2018 one year with a remaining with a remaining term of between term of more than 1 and 5 years 5 years € € € €

1. Bonds 110,121,244.44 121,244.44 0.00 110,000,000.00

2. Liabilities to banks 370,913,247.65 142,657,827.34 69,683,168.92 158,572,251.39

3. Advance payments received 891.00 891.00 0.00 0.00

4. Trade payables 45,931,602.14 45,226,242.14 176,340.00 529,020.00

5. Liabilities to affiliates 66,171,036.48 66,171,036.48 0.00 0.00

6. Liabilities to other long-term investees and investors 340,863.30 340,863.30 0.00 0.00

7. Other liabilities 158,653,489.07 61,647,810.20 80,069,271.87 16,936,406.99 of which taxes 30,226,842.56 30,226,842.56 0.00 0.00 of which social security 2,356,767.29 2,356,767.29 0.00 0.00 of which loans from insurance companies 82,448,000.00 2,448,000.00 80,000,000.00 0.00

TOTAL Liabilities 752,132,374.08 316,165,914.90 149,928,780.79 286,037,678.38

Liabilities as at Dec. 31, 2017 Balance Stating separately Stating Stating sheet value those due within separately those separately those Dec. 31, 2017 one year with a remaining with a remaining term of between term of more than 1 and 5 years 5 years € € € €

1. Bonds 110,121,244.44 121,244.44 0.00 110,000,000.00

2. Liabilities to banks 292,459,460.78 122,191,362.40 62,437,413.76 107,830,684.62

3. Advance payments received 11,615.00 11,615.00 0.00 0.00

4. Trade payables 44,829,524.15 44,124,164.15 176,340.00 529,020.00

5. Liabilities to affiliates 65,747,633.57 65,747,633.57 0.00 0.00

6. Liabilities to other long-term investees and investors 33,702.02 33,702.02 0.00 0.00

7. Other liabilities 147,166,345.84 50,469,114.75 80,073,986.24 16,623,244.85 of which taxes 26,559,090.75 26,559,090.75 0.00 0.00 of which social security 2,314,671.52 2,314,671.52 0.00 0.00 of which loans from insurance companies 82,448,000.00 2,448,000.00 80,000,000.00 0.00

TOTAL Liabilities 660,369,525.80 282,698,836.33 142,687,740.00 234,982,949.47 Financial statements for the company and for the group ▪ Notes 127

As at the balance sheet date, the carrying amount of the liabilities­­­ arising from free power commitments was 2%, euro bonds stood at € 110,121,244.44 (previous year: in as in the previous year. Liabilities payable to customers € 1,000: 110,121.2). Liabilities to banks in the amount of increased to € 16,283,936.95 (previous year: in € 1,000: € 370,913,247.65 (previous year: in € 1,000: 292,459.5) 11,050.4). Other liabilities in the amount of € 146,254.57 are due mainly to bank loans with a remaining term of (previous year: in € 1,000: 164.4) are mortgage-secured. more than five years. Deferred income Liabilities to affiliates, which consist of trade payables Deferred income includes, among other things, the total in the amount of € 19,744,036.48 (previous year: in net present value benefit resulting from all CBL transac- € 1,000: 36,480.8) and financial liabilities in the amount tions, which is deferred and recognized in income over of € 46,427,000.00 (previous year: in € 1,000: 29,266.7), the term of the underlying lease transaction. relate to the subsidiaries TINETZ-Tiroler Netze GmbH, As at the balance sheet date, deferred income from Wasser Tirol - Wasserdienstleistungs-GmbH, TIWAG-­ the remaining financial transactions amounted to Beteiligungs GmbH and Gemeinschaftskraftwerk Inn € 30,386,338.49 (previous year: in € 1,000: 31,924.2). GmbH. The liabilities to other long-term investees and investors Reserves for the reversal of impairment losses of include trade payables. Other liabilities primarily include fixed and financial assets have been recognized and are loans in the amount of € 80,000,000.00 (previous year: shown separately on the balance sheet under deferred € 80.0 million), liabilities arising from compensation or income and will be reversed in line with the provisions of purchase contracts and free power commitments in the section 124 b (270) EStG (pursuant to section 906 (32) amount of € 17,204,918.22 (previous year: in € 1,000: UGB). 16,888.8). The interest rate used for measuring the

Dec. 31, 2018 Dec. 31, 2017 € in € 1,000

Accruals and deferrals (section 906 (32) UGB) 38,284,245.70 42,476.6

Net present value benefits from CBL 30,386,338.49 31,924.2

Other accruals and deferrals 611,455.61 656.7

TOTAL 69,282,039.80 75,057.5 128 Financial statements for the company and for the group ▪ Notes

VI. NOTES TO THE INCOME STATEMENT (SEPARATE FINANCIAL STATEMENTS)

Sales revenue

Sales revenue by segments of activity 2018 2017 € in € 1,000

1. Electricity sales 678,023,938.54 662,763.8

2. Lease income and other sales revenue 253,378,948.55 145,769.6

TOTAL Sales revenue 931,402,887.09 808,533.4

Sales revenue by regions 2018 2017 € in € 1,000

1. Austria 521,086,042.76 400,234.4

2. Abroad 410,316,844.33 408,298.9

TOTAL Sales revenue 931,402,887.09 808,533.3

Lease income and other sales revenue includes the revenue from lease accounting for distribution system operations in the amount of € 113,021,767.64 (previ- ous year: in € 1,000: 125,830.3) and a one-time special effect­­­ in the amount of € 119,260,634.02. This special effect results from an administrative decision issued by the regulatory authority concerning in the compensation of social capital expenses outstanding from the past. In the case of regulated system tariffs, the collection is spread over 15 years.

Other operating income Other operating income includes, among other things, income from disposal of assets in the amount of € 118,623.36 (previous year: in € 1,000: 1,884.2), in- come from the reversal of impairment losses of fixed assets in the amount of € 1,351,694.33 (previous year: € 1,000: 3,102.3), income from the reversal of provisi- ons in the amount of € 8,800,128.31 (previous year: in € 1,000: 4,359.3) and from sundry other operating in- come in the amount of € 2,671,807.74 (previous year: in € 1,000: 3,802.7). Financial statements for the company and for the group ▪ Notes 129

Cost of materials and other purchased manufacturing services

2018 2017 € in € 1,000

1. Cost of materials (electricity purchased from other suppliers, swapped energy, and similar) 505,025,008.96 472,747.9

2. System services 1,462,346.31 2,656.5

3. Other materials used 8,675,414.13 8,090.4

TOTAL Cost of materials and purchased manufacturing services 515,162,769.40 483,494.8

Personnel expenses Expenses for severance payments and payments to em- ployee provision funds include payments to employee provision funds in the amount of € 403,203.94 (previous year: in € 1,000: 365.9).

Expenses for severance payments for employees amounted to € 7,653,717.26 (previous year: in € 1,000: 3,772.2). The item Expenses for pensions includes, among other things, ongoing pension payments, the changes in pension provisions and pension-like obligati- ons, as well as current pension fund contributions. Expenses for pensions for employees amounted to € 146,874,737.68 (previous year: in € 1,000: 33,367.6). This item includes an obligation to make supplemen- tary contributions to pension funds in the amount of € 118,761,821.91 (previous year: in € 1,000: 27,723.1).

Other operating expenses The taxes reported under Other operating expenses in the amount of € 477,221.55 (previous year: in € 1,000: 555.1) mainly refer to property taxes and motor vehicle taxes.

Sundry other operating expenses amount to € 59,548,006.60 (previous year: in € 1,000: 72,846.6). 130 Financial statements for the company and for the group ▪ Notes

2018 2017 € in € 1,000

1. External services 24,340,843.84 33,825.8

2. Consultation expenses, fees 1,690,211.92 2,505.3

3. Rents and leases 4,023,442.14 3,986.1

4. Compensations, contribution payments 5,292,913.36 5,552.5

5. Travel expenses 2,711,909.83 2,947.2

6. Sundry other operating expenses 21,488,685.51 24,029.7

TOTAL Other operating expenses 59,548,006.60 72,846.6

Income from investments Interest and similar expenses Income from investments includes, among other things, Under the item Interest and similar expenses, the main profit distributions by VERBUND AG amounting to points to note are interest payments for loans and bank € 11,990,897.10 (previous year: in € 1,000: 8,279.4). loans in the amount of € 7,399,785.94 (previous year: in Based­­­ on the decisions taken, the distribution of profits € 1,000: 5,352.5), and the interest portion of social capi- of subsidiary TIGAS-Erdgas Tirol GmbH in the amount tal provisions in the amount of € 6,670,183.14 (previous of € 8,600,000.00 (previous year: in € 1,000: 10,492.0) year: in € 1,000: 7,536.8). is reported for the same period as income from invest- ments. Income taxes The reported taxes of € 1,823,041.89 (previous year: in Other interest and similar income € 1,000: 5,661.0) not only include the corporate income This item includes proportional income from cross- tax for fiscal 2018 in the amount of € 11,740,072.20 (pre- border leasing transactions amounting to € 1,834,592.19 vious year: in € 1,000: 15,467.0) and income from tax all- (previous year: in € 1,000: 2,542.0). ocation in the amount of € 3,409,775.18 (previous year: in € 1,000: 5,261.1), but also income from movements in Income from disposals of and write-ups deferred taxes in the amount of € 6,507,255.13 (previous to financial assets year: in € 1,000: 4,544.8). The income recognized in the year under review con- sists of a reversal of impairment losses in the amount of Net retained profit € 2,840,696.06 (previous year: in € 1,000: 1,789.3) and Profit before taxes amounts to € 78,400,995.80 (previ- the proceeds from the sale of securities in the amount of ous year: in € 1,000: 75,794.4). Taking into account in- € 1,103,979.30 (previous year: in € 1,000: 0.0). come taxes, the resulting profit for the year comes to € 76,577,953.91 (previous year: in € 1,000: 70,133.4). Expenses related to financial assets and current securities Taking into account the adjustments to the reserves – in Expenses related to financial assets amounted to particular the allocation made to reserves from retained € 3,405,238.84 (previous year: in € 1,000: 9,835.3). earnings in the amount € 73,000,000.00 (previous year: Moreover­­­, this item includes an impairment of invest- in € 1,000: 49,000.0) and the profit carried forward from ments in the amount of € 3,077,431.27 and a loss trans- the previous year amounting to € 609,245.62 (previous fer in the amount of € 327,807.57 (previous year: in year: in € 1,000: 75.8) – net retained profit comes to € 1,000: 9,775.3). € 4,187,199.53 (previous year: in € 1,000: 21,209.2). Financial statements for the company and for the group ▪ Notes 131 132 Financial statements for the company and for the group ▪ Notes

VII. NOTES TO THE BALANCE SHEET (CONSOLIDATED FINANCIAL STATEMENTS)

Tangible assets The development of consolidated fixed assets and the breakdown of annual depreciation and amortization are shown in the consolidated statement of fixed assets. Additions to tangible assets amounted to € 215.0 million (previous year: € 256.3 million), of which € 27.7 million (previous year: € 36.0 million) came from the gas sector.

The item Land, rights equivalent to land and buildings, in- cluding buildings on third-party land includes land valued at € 55,918,610.07 (previous year: in € 1,000: 55,339.2).

Financial assets Loans totaling € 454,419.80 (previous year: in € 1,000: 459.1) will become due within one year.

Inventories

Dec. 31, 2018 Dec. 31, 2017 € in € 1,000

1. Raw materials and supplies 2,914,882.36 3,119.2

2. Installation materials and goods purchased for resale 81,407.05 78.3

3. Natural gas inventory 219,727.08 116.7

4. Other inventories 1,559,548.84 980.5

5. Services not yet chargeable 690,597.99 882.0

TOTAL Inventories 5,466,163.32 5,176.7

Receivables and other assets

Dec. 31, 2018 Stating separately Dec. 31, 2017 those with a remaining term of less than 1 year € € in € 1,000

1. Trade receivables 113,768,868.78 6,470,796.30 110,811.0

2. Receivables from affiliates 125,643.20 0.00 84.7

3. Receivables from other long-term investees and investors 5,870,901.41 0.00 11,740.0

4. Other receivables and assets 144,502,919.94 111,309,925.09 30,503.9

TOTAL Receivables and other assets 264,268,333.33 117,780,721.39 153,139.6 Financial statements for the company and for the group ▪ Notes 133

Under trade receivables, deductions amounting to € 1,048,277.72 (previous year: in € 1,000: 1,087.6) were made as provisions for bad debts. The receivables from other long-term investees and investors mainly relate to goods and services provi- ded. With regard to this item, deductions amounting to € 546,496.91 (previous year: in € 1,000: 656.0) were made as provisions for bad debts in the year under review.

Deferred tax assets Deferred tax assets in the amount of € 3,907,236.93 were recorded for the first time in the year under review. In the previous year, tax provisions included provisions for deferred tax liabilities in the amount of approximately in € 1,000: 2,567.0.

The differences between the amounts under company law and under tax law result from different useful lives for tangible assets, from write-downs to going concern value being distributed over a seven-year period for financial­­­ assets, and from interest rate differences for social capital provisions. The differences determined were measured at a tax rate of 25%.

Consolidated equity capital The group’s share capital is € 300,000,000.00 (previous year: in € 1,000: 300,000.0). Retained earnings amount to € 915,927,855.50 (previ- ous year: in € 1,000: 858,229.6) and comprise both the statutory reserve and uncommitted reserve. This item also includes positive and negative goodwill resulting from first and subsequent consolidations. The consoli- dated net income for the reporting year without interests of other shareholders amounts to € 78,717,282.65 (previ- ous year: in € 1,000: 78,297.7), with the interests of other shareholders accounting for € 42,298,562.85 (previous year: in € 1,000: 41,980.0).

Contributions to construction costs and construction cost grants Of the contributions to construction costs reported as at the balance sheet date, € 163,272,707.70 (previous year: in € 1,000: 158,510.5) can be attributed to the cons- truction cost contributions of those entitled to purchase electricity, € 60,511,517.82 (previous year: in € 1,000: 82,236.1) to construction cost grants, € 28,163,770.43 134 Financial statements for the company and for the group ▪ Notes

(previous year: in € 1,000: 27,807.8) to the construction cost contributions of those entitled to purchase gas, and € 13,065,462.26 (previous year: in € 1,000: 12,442.3) to other contributions to construction costs. The consumption of contributions to construction costs amounting to € 18,230,413.36 (previous year: in € 1,000: 18,036.7) is included in the sales revenue.

Provisions

Dec. 31, 2018 Dec. 31, 2017 € in € 1,000

1. Provisions for severance payments (subject to tax: € 21,670,663.57; previous year: in € 1,000: 16,346.1) 58,144,577.36 52,610.2

2. Provisions for pensions (subject to tax: € 58,343,631.71; previous year: in € 1,000: 58,536,6) 159,136,369.58 153,885.7

3. Tax provisions 0.00 2,566.9

4. Other provisions (subject to tax: € 5,394,478.88; previous year: in € 1,000: 5,116.4) 281,112,967.50 171,687.7

TOTAL Provisions 498,393,914.44 380,750.6

In the previous fiscal years, TINETZ-Tiroler Netze GmbH and the regulatory authority E-Control conduc- ted negoti­ations on compensation for the burden arising from changes in mortality tables and the low level of interest in regulated system tariffs. These negotiations were completed in the fiscal year 2018, with an admi- nistrative decision being issued. The calculations un- derlying the decision take into account current market interest rates. As the employees hired out by TIWAG-­ Tiroler Wasserkraft AG to TINETZ-Tiroler Netze GmbH form a significant share of the entire staff of TIWAG, the actuarial interest rate was changed in fiscal 2018, from an average value to current market interest rates for all employee-related provisions in all group companies.

This item includes the provisions for anniversary bonu- ses (€ 12,921,835.74 (previous year: in € 1,0 0 0: 12,191.7), for annual leave entitlements not used (€ 7,034,857.61 (previous year: in € 1,000: 6,611.2)), for accrued flexib- le working hours of employees (€ 1,953,288.86 (pre- vious year: in € 1,000: 1,346.3)) and provisions under an energy­­­ barter agreement (€ 28,641,819.29 (previous year: in 1,000: 31,235.6). Financial statements for the company and for the group ▪ Notes 135

Moreover, this item includes provisions for pension-­ like obligations relating to electricity allowance-in-kind commitments­­­ in the amount of € 15,645,920.48 (previ- ous year: in € 1,000: 13,415.5).

Liabilities

Liabilities as at Dec. 31, 2018 Balance Stating separately Stating Stating sheet value those due within separately those separately those Dec. 31, 2018 one year with a remaining with a remaining term of between term of more than 1 and 5 years 5 years € € € €

1. Bonds 110,121,244.44 121,244.44 0.00 110,000,000.00

2. Liabilities to banks 370,913,361.66 142,657,941.35 69,683,168.82 158,572,251.39

3. Advance payments received 4,253,435.62 4,253,435.62 0.00 0.00

4. Trade payables 105,877,752.25 105,172,392.25 176,340.00 529,020.00

5. Liabilities to affiliates 861,453.03 861,453.03 0.00 0.00

6. Liabilities to other long-term investees and investors 1,898,240.79 1,898,240.79 0.00 0.00

7. Other liabilities 180,734,337.47 83,728,658.61 80,069,271.87 16,936,406.99 of which taxes 33,817,174.07 33,817,174.07 0.00 0.00 of which social security 2,611,020.77 2,611,020.77 0.00 0.00 of which loans from insurance companies 82,448,000.00 2,448,000.00 80,000,000.00 0.00

TOTAL Liabilities 774,659,825.26 338,693,366.09 149,928,780.79 286,037,678.38

Liabilities as at Dec. 31, 2017 Balance Stating separately Stating Stating sheet value those due within separately those separately those Dec. 31, 2017 one year with a remaining with a remaining term of between term of more than 1 and 5 years 5 years € € € €

1. Bonds 110,121,244.44 121,244.44 0.00 110,000,000.00

2. Liabilities to banks 292,461,017.91 122,192,919.53 62,437,413.76 107,830,684.62

3. Advance payments received 4,374,098.36 4,374,098.36 0.00 0.00

4. Trade payables 103,120,157.21 102,414,797.21 176,340.00 529,020.00

5. Liabilities to affiliates 748,751.23 748,751.23 0.00 0.00

6. Liabilities to other long-term investees and investors 9,899,763.33 9,899,763.33 0.00 0.00

7. Other liabilities 166,630,108.05 69,932,876.96 80,073,986.24 16,623,244.85 of which taxes 31,908,405.63 31,908,405.63 0.00 0.00 of which social security 2,555,893.74 2,555,893.74 0.00 0.00 of which loans from insurance companies 82,448,000.00 2,448,000.00 80,000,000.00 0.00

TOTAL Liabilities 687,355,140.53 309,684,451.06 142,687,740.00 234,982,949.47 136 Financial statements for the company and for the group ▪ Notes

The liabilities to other long-term investees and investors consist of trade payables. In addition to current tax liabilities, other liabilities pri- marily include a loan in the amount of € 80,000,000.00 (previous year: in € 1,000: 80,000.00), liabilities arising from compensation or purchase contracts and free power­­­ commitments in the amount of € 17,204,918.22 (previous year: in € 1,000: 16,888.8) and liabilities to customers in the amount of € 18,855,968.83 (previous year: in € 1,000: 15,638.2). Other liabilities in the amount of € 146,254.57 (previous year: in € 1,000: 164.4) are mortgage-secured.

Deferred income Reserves for the reversal of impairment losses of fi- xed and financial assets have been recognized and are shown separately on the balance sheet under deferred income and will be reversed in line with the provisions of section 124 b (270) EStG (pursuant to section 906 (32) UGB).

VIII. NOTES TO THE INCOME STATEMENT (CONSOLIDATED FINANCIAL STATEMENTS)

Sales revenue

Sales revenue by segments 2018 2017 € in € 1,000

1. Electricity sales 978,576,575.77 858,089.1

2. Gas sales 219,884,891.20 204,167.8

3. Remote heat sales 15,031,663.42 14,847.4

4. Other 25,179,204.53 22,020.7

TOTAL Sales revenue 1,238,672,334.92 1,099,125.0 Financial statements for the company and for the group ▪ Notes 137

Sales revenue includes a one-time special effect in the Depreciation, amortization and impairments amount of € 119,260,634.02. This special effect results Depreciation, amortization and impairments amounted from an administrative decision issued by the regulatory to € 90,921,333.06 (previous year: in € 1,000: 96.365,0). authority concerning the compensation of social capi- Moreover, this item includes an impairment of movable tal expenses outstanding from the past. In the case of fixed assets in the amount of € 3,799,758.09 (previous regulated­­­ system tariffs, the collection is spread over 15 year: in € 1,000: 8,495.2). years. Expenses related to financial assets and Cost of materials and other purchased current securities manufacturing services This item includes impairments of investments in the The item Cost of materials and other purchased amount of € 3,078,399.69 (previous year: € 3.0 million). manufacturing­­­ services primarily includes expenses for purchases of electricity, natural gas and remote heat. Income from associated companies The relevant value increased by € 56,323,905.90 to The reported € +12,658,022.94 (previous year: in € 704,584,153.41 (previous year: in € 1,000: 648,260.2) € 1,000: +11,420.0) result from the inclusion of associa- in fiscal 2018. The increase is also attributable to the ted companies. increase in revenue from energy business. Interest and similar expenses Personnel expenses The interest component contained in Interest and similar Expenses for severance payments for employees expenses decreased to € 6,787,367.96 (previous year: in amounted to € 7,993,562.08 (previous year: in € 1,000: € 1,000: 7,636.7). 3,931.0). The assessment base comprises all social capital provi- Contributions to employee provision funds came to sions; the interest rate applied was the average market € 484,989.46 (previous year: in € 1,000: 443.0). rate. In addition to ongoing pension payments, the item Expense­­s for pensions also includes the changes in Consolidated net income for the year pension provisions. Expenses for pensions for emp- The consolidated net income for the year including mino- loyees amounted to € 149,595,543.28 (previous year: in rity interests amounts to € 81,020,522.79 (previous year: € 1,000: 33,750.2). in € 1,000: 81,258.0). Adjusted for the share of other This figure includes an obligation to make supplemen­ shareholders in the income for the year in the amount of tary contributions in the amount of € 118,761,821.91 € -2,303,240.14 (previous year: in € 1,000: -2,960.3), the million­­­ (previous year: € 27.7 million). remaining amount is € 78,717,282.65 (previous year: in € 1,000: 78,297.6). 138 Financial statements for the company and for the group ▪ Notes

DEVELOPMENT OF CONSOLIDATED FIXED ASSETS (CONSOLIDATED STATEMENT OF FIXED ASSETS)

Balance sheet item Cost of acquisition and/or production

As at Additions Interest pursuant to Disposals Transfers As at Jan. 1, 2018 section 203 (4) Austrian Dec. 31, 2018 Business Code € € € € € €

I. Intangible assets

1. Electricity procurement rights 860,749.90 2,542.00 0.00 0.00 0.00 863,291.90

2. Other rights 19,719,411.11 660,114.04 0.00 0.00 122.48 20,379,647.63

3. IT programs 21,503,835.31 1,138,357.39 0.00 -238,788.29 20,916.52 22,424,320.93

4. Goodwill 57,961,581.04 0.00 0.00 0.00 0.00 57,961,581.04

5. Prepayments made 5,129,801.82 4,940,098.09 0.00 -1,385,919.00 -3,217,811.48 5,466,169.43

TOTAL I. Intangible assets 105,175,379.18 6,741,111.52 0.00 -1,624,707.29 -3,196,772.48 107,095,010.93

II. Tangible assets

1. Land, rights equivalent to land and buildings, including buildings on third-party land 1,361,637,888.61 7,830,548.41 0.00 -55,694.37 12,907,041.35 1,382,319,784.00

2. Machinery and electrical plants 1,026,936,165.12 11,429,356.10 0.00 -1,820,847.58 14,560,787.71 1,051,105,461.35

3. Line systems 1,521,282,762.30 29,195,576.31 0.00 -756,076.73 12,531,495.26 1,562,253,757.14

4. Other fixtures, fittings, tools and office equipment 70,309,304.43 3,104,405.30 0.00 -2,581,920.75 30,311.81 70,862,100.79

5. Prepayments and construction in progress 499,898,435.88 163,469,651.94 0.00 -236,339.85 -36,832,863.65 626,298,884.32

TOTAL II. Tangible assets 4,480,064,556.34 215,029,538.06 0.00 -5,450,879.28 3,196,772.48 4,692,839,987.60

III. Financial assets

1. Investments in affiliates 2,239,600.00 25,000.00 0.00 0.00 0.00 2,264,600.00

2. Loans to affiliates 0.00 0.00 0.00 0.00 0.00 0.00

3. Investments in associated companies 269,851,668.77 0.00 0.00 0.00 0.00 269,851,668.77

4. Other equity investments 434,767,268.47 0.00 0.00 -1,312.50 0.00 434,765,955.97

5. Loans to long-term investees and investors 0.00 0.00 0.00 0.00 0.00 0.00

6. Non-current securities (book-entry securities) 96,836,607.54 0.00 0.00 -9,944,965.86 0.00 86,891,641.68

7. Other loans 6,383,402.27 186,959.28 0.00 -314,607.73 0.00 6,255,753.82

TOTAL III. Financial assets 810,078,547.05 211,959.28 0.00 -10,260,886.09 0.00 800,029,620.24

TOTAL Fixed assets 5,395,318,482.57 221,982,608.86 0.00 -17,336,472.66 0.00 5,599,964,618.77 Financial statements for the company and for the group ▪ Notes 139

Balance sheet item Cost of acquisition and/or production

As at Additions Interest pursuant to Disposals Transfers As at Jan. 1, 2018 section 203 (4) Austrian Dec. 31, 2018 Business Code € € € € € €

I. Intangible assets

1. Electricity procurement rights 860,749.90 2,542.00 0.00 0.00 0.00 863,291.90

2. Other rights 19,719,411.11 660,114.04 0.00 0.00 122.48 20,379,647.63

3. IT programs 21,503,835.31 1,138,357.39 0.00 -238,788.29 20,916.52 22,424,320.93

4. Goodwill 57,961,581.04 0.00 0.00 0.00 0.00 57,961,581.04

5. Prepayments made 5,129,801.82 4,940,098.09 0.00 -1,385,919.00 -3,217,811.48 5,466,169.43

TOTAL I. Intangible assets 105,175,379.18 6,741,111.52 0.00 -1,624,707.29 -3,196,772.48 107,095,010.93

II. Tangible assets

1. Land, rights equivalent to land and buildings, including buildings on third-party land 1,361,637,888.61 7,830,548.41 0.00 -55,694.37 12,907,041.35 1,382,319,784.00

2. Machinery and electrical plants 1,026,936,165.12 11,429,356.10 0.00 -1,820,847.58 14,560,787.71 1,051,105,461.35

3. Line systems 1,521,282,762.30 29,195,576.31 0.00 -756,076.73 12,531,495.26 1,562,253,757.14

4. Other fixtures, fittings, tools and office equipment 70,309,304.43 3,104,405.30 0.00 -2,581,920.75 30,311.81 70,862,100.79

5. Prepayments and construction in progress 499,898,435.88 163,469,651.94 0.00 -236,339.85 -36,832,863.65 626,298,884.32

TOTAL II. Tangible assets 4,480,064,556.34 215,029,538.06 0.00 -5,450,879.28 3,196,772.48 4,692,839,987.60

III. Financial assets

1. Investments in affiliates 2,239,600.00 25,000.00 0.00 0.00 0.00 2,264,600.00

2. Loans to affiliates 0.00 0.00 0.00 0.00 0.00 0.00

3. Investments in associated companies 269,851,668.77 0.00 0.00 0.00 0.00 269,851,668.77

4. Other equity investments 434,767,268.47 0.00 0.00 -1,312.50 0.00 434,765,955.97

5. Loans to long-term investees and investors 0.00 0.00 0.00 0.00 0.00 0.00

6. Non-current securities (book-entry securities) 96,836,607.54 0.00 0.00 -9,944,965.86 0.00 86,891,641.68

7. Other loans 6,383,402.27 186,959.28 0.00 -314,607.73 0.00 6,255,753.82

TOTAL III. Financial assets 810,078,547.05 211,959.28 0.00 -10,260,886.09 0.00 800,029,620.24

TOTAL Fixed assets 5,395,318,482.57 221,982,608.86 0.00 -17,336,472.66 0.00 5,599,964,618.77 140 Financial statements for the company and for the group ▪ Notes

DEVELOPMENT OF CONSOLIDATED FIXED ASSETS (CONSOLIDATED STATEMENT OF FIXED ASSETS)

Balance sheet item Accumulated depreciation/amortization Carrying amounts

As at Write-ups Additions Disposals Transfers As at Carrying amount as at Carrying amount as at Jan. 1, 2018 Dec. 31, 2018 Jan. 1, 2018 Dec. 31, 2018 € € € € € € € €

I. Intangible assets

1. Electricity procurement rights 614,161.69 0.00 34,441.20 0.00 0.00 648,602.89 246,588.21 214,689.01

2. Other rights 15,641,571.61 0.00 721,757.96 0.00 -19,877.52 16,343,452.05 4,077,839.50 4,036,195.58

3. IT programs 19,282,749.50 0.00 1,021,012.11 -238,788.29 20,474.77 20,085,448.09 2,221,085.81 2,338,872.84

4. Goodwill 54,418,766.67 0.00 428,620.16 0.00 0.00 54,847,386.83 3,542,814.37 3,114,194.21

5. Prepayments made 3,628,199.58 0.00 0.00 0.00 0.00 3,628,199.58 1,501,602.24 1,837,969.85

TOTAL I. Intangible assets 93,585,449.05 0.00 2,205,831.43 -238,788.29 597.25 95,553,089.44 11,589,930.13 11,541,921.49

II. Tangible assets

1. Land, rights equivalent to land and buildings, including buildings on third-party land 808,149,866.52 -831,776.08 20,402,941.16 -51,562.39 0.00 827,669,469.21 553,488,022.09 554,650,314.79

2. Machinery and electrical plants 836,543,283.92 -965,304.33 20,381,628.80 -1,749,251.05 -673.56 854,209,683.78 190,392,881.20 196,895,777.57

3. Line systems 860,681,013.47 -558,955.64 40,571,059.54 -727,195.94 673.56 899,966,594.99 660,601,748.83 662,287,162.15

4. Other fixtures, fittings, tools and office equipment 60,375,167.07 0.00 3,567,138.56 -2,488,271.93 -597.25 61,453,436.45 9,934,137.36 9,408,664.34

5. Prepayments and construction in progress 4,934,757.04 0.00 3,792,733.57 0.00 0.00 8,727,490.61 494,963,678.84 617,571,393.71

TOTAL II. Tangible assets 2,570,684,088.02 -2,356,036.05 88,715,501.63 -5,016,281.31 -597.25 2,652,026,675.04 1,909,380,468.32 2,040,813,312.56

III. Financial assets

1. Investments in affiliates 923,200.00 0.00 0.00 0.00 0.00 923,200.00 1,316,400.00 1,341,400.00

2. Loans to affiliates 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

3. Investments in associated companies 155,274,093.75 0.01 8,479,039.20 -12,658,022.54 0.00 151,095,110.42 114,577,575.02 118,756,558.35

4. Other equity investments 42,444,261.61 0.00 0.00 0.00 0.00 42,444,261.61 392,323,006.86 392,321,694.36

5. Loans to long-term investees and investors 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

6. Non-current securities (book-entry securities) 1,852,623.29 0.00 3,077,431.27 0.00 0.00 4,930,054.56 94,983,984.25 81,961,587.12

7. Other loans 0.00 0.00 0.00 0.00 0.00 0.00 6,383,402.27 6,255,753.82

TOTAL III. Financial assets 200,494,178.65 0.01 11,556,470.47 -12,658,022.54 0.00 199,392,626.59 609,584,368.40 600,636,993.65

TOTAL Fixed assets 2,864,763,715.72 -2,356,036.04 102,477,803.53 -17,913,092.14 0.00 2,946,972,391.07 2,530,554,766.85 2,652,992,227.70 Financial statements for the company and for the group ▪ Notes 141

Balance sheet item Accumulated depreciation/amortization Carrying amounts

As at Write-ups Additions Disposals Transfers As at Carrying amount as at Carrying amount as at Jan. 1, 2018 Dec. 31, 2018 Jan. 1, 2018 Dec. 31, 2018 € € € € € € € €

I. Intangible assets

1. Electricity procurement rights 614,161.69 0.00 34,441.20 0.00 0.00 648,602.89 246,588.21 214,689.01

2. Other rights 15,641,571.61 0.00 721,757.96 0.00 -19,877.52 16,343,452.05 4,077,839.50 4,036,195.58

3. IT programs 19,282,749.50 0.00 1,021,012.11 -238,788.29 20,474.77 20,085,448.09 2,221,085.81 2,338,872.84

4. Goodwill 54,418,766.67 0.00 428,620.16 0.00 0.00 54,847,386.83 3,542,814.37 3,114,194.21

5. Prepayments made 3,628,199.58 0.00 0.00 0.00 0.00 3,628,199.58 1,501,602.24 1,837,969.85

TOTAL I. Intangible assets 93,585,449.05 0.00 2,205,831.43 -238,788.29 597.25 95,553,089.44 11,589,930.13 11,541,921.49

II. Tangible assets

1. Land, rights equivalent to land and buildings, including buildings on third-party land 808,149,866.52 -831,776.08 20,402,941.16 -51,562.39 0.00 827,669,469.21 553,488,022.09 554,650,314.79

2. Machinery and electrical plants 836,543,283.92 -965,304.33 20,381,628.80 -1,749,251.05 -673.56 854,209,683.78 190,392,881.20 196,895,777.57

3. Line systems 860,681,013.47 -558,955.64 40,571,059.54 -727,195.94 673.56 899,966,594.99 660,601,748.83 662,287,162.15

4. Other fixtures, fittings, tools and office equipment 60,375,167.07 0.00 3,567,138.56 -2,488,271.93 -597.25 61,453,436.45 9,934,137.36 9,408,664.34

5. Prepayments and construction in progress 4,934,757.04 0.00 3,792,733.57 0.00 0.00 8,727,490.61 494,963,678.84 617,571,393.71

TOTAL II. Tangible assets 2,570,684,088.02 -2,356,036.05 88,715,501.63 -5,016,281.31 -597.25 2,652,026,675.04 1,909,380,468.32 2,040,813,312.56

III. Financial assets

1. Investments in affiliates 923,200.00 0.00 0.00 0.00 0.00 923,200.00 1,316,400.00 1,341,400.00

2. Loans to affiliates 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

3. Investments in associated companies 155,274,093.75 0.01 8,479,039.20 -12,658,022.54 0.00 151,095,110.42 114,577,575.02 118,756,558.35

4. Other equity investments 42,444,261.61 0.00 0.00 0.00 0.00 42,444,261.61 392,323,006.86 392,321,694.36

5. Loans to long-term investees and investors 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

6. Non-current securities (book-entry securities) 1,852,623.29 0.00 3,077,431.27 0.00 0.00 4,930,054.56 94,983,984.25 81,961,587.12

7. Other loans 0.00 0.00 0.00 0.00 0.00 0.00 6,383,402.27 6,255,753.82

TOTAL III. Financial assets 200,494,178.65 0.01 11,556,470.47 -12,658,022.54 0.00 199,392,626.59 609,584,368.40 600,636,993.65

TOTAL Fixed assets 2,864,763,715.72 -2,356,036.04 102,477,803.53 -17,913,092.14 0.00 2,946,972,391.07 2,530,554,766.85 2,652,992,227.70 142 Financial statements for the company and for the group ▪ Notes

IX. OTHER DISCLOSURES

Derivative financial instruments Where commodities are concerned, TIWAG-Tiroler Wasserkraft AG uses derivative financial instruments which are composed of (electricity) forward contracts re- quiring fulfillment by either physical delivery or payment. Trade transactions are shown in the “business on own account” book; all transactions concerning procurement and distribution for system optimization are shown in the “own use” book. Transactions allocated to the “business on own account” book are considered to be derivate instruments­­­ pursuant to section 238 (1) (1) UGB. Business on own account is carried out within narrow limits only, so the associated risk can be assessed to be negligible.

The derivative financial instruments (electricity futures and forwards) under electricity business (“business on own account”) are as follows:

Contracts and fair value as at Dec. 31, 2018 Nominal values Current values

in € million Purchases Sales Net Positive Negative Net

Forwards 288.3 279.5 8.8 100.1 -98.0 2.1

Futures 7.9 18.8 -10.9 1.3 -0.4 0.9

Total before netting 296.2 298.3 -2.1 101.4 -98.4 3.0

Adjusted for netting contracts -237.0 -237.0 0.0 -75.2 75.2 0.0

Total after netting 59.2 61.3 -2.1 26.2 -23.2 3.0

The nominal values shown represent the sums of the non-netted individual positions in the respective deriva- tive financial instruments. Current values show the sum of the differences between current market prices as at the balance sheet date and the nominal values of the instruments. The derivative financial instruments require no provision to be recognized in the year under review (previous year: € 2.5 million).

Contingent liabilities As at December 31, 2018, the separate financial state- ments show off-balance-sheet contingent liabilities consisting mainly in letters of comfort, guarantees and long-term contracts granting rights of use to third par- ties in the amount of € 22,831,560.95 (previous year: in € 1,000: 22,730.7). Financial statements for the company and for the group ▪ Notes 143

The off-balance-sheet contingent liabilities shown in the Remuneration for the Management Board consolidated financial statements, which consist mainly and the Supervisory Board in guarantees and long-term contracts granting rights of Total remuneration granted to the Management Board use to third parties, amount to € 38,118,906.19 (previous for the fiscal year 2018 amounted to € 1,143,878.05 year: in € 1,000: 40,290.3). (previous­­­ year: in € 1,000: 1,064.5). Payments to former members of the Management Board The total of Other financial obligations connected with of TIWAG-Tiroler Wasserkraft AG and their surviving open-ended investments and the general overhaul of dependents came to € 230,474.07 (previous year: in various facilities will amount to approximately € 130.0 € 1,000: 367.4). Severance payments for members of the million (previous year: € 94.2 million) in the separate Management Board came to approximately in € 1,000: financial statements and approximately € 215.7 million 35.3 (previous year: in € 1,000: 12.2) and expenses for (previous year: € 199.7 million) in the consolidated finan- pensions ­­­amounted to € 2,411,785.88 (previous year: in cial statements in the next fiscal year (2019). € 1,000: 835.0). In 2018, remuneration for the Supervisory Board amoun- Business relationships with related parties ted to € 37,800.00 (previous year: in € 1,000: 40.4). Cash pooling agreements have been concluded at arm’s length with the affiliates of TIWAG-Tiroler Wasserkraft Allocation of profit AG. Within the scope of this group-wide cash pooling The Management Board proposes to the annual ge- system, required liquid funds are passed on as needed neral meeting of shareholders to distribute an amount within the group. of € 4,000,000.00 from net retained profit and to car- ry forward to new account the remaining amount of Employees € 187,199.53. In fiscal 2018, TIWAG-Tiroler Wasserkraft AG employed 1,256 persons on average, thereof 1,092 salaried emp- Material events after the balance sheet date loyees, 132 wage earners and 32 apprentices (previous No material events occurred after the balance sheet date. year: 1,280 persons employed, thereof 1,097 salaried employees, 140 wage earners and 43 apprentices). Company boards Under the employee leasing contract dated November The following persons were members of the Manage- 18, 2005, an annual average of 63 wage earners, 405 ment Board: salaried employees and 17 apprentices (previous year: ▪ Dr. Erich Entstrasser (Chair) 67 wage earners, 406 salaried employees, 19 appren- ▪ Dipl.-Ing. Thomas Gasser tices) were hired out to TINETZ-Tiroler Netze GmbH. ▪ Dipl.-Ing. Johann Herdina The group employed an average of 1,415 (previous year: 1,433) persons, thereof 1,178 (previous year: 1,174) In the fiscal year 2018, the following persons were salaried­­­ employees, 201 (previous year: 211) wage members­­­ of the Supervisory Board: earn­ers and 36 (previous year: 48) apprentices. ▪ Dr. lic.oec. Reinhard Schretter (Chair) ▪ Patrizia Zoller-Frischauf (1st Deputy Chair), Member Auditing expenses of the Provincial Government In the year under review, auditing expenses amounted to ▪ Mag. Manfred Pletzer (2nd Deputy Chair) € 289,298.59 overall (previous year: in € 1,000: 299.2), ▪ Mag. Hartwig Röck of which € 182,100.00 (previous year: in € 1,000: 176.3) ▪ Univ.-Prof.in Dr. Hannelore Weck-Hannemann were accounted for by the audit of the financial state- ▪ Mag.a Julia Lang ments, € 23,812.50 (previous year: in € 1,000: 28.4) by other assurances, reviews and reports, and € 83,386.09 Appointed by the Works Council: (previous year: in € 1,000: 94.5) for other services. ▪ Ing. Stefan Mark, Chair of the Central Works Council ▪ Bernhard Paßler ▪ Friedrich Vogt 144 Financial statements for the company and for the group ▪ Notes

X. FINANCIAL STATEMENTS PURSUANT Under the employee leasing contract dated November TO SECTION 8 OF THE AUSTRIAN 18, 2005, TIWAG-Tiroler Wasserkraft AG hired out those ELECTRICITY INDUSTRY AND employees who had previously been working in the grid ORGANIZATION ACT (ElWOG) sector to (former) TIWAG-Netz AG. By order of the pro- vincial government of Tyrol, dated January 1, 2006, the This section of the notes contains the information re- government, as the electricity authority, granted (former) quired pursuant to section 8 of the Austrian Electricity TIWAG-Netz AG the license to operate the distribution Industry and Organization Act (Elektrizitätswirtschafts- grid of TIWAG-Tiroler Wasserkraft AG. TINETZ-Tiroler und -organisationsgesetz, ElWOG). Netze GmbH (new company name) took on the respon- In order to effect the unbundling compulsory under sibilities of operator of the distribution grid of TIWAG-­ corporate­­­ law, TIWAG-Tiroler Wasserkraft AG (TIWAG) Tiroler Wasserkraft AG as of January 1, 2006, and has had developed (former) TIWAG-Netz AG as a combined been responsible for the operation, maintenance and grid operator and transferred the operation of the distri- development of these systems since that date. bution grid to TIWAG-Netz AG in the form of a lease as per the agreement dated November 18, 2005.

1. BALANCE SHEET AS AT DECEMBER 31, 2018 (IN €)

Generation, energy Distribution Other Total trading, supply Assets A. Fixed assets 1,121,998,482.85 481,537,430.39 879,042,190.07 2,482,578,103.31 I. Intangible assets 378,532,744.94 2,940,686.31 2,579,285.55 384,052,716.80 II. Tangible assets 615,566,716.05 422,986,733.25 42,334,417.70 1,080,887,867.00 III. Financial assets 127,899,021.86 55,610,010.83 834,128,486.82 1,017,637,519.51

B. Current assets 72,965,191.00 149,200,447.24 50,673,611.69 272,839,249.93 I. Inventories 772,014.31 169,464.42 3,090,352.83 4,031,831.56 II. Receivables and other assets 54,189,326.69 136,660,646.82 46,344,012.05 237,193,985.56 III. Cash in hand and at bank, checks 18,003,850.00 12,370,336.00 1,239,246.81 31,613,432.81

C. Deferred expense 2,189,150.18 544,361.44 959,499.76 3,693,011.38 D. Deferred tax assets 0.00 0.00 6,269,823.77 6,269,823.77 TOTAL Assets 1,197,152,824.03 631,282,239.07 936,945,125.29 2,765,380,188.39

Equity and liabilities A. Shareholders’ equity 916,647,008.85 266,584,880.76 117,768,246.92 1,301,000,136.53 B. Special item for investment grants 7,725,563.36 97,012.10 474,078.96 8,296,654.42 C. Contributions to construction costs 757,724.86 157,977,338.86 6,544,381.32 165,279,445.04 D. Provisions 154,196,145.98 164,280,951.45 150,912,441.09 469,389,538.52 E. Liabilities 86,216,335.33 42,342,055.90 623,573,982.85 752,132,374.08 F. Deferred expense 31,610,045.65 0.00 37,671,994.15 69,282,039.80 TOTAL Equity and liabilities 1,197,152,824.03 631,282,239.07 936,945,125.29 2,765,380,188.39 Financial statements for the company and for the group ▪ Notes 145

Generation, energy Distribution Other Total trading, supply Assets A. Fixed assets 1,121,998,482.85 481,537,430.39 879,042,190.07 2,482,578,103.31 I. Intangible assets 378,532,744.94 2,940,686.31 2,579,285.55 384,052,716.80 II. Tangible assets 615,566,716.05 422,986,733.25 42,334,417.70 1,080,887,867.00 III. Financial assets 127,899,021.86 55,610,010.83 834,128,486.82 1,017,637,519.51

B. Current assets 72,965,191.00 149,200,447.24 50,673,611.69 272,839,249.93 I. Inventories 772,014.31 169,464.42 3,090,352.83 4,031,831.56 II. Receivables and other assets 54,189,326.69 136,660,646.82 46,344,012.05 237,193,985.56 III. Cash in hand and at bank, checks 18,003,850.00 12,370,336.00 1,239,246.81 31,613,432.81

C. Deferred expense 2,189,150.18 544,361.44 959,499.76 3,693,011.38 D. Deferred tax assets 0.00 0.00 6,269,823.77 6,269,823.77 TOTAL Assets 1,197,152,824.03 631,282,239.07 936,945,125.29 2,765,380,188.39

Equity and liabilities A. Shareholders’ equity 916,647,008.85 266,584,880.76 117,768,246.92 1,301,000,136.53 B. Special item for investment grants 7,725,563.36 97,012.10 474,078.96 8,296,654.42 C. Contributions to construction costs 757,724.86 157,977,338.86 6,544,381.32 165,279,445.04 D. Provisions 154,196,145.98 164,280,951.45 150,912,441.09 469,389,538.52 E. Liabilities 86,216,335.33 42,342,055.90 623,573,982.85 752,132,374.08 F. Deferred expense 31,610,045.65 0.00 37,671,994.15 69,282,039.80 TOTAL Equity and liabilities 1,197,152,824.03 631,282,239.07 936,945,125.29 2,765,380,188.39 146 Financial statements for the company and for the group ▪ Notes

2. STATEMENT OF EARNINGS 2018 (IN €)

Generation, energy Distribution Other Total trading, supply

1. Sales revenue 673,064,261.00 128,722,598.07 129,616,028.02 931,402,887.09

2. Increase or decrease in inventory of services not yet chargeable 0.00 0.00 -480,137.88 -480,137.88

3. Other own work capitalized -9,476,917.50 3,834,608.11 27,458,952.61 21,816,643.22

4. Other operating income 9,334,697.67 718,011.30 2,889,544.77 12,942,253.74

5. Cost of materials and purchased services -509,263,014.94 -4,637,955.70 -1,261,798.76 -515,162,769.40

6. Personnel expenses -44,038,839.65 -58,866,791.86 -173,334,434.84 -276,240,066.35

7. Amortization of intangible fixed assets and depreciation of tangible fixed assets -27,974,560.73 -35,651,583.48 -4,529,690.97 -68,155,835.18

8. Other operating expenses -25,735,034.28 -14,566,113.32 -19,724,080.55 -60,025,228.15

9. Subtotal items 1 to 8 65,910,591.57 19,552,773.12 -39,365,617.60 46,097,747.09

10. Income from investments 4,670,155.35 893,147.90 39,099,293.14 44,662,596.39

11. Other net finance income -7,003,070.00 -5,319,036.00 -37,241.68 -12,359,347.68

12. Subtotal items 10 to 11 -2,332,914.65 -4,425,888.10 39,062,051.46 32,303,248.71

12a. Set-off of activities -15,962,866.09 -19,984,141.00 35,947,007.09 0.00

13. Profit before taxes 47,614,810.83 -4,857,255.98 35,643,440.95 78,400,995.80

14. Income taxes -3,580,480.66 272,950.97 1,484,487.80 -1,823,041.89

15. TOTAL Net income for the year 44,034,330.17 -4,584,305.01 37,127,928.75 76,577,953.91 Financial statements for the company and for the group ▪ Notes 147

Generation, energy Distribution Other Total trading, supply

1. Sales revenue 673,064,261.00 128,722,598.07 129,616,028.02 931,402,887.09

2. Increase or decrease in inventory of services not yet chargeable 0.00 0.00 -480,137.88 -480,137.88

3. Other own work capitalized -9,476,917.50 3,834,608.11 27,458,952.61 21,816,643.22

4. Other operating income 9,334,697.67 718,011.30 2,889,544.77 12,942,253.74

5. Cost of materials and purchased services -509,263,014.94 -4,637,955.70 -1,261,798.76 -515,162,769.40

6. Personnel expenses -44,038,839.65 -58,866,791.86 -173,334,434.84 -276,240,066.35

7. Amortization of intangible fixed assets and depreciation of tangible fixed assets -27,974,560.73 -35,651,583.48 -4,529,690.97 -68,155,835.18

8. Other operating expenses -25,735,034.28 -14,566,113.32 -19,724,080.55 -60,025,228.15

9. Subtotal items 1 to 8 65,910,591.57 19,552,773.12 -39,365,617.60 46,097,747.09

10. Income from investments 4,670,155.35 893,147.90 39,099,293.14 44,662,596.39

11. Other net finance income -7,003,070.00 -5,319,036.00 -37,241.68 -12,359,347.68

12. Subtotal items 10 to 11 -2,332,914.65 -4,425,888.10 39,062,051.46 32,303,248.71

12a. Set-off of activities -15,962,866.09 -19,984,141.00 35,947,007.09 0.00

13. Profit before taxes 47,614,810.83 -4,857,255.98 35,643,440.95 78,400,995.80

14. Income taxes -3,580,480.66 272,950.97 1,484,487.80 -1,823,041.89

15. TOTAL Net income for the year 44,034,330.17 -4,584,305.01 37,127,928.75 76,577,953.91 148 Financial statements for the company and for the group ▪ Notes

Explanatory notes pursuant to section 8 of the Austrian Electricity Industry and Organization Act (ElWOG) As a rule, balance sheet items and items of the income statement are allocated directly. Only in cases involving a merely indirect relation to the subject matter or unjus- tifiably high expenditure for direct allocation are items allocated indirectly on the basis of appropriate reference values. Allocations are determined by means of largely process-oriented allocation formulas. Segment-specific calculation rates form the basis for cost allocation.

Commercial transactions within the meaning of section 8 (3) of the Austrian Electricity Industry and Organiza- tion Act 2010 have been carried out with TINETZ-­Tiroler Netze GmbH (lease relationship with regard to grid operation­­­, cash pooling).

Innsbruck, April 1, 2019

The Management Board

Mag. Dr. Erich Entstrasser

Dipl.-Ing. Thomas Gasser Dipl.-Ing. Johann Herdina Financial statements for the company and for the group ▪ Notes 149

REPORT ON THE assets, financial position, and the results of its opera- FINANCIAL STATEMENTS tions. Moreover, the company’s management is respon- sible for internal control as management determines is Audit opinion necessary to enable the preparation of financial state- We have audited the financial statements of ments that are free from material misstatement, whether due to fraud or error. TIWAG-Tiroler Wasserkraft AG, Innsbruck, In preparing the financial statements, management is which comprise the balance sheet as at December 31, responsible for assessing the company’s ability to con- 2018, the income statement for the year then ended, and tinue as a going concern, disclosing, as applicable, the notes. matters related to going concern and using the going concern basis of accounting unless management either In our opinion, the financial statements correspond to intends to liquidate the Company or to cease operations, statutory requirements and present fairly, in all material or has no realistic alternative but to do so. respects, the financial position as at December 31, 2018, as well as the company’s performance for the year then The audit committee is responsible for overseeing the ended, in accordance with the provisions of the Austrian company’s financial reporting process. Business Code and any other applicable special legal provisions. Responsibilities of the auditor for the audit of the financial statements Basis for opinion Our objectives are to obtain reasonable assurance ab- We conducted our audit in accordance with Austrian out whether the financial statements as a whole are free Standards on Auditing, which require the application of from material misstatement, whether due to fraud or the International Standards on Auditing (ISA). Our re- error, and to issue an auditor’s report that includes our sponsibilities under these provisions and standards are opinion. Reasonable assurance is a high level of assu- further described in the “Auditor’s responsibilities for the rance, but is not a guarantee that an audit conducted audit of the financial statements” section of our report. in accordance with International Standards on Auditing We are independent of the company in accordance with (Austria) (ISAs (Austria)), will always detect a material the relevant provisions of Austrian company law and the misstatement when it exists. Misstatements can arise code of ethics for professional accountants and have from fraud or error and are considered material if, indi- fulfilled our other ethical obligations in accordance with vidually or in the aggregate, they could reasonably be these requirements. We believe that the audit evidence expected to influence the economic decisions of users we have obtained is sufficient and appropriate to provide taken on the basis of these financial statements. a basis for our audit opinion. As part of an audit in accordance with ISAs (Austria), the Responsibilities of management and auditor exercises professional judgment and maintains of the audit committee for the financial statements professional scepticism throughout the audit. The company’s management is responsible for the pre- paration, in accordance with the applicable provisions We also: under Austrian company law and any other applicable ▪ Identify and assess the risks of material misstatement special legal provisions, of financial statements which of the financial statements, whether due to fraud or present fairly, in all material respects, the company’s net error, design and perform audit procedures respon- 150 Financial statements for the company and for the group ▪ Notes

sive to those risks, and obtain audit evidence that is OTHER STATUTORY AND sufficient and appropriate to provide a basis for our LEGAL REQUIREMENTS opinion. The risk of not detecting a material mis­ statement resulting from fraud is higher than for one Report on the management report resulting from error, as fraud may involve collusion, Based on Austrian provisions under company law, the forgery, intentional omissions, misrepresentations, or management report is to be audited as to whether it the override of internal control. is consistent with the financial statements and has ▪ Obtain understanding of internal control relevant to been prepared in accordance with the applicable legal the audit in order to design audit procedures that are requirements ­­­. appropriate in the circumstances, but not for the pur- pose of expressing an opinion on the effectiveness of The company’s management is responsible for the pre- the company’s internal control. paration of the management report in accordance with ▪ Evaluate the appropriateness of accounting policies the applicable provisions under Austrian company law used and the reasonableness of accounting estimates as well as any other applicable special legal provisions. and related disclosures made by management. ▪ Conclude on the appropriateness of the manage- We conducted our audit in accordance with the ethical ment’s use of the going concern basis of accounting principles applicable to the auditing of management and, based on the audit evidence obtained, whether a r e p o r t s ­­­. material uncertainty exists related to events or condi- tions that may cast significant doubt on the company’s Opinion ability to continue as a going concern. If we conclu- In our opinion, the management report has been pre- de that a material uncertainty exists, we are required pared in accordance with the applicable statutory and to draw attention in our auditor’s report to the related legal requirements and is consistent with the financial disclosures in the financial statements or, if such disc- statements. losures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained Basis for opinion up until the date of our auditor’s report. However, fu- Based on the findings of our audit of the financial state- ture events or conditions may cause the company to ments and the knowledge gained of the company and its cease to continue as a going concern. environment, we did not find any material misstatements ▪ Evaluate the overall presentation, structure and con- in the management report. tent of the financial statements, including the disclo- sures, and whether the financial statements represent Other information the underlying transactions and events in a manner Management is responsible for the other information. that achieves fair presentation. The other information comprises the information in- ▪ We communicate with the audit committee, among cluded in the annual report, but does not include the other­­­ matters, the planned scope and timing of the (consolidated) financial statements and the (group) audit­­­ and significant audit findings, including signifi- management­­­ report and the auditor’s reports thereon. cant deficiencies in internal control that we identify We expect to receive the annual report after the date of during our audit. this audit opinion. Financial statements for the company and for the group ▪ Notes 151

Our opinion on the financial statements does not cover the other information and we will not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information iden- tified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our know- ledge obtained in the audit or otherwise appears to be materially misstated.

Innsbruck, April 5, 2019

KPMG Austria GmbH Wirtschaftsprüfungs- und Steuerberatungsgesellschaft

Mag. Ulrich Pawlowski Auditor 152 Financial statements for the company and for the group ▪ Notes

REPORT ON THE CONSOLIDATED Responsibilities of management and FINANCIAL STATEMENTS of the audit committee for the consolidated financial statements Audit opinion The company’s management is responsible for the pre- We have audited the consolidated financial statements of paration, in accordance with the applicable provisions under Austrian company law and any other applicable TIWAG-Tiroler Wasserkraft AG, Innsbruck, special legal provisions, of consolidated financial state- ments which present fairly, in all material respects, the and its subsidiaries (the “group”) which comprise the company’s net assets, financial position, and the results consolidated balance sheet as at Fehler! Verweisquelle of its operations. Moreover, the group’s management is konnte nicht gefunden werden., the consolidated income responsible for internal control as management deter- statement, the consolidated comprehensive income mines is necessary to enable the preparation of conso- statement, the consolidated cash flow statement and the lidated financial statements that are free from material development of the group’s equity capital for the year misstatement, whether due to fraud or error. then ended, and the consolidated notes. In preparing the consolidated financial statements, In our opinion, the consolidated financial statements cor- management­­­ is responsible for assessing the group’s respond to statutory requirements and present fairly, in ability to continue as a going concern, disclosing, as all material respects, the group’s financial position as at applicable­­­, matters related to going concern and using December 31, 2018, as well as the group’s performance the going concern basis of accounting unless manage- and cash flows for the year then ended, in accordance ment either intends to liquidate the group or to cease with the provisions of the Austrian Business Code and operations, or has no realistic alternative but to do so. any other applicable special legal provisions. The audit committee is responsible for overseeing the Basis for opinion group’s financial reporting process. We conducted our audit in accordance with Austrian Standards on Auditing, which require the application of Responsibilities of the auditor for the audit the International Standards on Auditing (ISA). Our re- of the consolidated financial statements sponsibilities under these provisions and standards are Our objectives are to obtain reasonable assurance further described in the “Auditor’s responsibilities for the about ­­­whether the consolidated financial statements as audit of the consolidated financial statements” section a whole are free from material misstatement, whether of our report. We are independent of the group in accor- due to fraud or error, and to issue an auditor’s report that dance with the relevant provisions of Austrian company includes our opinion. Reasonable assurance is a high law and the code of ethics for professional accountants level of assurance, but is not a guarantee that an audit and have fulfilled our other ethical obligations in accor- conducted in accordance with International Standards dance with these requirements. We believe that the audit on Auditing (Austria) (ISAs (Austria)), will always detect evidence we have obtained is sufficient and appropriate a material misstatement when it exists. Misstatements to provide a basis for our audit opinion. can arise from fraud or error and are considered materi- Financial statements for the company and for the group ▪ Notes 153

al if, individually or in the aggregate, they could reasona- Our conclusions are based on the audit evidence­­­ ob- bly be expected to influence the economic decisions of tained up until the date of our auditor’s report­­­. Howe- users taken on the basis of these consolidated financial ver, future events or conditions may cause the group statements. to cease to continue as a going concern­­­. ▪ Evaluate the overall presentation, structure and con- As part of an audit in accordance with ISAs (Austria), the tent of the consolidated financial statements, inclu- auditor exercises professional judgment and maintains ding the disclosures, and whether the consolidated professional scepticism throughout the audit. financial statements represent the underlying trans- actions and events in a manner that achieves fair pre- We also: sentation. ▪ Identify and assess the risks of material misstatement ▪ Obtain sufficient appropriate audit evidence regarding of the financial statements, whether due to fraud or the financial information of the entities or business error, design and perform audit procedures respon- activities ­­­ within the group to express an opinion on sive to those risks, and obtain audit evidence that is the consolidated financial statements. We are respon- sufficient and appropriate to provide a basis for our sible for the direction, supervision and performance of opinion. The risk of not detecting a material mis­ the group audit. We remain solely responsible for our statement resulting from fraud is higher than for one audit opinion. resulting from error, as fraud may involve collusion, ▪ We communicate with the audit committee, among forgery, intentional omissions, misrepresentations, or other­­­ matters, the planned scope and timing of the the override of internal control. audit­­­ and significant audit findings, including signifi- ▪ Obtain understanding of internal control relevant to cant deficiencies in internal control that we identify the audit in order to design audit procedures that are during our audit. appropriate in the circumstances, but not for the pur- pose of expressing an opinion on the effectiveness of the company’s internal control. REPORT ON THE ▪ Evaluate the appropriateness of accounting policies CONSOLIDATED MANAGEMENT REPORT used and the reasonableness of accounting estimates and related disclosures made by management. Based on Austrian provisions under company law, the ▪ Conclude on the appropriateness of the manage- consolidated management report is to be audited as to ment’s use of the going concern basis of accounting whether it is consistent with the consolidated financial and, based on the audit evidence obtained, whether­­­ a statements and has been prepared in accordance with material uncertainty exists related to events or conditi- the applicable legal requirements. ons that may cast significant doubt on the group’s ab- ility to continue as a going concern. If we conclude that The group’s management is responsible for the pre- a material uncertainty exists, we are required to draw paration of the consolidated management report in attention in our auditor’s report to the related disclosu- accordance­­­ with the applicable provisions under res in the consolidated financial statements or, if such Austrian­­­ company law as well as any other applicable disclosures are inadequate, to modify our opinion. special legal­­­ provisions. 154 Financial statements for the company and for the group ▪ Notes

We conducted our audit in accordance with the ethi- cal principles applicable to the auditing of consolidated management­­­ reports.

Opinion In our opinion, the consolidated management report has been prepared in accordance with the applicable statutory ­­­­and legal requirements and is consistent with the consolidated financial statements.

Basis for opinion Based on the findings of our audit of the consolidated financial statements and the knowledge gained of the group and its environment, we did not find any material misstatements in the consolidated management report.

Innsbruck, April 5, 2019

KPMG Austria GmbH Wirtschaftsprüfungs- und Steuerberatungsgesellschaft

Mag. Ulrich Pawlowski Auditor Financial statements for the company and for the group ▪ Notes 155

PROPOSAL FOR THE APPROPRIATION and fair view of the income, asset and financial status OF PROFITS of the company ­­­ under generally accepted accounting standards. The auditor has also confirmed that the ma- It is proposed that a dividend in the amount of nagement report for the company and the group is in € 4,000,000.00 be paid out of the net retained profit of accordance with the separate and consolidated finan- fiscal­­­ 2018 in the amount of € 4,187,199.53 and that the cial statements. The auditor has issued an unqualified remaining amount of € 187,199.53 be carried forward to opinion­­­ on the separate and consolidated financial new account. s t a t e m e n t s ­­­.

Innsbruck, April 1, 2019 The Supervisory Board has reviewed the separate financial­­­ statements and the consolidated financial statements, the management report for both the com- The Management Board pany and the group, and the proposal for the appropria- tion of profits. The Supervisory Board hereby declares Mag. Dr. Erich Entstrasser that it is in agreement with the management report as presented and with the proposal for the appropriation Dipl.-Ing. Thomas Gasser Dipl.-Ing. Johann Herdina of profits, and gives its approval to the 2018 financial statements, hereby adopted in accordance with section 96 (4) of the Stock Corporation Act. The consolidated REPORT OF THE SUPERVISORY BOARD financial statements and management report are hereby duly acknowledged. In fiscal 2018, the Supervisory Board kept abreast of the course of business and the state of the company. It The Supervisory Board recommends to the annual ge- convened four times and was regularly informed by the neral meeting of shareholders that KPMG Austria GmbH Management Board on the basis of regular reports, both Wirtschaftsprüfungs- und Steuerberatungsgesellschaft orally and in writing, and supervised the Management in Innsbruck be appointed auditor of the separate and Board’s executive decisions. consolidated financial statements of TIWAG-Tiroler Wasserkraft AG for fiscal 2019. The separate and consolidated financial statements for fiscal 2018, along with the accounts and the manage- We should like to express our thanks to the Management ment reports for both the company and the group, have Board and to all our employees for their commitment and been audited by KPMG Austria GmbH Wirtschafts­ dedication in the past fiscal year. prüfungs- und Steuerberatungsgesellschaft, Innsbruck. The auditor has drawn up a written report outlining the Innsbruck, May 6, 2019 results and has confirmed that the Management Board provided the required information and supporting docu- ments and that the accounting as well as the financial The Chairman of the Supervisory Board statements for both the company and the group are in Dr. Reinhard Schretter compliance with statutory provisions and present a true 156 Financial statements for the company and for the group ▪ Notes

POWER SOURCE IDENTIFICATION (TIWAG-TIROLER WASSERKRAFT AG)

Power source identification: kWh Share in %

Hydropower 3,635,338,976 85.74

Wind power 366,059,356 8.64

Solid biomass 139,406,191 3.29

Biogas 41,056,220 0.97

Photovoltaics 49,843,067 1.18

Landfill gas 764,174 0.02

Waste with a high biogenic share 5,990,839 0.14

Sewage gas 754,620 0.02

Liquid biomass 5,003 0.00

Geothermal energy 17,409 0.00

Electricity of unknown provenance 0 0.00

Natural gas 0 0.00

TOTAL Electricity volume delivered 4,239,235,855 100.00

Countries of origin: Share in %

Austria 72.69

Abroad 27.31

TOTAL Countries of origin 100.00

Environmental impact of electricity generation:

CO2 emissions (g/kWh) 0.0 Radioactive waste (mg/kWh) 0.0

AUDIT OPINION This report may be used exclusively for the purpose of fulfilling your obligations in connection with electrici- Based on the results of our audit in April 2019, the in- ty labeling, in particular, for the purpose of publishing formation on the origin and environmental impact of the our audit opinion in the notes to the annual report in volumes­­­ delivered to end consumers, which was pro- accordance­­­ with section 79 (6) of the Austrian Electricity vided pursuant to sections 78 and 79 of the Austrian Industry ­­­and Organization Act 2010. Electricity­­­­ Industry and Organization Act 2010 and the provisions of the statutory regulation on electricity labe- Terms and conditions of this audit ling, broken down by primary energy sources (“supply Our responsibility and liability towards the company and mix”), is conclusive and clear. third parties is governed by item 7 of the General Condi- tions of Contract for the Public Accounting Professions. Limitation of use It is the aim of this audit to support you in obtaining a Innsbruck, April 30, 2019 confirmation relating to the supply mix put together in accordance­­­ with sections 78 and 79 of the Austrian Electricity Industry and Organization Act 2010. Our re- KPMG Austria GmbH port on the audit may only be passed on subject to the Wirtschaftsprüfungs- und Steuerberatungsgesellschaft condition that our total liability towards you, and any further recipient to whom this report is passed on with Mag. Ulrich Pawlowski our consent, is limited to the amount resulting from the Auditor enclosed “General Conditions of Contract for the Public Accounting Professions”. Financial statements for the company and for the group ▪ Notes 157

POWER SOURCE IDENTIFICATION (ÖKOENERGIE TIROL GMBH)

Power source identification: kWh Share in %

Hydropower 102,405,051 100.00

Wind power 0 0.00

Solid biomass 0 0.00

Biogas 0 0.00

Photovoltaics 0 0.00

Landfill gas 0 0.00

Waste with a high biogenic share 0 0.00

Sewage gas 0 0.00

Liquid biomass 0 0.00

Geothermal energy 0 0.00

Electricity of unknown provenance 0 0.00

Natural gas 0 0.00

TOTAL Electricity volume delivered 102,405,051 100.00

Countries of origin: Share in %

Austria 100.00

Abroad 0.00

TOTAL Countries of origin 100.00

Environmental impact of electricity generation:

CO2 emissions (g/kWh) 0.0 Radioactive waste (mg/kWh) 0.0

AUDIT OPINION This report may be used exclusively for the purpose of fulfilling your obligations in connection with electrici- Based on the results of our audit in April 2019, the in- ty labeling, in particular, for the purpose of publishing formation on the origin and environmental impact of the our audit ­­­ opinion in the notes to the annual report in volumes­­­ delivered to end consumers, which was pro- accordance­­­­ with section 79 (6) of the Austrian Electricity vided pursuant to sections 78 and 79 of the Austrian Industry ­­­and Organization Act 2010. Electricity­­­ Industry and Organization Act 2010 and the provisions of the statutory regulation on electricity labe- Terms and conditions of this audit ling, broken down by primary energy sources (“supply Our responsibility and liability towards the company and mix”), is conclusive and clear. third parties is governed by item 7 of the General Condi- tions of Contract for the Public Accounting Professions. Limitation of use It is the aim of this audit to support you in obtaining a Innsbruck, April 30, 2019 confirmation relating to the supply mix put together in accordance­­­ with sections 78 and 79 of the Austrian Electricity Industry and Organization Act 2010. Our re- KPMG Austria GmbH port on the audit may only be passed on subject to the Wirtschaftsprüfungs- und Steuerberatungsgesellschaft condition that our total liability towards you, and any further recipient to whom this report is passed on with Mag. Ulrich Pawlowski our consent, is limited to the amount resulting from the Auditor enclosed “General Conditions of Contract for the Public Accounting Professions”. IMPRINT

TIWAG-Tiroler Wasserkraft AG 6020 Innsbruck · Eduard-Wallnöfer-Platz 2 T +43 (0)50607-0 · F +43 (0)50607-21126 www.tiwag.at · [email protected]

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The English translation of the TIWAG-Tiroler Wasserkraft AG Annual Report is for convenience. Only the German text is binding.

This Annual Report contains forecasts that involve risks and uncertainties. These forecasts are usually accompanied by words such as “expect”, “predict”, “plan”, “believe”, “intend”, “estimate”, “aim”, “anticipate”, “target” etc. Actual results may differ from those anticipated in these forecasts as a result of a number of factors. Forecasts involve inherent risks and uncertainties. TIWAG-Tiroler Wasserkraft AG cautions that a number of important factors could cause actual results or outcomes to differ materially from those expressed in any forecasts.

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TIWAG- Tiroler Wasserkraft AG 6020 Innsbruck Eduard-Wallnöfer-Platz 2 www.tiwag.at