Good morning, ladies and gentlemen, and welcome to the conference call on EVN's results for the first three quarters of the 2019/2020 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, CEO, Mr. Stefan Szyszkowitz.
Good morning, and welcome to the conference call on EVN's results for the first three quarters of the 2019/2020 financial year. We are reporting sound results today. Group net results for the period is up by 25.2%. EBITDA and EBIT also exceed prior year's level. This positive development was mainly supported by the recovery of our supply company, EVN KG. After implementing two price increases in 2018/2019 and changing the methodology for accounting of hedges, we managed to bring the operational result of the equity consolidated company, EVN KG, back to a normalized level. Therefore, I can confirm our full-year guidance. We expect group net results for the 2019/2020 financial year to range between EUR 180 million and EUR 200 million.
Such outlook is made under the assumption of the average conditions in the energy business environment and a stable situation connection with the COVID-19 crisis during the fourth quarter of this financial year. Our integrated business model and broad customer diversification proved their resilience so far and served as a stabilizing factor during the COVID-19 crisis. During the third quarter, there were only some limited negative impacts of the pandemic. In particular, lower electricity demand, especially from industrial customers, is visible in energy demand and network distribution volumes. However, the volume effects in the networks will be offset in future tariffs in accordance with the regulatory method. Another negative impact related to the pandemic are impairment losses, which already became necessary in the second quarter due to increased country risk premiums. In total, these negative non-cash effects amounted to roughly EUR 50 million.
I would like to stress that we are highly committed to fulfill our investment program as previously planned and announced, irrespective of the COVID crisis. We aim for an annual investment level of about EUR 400 million. Thereof, EUR 300 million are dedicated to Lower Austria. The focus here is on the regulated network business, the expansion of renewable energy, and growth of our drinking water business. There have been sporadic delays in some projects due to the COVID lockdown, but these shall be recovered as soon as possible. We are currently working on the construction of a new wind park with an installed capacity of 8.4 MW . Commissioning is scheduled for the end of this calendar year. Our past efforts to expand our renewable generation capacity are visible when looking at the share of renewable generation, which was almost 60% in the reporting period as compared to 43% a year ago.
This progress to reduce our CO2 footprint was, of course, also supported by the termination of coal-fired generation in Dürnrohr last summer. In the international project business, I'm highly pleased by the success achieved in the area of thermal sludge incineration. Based on the group's excellent experience in wastewater treatment and thermal waste incineration, it was just a logical step to further develop the project business. We anticipated a window of opportunity for thermal sludge incineration at an early stage when Germany changed the laws with the aim to restrict the spreading of sewage sludge on fields, and at a later stage, called for phosphorus recycling. Today, I can inform you that we received three new general contract assignments for thermal sludge incineration projects in Germany: Berlin, Hanover, and Straubing. I will provide you with further information details later in the call.
Further good news for the future development of our international project business is the closing of the wastewater treatment project in Kuwait by the end of July. Now all requirements are met to start the stabilization of the project. The construction of the wastewater treatment plant will take two and a half years. In parallel, we will be responsible for the construction of a new canal infrastructure, which will take up to four years. On the shareholder level, on the 5th of August, the closing took place for the transaction agreed between Wiener Stadtwerke and EnBW. Wiener Stadtwerke acquired 51 million EVN shares previously owned by EnBW, which corresponds to a stake of 28.4% in EVN. This makes the Viennese utility company our second-largest shareholder after the province of Lower Austria, which owns a majority stake of 51%. The remaining 20.6%, 2% free float, including 1% treasury shares.
Let me now continue with the key financials in the reporting period. The group's revenue declined by 6.8% year-on-year. The main reason for this development are the decline in thermal generation as well volume and price effects in the network segment. In contrast, energy revenue in Bulgaria and the international project business showed a positive development. The recovery of EVN KG supported the improvement of the share of results from equity accounted investees. In addition, there were positive one-time effects in RAG and Energie Burgenland. In contrast, there were negative earnings contributions from EnergieAllianz, as well as an impairment loss on our investment in Ashta hydropower plant in Albania in the second quarter due to the higher country risk premiums. EBITDA was up by 70.9% at EUR 513.6 million. Scheduled depreciation went up.
This was due to investments, revaluations we had to do after impairment testing at the end of last financial year, and the initial application of IFRS 16. In turn, higher country risk premiums of Southeast European countries due to their COVID-triggered impairment losses on assets in Bulgaria and North Macedonia in the second quarter. The group's EBIT increased by 20.3% to EUR 284.5 million. In total, we generated a group net result of EUR 210.7 million during the first three quarters of this financial year, which corresponds to an increase by 25.2% year-over-year. Now I would like to move to the next slide, which provides some information regarding the group's balance sheet structure. As of the end of June 2020, net debt stood by around EUR 1.1 billion.
Please note that the increase of net debt was also due to the recognition of non-current lease liabilities in connection with the initial application of IFRS 16. This had an effect of about EUR 70 million. Our financial flexibility is very solid. We benefit from low net debt and sufficient committed undrawn credit facilities, which amounted to EUR 595 million as of the 1st of July. Gearing was up from 2020 to 25.1% in the first nine months of the financial year. 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, which are well in line with our segment forecast. On the positive side, you can see improvement in the energy and Southeast Europe segment. In contrast, performance of the generation environment and network segment remained below the prior year. With this very general overview, let's now move on to the next slide, which covers the generation segment in more detail. Electricity generation volumes in the segment were down by 38.5% year-on-year. Renewable generation volumes were slightly below the previous year, whereas last year's commissioning of new wind parks supported an increase in wind production. Water flows declined. Thermal generation dropped. This was due to the closure of our coal-fired plant during the last year and lower use of our gas-fired plants in ties for network stabilization.
The usage of the Walsum power plant was below previous year level too. Segment revenue declined in line with these developments. The generation segment includes impairment losses, which I mentioned earlier. The Ashta hydropower plant, which is at equity consolidated in the Kavarna wind park in Bulgaria. Scheduled depreciation went up due to the investment in previous year's revaluations. In total, the generation segment generated a lower EBIT of EUR 49.4 million. On the next slide, I will continue with the energy segment. Revenue in the segment was by 33.7% below the previous year. This was primarily due to the decline in the marketing of our own electricity generation and a reduction in natural gas trading. The reduced usage of primary energy carriers and lower procurement prices were driving operating expenses down by 39.7%. The energy sales volumes showed contrasting developments. Electricity sales volumes were up by 6.4%.
The overall positive development of sales to industrial customers was, however, slowed by a COVID-19-related temporary decline in sales to industrial customers. Natural gas sales volumes were down by 3.8% due to a warmer winter and an increased competition. Our electricity and natural gas supply business, which is handled by EVN KG, recovered and returned to normalized earnings levels. EVN KG's contribution to an equity result was EUR 35 million in the first three quarters, after a loss of EUR 41.8 million last year. You will remember this was caused by a higher procurement cost and negative effects from the valuation of hedges at that time. Based on these developments in the energy segment, we reported EBITDA of EUR 72.9 million and the EBIT of EUR 57.4 million. On the next slide, I will present the development in our network segment.
As I already mentioned at the beginning of today's call, electricity consumption declined due to COVID-19, especially in the segment of industrial customers. Network sales 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 thermal power plants in Lower Austria. I would also like to remind you that the lower WACC for electricity distribution network, which was implemented on the 1st of January 2019, is for the first time applied for the full financial year. Based on this volume and price effect, revenue went down by 4%. Based on the stable development of operating expenses, EBITDA in the network segment declined by 8.5% and EBIT by 21.5%. On the next slide, I will continue with the Southeast Europe segment.
Energy demand in Southeast Europe suffered from mild temperatures and more recently, the COVID-19. Consequently, energy sales and network distribution volumes declined year-on-year. The financial performance in this segment was found during the reporting period. One supportive factor, a lower procurement cost of network losses in Bulgaria. This segment includes the other two impairment losses, which were triggered in the second quarter by higher country risk premiums due to the COVID-19. One was for our district heating in Bulgaria, EVN Bulgaria Toplofikatsia, and the other for the customer base in North Macedonia. The total segment EBIT stood at EUR 39.1 million. As always, in summer, the regulatory authorities decided on new regulatory electricity prices for household customers.
In Bulgaria, effective the 1st of July 2020, the prices for household customers in EVN supply area were increased by an average of 4.2%, following an increase by 3.5% in July 2019. In North Macedonia, the tariff decision became effective of the 1st of August 2020. It provides for an increase of roughly 7.4% for customers of our supply company, EVN Home. In last year's tariff decision, there was no price adjustment. Please note that these price increases are contrasted by higher procurement costs. I would like to conclude my presentation of the segment with the environment segment. I already mentioned some success in our international project business in the beginning of today's call. Let me briefly repeat. In Kuwait, the closing of our wastewater treatment project took place at the end of July.
Now all requirements are met such that we can start with utilization of the project. Due to the percentage of completion method, we will now be able to report results according to project progress. We were very successful in the acquisition of general contractor assignments for thermal sludge utilization projects in Germany. WTE Wassertechnik was awarded the contract in Berlin. The contract volume is about EUR 190 million. EVN share will be roughly 50% of the contract volume. Please note that the realization of the Berlin project will start only in autumn 2021. In the thermal sludge utilization, we are also active through our joint venture, Sludge to Energy. WTE Wassertechnik partnered with the German company, HUBER. Sludge to Energy received contracts for two new projects, one in Hanover with a contract volume of around EUR 40 million, one in Straubing with a contract volume of about EUR 15 million.
We see further potential for these projects in Germany. Therefore, the projects in Hanover, Straubing, and Berlin will add well to our track record in this area. In the international project business, WTE Wassertechnik is currently working on 10 projects in Germany, Croatia, Lithuania, Poland, Romania, Bahrain, and Kuwait. The order book was about EUR 445 million at the end of June. This number does not yet include the Kuwait project, as the closing only occurred at the end of July. Finally, I would like to inform you that the contract for the operation of the thermal waste incineration plant number three in Moscow expired at the end of June, and that the plant was constructed in accordance with the contract. 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 the segment. The share of results from equity accounted investees with operation in the nature was below the previous year. Please remember that last year's earnings from the wastewater purchase in Prague were included. In total, these developments led to a decline by EBITDA to EUR 14.1 million and an EBIT of EUR 5.3 million. 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 70.3% to EUR 392.3 million in the first three quarters of this financial year, which was caused by a lower dividend payment from equity accounted investees.
In addition, gross cash flow was corrected by the dividend from Verbund, which was paid in July after the balance sheet closing date, but was approved in June and therefore already included in EVN's financial results. Due to the development of working capital as at the end of June, cash flow from operating activities amounted to EUR 205.8 million. Cash flow from investing activities reflected a partial delay of investments due to the COVID-19, disinvestment of securities in one of our funds, and the guarantee payment from the Republic of Montenegro for the wastewater project in Budva. This was contrasted by the equity contribution for the Kuwait project and increased investment in cash funds. The cash flow from financing activities reflected the scheduled repayment of loans and the dividend paid for the previous financial year. The contrary factor was the issue of a green promissory note loan.
The net change in cash and cash equivalents amounted to EUR -75.8 million. With that, I would like to conclude my presentation. We are ready to take your questions.
Yes, ladies and gentlemen. If you would like to ask a question, please press nine followed by a star key on your telephone keypad. If you would like to withdraw your question, press nine and star again. The first question comes from Mr. Peter Crampton for Barclays. Please go ahead.
Good morning. I'm Peter Crampton here from Barclays. Two questions, if I may. Firstly, looking at your group net results, the EUR 211 million. Looking at your guidance, you're now already above that guidance. Were there any particular reasons you didn't adjust your full year outlook? The second question is, now where we have the Vienna Stock Exchange transaction closed, is there the potential of an ATX inclusion for EVN, and what would be the prerequisites for that to happen and when? Thank you.
Okay, thank you for your questions, Peter. Our financial year is following also the year regarding summer into winter. We are now in the real summer quarter. Traditional, this is the weakest quarter of EVN's performance. You have the fixed cost and you have especially also the depreciation. On this basis, you cannot draw a conclusion out of the third quarter result to the guidance for the financial year. We will have a lot of end of the year balance sheet date approvals of the hedges and so on. On this basis, I cannot change the outlook we were giving for the financial year. More or less, we confirm all trends are in line with this EUR 180 million-EUR 200 million net result, which we are expecting.
The second question, which we are raising, it is right after this kind completion of the transaction, the Vienna Stock Exchange is informed by the new owners about the new shareholder structure. Our free float is actually above 20% following their regulation. There's also committees which have to evaluate this. Secondly, of course, the volumes, which are traded in comparison to other competitors are defining then our chances. I'm confident that on the midterm, we will get back into the ATX.
Perfect. Thank you for your answers.
The next question comes from Ms. Teresa Schinwald from Raiffeisen Centrobank AG. Please go ahead.
Good morning, thanks for taking my question. I have two. The first on the hedge valuation effect, and pardon if I missed it during the presentation, but could you remind us on the remaining hedge valuation effect in the first nine months of this year? The second one is if you could provide us with an update on the renewables energy law in Austria that is still outstanding, has been outstanding for a very long time. If there has been any progress in the past three months, and what's ahead?
Okay. I think some help to do your evaluation is if you go to our notes and look on the equity investees, then you see EVN KG for the first three quarters last year and this year, how this has changed from -41 to +45. The main result for the group is coming from these changes from EVN KG. From this result, 2/3 are coming more or less, as a rule of thumb, from the hedges. The rest is the improved operating result. This, I think, gives you some guidance, how important the influence EVN KG's results for the group's results. We are very careful regarding expectation because it's the end of September who will decide how big this effect will be on a full year's basis.
If you look on the comparison for the first two quarters in EVN KG, you see the difference in the turnaround, which was taking place operational 1/3 and 2/3 by the changes of the market prices.
Great. That's all.
The second is the new law. The new law is late because I remember when we were discussing the half-year's result, we were expecting that the draft for the new energy law will be submitted to the parliament before December, then there was some news in December. Now we're coming at least at the end of the holiday season. The latest information is to expect it somewhere in September because in a couple of issues, we need also clear decisions to submit them for approval to Brussels. What has not changed, and this is maybe the most important for us, there is no indication that state institutions are ready to provide more than EUR 1 billion on subsidies per year.
This is the level of support which the public will give for the transition of the energy system on this basis, because this is in a way in compliance also with the levels of the recent past and the system itself got, in the past, the approval of Brussels. On this level, it's too early to say what kind of further details will define our framework for the further transformation of the renewable production, not only for Austria, but also for EVN Group. The project which we mentioned before and which we are pursuing are based on the old system of subsidization. There are permits for this project. It's more about additional projects in the near future, which we would be able then to pursue. This is especially true for photovoltaic.
There is no clear guidance till now what kind of support for the organization of big photovoltaic industrial parks will be given. There is a certain tendency that will be a tender system, but not on which basis the support will be.
There are no further questions in the queue. Therefore, I will repeat. Ladies and gentlemen, in order to state your question, please press nine followed by a star key on your telephone keypad. Yes, and we have Ms. Teresa Schinwald once again. Please go ahead.
Sorry, I have a follow-up. Also in the renewables sphere, and I know the conditions in Austria are not the best for PV, but there has been an increasing push for also PPA agreements in the southern parts of Europe and with your operations in Bulgaria. Would you see a potential for solar developments under PPA contracts in Bulgaria or even North Macedonia?
Yes, we have not seen so far big scale photovoltaic, which would be the basis for these PPAs on the midterm. We are following this trend. We see also the publication, we cannot confirm that in our core countries till now, that this is a big change in customer investor structure so far. It's still pretty much defined by subsidized tariffs and first phase of support for building up renewable capacity. It's more in Spain and in these Western European southern countries.
Okay. Thank you.
There are no further questions in the queue. I would like to hand over back to you, Mr. Szyszkowitz.
Yeah. Thank you for joining today's conference call. We will publish our full year results on Wednesday the 16th of December. Please join us then again, and goodbye.