Good morning, ladies and gentlemen, and welcome to the EVN's conference call on the results of the fiscal year 2019/20. 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, Stefan Szyszkowitz.
Good morning and welcome to the conference call on EVN's results for the 2019/2020 financial year. We are reporting sound results today, with group net results for the financial year amounting to EUR 199.8 million. This means that we reached the upper end of our full-year forecast. To start with, I would like to provide an overview of the most important effects of the COVID-19 pandemic on our business development. As an operator of critical infrastructure, we are very well prepared to deal with the pandemic. Since 2009, we have a group guideline on how to deal with COVID-19. In addition, we have emergency plans for various crisis situations, and we regularly hold training exercises for crisis scenarios. Therefore, I can say that our crisis plans worked very well, and supply security was guaranteed at all times.
We also paid particular attention to protecting the health and safety of our customers and employees. The COVID crisis had selective negative impacts on our operating results, but remained relatively moderate overall because our integrated business model and a widely diversified customer base worked well as stabilizing factors. Nevertheless, I would like to be transparent on those COVID-related effects, which had an impact on full-year results. Energy sales volumes to industrial and commercial customers declined during the lockdown in spring 2020. This has also had a negative effect on results contribution from Energie AG. Lower energy demand also led to lower network distribution volumes. However, this volume effect will be corrected in future tariffs according to the Austrian regulatory methodology. According to EVN, we determine impairment losses for trade receivables based on historic, regionally differentiated default incidents.
Due to COVID-19, calculated impairment losses to trade receivables were increased by EUR 4.7 million. The market value of securities in the R138 fund also suffered from development of stock exchanges. The impact on our financial results was EUR 5.6 million. Finally, progress on projects was delayed due to COVID. In particular, this was an issue for our Kuwait project, as the closing only occurred at the end of July, and the earnings contribution in the financial year was consequently lower. Investments were also delayed, but we are committed to realize them and catch up in the coming months. When you compare this year's results with last year, please bear in mind that the previous year included positive one-off effects of approximately EUR 110 million after tax. This year also contains effects from impairment testing, which I will elaborate on in a minute.
For last year, it was our goal to evaluate our strategy, which had existed since 2010, and to update it for the next 10 years. We achieved this goal despite the restrictions caused by COVID-19, and in October, both the executive board and the supervisory board approved the strategy 2030. The main driver for the strategy update was to reflect the changes in our operating environment, especially the climate and energy policies, which aim to slow and reduce global warming. Within frameworks such as the Paris Climate Agreement, the European Union's Clean Energy Package, and the energy and climate goals encouraged in the program of the Austrian government, we want to play an active role in this realization. We aim for a substantial increase in our renewable generation capacity from wind power and photovoltaics.
This will allow us to reduce the specific CO2 emissions from our electricity generation by half by 2030 compared to 2005. Another future-oriented project by the European Union concerns the circular economy. In this area, we also plan to make a contribution in the coming years as an environmental service provider with innovative solutions. The third key goal of our strategy is to more effectively utilize the opportunities created by digitalization. We want to make all customer-related processes easier, faster, and more efficient. In doing so, we plan to remain an attractive partner for our customers. To summarize these key points, the motto of our strategy 2030 is to make EVN more sustainable, more digital, more efficient. We are already actively working on specific implementation measures, we also developed broader concrete measures during this financial year. Now for the dividend proposal.
The executive board will propose to the annual general meeting a higher ordinary dividend of EUR 0.49 per share. In comparison with last year, this represents an increase of EUR 0.02 per share in the ordinary dividend. With this dividend proposal, we want to confirm that the EVN share remains a reliable and stable investment despite the challenges created by the COVID-19 pandemic. In line with our dividend policy, this proposal also signals that we want to hold the ordinary dividend at least stable at such a new level of EUR 0.49 in the coming years. Let me now continue with the key financials for the financial year. The group's revenue declined by 4.4% year-on-year. The main reason for this development are the decline in thermal generation, as well as volume and price effects in the networks segment.
In contrast, energy revenue in Bulgaria and in the international project business showed a positive development. Other operating income declined to 45.4% due to the changes in inventory caused by the invoicing of customer projects. The cost of electricity purchases from third parties and primary energy expenses reflected the development of energy revenue with a decline of 70.9%. This reduction was based above all on the lower use of primary energy carriers due to the reduction of thermal generation, a decline in wholesale prices, and lower electricity purchases. The share of results from equity accounted investees was influenced by country development and fell by 37.8% year-on-year. On the positive side, the earnings contribution from EVN KG normalized and amounted to EUR 39.5 million, following a loss of EUR 36.2 million the year before.
This recovery resulted from the reduction of effects from the valuation of hedges and price increases, which had been implemented in the previous year. In addition, there were positive one-term effects in RAG and Energie Burgenland. In contrast, however, impairment testing caused a strong decline at Verbund AG. A revaluation of EUR 92.2 million in the previous year was contrasted by an impairment loss of EUR 20.7 million. This was mainly caused by an increase in the interest rate used for discounting. In addition, there were negative earning contributions from Energy ALIN, as well as an impairment loss of EUR 4.9 million on our investment in the Ashta hydropower plant in Albania in the second quarter due to the COVID-19 related increase in the country risk premiums. Based on this development, EBITDA declined by 6.5% to EUR 590.4 million. Schedule depreciation went up.
This was due to investment revaluations we had to do after impairment testing at the end of last financial year and the initial application of IFRS 16 for our leasing contract. Impairment testing as of the 30th September of 2020 resulted in an impairment loss of EUR 22.1 million. The main effect of EUR 16.8 million was related to the Walsum 10 power plant. When comparing effects of impairment testing, please bear in mind that we had a positive effect of it in total EUR 41.6 million in the previous year. This had resulted from reevaluations of generation and heating assets, electricity procurement rights, and customer base in Bulgaria and North Macedonia. I would also like to inform you that the impairment losses, which we recognized through assets in Bulgaria and North Macedonia in the second quarter of 2019/2020, have not to be included in the full financial year anymore.
The reason is that the country risk premiums, which had increased in spring due to COVID-19, have declined in recent months and the framework conditions have improved. The group's EBIT amounted to EUR 273.1 million, which corresponds to a decline by 32.3% year-on-year. Financial results were up by 47.3%, in particular due to the higher dividend paid by Verbund. In total, we generated a group net result of EUR 199.8 million. As already mentioned, please bear in mind that the previous year included a positive one-off effect of approximately EUR 110 million after tax. Now I would like to move to the next slide, which provides some information regarding the group's balance sheet structure. EVN's net debt has remained constant at approximately EUR 1 billion for three years, with fluctuations as of the respective balance sheet dates.
Please note that the net debt included roughly EUR 73 million additional lease liabilities due to the initial application of IFRS 16. Gearing ratio was slightly up to 222.8%. Our financial flexibility is solid. We benefit from low net debt and sufficient committed undrawn credit facilities, which amounted to EUR 605 million as of the end of September 2020. Our strong balance sheet structure forms the basis for pursuing organic growth opportunities in our regulated and stable Austrian activities. Before I will go through each of the segments in detail, I would like to give you a general overview on the EBITDA development of our business segments. The overview of the EBITDA development per segment illustrates the key drivers of our performance during the reporting period. On the positive side, you can see improvements in the energy in the Southeast European segment.
In contrast, performance of generation, environment, and network segment remain below the prior year. With this general overview, let's move on now to the next slide, which covers the generation segment in more detail. Electricity generation volumes in this segment were down by 36.4% year on year. Renewable generation volumes are slightly below the previous year, whereas last year's commissioning of new wind farms supported an increase in wind production, water flows declined. Thermal generation grew up. This was due to the closure of our coal fire plant in Dürnrohr last year and lower use of our gas fire plant in Theiss for network stabilization. Usage of the Walsum power plant was below prior year's level too. Segment revenue, also operating expenses declined in line with these developments.
The share of results from equity accounted investors fell to -EUR 22.3 million due to the impairment loss recognized at the investment in Verbund Innkraftwerke. In addition, there was an impairment loss of EUR 4.9 million on our investment in the Ashta hydropower plant in Albania in the second quarter, due to the COVID-19 related increase in country risk premiums. Based on these developments, EBITDA in the generation segment declined by 55.7%. Depreciation and amortization, including effects of impairment test went up. The main reasons were investment in previous years revaluations. In total, the generation segment generated a lower EBIT of EUR 42.9 million. Today, I would like to provide an outlook for each of the segments. In 2019/2020, results in the generation segments were negatively influenced by the impairment loss recorded to Verbund Innkraftwerke.
Therefore, assuming that wind and water flows reflect the long-term average and excluding the impairment loss, we expect earnings of this segment to exceed the previous year. The COVID-19 pandemic is not expected to have an influence on our electricity production. However, the corona crisis could influence the development of energy prices in the short term. 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 generated in EVN's power plant that is reported in this segment. Therefore, due to the before mentioned decline in electricity generation, as well as lower revenue from natural gas trading and heat supply, revenue was down by 33.1%. The reduced usage of primary energy carriers and lower procurement prices were driving operating expenses down by 45.8%.
Another reason for the reduction was the partial release of a previously created provision of an old contract from the marketing of EVN electricity production. The energy sales volume showed contrasting development. Electricity sales volumes were up by 6.6%. The overall positive development of sales comes from an expansion of the customer base. The increase was slowed by a corona related decline in sales to industrial customers. Natural gas sales volumes were down by 2.8% due to warm winter and increased competition. The share of results from equity accounted investors with operation nature improved substantially to EUR 39.4 million. This increase was supported by the return to EVN KG to positive earnings contribution. Based on these developments, the energy segment reported an EBITDA of EUR 83.8 million and EBIT of EUR 61.4 million. Our outlook for the segment anticipates results for 2021 to be lower than the previous year.
The reason is that these results are positively influenced above all by more favorable procurement prices for our heating business and the release of the previously created provision of an old contract from the marketing of EVN electricity production. Please note that the further course of the corona crisis could have a negative effect on energy sales. On the next slide, I will present the developments in our network segment. As already mentioned at the beginning of today's call, electricity consumption declined to COVID-19, especially in the segment of industrial customers. Consequently, network sale volumes were down too. This volume effect will be offset in future tariffs in accordance with the Austrian regulatory method. The natural gas distribution volumes declined too. The main reason for this was the reduced use of the thermal power plants in Lower Austria and the mild temperatures during the last winter.
I would also like to remind you that the lower WACC for electricity distribution network, which was implemented on the 1st of January 2019, was for the first time applied for the full financial year. Based on this volume and price effect, revenue went down by 3%. Based on a stable development of operating expenses, EBITDA in the network segment declined by 4% and EBIT by 16.1%. The development of earnings in the network segment is determined by the Austrian regulatory methodology. Earnings in this segment are therefore expected 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 the gas via power plant pipes, or the future development of the corona crisis. In the next slide, I will continue with the Southeast Europe segment.
In Croatia, we were able to expand our activities. As you know, we already own three concessions to build and operate gas distribution networks in the counties of Zadar, Šibenik, and Split-Dalmatia. End of August, we signed another concession agreement for the Lika-Senj County, which is the neighboring county next to Zadar. We plan to construct a gas distribution network for the cities of Trogir and Opatija. Based on this agreement and will invest roughly EUR 3.2 million over the coming years. Energy demand in Southeast Europe suffered from mild temperatures and the corona crisis. Consequently, energy sales and network distribution volumes declined year-on-year. However, the financial performance in this segment was sound during the reporting period. One supportive factor were lower procurement costs of network losses in Bulgaria and North Macedonia. Segment EBITDA amounted to EUR 136.7 million, which was up by 4.3% year-on-year.
Depreciation and amortization, including effects of impairment test went up. The main reasons were investments in previous years' revaluations, as already mentioned earlier. In total, segment EBIT stood at EUR 66.1 million, which corresponds to a decline by 31.1%. Regarding segment outlook, we expect that EBIT will be in the range between EUR 40 million-EUR 60 million, subject to stable regulatory and energy sector framework conditions. I would like to conclude my presentation of this segment with the environment segment. Let me start with the developments in our international project business. I am pleased that I can inform you about achievements in that area. In Kuwait, we were awarded the contract of the Umm Al-Hayman wastewater project in January. End of July, the closing for this project took place. With this, all requirements were met that we were able to start with the realization of the project.
Due to the percentage of completion method, we are now able to report results according to the project's progress. In Germany, we were successful in the acquisition of general contractor assignment for thermal sludge utilization project. WTE Water Technology was awarded a contract in Berlin. The contract volume is about EUR 190 million. EVN's share will be roughly 50% of the contract value. Please note that the realization of the Berlin project will only start in autumn 2021. The thermal sludge utilization, we are also active through our joint venture, Sludge2 Energy. Sludge2 Energy received the contract of two new projects, one in Hanover with a contract value of about EUR 40 million, and one in Straubing with a contract value of about EUR 50 million. We see further potential for this project in Germany.
Therefore, the project in Hanover, Straubing, and Berlin will add well to our track record in this area. In the international project business, WTE Water Technology is currently working on 10 projects in Germany, Croatia, Lithuania, Poland, Romania, Bahrain, and Kuwait. The order book was about EUR 1.6 billion at the end of September. This number includes our share in the Kuwait project. The financial performance of the segment is in line with the development in the international project business. There was a corresponding rise of both revenue and operating expenses in this segment. The share of results from our equity accounted investees with operation nature was below the previous year. Please remember that the last year the earnings from the wastewater project in Prague were included. In total, this development led to a decline in EBITDA to EUR 17.3 million and an EBIT to EUR 0.6 million.
Our outlook for the environment segment is always subject to the further realization of assignments in the international project business. Assuming progress as scheduled on our current projects, above all the large-scale project in Kuwait, we expect an increase in segment earnings in 2020/21. An intensification of the Corona crisis can influence the international project business through the economic development in these countries where we are currently active and through negative effects on international suppliers. An estimate of the potential impact is not possible at the present time. With this, I conclude the presentation of this segment. On the next slide, I will continue with the development of our group cash flows. Gross cash flows fell by 9.7% to EUR 497.1 million during the financial year.
The main factors for the decline included a reduction in the results before income tax and a higher non-cash earnings contribution from equity accounted investees. The increase in depreciation and amortization was only able to partly offset these effects. Due to the development of working capital, as at the end of December, cash flow from operating activities amounted to EUR 412 million. Cash flow from investing activities reflected investments in property, plant, and equipment with investment of securities in one of our funds and guaranteed payments from the Republic of Montenegro for their wastewater project in Budva. This was contrasted by the equity contribution for the Kuwait project and increased investments in cash funds. The cash flow from financing activities reflected its scheduled repayment of loans and the dividend paid for the previous financial year. A contrary factor was the issue of a green promissory note loan.
The net change in cash and cash equivalents amounted to -EUR 105.4 million. I would now like to conclude my presentation with the outlook for the group. Plans call for a continued increase in annual investments cover the coming years to average up to EUR 450 million, depending on the projects in progress. Roughly 3/4 of this investment volume will be directed to projects in Lower Austria in regulative and stable business areas of network infrastructure, renewable generation, and drinking water supply. This will protect our solid operating base and will drive continued growth. In line with our updated strategy, we aim to contribute actively to Austrian and European targets to expand renewable generation. We will continue to build wind farms in Austria, but, and this is new, we also start to develop wind and photovoltaic projects in our core markets outside Lower Austria.
As for the outlook, assuming average conditions in the energy business environment, we expect that the group net result in 2021 will be in a range of approximately EUR 200 million-EUR 230 million. However, the further course of the Corona crisis and the resulting macroeconomic effects would have a negative influence on individual business areas at EVN and in turn on the development of earnings for the entire group. I'm now looking forward to answering your questions.
Ladies and gentlemen, if you would like to ask a question now please press nine followed by the star key on your telephone keypad. If you wish to cut on your question press nine followed by the star again. First question comes from Peter Crampton. Please go ahead. Mr. Crampton, your line is open.
Good morning. Peter Crampton here from Barclays. Very well done on decent results in what was a very difficult year. Three questions, if I may. The first one relates to your outlook for the 2020, 2021 financial year. What kind of COVID-19 macroeconomic assumptions you're making there? The second question relates to your environment business, and it seems like a good number of projects for WTE, a lot also happening in your Austrian water business. Is an assumption correct that we could expect some quite good operating profit growth in the coming years? Could we maybe even go back to the very good levels of operating profit you had a few years ago?
My third question would relate to, we've got a new government in Austria and lots of talk about adding more renewables. I was just wondering your views on what kind of renewable policy we could maybe get next year. Whether you are excited about potentially stepping up investments and the return potential. Thank you very much.
Thanks, Peter, for the questions. As always, they are pretty much to the point regarding the overall development, which are the basis for our planning and environment. As we have seen over the last years, of course, we are also exposed to macroeconomic trends. What was the good surprise was that at the end, the overall result was more stable than we would have expected in the summer period because we were able to realize some of our investments in time, and we were able to reduce the outstanding invoices by the customers and so on. We take this as a basis, of course, for our assumptions for the future. What we have seen and when we did the analysis, also through the crisis 2008 and 2009, we expect that there will be an overall process of speeding up growth again.
In the sense 3%-5%, we would expect in the outlook that the overall improvement of the economic situation will help also societies to get along. What we were doing, and maybe this is interesting for you, the Oesterreichische Nationalbank is publishing a weekly comparison to the economic development in the year before. On a weekly basis, you see the change. What we saw there was in March, April, in relative to the year before, it went down to 23%. Over the summer, the gap was more or less closed again. Of course now, in October, November, once again, the gap was widening to 8%. This shows that the measures which has been taken in this autumn, winter, are not so affecting the industrial production as they did in this very strange period of March and April.
On this basis, we come down to the conclusion that the societies which we are working in might be making up with a stronger economic growth in the upcoming years. Let's put it mildly, because I'm sure 2001 will be a little bit weaker than we would have expected a couple of weeks and month again. What we also have seen is that the consumption of household customers, normal tariff customers, is pretty well. In this sense, this is very stable. Also, the payment habits over the period have been quite strong, especially in Bulgaria. We had not a lot of problems regarding outstanding payments. Therefore, these were the surprising lessons we draw from the development over the last couple of months, and this is the basis also for our expectation.
Regarding the international project, of course, the delay of Kuwait was painful for this year because we would have expected that we can already book a higher part of the results already. This delay was hindering this year. Of course, this is now coming in the next year. Therefore, Kuwait from its size and regarding its percentage of completion method will be very important for the upcoming next three to four years. Therefore, this will also stabilize the overall group. What we also checked and what is also important, of course, that in all these countries you have COVID-19 effects. You have delays. We have in the contracts, this kind of force majeure clauses. Yeah, extension of timelines will be activated immediately. We will make sure, and I think there is quite an understanding, that this is bigger than the normal customer-client relationship.
Regarding the renewables policy, I think we are a bit late. We would have expected that the new law, which is the basis for further project and further development of capacities, should have been voted in the parliament already at the end of 2020. They now confirm that they will try to put it into force in the first quarter of 2021. Of course, as an infrastructure company, we would definitely ask for clear guidance for the midterm because all our investments are long-term investment, therefore we need long-term guidance. We also need a bigger debate, what are the preferences in society? We have still some doubts if the ambition in the renewable environmental field are really backed up and shared by the overall majority of the electorate, even when we are discussing about the consequence of the costs coming from this.
Therefore, from our point of view, as a stakeholder in these policy processes, we would really push for more transparency, open books, and clearance of the preferences where the society should head. Maybe this is not so different in Austria than from other European countries. What we see is the big ambition by the European Union, by the international community, and by the Austrian government. To find a legal base for long-term investment clearance, there is some steps have to be taken to do that.
Okay. Thank you for your answers.
The next question comes from Roland Vetter. Please go ahead. Your line is open.
Good morning. It is Roland Vetter from Praxis Partners. Could you please tell us what are your plans with your stake in Verbund? Because it is about more than 90% of your market cap at the moment, the value of the stake, and it contributes very little to net income. Would you consider, for example, disposing part of it or the other possibility, it gives additional leverage capacity on the balance sheet because of a huge value which is not reflected in the net debt?
Yes, well, I won't comment on the share price. Please ask Verbund colleagues about this. As you know, this is a historic stake which we took in the past. We have seen some volatility in the share price over the years. It is part of our overall strategy to secure the energy sourcing. In Verbund, it's the hydropower. In Energie Burgenland, it's the wind power, and in RAG, it will be the green gas of the future. This is our understanding of the energy value chain. From this point of view, I would rule out to increase, decrease the Verbund stake as it is. Maybe it's an invitation for you to invest in EVN shares because it's a cheap way in this stake.
Okay. Thanks a lot.
The next question comes from Lueder Schumacher. Please go ahead.
Interesting. Yes, Lueder here. Three questions also from my side. The first one is related to what Roland just referred to. If you take your market cap, deduct the value of your stake in Verbund, there isn't much left. It's about EUR 170 million, which, if you adjust for the Verbund dividend, EPS means that EVN itself is trading at one times PE, which arguably is a bit low. Is that something that concerns you? Could you do something about it, maybe through the dividend? You do have a very low pay issue, and you say the dividend will be at least stable. Wouldn't this be a good way to boost the rating of EVN itself if you actually show some more ambitions as far as the dividend is concerned? That is my first question.
The second one is on your impairment loss you booked on Verbund Innkraftwerke. I just don't get it. You've got price going through the roof at an all-time high. Verbund itself, which presumably should be a good value indicator for your stake there, is also at an all-time high. You mentioned a discount rate, but if 10-year Austrian government bonds, they are also at an all-time low and have been falling throughout most of the year. I don't know what the basis for the impairment is. Last one is on Umm Al-Hayman. You mentioned that it could be quite important, the earnings contribution over the next 84 years. What kind of earnings contribution at a normalized level are we looking here?
Okay. First of all, I think the Verbund question I answered, yeah. We are not speculate on the Verbund stake in any case, yeah. We will-
I didn't ask you about the Verbund stake. I didn't ask you about the stake. I asked you about the rating of one times earnings. If that is something for EVN itself, if that is something that concerns you.
Well, as a board member of Verbund, I follow the electricity prices also on the long term and on their earnings very closely as everyone can do on the published results. I think talk to CFO Coleman what he's seeing in the share price. Yeah. Obviously, there is something going on, which is the secure haven for investment, which is not backed by development in this sense anymore. This is very sensitive and I will withdraw from that. What we think is that on the long term, this kind of backing up of the energy value chain and good dividends should be attractive for everyone. We increased on the basis of our operative performance, now the base is dividend also for the future. Let's see, especially in this COVID environment, how the future will turn out.
We can also comment then on the to be expected dividend if the operative results are really showing this. Regarding the impairment, I think it's a very well-taken point. Interestingly, we are also exposed there, how interest rates are changing, and interestingly, interest rates increased and also the beta increased. At the end, this is more driven by EFS and the methodology than anything else. This is also paying into this kind of environment which of expectations we live in. We have seen this in the first half of the year when suddenly, the risk premium for countries was increasing suddenly and we had to do these impairments. Over the following months, these risk premiums went down again. Therefore, we are exposed to this kind of macroeconomic expectation in the methodology as everyone else.
Regarding Kuwait, we expect in this kind of turnkey project, which is Kuwait mainly a turnkey project, a low single-digit percentage over the next four years. This is what we are looking at normally. This time twist volume gives you some expectation, what we will see over the next four years on average.
In terms of EBITDA or EBIT?
EBIT. It's a single-digit, middle single-digit percentage, which we are aiming for in projects like that.
Okay. Thank you.
The next question comes from Theresa Schönwiese. Please go ahead.
Good morning, thanks for taking my questions. I still have a few remaining. Let me start with the Walsum power plant, which is almost the only dark spot in the results. According to my calculations, it accounted for about 1.4% of revenues, which is just above the 1% threshold required by an increasing number of investors, to make a share a company investable. How do you plan to address the issue of still having a share in the coal-fired power plant that is also not very likely to be shut down due to its recent constructions? What are the options on the table? This would be my first question. My second one is, I of course listened up when you mentioned renewables investments outside of the core region of Lower Austria. How can we think about that? Could this include teaming up with other regional utilities?
Could you elaborate a bit more on that one? The last one is not only on the current Renewables Expansion Act, but which developments and timelines can we expect on other important issues like the new network development plan, and also what's your view on the tighter EU targets of the 55% reduction in CO2? Do you believe that the Austrian targets need to be stepped up? Would it affect the energy sector? What's your expectations on that? Would this rather concern other industries? Thank you.
Okay. Thanks, Theresa. First of all, Walsum. As you know, the German government made a decision in the law to step out of thermal power production there. Question mark is, how can this be done effectively? The first auction brought a bigger share of capacity, which the energy companies are ready to take out. Question mark is how will be the next auction organized? What is definitely for sure is that it will be not longer than 2038. Question mark is, will it be, and this is also affecting Walsum in the early '30s or not? Therefore, we are very cautious because we are only the minority stakeholder in the power plant company. It's STEAG which is having the majority.
Nevertheless, I would expect for them, it's also a question mark, what is the right timing and what are the incentives given by the public to maybe come to an earlier close on that. For us, there are different scenarios. None of them is in any way already so precise that we would be able to announce something about it. Definitely, there will be no Walsum on the grid anymore, coal-fired in 2038, and therefore, it is more or less a timing question. It's not a question if this power plant will go to its technical end anymore. Therefore, I see this as a question mark of different options for the future.
At least we have now a law which has been published in August, and therefore it's more clear on which kind of legal basis the government has to make their individual decisions as these capacity options were already showing it. What do we have in books? We have a residual book value net of EUR 78 million. This is what is in our books, and of course, we have the contract of the energy, and therefore, we are on both sides interested on the future of the Walsum power plant. Regarding renewable, there are two sides of that. One is this Renewable Act in Austria, which has been postponed and which we addressed. It should be voted on and giving some guidance in the next year.
What we decided also, and I mentioned it before, that we will try to reduce our specific CO2 emissions till 2030, to around 50% of the level we had in 2005 in the world before these changes were happening. We will drive down the specific CO2 emissions in the scope one regarding our production. Therefore, as you see this 2030 and you see, okay, there is the Walsum still on the grid. If things are changing, there will be more dynamic use in this path down of the specific CO2 emissions, targeting 2040 and targeting 2050 in a way to become also carbon neutral, with all means, and if it's backed up by the stakeholders. It is an open process driven by technology, driven by financing, driven by legal restrictions or possibilities. As we all know, hydrogen is now used as a symbol of technological change.
We know it's not about the technique, it's about the costs. Therefore, every strategy which is using hydrogen too early is more wishful thinking than real market-based projects. Therefore, we will look for the mix of electricity production, distribution, and sales to ensure that our society has energy secured supply. We need guidance, and we will need, in certain areas, even support to be able to make this transition. Therefore, I would say that the EAG, as it is now drafted, is helping for the next years. It's not answering the 2030 challenge and question mark. I hope that more transparency on costs and possibilities on mix will help to boost the 2030 target on a more reliable long-term orientation, because what we see now is pretty much driven by announcements for the next quarter and not for the long term.
In this sense, I think it's good if Europe is having an ambition of the energy transition. As we know, the differences between the European member states are quite enormous regarding their overall energy production and CO2 exposure. Austria is starting from a very good position in that. A question mark of an economist is always what are the costs of the additional targets? If the money would be the money somewhere else better spent than in their own field, and this has to be answered. I think only open-book, only economic cost for society, only microeconomic evaluations can help us to find a better agreement, besides just individual members of governments on the Commission regarding these targets.
Therefore, for us, it's also interesting in these member states where we are active and are having operation and having already assets which are members of the European Union, like Bulgaria and Croatia, with better sun hours. It might be also more interesting to invest there if these technologies are already coming close to market price production so that the risk of tariffs are getting smaller, and if these countries are getting more stable, The European Union regarding the country risk, because this is what we have seen in the first half year of this business year, that suddenly the country risk was driving down the value of the assets, not energy prices. Therefore, we also have to see energy prices, we have to see the country risk, and of course, we have to see the specific generation conditions to make the case there.
Of course, the escalation is there. What we are aiming for would be that we say, okay, if two-thirds of this additional renewable production can be done in Austria, in Lower Austria, and one-third in these other European countries, which we call home markets, I think the business mix would be fine for us, and this is what we now try to pursue. You also mentioned, do we have to do it alone? No, sometimes it's good to team up, to partner with other investors and energy companies, especially if they have special experience. I think could be also very smart to work in cooperation. Let's see what the future will bring.
This is the change which we wanted to announce today, that we are not only pursuing renewable energy in Lower Austria mainly, but that we will also try to build a project pipeline in these new countries where we are active in, but are really also restricted on these countries where we are already active in and where we have some experience and where we also have some stakeholder relationships to also balance the business risk here.
Thank you.
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Thank you for joining today's conference call. We will publish our first quarter results in for 2021 on Friday, the 26th of February. Please join us then again and stay healthy. We all wish you happy holidays. Goodbye.