Good morning, ladies and gentlemen, and 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 Shekovich.
Good morning, and welcome to the conference call on EVM's results for the first half of the twenty nineteen-twenty twenty financial year. The balance sheet closing date of our first half year was the 31st March. So please be in mind that today's results only include 2 weeks of the COVID-nineteen lockdown in Austria, which started mid March. Before I will dive a bit more into possible impacts of the COVID-nineteen 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 in previous communication. Most importantly, we delivered the envisioned normalization of our supply business. Last year, our supply company, Evenkake, suffered from higher wholesale prices, both in terms of reduced margins as well as the valuation of hedges. After implementing 2 price increases in 20 eighteentwenty 19 and then changing the apology for accounting of hedges, we managed to bring the operational result of the equity consolidated company, even Kake, back to a normalized level.
But our communication has also been very clear that results in the Generation Network segment would decline this year. This is also visible in today's results, and I will elaborate in a more detail later in the call. On the positive side, I'm very pleased that the progress continues CO2 footprint. The share of the group's renewable generation was 54% as compared to 40% a year ago. Partly, this rise in renewal generation is a result of last year's expansion of our wind power capacities.
In addition, the termination of the coal fired generation in Duenor last summer contributes well to a substantially less CO2 intensive production mix. SEGG analysts and investors are, of course, aware of our 49% investment in the Weizmann power plant in Germany To make sure that market participants make the correct assumption on the share of our remaining activity in car hard core, please be informed that ViZoom 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, which has been which with an installed capacity of 8.4 Megawatt. Commissioning is scheduled for the end of this calendar year.
Further wind projects in Lower Austria are in the pipeline. In April, we issued our 1st so called green promissory note loan. The transaction at a volume of €100,000,000 in January is 10 years, and 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. And 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-nineteen pandemic has or may have on EVM. To start with, on the 29th April, 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 €180,000,000 €200,000,000 The previous range had been €200,000,000 to €230,000,000 Such change in outlook became necessary in Europe impairment losses, which were triggered by an increase in country risk premiums for Southeastern European countries due to the COVID-nineteen. These impairment losses had a total negative non cash effect of about EUR 50,000,000 after tax.
In addition, the lockdown in Cobalt had been delaying the start of the wastewater project. Such delay reduced expected earnings contribution previously expected for this year and then 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 access mid- the long term consequences of the corona 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 both 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 Austin 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 project, but our investment focus remain unchanged. We continue to focus on networks, renewables, biomass heating and drinking water in rural 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 557,000,000 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, the volume largely 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 IVANKAG supported improvement of the share results from Equity Accounted Industries.
This profit and loss item, however, also includes an impairment loss of €4,900,000 made on our investment in the Ashta Hydropower joint venture in Albania. EBITDA was up by 17.7 percent at €388,800,000 Capital 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-nineteen triggered to the following impairment loss, €9,900,000 on the district heating company, Desk Clotiv and €1,300,000 on the Kamahana Windbag, both in Bulgaria as well as €3,200,000 on customer stock in Northern Macedonia. The group's EBIT increased by 16.5 percent to €230,700,000 In total, we generated a group net result of €152,700,000 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 1,200,000,000. Please note that the increase of net debt was also due to the recognition of a non core NPE abilities in connection with the initial application of IFRS 16, This had an effect of about EUR 17,000,000. Here, it was up from 22% to 29.8% in the first half of the financial year. Our strong balance sheet structure forms the basis of pursuing organic growth opportunities in our regulated and stable Austrian activities. In good position, half year is the first time to inform you about the annual update of our credit rating, which were published by the rating agency during May.
Moody's confirmed the AAN's rating and the stable outlook. S and P originally also confirmed the A rating and stable outlook. However, they had to revise the outlook to negative according to their rating methodology. The outlook of the rating of the province of Lower Austria was changed to negative in view of COVID-nineteen. 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 Southeast Europe segment. In contrast, performance of the Generation in Networks segment remained below the prior year. This is a 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. Renewal generation volumes were slightly below the previous year, whereas last year's commissioning of new wind products 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 last year, a lower use of our gas fired plant in Typhoon Network Service Stabilization. The usage of the Evolvazen power plant was below prior year's level 2.
Segment revenue declined in line with these developments. The Generation segment includes 2 impairment losses, which I mentioned earlier, one of the Ashta Hydro plant, which is at equity consolidated and the other for the Kavanah Windpack in Bulgaria. Scheduled depreciation went up due to the investments in real relations. In total, the Generation segment generated a lower EBIT of €32,100,000 In view of COVID-nineteen, 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 confirm 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 this 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 constant developments.
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 Yvencargi, recovered and returned to a normalized earnings level. Evencargis' contribution to add an equity result about EUR 20,300,000 in the first half year after loss of EUR 44,300,000 last year, which was caused by higher procurement costs and negative effect of devaluation of hedges at that time. Based on these developments, the Energy segment reported an EBITDA of €60,500,000 and an EBIT of €55,000,000 I confirm the full year outlook for this segment, which was predicted which predicts positive earnings.
However, we believe that COVID-nineteen will cause lower sales to industrial and commercial customers. In the next slide, I will present the developments in our network segment. As 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 the 1st January 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 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 2 impairment losses, which were triggered by higher country risk premiums due to COVID-nineteen. One for our Bulgarian district heating company that blocked it and the other for the customer base in Northern Macedonia. In total, segment EBIT stood at 31 point €6,000,000 I also can confirm the segment outlook for the Southeast Europe.
Assuming stable regulatory and energy framework conditions for the remaining 6 months of the financial year, we expect EBIT to range from €40,000,000 to €60,000,000 I would like to conclude my presentation of the segments with the Environment segment. In the International Project business, we are currently working on 9 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 will also include it in our order book. So excluding the Kuwait contract, the order book was about €255,000,000 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 the ongoing demand in Germany and Austria. According to German law, it will in the future no longer be possible to use sewage sludge as a fertilizer. This is to avoid pollution to harmful substances such as microplastic or hormones. In addition, treatment of sludge can lapse to the recovery of phosphorus, which is known as a piniparum material.
Therefore, I'm very pleased that I can inform you today that we won 2 contracts in Germany. In favor of 50% joint venture Sludge TO Energy, our partners, the German company Hooper, 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 €40,000,000 And just last Tuesday, we were awarded a contract in Berlin. We can be very proud that WTE Waserdegen will act as a general contractor for the planning and turnkey new thermal sludge utilization plant in the German capital. Our customer is the Berliner Wasabitribe, which is the company in charge of drinking water supply and wastewater disposal for the city of Bernin in parts of Brandenburg.
This project has a contract value of about €190,000,000 Therefore, our share is about 50%. Construction will start in autumn 2021. We see further potential for a lease project in Germany. Therefore, the Hannover and the Berlin contract will add well to our track record in this area. The development in the intention project business resulted in a corresponding rise of both revenue and operating expenses in the segment.
The share of results from equity accounted industries with operational 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, this development led to a decline in EBITDA to €9,200,000 and EBITDA of €3,300,000 Finally, I also want to confirm the outlook on the environment segment. The delay in the start of the COVID 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 this 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 flow fell by 17.5 percent to EUR 321,100,000 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 at the end of March, cash flow from operating activities amounted to €31,200,000 Cash flow from investing activities reflected net investments in the first equity tranche for the Coovat project.
This was contrasted by disinvestment of cash funds and guarantee payment from the Republic of Montenegro for the wastewater project in Budua. The cash flow from financing activities reflected the scheduled repayment of loans and the dividend paid for the last financial year. The net cash the net change in cash and cash equivalents amounted to minus €62,400,000 I would like to conclude with an update on Evian's shareholder structure. On the 5th March, Wiener Stadtberg informed the public that they have signed a share purchase agreement to acquire 51,000,000 EVM shares currently held by EMDW Trust. This corresponds to a stake of 28.4 percent in EVM.
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 €180,000,000 €200,000,000 assuming average conditions in the in the emerging market during the remaining 6 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 $0.47 per share. I have now reached the end of my presentation of Ewen's results for the first half of the 20 nineteen-twenty twenty financial year. I'm now looking forward to answering your questions.
The first question comes from Mr. Peter Krampton.
Good morning and hope all is well. Two questions, if I may. The first one is looking at your guidance of kind of €180,000,000 to €200,000,000 net income for this financial year, Is it true that there's a degree of conservativeness in that guidance given that you've done €152,000,000 just in the first half? And then the second question was when you expect kind of clearance of the Wineschachwerkke 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 now it's 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 a clear guidance, all of this based on normal energy kind of traditional weather conditions. As you know, this is maybe the main factor which is influencing our sales volumes and therefore also our expectations. So on this basis, I have no further information, which I can value now regarding this kind of outlook change. But as you may have seen or heard, Oster is doing quite well by getting the society and the economy back on track.
This will also help regarding stabilization of our outlook in the sense. We also see a certain similar development in Bulgaria and Northern 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. So I would confirm this EUR 180,000,000 to EUR 200,000,000 from today's point of view, but I have no further information. And regarding your second question, it is, as you know, an antitrust authority's approval necessary to the sales 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.
And 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? And then in general, where should we see 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 activity, some early days, but what have you seen so far in terms of bad debts? Is there an increase? Is it any comments you can make to volumes post the 31st March? What's the impact you've seen?
And lastly, on the EU Green deal and the boost for general renewable infrastructure investments, But what are your thoughts there? Are there any areas where EVM might benefit?
Thanks a lot. I think for the first question, let's go where we are expecting a normal cash flow of operations on a yearly basis. So around €400,000,000 we are fine with, yes? So this is answering your question. Why is it on the half year's results did go so down?
Because we have this event the sales company a delay. So in the last year, we earned the dividend there from the CAGI supply company in this year due to the bad result in the last year. This could be could not take this dividend. So this is the main effect, which is influencing the cash flow from operating activities. Everything else is just a question of target dates, yes, and no singular effects, which resulted in this kind of change, yes.
But we are confident on normal terms that this €400,000,000 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 1st couple of weeks of the lockdown, production went down obviously on a double digit level. Then it recovered. In the 1st couple of weeks, there was a stronger demand 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, yes. So more water was used already now in spring. And normally, the supply, in summer is even also getting higher every year. So this might balance this also. And 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. And regarding the aging and the collectability, 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 €7,000,000 Let's see how this is developing. But I think most of this is just also a timing question. And regarding the 3rd question, the green deal, I would expect that the green community and also the Austrian government, which is a green conservative gasm government, they will focus on investments in renewable production and greening of the infrastructure.
Therefore, 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. Therefore, we also try to adapt, try to put our infrastructure investments in this green segment on our top priority. And also our refinancing, which we did a couple of weeks ago goes in this direction.
Very clear. Thank you.
And the next question comes from Ms. Theresa 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 here? Then 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 regarding CapEx, which is normally at about €400,000,000 per year as far as I remember. Could you already quantify any effect from the delays resulting from the shutdown? That's about it.
Okay. Thanks a lot. First, regarding the valuation, it's around €20,000,000 the negative effect in the first half year at the target date. And if you try to follow the development of CAGI, I think it's you could say 2 third is coming from valuation, 1 third is coming from operational improvement. I think this will also be the target for this year, the evaluation of the AVN CAGI.
So I think this is a good turnaround here with the situation of pricing increases. And 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, RAC is serving very well as a partner in this because we have there contracted also gas storage. We use the gas storage for the optimization of Cadbury, so the supply business, but also for the security of supply regarding ties. Therefore, we tried to optimize this over time.
I think it's quite stable over the last years. It's also stable this year. And RAC has also repositioned itself by selling off the exploration business of SMO, mainly just the last part of the area, which is around the storage facilities. And so 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 cleaning of the gas and the use of storage facilities for our hydro what was this? Hydrogen.
Hydrogen, I'm sorry. Hydrogen. It was just hydro power, 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 €400,000,000 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 in part 2 years ago, yes, 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.
Yes, thank you for joining today's conference call. We will publish the results for the 1st 3 quarters of our 2019 2020 financial year on Thursday, 20 7th August. Please join us then and goodbye.