Good morning, ladies and gentlemen. Welcome to the conference call on EVN's results for the first half year 2019-2020. 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 first half of the 2019-2020 financial year. The balance sheet closing date of our first half year was March 31st. Please bear in mind that today's results only include two weeks of the COVID-19 lockdown in Austria, which started mid-March. Before I will dive a bit more into possible impacts of the COVID-19 pandemic on the full year, let me first talk about our operational performance during the reporting period, which was little affected by the coronavirus.
All in all, operational performance was sound. EBITDA, EBIT, and group net results were above the previous year. It is very important to note that all the key developments correspond to our expectations and previous communication. Most importantly, we delivered the envisioned normalization of our supply business. Last year, our supply company, EVN KG, suffered from higher wholesale prices, both in terms of reduced margins as well as the valuation of hedges. After implementing two price increases in 2018-2019 and then changing methodology for accounting of hedges, we managed to bring the operational result of the equity consolidated company, EVN KG, back to a normalized level.
Our communication has also been very clear that results in the generation and network segment would decline this year. This is also visible in today's result, and I will elaborate in more detail later in the call. On the positive side, I'm very pleased that the progress continues on the reduction of our CO2 footprint. The share of the group's renewable generation was 54%, as compared to 40% a year ago. Partly, this rise in renewable generation is a result of last year's expansion of our wind power capacities.
In addition, the termination of the coal-fired generation in Dürnrohr last summer contributes well to a substantially less CO2-intensive production mix. I think analysts and investors are, of course, aware of our 49% investment in the Walsum Power Plant in Germany. To make sure that market participants make the correct assumption on the share of our remaining activity in hard coal, please be informed that Walsum will account for less than 3% of our group revenue. We are highly committed to further expand our renewable generation fleet over the coming years. 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. Further wind project in Lower Austria are in the pipeline. In April, we issued our first so-called green promissory note loan. The transaction had a volume of EUR 100 million with tenor is 10 years. The funds will be used for the financing of our wind park projects. We also access possibilities for large-scale photovoltaic projects within the group. We will install photovoltaic equipment on our own buildings to produce solar energy for our own energy and electricity needs, for example, on biomass heating plants or pumping stations for drinking water.
Finally, distribution grids are the backbone of the transformation of the energy system. Therefore, the major proportion of our investment program is dedicated towards upgrading the network infrastructure for the generation of growing volatile and decentralized electricity generation from wind and sun. Next, I would like to provide a brief overview on impact the COVID-19 pandemic has or may have on EVN.
To start with, on April 29th, we published an ad hoc announcement informing the market that we had to lower our full-year guidance for the group net result to range between EUR 180 million and EUR 200 million. The previous range had been EUR 200 million-EUR 230 million. Such change in outlook became necessary in view of impairment losses, which were triggered by an increase in country risk premiums for Southeastern European countries due to the COVID-19. These impairment losses had a total negative non-cash effect of about EUR 50 million after tax. In addition, the lockdown in Kuwait had been delaying the start of the wastewater project.
Such delay reduced expected earnings contribution previously expected for this year and next year. However, I would like to mention that we were asked to take over the operation of an existing wastewater treatment plant in Kuwait in April 2019, which generated ongoing income in Kuwait for a year already. As you can imagine, it's difficult to assess mid- to long-term consequences of the COVID-19 crisis on our business and framework conditions at this stage. What I can say is that we noted weaker demand from industrial and commercial customers during the lockdown.
However, our integrated business model and broad diversified customer base proved to be resilient and stabilizing. When you think about possible negative volume effects in the network business, please bear in mind that the Austrian regulation provides for adjustments of such negative volume effects through future tariffs. I can also inform you that the lockdown has occasionally been delaying investment projects, but our investment focus remain unchanged.
We continue to focus on networks, renewables, biomass heating, and drinking water in Lower Austria. Finally, let me assure you that our financial flexibility remains solid. We benefit from net debt and sufficient committed undrawn credit facilities in the amount of EUR 557 million. Let me now continue with the key financials for the reporting period. The group revenue declined by 4.2% year-on-year. The main reasons for this development are the decline in thermal generation, as well as volume and price effects in the network segment. In contrast, energy revenue in Bulgaria and in 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. This profit and loss item, however, also includes an impairment loss of EUR 4.9 million made on our investment in the Ashta Hydropower joint venture in Albania. EBITDA was up by 17.7% at EUR 388.8 million. Schedule depreciation went up due to investments and the reevaluation we had to do after impairment testing at the end of the last year.
In turn, higher country risk premiums for Southeastern Europe countries due to the COVID-19 triggered the following impairment loss, EUR 9.9 million on the district heating company TEZ Plovdiv, and EUR 1.3 million on the Kavarna Wind Park, both in Bulgaria, as well as EUR 3.2 million on customer stock in North Macedonia. The group's EBIT increased by 16.5% to EUR 230.7 million. In total, we generated a group net result of EUR 152.7 million during the first half year of this financial year, which corresponds to an increase by 18.4% year-on-year.
Now I would like to move to next slide, which provides some information regarding the group's balance sheet structure. As of the end of March 2020, our net debt stood at EUR 1.2 billion. Please note that the increase of net debt was also due to the recognition of the non-current lease liabilities in connection with the initial application of IFRS 16, which had an effect of about EUR 70 million. Gearing was up from 22%- 29.8% in the first half of this financial year.
Our strong balance sheet structure forms the basis of pursuing organic growth opportunities in our regulated and stable Austrian activities. In good tradition, half year is the first time to inform you about the annual update of our credit rating, which were published by the rating agencies during May. Moody's confirmed the A1 rating and the stable outlook. S&P originally also confirmed the A rating and stable outlook.
However, they had to revise the outlook to negatives according to their rating methodology, and the outlook of the rating of the province of Lower Austria was changed to negative in view of COVID-19. 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 improvements in the energy in the South East Europe segment. In contrast, performance of the generation, the network segment remained below the prior year. With this very 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 31.4% 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 in June of last year, a lower use of our gas-fired plant Theiß for network service stabilization. The usage of the Walsum Power Plant was below prior year's level too. Segment revenue declined in line with these developments. The generation segment includes two impairment losses, which I mentioned earlier. One of the Ashta Hydro plant, which is at equity consolidated, and the other for the Kavarna Wind Park in Bulgaria. Scheduled depreciation went up due to the investments and reevaluations.
In total, the generation segment generated a lower EBIT of EUR 32.1 million. In view of COVID-19, I would like to provide an update on the segment's outlooks for this financial year, which we published in December in our last full year report. For the generation segment, I confirmed the original outlook, which predicts a decline of the full year segment result, which is mainly due to lower thermal generation. On the next slide, I will continue with the energy segment. Revenue in the segment was by 28.1% below the previous year. This was primarily due to a decline in the marketing of our own electricity generation and a reduction in natural gas trading.
The lower usage of primary energy carriers were driving operation expenses down by 35.3%. The energy sales volumes showed contrasting developments, where volumes in the electricity were up 7.9%, following higher supplies to larger customers in Austria and Germany. In turn, natural gas sales volumes were down by 2.7%. Our electricity and natural gas supply business, which is handled by EVN KG, recovered and returned to a normalized earnings level. EVN KG's contribution to add an equity result about EUR 20.3 million in the first half year after a loss of EUR 44.3 million last year, which was caused by higher procurement costs and negative effect of the valuation of hedges at that time.
Based on these developments, the energy segment reported an EBITDA of EUR 65.2 million and an EBIT of EUR 55 million. I confirm the full year outlook for the segment, which predicts positive earnings. We believe that COVID-19 will cause lower than expected sales to industrial and commercial customers. On the next slide, I will present the developments in our network segment. The network sales volumes were at previous year's level, the natural gas distribution volumes declined in view of the reduced use of the 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 January 1, 2019, is for the first time applied for the full financial year. Based on volumes and price effects, revenues went down by 2%. As expected, the network segment generated lower EBITDA and EBIT. This brings me to confirm the segment outlook. We expect full year's result to be below the previous year. On the next slide, I will continue with the Southeast Europe segment. Energy sales and the network distribution volumes suffered in this region from mild temperatures.
Still, operating performance was sound during the first half year of the financial year. One supportive factor were lower procurement costs for network losses in Bulgaria. This segment includes the other two impairment losses, which were triggered by higher country risk premiums due to COVID-19. One for our Bulgarian district heating company, TEZ Plovdiv, and the other for the customer base in North Macedonia. In total, segment EBIT stood at EUR 31.6 million.
I also can confirm the segment outlook for Southeast Europe, assuming stable regulatory and energy sector framework conditions for the remaining six months of the financial year, we expect EBIT to range from EUR 40 million-EUR 60 million. I would like to conclude my presentation of the segments with the environment segment. In the international project business, we are currently working on nine projects in Croatia, Lithuania, Poland, Romania, Bahrain, and Kuwait. As already mentioned, the lockdown in Kuwait had been delaying the start of the wastewater project. Once we officially kick off the project, we'll also include it in our order book.
Excluding the Kuwait contract, the order book was about EUR 255 million at the end of March. In our last full year report, we informed you that we started to develop solutions in an exciting and interesting new area of business, thermal sludge utilization. Based on our experience in both wastewater treatment and thermal waste incineration, it was the next logical step to take, especially in view of growing demand in Germany and Austria. According to German law, it will in future no longer be possible to use sewage sludge as a fertilizer. This is to avoid pollution through harmful substances, such as microplastic or hormones.
In addition, treatment of sludge can lead to the recovery of phosphorus, which is known as a critical material. Therefore, I'm very pleased that I can inform you today that we won two contracts in Germany. In favor of 50% joint venture sludge2energy, our partner is the German company, Huber, was awarded a contract for construction of a thermal sludge incineration plant for the German city of Hanover. This project has a contract volume of about EUR 40 million. Just last Tuesday, we were rewarded a contract in Berlin. We can be very proud that WTE Wassertechnik will act as a general contractor for the planning and turnkey construction of a new thermal sludge utilization plant in the German capital.
Our customer is the Berliner Wasserbetriebe, which is the company in charge of drinking water supply and wastewater disposal for the city of Berlin and parts of Brandenburg. This project has a contract value of about EUR 190 million. Our share is about 50%. Construction will start in autumn 2021. We see further potential for this project in Germany. The Hanover and the Berlin contract will add well to our track record in this area.
The development in the international project business resulted in a corresponding rise of both revenue and operating expenses in the segment. The share of results from equity accounted investees with operation in nature was below the previous year. Please remember that the last year, the earnings from the wastewater project in Prague were included. In total, these developments led to a decline in EBITDA to EUR 9.2 million and in EBIT to EUR 3.3 million. Finally, I also want to confirm the outlook from the Environment segment.
The delay in the start of the Kuwait project and resulting impact on our full year guidance, we still expect that the contractual realization of the project will be initiated in the course of this financial year. Therefore, we expect the segment result to exceed prior year's level. With this, I conclude the presentation of the segment. On the next slide, I will continue with the development of our group cash flows. Gross cash flows fell by 17.5% to EUR 321.1 million in the first half year of this financial year. This was caused by lower dividend payments from equity accounted investees.
Due to the seasonal development of working capital as at the end of March, cash flow from operating activities amounted to EUR 31.2 million. Cash flow from investing activities reflected net investments in the first equity tranche for the Kuwait project. This was contrasted by disinvestment of cash funds and the guarantee payment from the Republic of Montenegro for the wastewater project in Budva. The cash flow from financing activities reflected the scheduled repayment of loans and the dividend paid for the last financial year.
The net change in cash and cash equivalents amounted to minus EUR 62.4 million. I would like to conclude with an update on EVN shareholder structure. On March 5th, Wiener Stadtwerke informed the public that they have signed a share purchase agreement to acquire 51 million EVN shares currently held by EnBW Trust. This corresponds to a stake of 28.4% in EVN. The transaction is still subject to the approval from the antitrust authorities. The participants of these transactions will, of course, have to inform the market once the transaction will have been closed. Finally, I would like to confirm our outlook for the financial year.
We expect to reach a group net profit in the range between EUR 180 million and EUR 200 million, assuming average conditions in the energy market during the remaining six months of the current financial year. I can also confirm our dividend policy. We aim to hold the absolute amount of the ordinary dividend at least constant at the level of EUR 0.47 per share. I've now reached the end of my presentation of EVN results for the first half of the 2019-2020 financial year. I'm now looking forward to answering your questions.
Ladies and gentlemen, if you would like to ask a question, please press nine star on your telephone keypad. Please press nine star if you'd like to ask a question. The first person comes from Mr. Peter Crampton.
Good morning. Hope all is well. Two questions, if I may. The first one is, looking at your guidance of EUR 180 million-EUR 200 million net income for this financial year, is it true that there's a degree of conservativeness in that guidance given that you've done EUR 152 million just in the first half? The second question was, when you expect clearance of the Wiener Stadtwerke buy of the EVN shares and whether you foresee any kind of difficulties or not. Thank you.
Well, both questions are good questions, but complicated questions because till now, it is very hard to judge what to expect further on regarding the pandemic situation. What we try to do, on the basis of end of March projections, to do our best to give the client a clear guidance. All of this based on normal energy and traditional weather conditions. As you know, this is maybe the main factor which is influencing our sales volumes and therefore also our expectations. On this basis, I have no further information which I can value now regarding this kind of outlook change.
As you may have seen or heard, Austria is doing quite well by getting the society and the economy back on track, and this will also help regarding stabilization of our outlook in the sense. We also see a certain similar development in Bulgaria and North Macedonia, that after the first troubling couple of weeks, now things are getting more optimistic. This might also influence the overall production and also economic development in these main core regions, which are the most important sales regions for us.
I would confirm this EUR 180 million-EUR 200 million from today's point of view, but I have no further information. And regarding your second question, it is, as you know, antitrust authorities approval necessary. The seller and the buyer both made public that they're expecting till the end of the year to reach this confirmation. Let's see. We will inform you immediately if anything is changing to this expected outlook.
Okay. Thank you for your answers.
The next question comes from Mr. Lueder Schumacher.
Yes. Good morning. Hope all is well. Three questions on my side, the first one is on your cash flow from operating activities. It is down a lot, 71%. Could you just maybe elaborate a bit more on the driving factors there? How much of that is due to working capital? How much of this do you expect to normalize by the end of the financial year? In general, where can we expect this number for the full year? Is there some kind of recovery you would expect?
The second one is just on the supply activities. Early days, but what have you seen so far in terms of bad debts? Is there an increase? Any comments you can make to volumes post March 31st? What's the impact you've seen? Lastly, on the EU Green Deal and the boost for general renewable infrastructure investments, what are your thoughts there? Are there any areas where EVN might benefit?
Thanks a lot. I think for the first question, let's go where we're expecting a normal cash flow from operations on a yearly basis. Around EUR 400 million, we are fine with. This is answering your question. Why is it on the half year's results, it goes so down? Because we have this EVN KG, the sales company, a delay. In the last year, we earned the dividend there from the KG supply company. In this year, due to the bad result in the last year, we could not take this dividend, therefore. This is the main effect which is influencing the cash flow from operating activities.
Everything else is just a question of target dates. No singular effects which resulted in this kind of change. We are confident on normal terms, that is EUR 400 million on operating cash flow on average is the target which we were aiming at. Regarding the supply side, it's very interesting because in the first couple of weeks of the lockdown, production went down, obviously, on a double-digit level. It recovered. In the first couple of weeks, there was a stronger demand on the household side, which also over the time were more going back to this kind of normal levels of demand.
Therefore, if I have a projection, I would expect that over the year, there will be a single-digit reduction on sales on the energy side. On the water side, we have an increase of sales. More water was used already now in spring, and normally, the supply in summer is even also getting higher every year. This might balance this also. Please keep in mind, as I said before, that the volumes effect in the grid will be put into the tariffs in the future, so it's only a timing question. Regarding the aging and the collectibility, maybe it's still too early to have a proper judgment here.
In Austria, till the end of June, we expect on our activities here, an increase of working capital of around EUR 7 million. Let's see how this is developing, but I think most of this is just also a timing question. Regarding the third question, the Green Deal, I would expect that the European Community and also the Austrian Government, which is a green conservative government, they will focus on investment in renewable production and greening of the infrastructure.
I think after overcoming these turbulences now with the pandemic, I think, this is not changing the course of Europe, but they will try to combine the financing and the targeting of green infrastructure. We also try to adopt, try to put our infrastructure investment in this green segment on our top priority. Also the financing which we did a couple of weeks ago goes in this direction.
Very clear. Thank you.
The next question comes from Miss Teresa Schinwald.
Good morning, and thank you very much for taking my questions. The first one is more for bookkeeping. I know that the hedge valuation effect is tapering out, but could you still provide us with the remaining valuation effect for the first half of the business year? My second question is regarding actually your gas storage business, as you're in a unique position in Central Europe.
Could you tell us what's going on right now, apart from very full storage levels? What's the outlook for the next two quarters in terms of the contribution for RAG? What's going on there? The last one is regarding CapEx, which is normally at about EUR 400 million per year, as far as I remember. Could you already quantify any effects from the delays resulting from the shutdown? That's about it.
Okay, thanks a lot. First, regarding the valuation, it is around EUR 20 million, the negative effect in the first half year at the target date. If you try to follow the development of EVN KG, I think you could say 2/3 is coming from valuation, one-third is coming from operational improvement. I think this will also be the target for this year, the evaluation of the EVN KG. I think this is a good turnaround with the perspective pricing increases. The second thing which you mentioned regarding gas storage, as you know, we really believe in the energy value chain from the sourcing of the energy to the end customer.
Therefore, RAG AG is serving very well as a partner in this because we have their contracted also gas storage. We use the gas storage for the optimization of KG, so the supply business, but also for the security of supply regarding Theiß. We try to optimize this over time. I think it's quite stable over the last years. It's also stable this year. RAG has also repositioned itself by selling off the exploration business of gas and oil mainly. They just have last part of the area, which is around the storage facilities.
They're transforming themselves more and more to a storage facility, and hopefully in a new green world, as we discussed before, they will find a place also regarding the greening of the gas and the use of storage facilities for hydro. What was this? Hydrogen. I'm sorry. Hydrogen. I almost said hydropower, but it's hydrogen. Sorry for that. Regarding the CapEx, we can give some guidance, which is, of course, influenced by the last couple of weeks.
We are still aiming at the EUR 400 million, as you mentioned, but it might be 10% less. It's pretty much also depending regarding permits and the delivering of construction. Over the last couple of days, I would say we will be even better in reaching this goal than two weeks ago, yeah, because now all the construction sites are already working. Again, the support by the governmental institution is also going back to normal.
Thank you very much.
There are no more questions. Ladies and gentlemen, if you'd like to ask a question, please press nine star on your telephone keypad.
Okay. Thank you.
There are no more questions on the phone.
Yeah. Thank you for joining today's conference call. We will publish the results for the first three quarters of our 2019-2020 financial year on Thursday, August 27th. Please join us then and goodbye.