State cashes in big time

Verbund lowers prices and invests € 5.5 billion

In the previous year, Verbund once again had an almost average year in terms of electricity generation from hydropower.

(Bild: Markus Wenzel)

Higher market prices and an increase in generation have helped the domestic utility Verbund to achieve a record result. The group result increased by a whopping 32 percent to € 2.226 billion. The state, which collected over 1.1 billion euros in taxes, dividends and profit absorption, can be pleased about this. But there is also good news for household customers: Energy prices will be reduced.

Specifically, gas prices will fall by an average of eight percent from May 1, while electricity prices for existing customers will fall to a gross 18.72 cents per kWh from July 1. New customers have been able to enjoy the lower prices for electricity tariffs since February 26. "We will then be one of the very cheap suppliers in Austria. It is our contribution to reducing the burden on households", says Verbund CEO Michael Strugl. An average household will save around 100 euros a year on electricity and gas.

The previous year was characterized by a very turbulent environment. In addition to the geopolitical upheavals, the weakened economy and the increased interest rate environment (making investments more difficult) had a negative impact on the utility. Nevertheless, thanks to higher market prices and increased generation (hydropower was at 98 percent of an average year in 2023), a record profit of EUR 2.266 billion (+32 percent) was achieved.

Verbund CEO Michael Strugl: "Biggest energy transformation of all time".

(Bild: Michael Indra/SEPA.Media /picturedesk.com)

State collects 1.1 billion euros
The positive development is also a blessing for the state - and therefore for taxpayers. In addition to 450 million euros in taxes and levies and 90 million euros in "profit absorption", 650 million euros in dividends (3.40 euros per share) and special dividends (15 cents per share) will flow to the Republic, which holds a 51% stake in the utility.

5.5 billion euros for the expansion of grids, power plants and storage facilities
The remainder of the profit that is not distributed is used to expand the grids, power plants and storage facilities. "Every euro earned is reinvested," emphasizes Strugl. In the next three years, Verbund alone will invest 5.5 billion euros. However, capital for this is also to be raised through new, "green" Verbund bonds.

In order to achieve the energy transformation in Austria by 2030, all parties involved will need to invest a total of 60 billion euros. The transmission system operator APG alone is investing around nine billion euros in grid expansion by 2034 (e.g. 380 kV Salzburg line).

Verbund CFO Peter Kollmann: "Gas price almost at pre-crisis level."

(Bild: Verbund)

Cautious outlook for 2024
This year, CFO Peter Kollmann "only" expects a group profit of between EUR 1.3 and 1.75 billion. The reason for this is the volatile, downward trend in prices. However, it is not known exactly where the journey will take us.

In the last five to six months, for example, the wholesale electricity price has fallen from 140 to 73 euros per megawatt hour (MWh). The price of gas is almost at pre-crisis levels, says Kollmann. A lot of LNG gas is currently coming onto the market at low prices because China is supplied from Russia and US volumes are therefore cheaper. All in all, Verbund managers expect electricity costs to remain relatively stable this year and gas prices on the market may even fall further.