New opportunity – fresh perspective Annual Financial Report 2013 Design concept for charts and tables Column/bar width Wide columns or bars represent measurement parameters that can be physically counted. Examples: MW, GWh, employees Medium columns or bars represent aggregated values. Examples: €k, €m, €bn Narrow columns or bars represent values in euros per unit. Examples: €/share, €/MWh Lines or dotted lines represent shares, quotients or indices. Examples: dividend yield in %, indexed share price, GDP growth in % Colours Current year Neutral Previous years Targets VERBUND Emphasis Five-year comparison VERBUND Group 2013 Unit 2009 2010 2011 20126 20136 Revenue1 €m 3,483.1 3,307.9 3,027.7 3,174.3 3,269.9 EBITDA2 €m 1,251.5 1,059.2 1,069.5 1,235.4 1,296.4 Adjusted EBITDA3 €m – – – 1,277.9 1,154.5 Operating result (EBIT)2 €m 1,042.3 828.5 1,030.0 900.2 147.1 Operating result before effects from impairment tests2 €m 1,042.3 828.5 827.8 955.9 931.5 Result after tax from discontinued operations €m – – – 0.2 – 351.4 Group result2 €m 644.4 400.8 355.8 389.3 579.9 Adjusted Group result3 €m – – – 625.4 384.5 Balance sheet total €m 10,345.2 11,291.0 11,859.3 12,387.3 12,808.6 Equity2 €m 3,409.7 4,372.4 4,919.1 5,099.4 5,546.5 Net debt2 €m 4,788.9 4,233.9 4,050.1 3,311.7 3,665.9 Additions to property, plant and equipment (without business acquisition) €m 471.9 635.7 581.4 680.3 575.0 Cash flow from operating activities €m 968.0 778.2 829.9 1,034.7 837.4 Free cash flow4 €m – 1,512.3 – 439.0 – 195.7 – 164.4 546.7 EBITDA margin1, 2 % 35.9 32.0 35.3 38.9 39.6 EBIT margin1, 2 % 29.9 25.0 34.0 28.4 4.5 Return on capital employed (ROCE)2 % 13.1 8.2 6.9 6.3 4.8 Return on equity (ROE)2 % 22.4 12.9 10.0 10.0 12.1 Equity ratio (adjusted)2 % 34.3 39.9 43.0 42.6 44.6 Gearing2 % 140.4 96.8 82.3 64.9 66.1 Gross debt coverage (FFO)2 % 20.2 17.6 19.5 20.6 26.0 Gross interest cover (FFO)2, 5 X 4.8 3.6 3.9 4.5 5.5 Closing price € 29.71 27.88 20.74 18.76 15.52 Market capitalisation €m 9,156.6 9,685.9 7,203.7 6,517.5 5,390.2 Earnings per share2 € 2.09 1.28 1.02 1.12 1.67 Cash flow per share € 3.14 2.49 2.39 2.98 2.41 Carrying amount per share2 € 10.12 11.62 12.42 12.83 14.22 Price/earnings ratio (last trading day)2 X 14.21 21.71 20.25 16.74 9.30 Price/cash flow ratio X 9.46 11.18 8.68 6.30 6.44 Price/book value ratio2 X 2.94 2.40 1.67 1.46 1.09 (Proposed) dividend per share € 1.00 0.55 0.55 0.60 0.55 (Proposed) special dividend per share € 0.25 – – – 0.45 Dividend yield % 4.21 1.97 2.65 3.20 6.44 Payout ratio2 % 59.79 47.67 53.71 53.54 59.91 Average number of employees 2,820 3,015 3,045 3,100 3,256 Electricity sales volume1 GWh 51,289 55,729 46,887 47,483 50,276 Hydro coefficient 1.06 0.99 0.89 1.11 1.07 1 The key figures were adjusted to reflect the changes in accounting treatment for energy derivatives in the wholesale portfolio. The change was implemented retrospectively effective 1 January 2011 in accordance with IAS 8. Amounts for the years prior to 2011 have not been adjusted. // 2 Key figures were adjusted to reflect the (early application of) changes in accounting treatment for employee benefits in accordance with IAS 19 (2011). The change was implemented retrospectively effective 1 January 2011 in accordance with IAS 8. Values for the years prior to 2011 have not been adjusted. // ³ Adjusted for extraordinary effects. (see glossary) // 4 The calculation was adjusted retrospectively in financial year 2013. (see glossary) // 5 Interest expenses without profit shares attributable to limited partners // 6 Result after tax from discontinued operations (equivalent to the results after tax of the French Pont-sur-Sambre and Toul combined cycle gas turbine power plants classified as held for sale) is included in the calculation of the key figures. Investor relations Shareholder structure % (Proposed) dividend per share € Free float Republic of Austria 1.25 TIWAG < 20 1.00 0.55 0.55 0.60 > 5 51 09 10 11 12 13 2009 and 2013 including a special dividend of €0.25 and €0.45 per share respectively. > 25 Dividend yield % EVN and Wiener Stadtwerke syndicate 6.44 4.21 3.20 2.65 1.97 Basic information Share capital (€) 347,415,686 Stock (shares) 347,415,686 09 10 11 12 13 2009 and 2013 including a special dividend of €0.25 and €0.45 per share respectively. Official quotation Vienna VER Capital market calendar 2013 Event Date Information systems Annual result 2013 5/3/2014 Bloomberg VER AV Publication of Annual Report 5/3/2014 Reuters VERB.VI Annual general meeting 9/4/2014 ISIN AT0000746409 Dividend ex-date 16/4/2014 Interim Report quarter 1/2014 7/5/2014 Rating agencies Dividend payment date 29/4/2014 Standard & Poor's A–/stable outlook Interim Report quarter 1– 2/2014 30/7/2014 Moody's Baa1/negative outlook Interim Report quarter 1– 3/2014 29/10/2014 0 VERBUND Annual Financial Report 2013 Contents Part 1 – Group. ................................................................................................... 5 Group management report ............................................................................................................ 13 Consolidated financial statements ............................................................................................... 70 Part 2 – Parent company ................................................................................ 240 Management report ...................................................................................................................... 247 Financial statements..................................................................................................................... 278 Part 3 – Declaration of all legal representatives ............................................. 314 CORPORATE GOVERNANCE BERICHT 1 Part 1 Group 6 Report of the Executive Board Dear Shareholders, In the past year, there have once again been massive changes in the European electricity market. For VERBUND, this provides both challenges and motivation: the market situation is and will remain extremely difficult. At the same time, however, the transition to new energy sources is opening up new perspectives for electricity suppliers. We want to use this as an opportunity – in 2013, we set our course accordingly. Change as an opportunity The electricity sector continues to experience far-reaching changes. More and more kilowatt hours are being generated from wind and solar power; these technologies are being massively oversubsidised. Modern gas power plants are needed to balance supply and demand, but these plants are not profitable, partly because of the failure of the CO2 market. Demand for electricity is weak, with wholesale prices persisting at a low level. As a result, European electricity suppliers are having to develop new business models and improve their cost and capital structures in order to retain their market positions. VERBUND is meeting these challenges head-on. Last year, we implemented measures to ensure our ongoing economic success and continued to actively develop our strategic direction. Tighter strategy, lower costs Our focus is on the generation of electricity from hydropower and wind power, the optimum marketing of our own generation in Austria and in Germany and the operation of the Austrian high-voltage grid. In 2013, we focused on these core activities and core markets. In April, we completed an asset swap in which VERBUND sold its 50% interest in Enerjisa Enerji A.S. in Turkey and in return acquired shares in 8 run-of-river power plants in Germany. This transaction reinforces our financial strength, reduces risk and underlines our position as a leading hydropower company in the heart of Europe. As far as capital expenditure is concerned, we are concentrating on the completion of the construction and increase in efficiency of our hydropower plants, as well as on regulated areas of business such as the Austrian high-voltage grid and wind power. In 2013, high priority was given to implementing our internal cost reduction and efficiency improvement programme. A future with hydropower and wind power Hydropower will remain VERBUND’S greatest strength, accounting for more than four-fifths of our own generation. In the autumn of 2013, the Mur power plant in Styria was reopened after modernisation. In quarter 1/2013, the second stage of the Ashta run-of-river power plant went online. At the end of 2014, the Reisseck II/Carinthia pumped storage power plant will go into operation – our biggest project at present. We are also taking advantage of the opportunities provided by wind power: in the Lower Austrian region of Bruck an der Leitha, we are building 3 wind farms, and in Romania, the second part of the Casimcea wind farm has been completed. The 10 new wind farms in the German state of Rhineland-Palatinate are already operating at full capacity. Conditions remain extremely challenging for thermal power. VERBUND’S combined cycle gas turbine power plants – as with all European gas power plants – cannot currently be operated profitably. We are working to improve this by restructuring our gas portfolio. Important steps taken last year in this regard included the almost complete takeover of VERBUND Thermal Power, the optimisation of gas procurement and operational cost reductions. This gives us scope for further measures.