Hello, ladies and gentlemen, and welcome to the conference call on EVN's results for the first quarter of 2019-2020 financial year. At this time, all participants have been placed on the 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 results for the first quarter of 2019-2020 financial year. We have started with a sound performance in 2019-2020 financial year, after finishing the first quarter at the end of December with an EBITDA result above the previous year. Most importantly, we delivered the initial normalization of our supply business. Last year, our supply company, EVN KG, suffered from higher wholesale prices, both in terms of reduced margin as well as the valuation of hedges. After implementing price increases in 2018-2019 and changing the methodology for the accounting of hedges, we managed to bring the operational results of the equity consolidated company eventually back to normalized level. What I would also like to highlight is the share of the Group's renewable generation was 50% in the first quarter, compared to 34% in the previous year.
Partly, this is a rise in renewable generation as a result of last year's expansion of our wind power capacity. As you know, we now have an installed capacity of 367 MW. In addition, the termination of the coal-fired generation in June of last summer contributed well to the substantially less CO2-intensive production mix. With our setup, EVN Group is in the best position when it comes to enabling the transformation of the energy system. During the strategic event, we increased our communication efforts to the general public and to investors in special. EVN shall be recognized as an enabler of the energy transition. In the coming years, we will further expand our renewable generation fleet, which will not only include wind, but also large-scale photovoltaic. For the latter, we have identified the potential of up to 100 MW for the Group.
We currently assess locations and best timing to implement such photovoltaic potential. The transmission grids are the backbone of the transformation of the energy system. Therefore, the major portion of our investment program is dedicated towards upgrading the network infrastructure for the integration of growing volatile and decentralized electricity generation from wind and sun. Let me remind you that EVN is number one in Austria in biomass heating, and that we have a strong foothold in the environmental business. In a nutshell and to conclude, we think that all of these activities will place further demands on ESG-oriented investors. I would also like to use today's call to provide some information on our new project in Kuwait. Let me turn to the next slide now. In January, the contract was awarded for the Umm Al-Hayman wastewater project. The project consists of two parts.
First, there's a contract for the construction and realization of a wastewater treatment plant within the standards of a public-private partnership. Our German subsidiary, WTE Wassertechnik, will serve as the general contractor. The contract value is about EUR 600 million. The capacity of the plant is for 500,000 cu m a day, which corresponds to the wastewater of about 1.7 million people. In the past, WTE already realized projects of comparable size, for example, in Warsaw, Iraq, Turkey, and Istanbul. According to the PPP structure, WTE customer under the EPC contract will be a project company, which will receive project financing from a consortium of banks, including the German KfW [IPEX]. In majority, shareholders of this project company will be Kuwaiti institutions. WTE will be a minority shareholder with as big as 20%, with stock equity contribution to be invested at about EUR 30 million.
This equity contribution is covered by a state guarantee from the Federal Republic of Germany. Construction period of the plant is 2.5 years. Thereafter, WTE will be responsible for the operation of the plant for a period of 25 years. The second part of the Kuwait project is a general contractual assignment for the construction of the respective sewage infrastructure. This means pipes and pumping station, which will transport the wastewater to the plant and the purified water back to be used for irrigation requirement. The sewage infrastructure as a whole [has a contract volume of about EUR 350 million]. WTE's share in this contract is 2/3. The payment of this EPC contract will be directly financed by the state of Kuwait. Construction for this part of the project will be scheduled to extend up to four years.
Let me now continue with the key financials of the reporting period. The Group revenue declined by 3.3% year-over-year. The main reasons for this development are the decline in thermal generation, as well as volume and price effects in the network sector. Contradictory effects are increased energy revenue in Bulgaria and earned revenue in the international project business. The recovery of EVN KG, as well as the sound performance in Southeast Europe, supported an improvement in EBITDA. It was up 15.8% at EUR 190.6 million. The basis for scheduled depreciation was higher due to the investments and the devaluations we had to do after the impairment testing at the end of last financial year.
The Group's EBIT increased by 21.9% to EUR 118.8 million. In total, we generated a good net result of EUR 82.9 million during the first quarter of this financial year, which corresponds to an increase by 40.3% on a year-to-year basis. I would like to move to the next slide, which will have some information regarding the Group's balance sheet structure. Our communication regarding capital structure and financial investment remains unchanged. We believe the net debt will remain at a level around EUR 1 billion, but it can be subject to some seasonal fluctuations. As at the end of September 2019, net debt stood at EUR 1.1 billion.
Please note that increases of the net debt was also due to the recognition of non-current lease to acquire the liabilities in connection with the lease application of IFRS 16, which had an effect of about EUR 70 million in the first quarter.
Gear ing was at 25.4% in the first quarter of this financial year. Our strong balance sheet structure forms the basis of pursuing organic growth opportunities in our regulated and [stable] Austrian activities. We plan to invest approximately EUR 400 million a year over the coming years. Therefore, roughly EUR 300 million annually are dedicated to our networks, renewables, biomass heating, and drinking water in Lower Austria. Before I go through each of these segments in detail, I would like to give you a general overview on the EBITDA development of our business segments. The overview of EBITDA development by segment illustrates the key drivers of our performance during the reporting period. On the positive side, you can see an improvement in the Energy and the Southeast Europe segment.
In contrast, performance of the Generation and the Network segment remained below the prior year, which is well in line with the segment outlooks which we gave in December. With this very general overview, let's now move to the next slide, which covers the Generation segment in more detail. The conditions for renewables were mixed, water flows in the Danube and the Inn River, which are relevant to our electricity purchasing rights, were above the previous year. In contrast, we had the low average hydrological conditions for our small hydropower plants. Wind flows in Austria were above the long-term average, but below the previous year. However, last year's commissioning of new wind parks led to an increase in wind generation. In total, electricity generation from renewables in the Generation segment exceeded last year, whereas thermal generation volume declined.
This was due to the closure of our coal-fired plant in Dürnrohr and lower use of our gas-fired plant in Theiss for network stabilization. In total electricity generation volumes in this segment were down by 32.3% year-on-year. Segment revenues declined in line with these developments. Generation segment also reported lower EBITDA of EUR 34.5 million. Scheduled depreciation went up due to the investments and revaluations, resulting in a lower EBIT of EUR 17.9 million. In the next slide, we'll continue with the Energy segment. Revenue in this segment was by 22.7% below the previous year. It was primarily due to the decline in the marketing of own electricity generation and the reduction in natural gas trading. The lower usage of primary energy carriers were driving operating expenses down to 33.6%. Energy sales volume showed contrasting development.
Volumes in electricity were up 10.4%, following higher supplies to larger customers in Austria and Germany. In turn, actual gas sales volumes were down by 1.9%. As already mentioned, 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 our equity result was EUR 6.3 million during the first quarter after a loss of EUR 16 million last year, which was caused by higher procurement costs and negative effects from the valuation of hedges at the same time. Based on these developments, the Energy segment reported an EBITDA of EUR 31.7 million and an EBIT of EUR 26.7 million. On the next slide, I will present the developments in our Network segment.
The Network sales volumes showed a different development, w hereas volumes for electricity were slightly up. Th e natural gas distribution volumes declined in view of the reduced use of the thermal power plant in Lower Austria. I would also like to remind you that a new regulatory period with a lower WACC resulted for our electricity distribution as of January 2019.
This means a much lower WACC was applied in our first quarter of 2019- 2020. Based on volume developments in view of lower tariffs, revenues went down about 5.3%. As expected, the Network segment generated lower EBITDA of EUR 68.6 million, which corresponds to a decline by 14.7%. EBIT was down by 27.4% at EUR 36.2 million due to a higher scheduled depreciation. At the beginning of the new year calendar, the Austrian regulator as always, determined new network tariffs, where tariffs for electricity were increased by 0.3% on average, whilst natural gas were reduced by 8.1% on average.
On the next slide, we will continue with the Southeast Europe segment. Whereas energy sales and network distribution volumes suffered in the region from mild temperatures, we are reporting today a sound performance of our Southeast Europe segment, and supported further with lower procurement costs for network losses in Bulgaria. In total, EBITDA of the segment was up EUR 33.3 million and EBIT at EUR 15.5 million. I would like to continue my presentation of the segment with the Environment segment. I already gave a detailed overview of the Kuwait project at the beginning of the call. Let me now focus on other main developments in the international project business. As of the end of last December, we were working on eight general contracts simultaneously in Lithuania, Poland, Romania, and Bahrain.
The order book volume is EUR 259 million, this number does not yet include the Kuwait project, as the contract was only awarded in January. The development of the order book has a positive impact on the development of revenue in the segment. The rise in revenue from the international project business will be accompanied by a corresponding rise in operating expenses. The share of results from equity accounted investees with an operational nature, just below the previous year. Please remember that last year still included final earnings contribution from the wastewater project in Prague. In total, this development led to an increase in EBITDA of EUR 5.5 million and an EBIT of EUR 2.5 million. Finally, I would like to update you on the recent development in connection with the termination of the wastewater treatment project in Budva in Montenegro.
This project has been ongoing since May 2018, we terminated the contract and started negotiations with the representatives of the municipality of Budva and the Republic of Montenegro. Last December, the enforcement of claims led to payment of the guaranteed amount of EUR 29.3 million by the Republic of Montenegro. The municipality of Budva still has not paid its obligations. This is the reason why in January 2020, the arbitration proceedings defined in the guarantee contract with the Municipality of Budva were initiated to enforce contract claims against Budva. As at the end of January 2020, WTE Wassertechnik also ended its interimistic operation of the wastewater treatment plant, which had been continued since May 2018 and handed it back over to the municipality. 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 29.9% to EUR 140.7 million in the first quarter of the financial year. This is caused by lower dividend payments from equity accounted investees. Due to the negative development of our working capital as of the end of December, cash flow from operating activities amounted to EUR -28.9 million. Cash flow from investing activities reflected net investment in the first equity tranche of the Kuwait project. This is contrasted by the investment of cash funds and the guarantee payment of the Republic of Montenegro for the wastewater project in Budva. The cash flow from financing activities reflected the scheduled repayment of loans. The net change in cash and cash equivalents amounted to EUR -90.4 million. I would like now to conclude our today's call with the outlook for the Group. Based on today's first quarter results, we confirm our full-year guidance.
Assuming average conditions in the energy business, we expect that the operating result will remain constant, which means that we expect that the Group net result for 2020 is in the range of EUR 200 million-EUR 230 million. In comparing the outlook with our results for the last financial year, please bear in mind that this included positive valuation effects of approximately EUR 110 million after tax. Finally, I would like to inform you that based on the information provided by EnBW Trust at the end of December 2019, we note that their stake has decreased further from previously 28.6% to 28.4%. This brings us up to a free float of 20.6%, including our treasury shares of around 1%. I have now reached the end of my presentation of EVN results for the first quarter of the 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 and star key on your telephone keypad. If you would like to withdraw your question, press nine and star key again. Please press nine and star to ask a question right now. We have the first question from Teresa Schinwald. Madam Schinwald, your line is open.
Good morning. Thanks for taking my questions. I have a few. First one is, you mentioned lower hedging effects in your report. How much lower were these effects compared to the EUR 40 million reported in the quarter last year? The second question is on the networks. If you could give us also a value for the reduction of the transmission cost in the networks, because they were lowered as well. Regarding the SEE results were really strong, surprisingly strong. Is it a benchmark for the rest of the year? What do you expect in terms of EBITDA for Southeast Europe? Last one is a quick one. What was the non-recurring effect at RAG, and how much was it?
Thanks a lot, Madam Schinwald. Yeah. Starting regarding the change in the valuation of the hedges, it's around EUR 40 million. Yeah. If you have a closer look, EUR 20 million coming from KG and EUR 20 million from AG. Yeah. Regarding the calculation, the yearly adoption of the grid prices, actually, it is true that the transition cost adoption is also included, but under the bottom line, this kind of small increase is what is the total calculation reflecting the cost adoption. Yeah. In the Network costs, they are higher also, higher market prices. Yeah. This is always a moving calculation. Regarding South East, actually, the same is the driving costs for balancing energy has increased in the comparison, year-over-year comparison of the first quarters.
I would confirm that we expecting to make a gain between EUR 40 million-EUR 60 million for the year, more on the upper side. Keep in mind that the prices are always adopted at the 1st of July, and we have to wait there until we know more how this will develop. Regarding RAG, last year's measures compensated this year's measures. It's also a timing effect here. It's not a change in the structural production portfolio or the expectation regarding the results there, huh. Coming up in investment in RAG, which is what's happening in the fourth quarter of last year. Therefore with our energy results on a yearly basis, this is the time.
Okay. If we would average the contribution in the fourth quarter and the first quarter, it hints about the one-time effect. Am I right?
It's more stable than it looks if you just take the balance sheet date and the first quarter year-on-year comparisons.
Okay, thank you. Got it.
Next question comes from Mr. Peter Crampton. Mr. Crampton, your line is open.
Good morning. Thank you for taking my question. We've seen good recovery in your energy subdivision, and I just wanted to know, when do you expect these kind of negative one-offs to fully have washed through? What would be a reasonable EBIT margin or EBIT for the energy division in a stable state environment? Thank you.
I think we expect one more year until the real actual volumes on this actual accounting basis is coming to a more normalized level. And of course, the volatility as we have seen over the last years, is increasing due to volatility of energy markets in general. Regarding the margin, we are expecting over a longer period, around 5% margin in this kind of retail business.
Okay, thank you for your answer.
Ladies and gentlemen, if you would like to ask a question, please press nine and star key on your telephone keypad.
Thank you for joining today's conference call. We will publish our half year results for 2019-2020 on Thursday the 28th of May. Please join us then again, and bye-bye.