Good morning, ladies and gentlemen, and welcome to the conference call on EVN's results for the first half of 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. Fiscal year. Let me now turn the floor over to your host, Mr.
Stefan Syskowitz.
Good morning, and welcome The conference call on EVN results for the first half of the twenty twenty one financial year. We are reporting today a sound performance the first half of our financial year. EBITDA, EBIT and group net results are above the previous year. The main drivers for these improvements were the earnings contribution from Adequity accounted investees, in particular, our supply company, EVN KG, and developments in our environment segment, in particular, the start of the COVID project. The corona crisis only had selective negative impacts Our integrated business model and a widely diversified customer base continue to be stabilizing factors.
Our investment level was high. We were able to increase investments by 21.3 percent to €155,800,000 This is in line with our commitment to further increase of CapEx. Our plan is to invest on average up to EUR 450,000,000 per year in the near future. Therefore, up to 3, 4, will be direct towards regulated and stable activities in Lower Austria. The key investment focus now and in future is on network infrastructure.
This investment fulfills 3 strategic objectives: this. They secure supply security, enable a carbon free energy future and provide for further growth of our regulated business. Further investment in areas are renewable, generation, biomass and drinking water. I would like to explain our recent progress in these areas. End of December, we started operations on a new Lindt farm with an installed capacity of 8.4 Megawatt.
This increased our installed wind capacity to 3 76 megawatts. And we are confident that before this summer, we will have around 400 megawatts under management. In Krems, which is the 5th largest town in Lower Austria, We will construct a new biomass cogeneration plant. Investment volume is about €40,000,000 Upon commissioning, which is planned for early 2023. This plant will supply renewable electricity to approximately 15,000 households natural heat to 30,000 households.
In the international project business, we were awarded a new contract in Romania. As a general contractor, we will be responsible for the modernization of a plant for drinking water supplies. The contract value is approximately €12,000,000 I'm also pleased to inform you that EVN is back in the Vienna Stock Exchange in this attics since mid March. Let me now continue with the key financials of the reporting period. The group's revenue was up by 7.6% year on year.
The main reason for this development is the start of construction of the wastewater project in Kuwait. In addition, temperatures were colder than last year, which led to slightly higher network sales in all 3 core markets. Contrary factors were lower effects from the evaluation of hedges for the electricity generation and the decline in revenue from natural gas trading. In the Q2, the deterioration of the clean dark spread led to a creation of an additional provision for ONEOZ contract an amount of €35,500,000 linked to the electricity production in the Walsom 10 power plant. The main reason for the rise in EBITDA were higher earnings contributions from net equity accounted indices.
Higher investments led to rise of euros was recognized to the Valzons 10 power plant already in the Q1. For a year on year comparison of effects From impairment testing, please bear in mind that higher country risk premiums for Southeastern European countries due to the COVID-nineteen had triggered impairment losses of EUR 15,500,000 in the previous year. Based on lease developments, the group EBIT was up by 10.3 twenty nineteen and amounted to €254,500,000 Financial results were up by 27.8%. In total, we generated a group net result of €176,000,000 which represents an increase by 15.3% 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 has remained Constant by approximately EUR 1,000,000,000. POE ratio was down and amounted to 17.9%. Our financial flexibility is solid. We benefit from lower net debt, insufficient committed undrawn credit facilities, which amounted to €551,000,000 as of the end of March 2021. Our strong balance sheet structure From the basis of pursuing organic growth opportunities in our regulated and stable Austrian activities.
The The rating agencies have recently published their annual updates and confirmed our current credit ratings. We have an A1 rating from Moody's and an A rating from SMB. Both ratings are well in line with our goal of having ratings in a solid A range. Before I will go through each of the segments in detail, I would like performance during the reporting period. With the exception of the Southeastern Europe segment, all other segments showed improvement in comparison with the previous year.
Let's move on now to next slide, which covers the generation segment in more detail. Electricity generation volumes in this segment were down by 4 0.1% year on year. Whereas renewable generation suffered from poor wind flows, thermal generation declined to the lower use of our gas fired plant in tires On network stabilization. EBITDA was up at €102,700,000 This increase was mainly due to a positive one effect related to the Valjams transaction in the Q1. In addition, there was a revaluation of our equity consolidated investment in the Astra the hydropower plant in the amount of €9,600,000 In the previous half year, we had to record an impairment loss €4,900,000 due to the higher country risk premiums and debt periods.
Those effects were driven by country risk premiums in the discount rate. In the previous year, it increased and in the year before it went down. Scatter depreciation and amortization increased as a result of high investments. In total, the Generation segment generated a higher EBIT of €60,500,000 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 the electricity generator, the EVANS power plants.
Therefore, Due to, among others, lower thermal generation and a year on year decline in valuation effect of hedges, revenue was down by 26.3%. The Balsam transaction in the Q1 also had a positive one off effect on the EBITDA in the Energy segment. This effect was constrained by the additional provision for a Norris contract in the Q2, which I mentioned before. Energy sales volume showed positive development. Electricity, natural gas and heat sales volumes were above the prior year level.
The increase in demand for natural gas and heat resulted from colder temperatures. The growth in electricity sales was supported by an expansion of customer base and stronger demand from household customers. The COVID-nineteen pandemic did not have a material negative effect on energy demand. The share results from equity accounted in Mercedes Benz operation in nature improved by €44,300,000 This increase was supported by a sound operating performance of EVN Carcay and positive effects from the valuation of hedges. Year.
Based on these developments, the Energy segment reported EBITDA of €67,400,000 and EBIT of €56,700,000 On the next slide, I will present the developments 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 in our core region in Lower Austria. This was contrasted by a slight decline in electricity consumption by commercial customers. There were no material negative effect network sales volumes from the COVID-nineteen pandemic. At the beginning of the new calendar year, the Austrian government determined new network tariffs.
Sales for electricity were increased by 6.3% on average and also natural gas were increased by 6.4% on average. Based on this volume and price development segment, revenues increased by 5%. EBITA in the network segment was up by 11% and EBIT by 0.5%. On the next slide, I will continue with the Southeast Europe segment. Temperatures in Southeast Europe were lower the unusual mild previous year, but still higher than the long term average.
In Bulgaria, we are facing stronger 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 Volume consisted by a decline in energy sales volumes. Segment EBITDA was below the prior year level. The reasons for the decline were higher energy procurement costs as well as lower sales margins in the regulated supply business in North Macedonia. In contrast, segment EBIT was up.
As already mentioned, higher country risk premiums for Southeastern European countries due to the COVID-nineteen had triggered impairment losses of €15,500,000 in the previous year. I would like to conclude my presentation of this segment the EMEA Environment segment. In our international project business, we were awarded a new contract in Romania regarding the modernization of a plan for drinking water supply. The project has a contract volume of about €12,000,000 In total, WTE Watertechnik is currently working on 9 projects in Germany, Lithuania, Poland, Romania, Bahrain and Kuwait. The order book was about EUR 1,400,000,000 at the end of March.
In addition, our joint venture company, Slush to Energy, is currently working on grease sewage sludge treatment projects in Germany. The financial performance of this segment is in line with the development in the international the business, there was a corresponding rise of both revenue and operating expenses in the segment. All in all, the segment benefited from the start of 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 €39,500,000 EBIT to €99,000,000 With this, I conclude the presentation of the segments.
On the next slide, I will continue the development of our group cash flows. Gross cash flow was substantially up €591,000,000 This was mainly due to the compensation payment for the takeover of an electricity procurement rate. The further factor was the higher balance of dividend from equity accounted in the seat. The increase in cash flow from 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, equipment and high investments in cash funds.
The cash flow from financing activities reflected the scheduled repayment of loans and dividend for our previous financial year. A contrary factor was the issuance of a green private placement. The net change in cash and cash equivalents amounted to €1,800,000 I would like to conclude my presentation with the confirmation of the outlook for the group. Assuming average conditions in the Energy business environment, we Expected the group net result 2021 will be in range of approximately €200,000,000 to €230,000,000 However, the quarter. The further cause of the corona crisis and the resulting macroeconomic effect would have negative influence on individual businesses' areas at EVN And in turn, on the development of earnings for the entire group.
I confirm our dividend policy. It is directed to holding the absolute amount of dividend at least constant at €0.49 per share. I'm now looking forward to answering your questions.
And the first question comes from Mr. Peter Krampton. Your line is open.
Good morning. Peter Crampton here from Barclays. Just one question on kind of Austria's plans regarding renewables. They've got this big ambition by 2,030 to kind of reach kind of total energy transition And for lots and lots of investments that kind of happen in the renewable energy sector. Are you kind of expecting some opportunities here for EVN, particularly since You do have that big net debt headroom in the balance sheet and an ability to invest more.
And do you feel the framework is now good enough to do so? Thank you.
Thank you, Peter, for this question. I want to confirm that we're all expecting that the parliament is voting on this new Energy Act before the summer break. As we all know, a lot of additional regulatory decisions have to be made after that. So the clear legal framework for the future development of renewable energy will be in place, I think, in autumn. EVN, as I mentioned before, is hoping to have around 400 megawatt of wind under management before the summer break.
We have an additional 100 megawatt on projects on different less stages of confirmation, but already the contract from the old system of the regulation. And of course, we expect that society and regulatory framework has to give incentives for the further development of installed renewable capacity for wind and photovoltaic for the future. In the photovoltaic case, it depends pretty much also on the Land regulation, where you are allowed to get the permits for photovoltaic. This is still debated also In the provinces, yes? So it's not quite clear if these ambitious targets of 2,030 are already reflected in a framework, Which is allowing companies like ours to develop this project as we would like to do.
And additional opportunity, we are also Pursuing now that we will look on additional renewable energy in North Macedonia and Bulgaria Because there we are already a grid operator, have access to the grid and have an organization in place.
Thank you for that answer.
And the next the
year. The
Three questions from my side. The first one is on EVN KG. Clearly, very strong results there. Could you maybe elaborate a bit on the drivers behind the strong performance and whether that Is likely to be sustainable? Or should we look at this as more of a one off?
The second question Is on something you mentioned earlier in the presentation, you said that the clear focus for CapEx is on network infrastructure. Why do you see network infrastructure as that much more of an attractive investment opportunity then renewables? Is it less competition? Is it just the regulated returns That you see as attractive. It will be quite interesting to hear your general thoughts there.
And lastly, on Valzum, another provision, another impairment, negative clean dark spreads. I mean, what is the investment case for Valzum with Carbon prices above €50 a tonne. Wouldn't it be easier to just bid the plant into the coal closure tender? And that's all from my side.
Okay. Thank you, Lueder. First of all, regarding EVN KG, that's our sales company. Of course, we have volume effects there. We have also price effects.
And if you look on the results over the last couple of years, We see quite a strong fluctuation. So it's pretty much always depending how the procurement costs in the period are developing and how you can pass through additional costs regarding procurement. If the tie is the timing of increase of procurement energy costs and pricing Is in line, and there should be no big fluctuations. This has happened in the recent past. And now you see in this year That the price increases of 2 years ago are now having the full effect connected also With the temperatures, which we have seen here, yes?
What over the midterm, we were always looking on around 5% kind of retail margin on the volumes. And of course, we are above this in this year. It is not sustainable as a business model. It is just a question of adopting at the right period and the right timing. Regarding the investment strategy, which I want to confirm again, around €450,000,000 It is the Bruto investment.
This is without a grid connection. This is on the level of the next couple of years. Three quarters of them go to lower Austria. And there, luckily, we have a broader opportunity to invest, Yes, of course, in the infrastructure of the grid because the grid infrastructure on the electricity side Has to be adopted for the further renewable production and connection. So we started originally to develop the grid on the basis of the Now produced renewable energy into a grid and to further develop the grid in this case.
This is a regulated business with, I think, very transparent regulatory framework. Therefore, this is giving this kind of backup of EVM's results for the upcoming years. Renewables are still also in the sense of regulated subsidy business. Of course, the new law, we will go into market premium, yes? So there's not a feed in tariff system anymore.
But for us, it's also in the for the time being, this is a regulated business. And we have also stable businesses, which are not regulated, but the definition good grid work similar like the water business. Therefore, I think we are quite good as an asset manager of grid infrastructures trying to have as many products with different grid infrastructures and one overhead OpEx structure. And this is the case where we believe in, I think, where we're also good in. And these are also in comparison our tariffs to the tariffs from other grid operators show that we They have quite a management performance.
So therefore, I think this is what EVN is good at, Independent if it's heating, if it's water, if it's telecom or if it's gas and electricity. And then regarding the third point, which you Have taken very well. Of course, the Balsam case is not the case anymore when we made the investment decision. In old Prime Minister Schroder's time, we wanted to get the confidence of investors in thermal production. Times have changed.
Government has changed. The next government of Germany is underway after the election in September. We are following quite closely the debate in Germany. We try also to understand what can trigger changes there. They have made a decision regarding the law how to exit thermal electricity production.
We have seen over the last couple of weeks even further demands for us as a minority For the stakeholder of the Walsam Power Plant, it is not a decision up to us. It's a decision together joint in the joint venture with the Stakeholder. What we also try to understand is how the fading out of the nuclear production In 2022, 2023 is influencing the German energy market, not only on the production side, but also on the stability security side. So I would expect that we have a clear view what we are able to do under what conditions And what we can also get the approval by our boards and put to our shareholders and we know more closer which are the conditions regarding the private future of the energy system in Germany because this will influence on a little base On the prices base and also on the CO2 base because we have seen in the last couple of months there was also a speculation on the CO2 limitations volumes, yes? So there is more than just the energy industry in the rise of this CO2 emission, yes?
It's also a financial speculation taking place. Therefore, it's very hard to judge in the moment. Okay, very clear. Thank you.
And the next question comes from Ms. Theresa Schindwald. Your line is open.
Okay. In this case, thank you for joining today's conference call. We will publish the results for the 1st 3 quarters of 2021 financial year on Thursday, 26th August. Please join us then again. Stay healthy and have a wonderful summer.