Good morning, ladies and gentlemen, and welcome to the conference call on EVN's results for the 2020, 2021 financial year. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Let me now turn the floor over to your host, Mr. Stefan Szyszkowitz.
Good morning and welcome to the conference call on EVN's results for the 2021 financial year. EVN showed a sound performance in the reporting period. EBITDA, EBIT, and group net results are above the previous year. The corona crisis only had selective negative impact on our operating results. Our integrated business model and a widely diversified customer base continued to be stabilizing factors. I would like to remind you that our outlook for group's net result was in the range of about EUR 200 million-EUR 230 million. We raised the outlook in an ad hoc release on the second of November, and today's group net result of EUR 325.3 million is in line with the increased guidance. The main drivers for our higher results are non-cash, non-recurring effects. In particular, we had revaluations to previously impaired equity-accounted investees.
Last year, our 13% stake in VERBUND Innkraftwerke suffered from an impairment loss of EUR 20.7 million. This year, this was contrasted by a revaluation of EUR 25.3 million euros, which was based on an increase in electricity forward prices. Also last year, we recognized impairment losses of EUR 4.9 million to the 50% stake in the Ashta Hydropower Plant in Albania. Again, this year, this was offset by a revaluation of EUR 23.8 million euros, which was due to a decline in the country risk premium after a COVID-19 related increase. Finally, our supply company, EVN KG, benefited from improved operating results as well as a valuation effect from hedges. Energienetze returns to a normalized level after the negative effects of the COVID crisis in the previous year.
Based on these developments, results from equity consolidated investees with an operational nature were up by EUR 145.5 million and stood at EUR 239.6 million. I just wanted to give you this initial overview for a better understanding of our results and reasons why we were well above our initial guidance. I will provide further details on our financials and segments in course of the call, but let me now continue with some future further highlights. A key message which I would like to put at the beginning of the call is that we will propose a higher dividend to the AGM. We intend to pay out EUR 0.52 per share, which corresponds to an increase by EUR 0.03 per share.
We also try to further specify our dividend policy, which states that we aim to hold the annual dividend at least constant. We now add to the policy that we are also committed to appropriate participation of our shareholders in future earnings growth. I do hope that today's increase in the dividend support such commitment, especially as the increase comes in line with an earnings growth which was mostly non-cash. To conclude on dividend policy, my intention is to reconfirm the message that EVN is a highly stable dividend stock. However, in years with earnings growth, we will let shareholder participate. Please note that our AGM has been rescheduled to the third of February. The new dividend payment date will be the eleventh of February.
A year ago, I informed you about our strategy update, as we had previously developed our strategy 2030, which has the motto, more sustainable, more digital, more efficient. In this strategy process, we developed a very clear view that climate change and how it impacts the transition of the energy system, political goals, legal regulatory frameworks, wholesale prices, demand patterns, et cetera, will be a key factor for EVN's strategy and future business model. Let me confirm that we share the understanding and views of ESG's investors. Therefore, the next logical step was to develop, based on the strategy 2030, what we call the EVN Climate Initiative. It consists of three pillars. The main pillar, and this is also a key achievement of the past month, is that we agreed decarbonization targets for EVN with the Science Based Targets initiative.
Today, the Science Based Targets initiative will publish that EVN has joined this internationally renowned initiative and has committed to science-based targets. In committing to making a contribution to the Paris Climate goals and defining CO2 reduction goals for the group, it was always important to me that we aim for an alignment with internationally accepted standards, external validation, transparency, and comparability. Therefore, I am proud that we received the sign-off on the Science Based Targets initiative. I also believe that this will make us even more attractive for ESG investors. For further details on our targets, please take a look into our full report. It goes without saying that the decision to disinvest from Weisweiler Power Plant is also well in line with our strategy 2030 and our climate initiative.
End of September, we completely stepped out from this project as we transferred our 49% stake to our partner, STEAG, and terminated all power purchase agreements from Weisweiler. I can confirm that EVN is not engaged in any coal-fired electricity generation activity anymore. This is also very important measure to many stakeholders, above all to ESG investors. I would also like to use the opportunity and update you on our expansion targets for renewable generation. According to our strategy, we plan to increase our installed wind capacity from currently 400 MW to 750 MW by 2030. In order to achieve such targets, we will pursue projects in Lower Austria, but also in Bulgaria. In Austria, we still struggle with delays in realizing projects. At the moment, we actually face two issues. The first issue is with the new Austrian Renewable Energy Expansion Act.
Although it has been ratified by the Austrian Parliament, we are still waiting for the specific regulation on roughly 30 topics, which must be declared by different ministries and are essential for our industry. The official notification by the European Commission regarding compliance of the new subsidy mechanisms is still outstanding. Amendments are likely and will require a new resolution by the Austrian Parliament. We are still on hold with the development of new projects when it comes to the new legal framework and subsidies. The second issue is the backlog of already developed approved projects. This backlog was caused in the past years as the annual budget for subsidy was all used, creating a waiting list. While being on waiting list, technology developed further and next generation of turbines became more efficient. Clearly, we would like and have to switch to such improved technology.
This, however, requires amendment procedures of previously approved wind projects. Meanwhile, public acceptance of wind project deteriorated, such that each project, even those previously approved, has to deal with some sort of appeal which delays the project. As part of our strategy, we also aim to expand our photovoltaic portfolio. Here we are still at an early stage, but we aim for installed capacity of about 300 MW by 2030. Our plan is to realize projects in Lower Austria, Bulgaria, and North Macedonia. Overall, we plan to raise our annual investment up to EUR 500 million over the coming years. The key investment focus remains on network infrastructure. These investments fulfill three strategic objectives. They secure supply security, enable carbon-free energy future, and provide for further growth of our regulated business. Further investment areas are renewable generation, including biomass heating as well as drinking water.
Let me now continue with key financials of the reporting period. The group's revenue was up by 13.6% year-on-year. The main reason for this development is the start of construction of the wastewater project in Kuwait. Other positive factors included an increase in energy sales in Bulgaria and higher network sales due to the cooler weather in all three core markets, as well as the higher network tariffs by E-Control in Austria as of January 1, 2021. Revenue growth was also supported by an increase in electricity generation and by higher electricity prices. Contrasting factors were lower effects from the valuation of hedges for electricity generation. The cost of electricity purchases from third parties and primary energy expenses rose by 19.9% to EUR 1,046.7 million.
Reasons were higher energy procurement costs in Southeast Europe and for our heating business. Other factors are the increased use of primary energy due to higher thermal generation volume, as well as rising wholesale prices. Effects from the valuation of hedges had a contrasting effect. The main reason for the rise in EBITDA were higher earnings contributions from at- equity accounted investees, which I already explained earlier. Higher investments led to rise of scheduled depreciation amortization. In connection with the takeover of an additional electricity procurement right, an impairment loss of EUR 113.1 million was recognized for the Walsum 10 power plant already in the first quarter. Based on this development, the group's EBIT was up by 41.5% and amounted to EUR 386.4 million.
Financial results declined to minus EUR 20 million due to the premature termination of an interest rate hedge in connection with Walsum 10 power plant and the termination of the rated bank financing. In total, we generated a group net result of EUR 325.3 million, which represents an increase of 62.9% over the previous year. Now I would like to move to next slide, which provides some information regarding the group's balance sheet structure. EVN's net debt amounted to EUR 813.8 million. Gearing ratio was down and amounted to 12.4%. Our financial flexibility is solid. We benefit from low net debt and sufficient committed undrawn credit facility, which amounted to EUR 552 million as of the end of September 2021.
Our strong balance sheet structure forms the basis of pursuing organic growth opportunities in our regulated and stable Austrian activities. Before I will go through each of these segments in detail, I would like to give you a general overview on the EBITDA development of our business segments. The EBITDA development per segment illustrates the key drivers of our performance during the period, reporting period. All segments showed improvements in comparison with the previous year, which, however, is partly due to one-off effects. Let's move on to the next slide, which covers the generation segment in more detail. Electricity generation volumes in this segment were up by 7.5% year-on-year. Renewable generation benefited from good water flows and thermal generation exceeds the low prior year level.
Good water flows and higher market prices for electricity led to an increase in revenue from renewable generation despite a decline in wind power. EBITDA was up at EUR 262.5 million. This increase was mainly due to a positive one-off effect related to the takeover of an electricity procurement right which took place in the first quarter. In addition, EBITDA's growth was supported by the revaluation of our at-equity consolidated stakes in VERBUND Innkraftwerke and the Ashta hydropower plant. Scheduled depreciation and amortization increased as a result of higher investments. In total, the generation segment generated a higher EBIT of EUR 182.2 million. I would also like to give you an outlook for each of the segments. For generation, please keep in mind that today's segment results are significantly influenced by positive one-off effects.
Therefore, under the assumption of average wind and water flows and lack of positive one-off results in this segment are expected to decline. However, higher electricity prices could moderate this decline. On the next slide, I will continue with the energy segment. The development of revenue in the energy segment depends primarily on the marketing of electricity generated in EVN's power plants. Besides, it includes the revenue from our domestic heating business. Higher revenue from the marketing of our own thermal electricity generation and from our district heating company only partially offset the year-on-year decline in the valuation of the effects of hedges. Therefore, revenue was down by 18.8%. Operating expenses were lower in total, but were influenced by contrary effects.
The increased use of primary energy due to higher thermal generation volumes and the higher procurement costs for our heating business were contrasted by the lower valuation of hedges for primary energy carriers and CO2 certificates, as well as for provisions to onerous contracts. Energy sales volumes were above the prior year level due to colder temperatures and a return of demand to pre-COVID levels. The share of results from equity accounted investments which are operational in nature improved by EUR 81.5 million. This increase was supported by sound operating performance and the positive effects from the valuation of hedges in EVN AG. Based on these developments, the energy segment reports EBITDA of EUR 188.6 million and EBIT of EUR 166.6 million. Now for the outlook of the energy segment.
Price increases on the wholesale markets are a challenge for all our energy supply activities. For electricity, there will be a price increase on customer contracts as of the beginning of January in order to cope with increased purchase prices. In addition, please bear in mind that future earnings will not consider any effects from the Walsum Power Plant anymore due to our exit from the project and termination of the electricity procurement. Excluding the positive one-off non-recurring effects from the termination of the onerous contract which we had at the segment level only, results from 2021, 2022 for the Energy segment are expected to be substantially lower than in the previous year. On the next slide, I will present the development in our Network segment.
Network sales volumes increased, supported by stronger demand for electricity and natural gas in the household customer segment due to lower temperatures and with demand back to the pre-COVID levels. With the beginning of the new year calendar, the Austrian regulator determined new network tariffs. Tariffs for electricity were increased by 6.3% on average, and those for natural gas were increased by 6.4% on average. Based on these volumes and price development, the segment revenue increased by 6.9%. EBITDA in the networks segment was up by 18.7% and EBIT by 36.3%. The development of earnings in the network segment is determined by the Austrian regulatory methodology. Earnings in this segment are therefore reported to remain stable at the prior year level.
However, network sales volumes and, in turn, earnings could be influenced by various factors such as temperature-related demand, usage of gas-fired power plants types, or the overall economic development. On the next slide, I will continue with the Southeast Europe segment. Temperatures in Southeast Europe were well below the previous year, which had a positive volume effect. Also here we saw a recovery from Corona-related weaker demand. In Bulgaria, we are facing strong competition following the market liberalization for commercial customers as of October 2020. Based on these developments, we are reporting today an increase in network sales and energy sales volume, which had a positive impact on revenue development. Operating expenses increased due to a higher energy procurement cost, but were reduced by a decline in impairment losses to receivables in North Macedonia.
Segment EBITDA was up by 1.7%, while segment EBIT remained nearly unchanged to EUR 65 million. For Southeast Europe, the segment outlook is impacted by the distortions on the energy market, as they may have a substantial negative influence on segment earnings. Higher energy prices led to increased procurement costs for network losses. Based on the regulatory framework, these negative effects should be offset through higher tariffs, but this compensation will only take place with a time lag in future years. This is in line with the existing regulatory methodology. I would like to conclude my presentation of the segments with the environmental segment. In our international project business, we can rely on a solid order book of about EUR 1.3 billion as end of September. In total, WTE Wassertechnik is currently working on 14 projects in Germany, Lithuania, Poland, Romania, Bahrain, and Kuwait.
Included are sewage sludge treatment projects in Germany, which are done by our joint venture company, sludge2energy. The financial performance of this segment is in line with the development in international project business. There was a corresponding rise of both revenue and operating expenses in the segment. However, I would also like to note that national lockdowns, travel restrictions, interruptions in international supply chain caused delays in the international project business. All in all, this segment benefited from the start of the construction of the Kuwait Wastewater project, which is accounted for according to the percentage of completion method. In addition, there was a positive one-off effect at our Lower Austrian water supply company. In total, this development led to an increase in EBITDA to EUR 64 million and an EBITDA of EUR 26.5 million.
Our outlook in the environment segment is always subject to the further realization of assignments in the international project business, above all the large scale Kuwait project. Assuming declining impact from the COVID pandemic, catch-up effects and focus on project according to the schedule should support an increase in segment results of 2021-2022. A renewed intensification of the corona crisis could, however, lead to further project delays due to lockdowns, travel restrictions and disruptions in the international supply chain with the result, a resulting decline in earnings. With this, I conclude the presentation of this segment. On the next slide, I will continue with the development of group's cash flows. Gross cash flow was substantially up at EUR 762.3 million. This was mainly due to the receipt of the compensation payment for the takeover of the electricity procurement right.
A further factor was the higher balance of dividend from equity accounted investments. The increase in cash flows from the operating activities was even higher in comparison due to the developments in the working capital. Cash flow from investing activities was influenced chiefly by year-on-year increase in investments in property, plant and equipment, the compensation payment from the exit from the Walsum Power Plant, and a change in investments in cash funds. The cash flow from financing activities reflected the scheduled repayment of loans and the dividend payments to our shareholders and non-controlling interest. A contrary factor was the issuance of a green private placement. The net change in cash and cash equivalents amounts to minus EUR 17.7 million. I would like to conclude my presentation with the outlook of the group and the key messages of our equity story.
In view of the macroeconomic catch-up effects related inflationary tendencies and the strong distortions on the international energy market, which we are responsible for a massive rise in wholesale prices for natural gas and electricity in autumn 2021. Our diversified integrated business model leads us to expect offsetting effects between individual segments. Short-term forecasts are, however, difficult due to the current volatility on the energy markets. Therefore, we are currently facing additional uncertainties on top of the usual ones like temperature-related energy demand, wind and water flows. Therefore, we use our initial guidance for the last mentioned year as the starting point, and expect that the group net result in 2021-2022 will be in the range of approximately EUR 200 million-EUR 240 million. Finally, let me reiterate the key messages of our equity story.
EVN has transformed into a highly attractive stock for ESG investors. We are no longer active in any coal-related energy activity, and our gas-fired generation plant entirely solely active for network stabilization measures. On top of these already finished decarbonization measures, we are committed to reach new CO2 reduction targets, which we have just agreed with the internationally renowned Science Based Targets initiative. As a clear strategy on growing our wind and photovoltaic generation capacities in our core markets until 2030. With our operations in regular distribution networks, we see ourselves as an enabler of the climate neutral energy future. We are strongly positioned in regulated and stable activities in our core markets, above all as the leading supplier of energy, cable TV and telecommunication services, waste incineration and drinking water in our home province, Lower Austria.
Based on these predictable activities, we developed a reputation of being a highly reliable dividend stock. This year, we will increase our dividend by another EUR 0.03- EUR 0.52 per share. According to our dividend policy, this defines the floor for future dividends. We are also committed to appropriate participation for our shareholders in future earnings growth. In the current period of highly volatile energy markets, the group gains stability from a diversified business model. Finally, since last March, EVN is again a member of ATX, the benchmark index of the Vienna Stock Exchange. With a free float of a bit more than 20% liquidity and the share showed a sound development in the last 12 months, as it is also reflected in the share price. With this, I've reached the end of my presentation and I'm looking forward to answering your questions.
Ladies and gentlemen, we will now begin the question and answer round. If you would like to ask a question, please press nine followed by the star key on your telephone. After pressing nine and the star key once on your telephone keypad, you will hear an automatic confirmation. To withdraw your question, please press nine and star key again. Now, please give the key combination nine and star key once to raise a question. Our first question is from Patrick Steiner from Kepler Cheuvreux. Please, your line is now open.
Good morning from Vienna. It's Patrick Steiner from Kepler Cheuvreux. My first question would be, I mean, you increased the annual CapEx program by EUR 50 million and proposing increased dividend of EUR 0.52 per share. You're in certainly very attractive financial position compared to its peers. My question would be how these announced measures would affect balance sheet development over the next year's year view.
This is a midterm to long-term perspective. As we mentioned before, we need some decisions by the parliament to be restated also that we can do this kind of investment. As you know, with all these investments, our regular asset base will grow over the next year even stronger than which we have seen in the recent past. We expect more than 4% growth over the next year. This is one bit. Of course, with this new and environmental projects, with the subsidies expected, we will also achieve performance which will help to grow our group net results. With this other financial guidance, we're always giving that around EUR 1 billion is the net debt which we are monitoring quite closely on the midterm.
Okay. Thank you very much. Very clear. Maybe one quick follow-up question. Are the additional EUR 50 million of CapEx mostly dedicated to the electricity networks? If yes, do you see even higher required CapEx dedicated to the networks in the future?
It's a very good question because this is showing the how serious society will be regarding this transition period, yeah. Which kind of time frame a project can be realized and are supported. Therefore, I would say around half of the investment over the next period will go into the grids, and the remaining part will go to renewable energy and the further development of the drinking water network in Lower Austria. In the best case, we could see around a potential of EUR 4 billion-EUR 5 billion over the next 10 years as investments.
Okay. Thank you very much.
Our next question is from Teresa Schinwald from Raiffeisen Bank International. Please, the floor is yours.
Thank you. I have some bookkeeping questions and also a clarification for the Erneuerbaren-Ausbau-Gesetz delays. For as this year was heavily impacted by one-offs and in both directions, I wonder what would be a kind of a normalized energy segment result to where you plan to return to once the rollercoaster ride of energy prices has calmed down. Also as a bookkeeping question, could you give us an idea about the size of the revaluation effect for the hedges that was still in the books? You already said it was lower. One question on the guidance, at which level was the VERBUND dividend included in this guidance as the increase for next year is quite substantial and the range a bit higher than usual?
The last one on the dreaded situation about the renewables expansion. You mentioned before that under the initial plans that projects could be presented in kind of 2023, would start in 2024, as far as I remember. Is this schedule still achievable, or what about the time you think that could be the delay so far?
Thanks, Teresa. Quite a couple of questions. The first one, regarding a normalized energy segment result, it's really hard to do this, yeah, for the ongoing year. If we take a kind of normalization based also on historic figures, just to give you a kind of a guidance also, the average EBITDA contribution is around EUR 40 million from the EVN KG business. Regarding the heating business, it's around EUR 45 million. Yeah. This is a rough estimate to give you here. Regarding the renewable energy directive, as you mentioned, there is a delay. We are also missing around thirty-
Ladies and gentlemen, please hold the line. We will continue in a moment. Thank you.
I'm sorry we lost you. Everyone back?
Okay.
Can you hear me? Hello?
Ladies and gentlemen, thank you for your patience. Let me now turn back the floor to your host, Mr. Szyszkowitz.
I'm sorry. I think there was an interruption. I hope we have not lost everyone. Teresa, are you still there?
Miss Theresa's line is no longer here, I'm sorry.
Okay.
As of the moment, there are no questions. Ladies and gentlemen, please give the key combination 9 and star key once to raise a question. Our question is from Patrick Steiner from Kepler Cheuvreux. Please, your line is now again open.
Hello again, Mr. Szyszkowitz. I'll take the opportunity to ask another question. The equity contribution, the energy segment rose from EUR 39 million last year to around EUR 101 million this year. How much of this increase is associated with an improvement in the operating business, and how much is resulting from the valuation of hedges at EVN KG? Maybe further on, how can we look at the valuation of hedges at EVN KG going forward?
I think as a rough estimate, two-thirds, yeah, is coming from the hedges from KG. The one-third is operational.
Okay. Thank you.
We have a question again from Miss Teresa Schinwald from Raiffeisen Bank International. Please, your line is now open.
Yeah, great. Thank you. Yes, I'm back, and I think we were interrupted at the delays for the Renewable Energy Expansion Act.
Yes, absolutely. Just to try to help you on that, we have around 90 projects with around 90 MW, which are on the old tariff system, which we are waiting to get permits to build them even in the refurbished technology. The remaining spend from 500 up to this round of 750 will be new projects which are now developed and pursued, but they will already be under the new Renewable Energy Expansion Act. Therefore, there are two different kinds of quality in this midterm perspective. Also on the timing side, this kind of 500 MW we should be, with some kind of disclaimer around 2024 should be ready and then the remaining six years will be spent to develop the 250 additional ones. We are aiming to develop own projects primarily. This is what we target.
A follow-up actually on the renewables expansion. The PPA market has grown substantially elsewhere, first of course in Southern Europe, but now also in Central Europe and even up north. Are you looking into that as an alternative to the subsidy schemes? Are there projects that might be interesting for you? Maybe not in Austria, but Bulgaria, and what about looking at the PPA market?
Well, I can confirm that this market is developing and growing, but you need a partner for that. A partner who is also having estimation regarding the long-term development of prices. Therefore, this market is really growing and developing, and we will try to take some part of the risk in certain projects if we find a partner who is valuing the energy in a way that is attractive for us, yeah. I'm cautious here because it's not depending on us alone, it's also depending on market volatilities and the willingness of industrial partners to take a risk in energy prices, yeah. Which they have not been so interested in in the past, but now with the climate and CO2 relevance, this market is developing and transforming.
Thank you. It's clearly a steep learning curve for everyone. Thank you very much.
Yes.
Mr. Szyszkowitz, there are no further questions from the audience.
Okay then. Thank you for joining today's conference call, and sorry for the interruption. We will publish the results for the first quarter of 2021-2022 financial year on Friday, 25th of February. Please join us then and again, stay healthy and happy holidays.