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