The head of the Verbund power group, Michael Strugl, considers the decoupling of electricity and gas prices to be a sensible measure to cushion the effects of the sharp rise in wholesale prices for electricity.
There is “actually a lot” in favor of this, according to Verbund boss Strugl, but it can only happen in “European harmony”, he said on Thursday. In the first half of the year, Verbund benefited significantly from the high wholesale prices for electricity. Net profit increased by 151.8 percent to EUR 817.1 million through June. Earnings before interest, taxes, depreciation and amortization (EBITDA) climbed 110.5 percent to EUR 1.38 billion. After the good first half of the year, Verbund has also raised its expectations for the year as a whole. In 2022, net profit is expected to reach EUR 1.68 to 2.03 billion, with an operating result (EBITDA) of EUR 3.9 to 3.5 billion. The company had previously assumed EBITDA of EUR 2.8 to 3.5 billion and net profit of EUR 1.55 to 2.00 billion.
At 0.90, the generation coefficient of the run-of-river power plants was 6 percentage points below the value of the previous year and 10 percentage points below the long-term average of 1.0. The generation of the annual storage power plants increased by 18.7 percent. As a result, electricity generation from hydropower fell by a total of 455 gigawatt hours (GWh).
Verbund sees volatile development
Geopolitical tensions and the war in Ukraine, high inflation and rising interest rates would have had a major impact on the energy industry in the first half of 2022. “We are experiencing a really volatile development on the energy markets,” said Strugl in the online press conference on the half-year results. This was mainly triggered by a gas supply crisis. But the prices for other primary energy sources and for CO2 certificates have also gone up, so that the European wholesale prices for electricity have risen very sharply.
The average sales price achieved on the futures and spot markets in the area of self-generation from hydropower almost doubled from EUR 65.9 to EUR 112.5 per megawatt hour (MWh). Governments across Europe are called upon to take countermeasures. “Wherever energy poverty threatens livelihoods, where rising energy prices for all energy sources also pose a challenge for the economy, it is important that appropriate measures are taken,” says Strugl. However, the choice of means is crucial. The head of Verbund is “very critical” of market interventions, such as skimming off the so-called excess profits that have been achieved through the sharp rise in wholesale prices, and warns of distortions in price signals and potential shortages.
Decoupling “quite sensible”
The decoupling of the electricity price from the gas price, on the other hand, is “quite sensible”, but only “possible in a European context”. “A lot actually speaks for such an abolition of the merit order principle,” said Strugl. In this context, the company also positions itself accordingly in discussions with decision-makers.
The association wants to invest a total of around 3.1 billion euros from 2022 to 2024. Of this, around 1.27 billion euros flow into the expansion of the Austrian power grid. New substations are necessary, for example, to integrate electricity from renewable sources. The power company wants to spend around 1.0 billion euros on the expansion and maintenance of hydropower, around 550 million are to be put into the expansion of wind and PV systems. More electricity from renewable energy sources also leads to lower wholesale prices because the hours in which fossil energy is used are fewer and the average daily price for electricity falls, explained Strugl.
Skimming off excess profits, on the other hand, would put a strain on investments, according to the Verbund boss. The Republic of Austria holds around 51 percent of Verbund shares, 30 percent are owned by the provincial suppliers EVN, Wiener Stadtwerke and Tiwag. “The Verbund example is a very good way of explaining what happens to the profits,” said Strugl. The group will pay a total of EUR 1.2 billion in dividends for this year, including a special dividend of EUR 400 million. Around EUR 600 million would thus be paid out to the state of Austria. Together with the taxes that the company pays, Strugl comes to around 1.0 billion euros, which will flow to the Republic for 2022.
Strugl considers the electricity price brake planned by the government, which provides for the basic supply of energy at a secure, cheaper price at the pre-war level for every household, to be a “reasonable compromise”. However, the network can only finally evaluate the measure once the specific design has been determined. The head of Verbund also welcomes the EIA amendment, which was sent for review this week. (APA/red)