Good morning, ladies and gentlemen. Welcome to the conference call on EVN's results for the 2018/2019 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, Mr. Stefan Szyszkowitz.
Good morning, welcome to the conference call on EVN's results for the 2018/2019 financial year. Today, we are reporting a group net result of EUR 302.4 million. This number includes a positive one-off effect of approximately EUR 110 million after tax. As reported ad hoc on the 24th of October, impairment testing triggered revaluations due to lower market interest rates and higher electricity prices. These revaluations were related to previously impaired renewable generation assets, electricity procurement rights, and distributing assets, as well as the customer base in Bulgaria, North Macedonia. Today's presentation contains an overview of the main revaluations. Please note that there was also revaluation of our investment in VERBUND Innkraftwerke , which is at the equity consolidated with operational nature. Apart from the effects from impairment testing, our full year results are well in line with the developments which we have been reporting throughout the year.
Earnings development was negatively influenced, as expected and predicted, by higher wholesale prices, the reduced volume of network stabilization contracts, as well as price and volume effects in the networks segment. I'm very pleased to report today that we reached our midterm target in connecting with our wind expansion strategy one year earlier than originally planned. As of the end of September 2019, we already had an installed wind capacity of 367 megawatts. Our aim now is to grow this number further to 500 megawatts until the end of 2023. The 2018-2019 financial year brought significant changes of our thermal power plant.
I would like to remind you that the separation of the German-Austrian electricity price zone, as of October 1, 2018, ended the use of our thermal power plants for network stabilization in Southern Germany. This has also substantially reduced reserve capacity to 430 MW coming from our Tyrolese gas-fired power plant, which is contracted by the Austrian transition network operator. This means that in view of the current market environment, all our remaining gas-fired capacities in Lower Austria have been deactivated and conserved. In view of the sharp increase in the prices of CO2 emission certificates, we also took the decision to exit from coal-fired generation in Lower Austria. Therefore, in early August, electricity generation from hard coal finally ended at our Dürnrohr power plant.
Through the massive expansion of our renewable generation and the shutdown of our hard coal-fired production in Dürnrohr, we will have reduced our CO2 footprint in Lower Austria 2020 by roughly two-thirds in comparison with 2005. In line with our strategy, our investments focused on the electricity and gas networks, renewable generation, natural heat, and drinking water in Lower Austria. In other words, our investments aim to strengthen our domestic regulated and stable activities. In total, gross investments were up 9.8% and amounted to EUR 391.4 million. Now for the dividend proposal. The executive board will propose to the annual general meeting a higher ordinary dividend of now EUR 0.47 per share, plus a bonus of EUR 0.03 per share.
The bonus dividend is also a signal to our shareholders to celebrate with us the 30th anniversary of EVN's listing to the Vienna Stock Exchange, which took place on the 27th of November 2019. On the basis of our planning parameters, our future dividend policy is to hold the absolute amount of the ordinary dividend at least constant at a level of EUR 0.47 per share. Let me now continue with the key financials of our 2018-2019 financial year. In 2018-2019, the group's revenue rose 6% year on year to EUR 2.2 billion. This increase was supported above all by the substantial growth in renewable generation. Further positive impulses, for example, from hedges for the marketing of electricity generation, were compensated by, among others, lower revenue from thermal generation in the network segment. Other operating income was up due to positive changes in inventories, especially in the international project business.
The cost of electricity purchases from third parties and primary energy expenses increased by 12.5%. This was partly due to a higher valuation of hedges for primary energy carriers and emission certificates, as well as the higher upstream network costs. Results from equity accounted investees operation nature were down by 30.6% at EUR 130.5 million. This development was mainly driven by two contrasting developments. EVN AG contributed negatively due to the higher procurement cost and negative effects from valuation of the hedges. Positive contrasting factors included the higher earnings contribution from Verbund Innkraftwerke, which was supported by an improvement in its operating business and the already mentioned revaluation of the investment. Based on these developments, we are reporting today a decline in EBITDA by 6% to EUR 631.7 million. As already explained, the effects from impairment testing were substantially positive this year.
The group EBIT improved by 2.7% year-on-year to EUR 403.5 million. Financial results improved by 19.5% to minus EUR 29.9 million, in particular due to an increase in the valuation of the R138 fund and to improved results from other investments. In total, group net result was by 18.8% higher at EUR 302.4 million. I would like to move to the next slide, which provides some information regarding the group's balance sheet structure. We managed to steadily reduce our financial indebtedness over the past couple of years. Meanwhile, net debt approximates EUR 1 billion. It's subject to mere minor seasonal fluctuations. Geared at the 30th of September was 22%. Please note that the further increase in equity was mainly due to the higher price of the Verbund shares. Our strong balance sheet structure forms the basis for pursuing organic growth opportunities in our regulated and stable Austrian activities.
Over the next four years, our investment will be at the range of EUR 400 million per year. Roughly EUR 300 million annually will be dedicated towards networks, renewable, and drinking water in Lower Austria. In the networks business, the already very high level of investment will increase even further. Here, the rollout of smart meters in Lower Austria marks the start of an additional investment cycle. However, these investments reflect the goal to generate higher earnings contribution from regulated and stable business areas in the Lower Austrian home market. For renewables, we intend to evaluate the feasibility of large-scale photovoltaic plants in our supply areas. For photovoltaic, we currently see a potential up to 100 megawatts, mainly in Lower Austria. When talking about our investment strategy, I would also like to highlight our focus on the drinking water business.
Here, we take a long-term view to fulfill our promise to our customers in Lower Austria to always supply sufficient drinking water in the best quality. Austria as a country fortunately has sufficient high-quality water reserves, but as a supplier, we need to take a proactive approach. In view of long, hot, and dry periods and population growth in the areas around Vienna, we need to ensure cross-regional transportation. That's why we are building new pipelines, and we are also investing in natural filter plants to reduce the hardness of water by natural means. 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.
One obvious development is that EBITDA of the generation and the energy segments include some of this year's positive and negative one-offs, as they were realized by companies which had equity consolidated with operational nature. The revaluations of the investment in Verbund Innkraftwerke and the negative valuation effects of hedges at EVN KG. EBITDA in the networks segment reflects negative price and volume effects. On the positive side, I would like to highlight the sound performance of the Southeast Europe segment. With this very general overview, let's move on now to the next slide, which covers the generation segment in more detail. Renewable generation in the segment was up to 9.6%. We benefited from the operation of our additional wind capacities and favorable wind conditions. Thermal generation volumes declined year-over-year due to the reduction in reserve capacity.
In total, electricity generation volumes in this segment were up by 1.2% year-on-year. Segment revenue benefited substantially from the increase in renewable electricity generation. When comparing this year's profit and loss statement to the previous year, please bear in mind that the generation segment now includes our thermal waste incineration plant in Zwentendorf , which resulted in a respective increase in revenue as well as operating expenses and depreciation. Results from equity accounted investees were substantially up due to a higher earnings contribution from Verbund Innkraftwerke. This company reported a better performance and impairment testing led to revaluation in the amount of EUR 92.2 million, which reflects lower market interest rates and higher electricity prices. In total, these developments resulted in EBITDA of EUR 260.6 million and an EBIT of EUR 218.4 million. Today, I will also provide an outlook for each of the segments.
For the generation segment, we need to differentiate between renewables and thermal. Renewables should benefit from the higher wind capacity. In 2018/2019, we added a capacity of 49 megawatts, which for the first time will now contribute for the whole financial year. Earnings from renewable depends on wind and water conditions, which can't be predicted. Please also bear in mind that roughly one-third of our total capacity of 367 megawatts does no longer produce at subsidized feed-in tariffs, as the 13-year term has already expired. For thermal, we expect a lower earnings contribution in 2019/2020, as our activities in Austria are currently limited to providing 430 megawatts of our gas-fired power plant in Theiss as a reserve capacity for the Austrian power grid. In view of all these aspects, we expect earnings in this segment to decline in 2019/2020.
On the next slide, I will continue with the energy segment. Our energy sales showed contrasting developments. Electricity sales volumes rose based on higher demand by industrial customer segment. In contrast, natural gas and heat sales volumes declined, mainly due to the milder temperatures. A main driver of revenue development in the energy segment is the marketing of electricity produced in our thermal power plants. Lower production there was, however, offset by a valuation of hedges for electricity production, as well as an increase in heat supplies and natural gas trading. In total, revenue was up 18.9% year-on-year. Operating expenses also increased due to the valuation of hedges for the procurement of primary energy carriers and emission certificates. The deterioration in the energy segment is mainly due to the performance of EVN AG, which is at equity consolidated with operational nature.
Our supply company suffered from higher energy procurement costs, which had a negative impact on its results in the amount of EUR 53 million compared to previous year. An additional negative effect resulted from the valuation of hedges, which is the company did as part of its free running procurement strategy. The resulting negative impact of the 30th of September 2019 was about EUR 96 million compared to 2017, 2018. Based on this development, the energy segment reported an EBITDA of minus EUR 85 million and an EBIT of minus EUR 97.2 million. Our outlook anticipates positive earnings again in this segment. This is based on the lower effects from the valuation of hedges and the normalization in the operating business. As you know, we did two price increases, one in October 2018 and one in June this year. On the next slide, I will present the developments in our network segment.
The development in our Austrian regulated business were in line with our expectations. Revenue was down by 3.7% due to price and volume effects. Regulatory determined lower network tariffs in the beginning of the calendar year, which reflected the lower weighted average cost of capital, which applied for the new five-year regulatory period. For electricity distribution, the new regulatory period started this year. For natural gas distribution, already a year ago. Network volumes fell substantially for natural gas distribution. This was due to the warm weather and the reduced use of the gas-fired power plants. Operating expenses were up due to higher upstream costs and expenses for third-party services. In total, EBITDA was down by 17.8% at EUR 208.2 million, and EBIT was down by 41.9% at EUR 82.9 million.
Lower cost of capital rates and the subsequent volume correction for prior periods required by the calculation methodology will influence network tariffs in 2020. For this reason, we expect segment results to be lower in 2019, 2020 than in the previous year. Please bear also in mind that the new five-year regulatory period for electricity distribution, which started in January 2019, will now apply for 12 months. Finally, our high investment in networks will lead to an increase in scheduled depreciation. On the next slide, I will continue with the Southeast Europe segment. Temperature-related energy demand in Bulgaria, North Macedonia was slightly higher than in the previous year, but below long-term average. In Bulgaria, sales volumes benefited from growth in the liberalized market. Based on these developments, we saw an increase in network and especially energy sales volumes.
In Bulgaria, the invoicing method for the so-called green electricity markup was changed in July 2018. In total, the change is neutral in results because revenue and procurement costs are reduced by the same amount. Despite this change, revenue grows slightly by 0.9% due to the overall positive energy sector developments. Lower write-offs of receivables and the change in the invoicing method for the green electricity markup are reflected in a decrease of 2.3% in operating expenses to EUR 779.6 million. Based on these developments, EBITDA increased by 25.3% to EUR 131.1 million. As already mentioned in the beginning of the call, impairment testing led to an increase in the value of customer bases in Bulgaria, North Macedonia, which had been impaired in 2013-'14. Additional valuations were related to our Bulgarian district heating company, Toplofikatsia Plovdiv, and our natural gas activities in Croatia.
In total, this development resulted in an EBIT of EUR 95.9 million. Subject to the stable regulatory and energy sector framework condition, we expect EBIT to range from EUR 40 million-EUR 60 million. I will conclude my presentation of the segments with the environment segment. I would like to start with an update on developments in our international project business. During 2018, 2019, our German subsidiary, WTE, successfully commissioned one wastewater treatment plant, each in Croatia, North Macedonia. WTE was also successful in acquiring six new general contractor assignments during the reporting year. These new projects have a combined value of about EUR 86 million. This means by the end of September, WTE was working on eight general contractor assignments in the wastewater sector in Lithuania, Poland, Romania, Croatia, and Bahrain. Our order books stood at EUR 268 million at the end of September.
In Kuwait, progress was made during the past financial year on the preparations and exclusive negotiations for the major wastewater project. In April 2019, WTE received the contract to handle the operation of the existing wastewater treatment plant, which shall later be replaced by the new plant. More recently, the required project company was founded, and the first equity contribution was already paid in by all state shareholders. WTE is a minority shareholder there, and state-owned Kuwait institutions are the majority shareholders. However, the final rewarding of the contract is still outstanding. From a strategic point of view, a new type of project is becoming increasingly important for the international project business, the planning and construction of plants for thermal sludge utilization. This is the next logical step after wastewater treatment.
With our longstanding expertise in know-how in the treatment of drinking water and wastewater, we are predestinated to engage in this field in which we see a lot of future potential. We are already working on such projects in Germany, Lithuania, and Bahrain. Due to legal changes in Germany and growing interest in other European Union states, we expect more tenders for such projects soon. For a comparison of the financial performance of the Environment Segment with the previous year, please bear in mind that our thermal waste incineration plant in Lower Austria was reassigned to the Generation Segment and is therefore no longer included. We are therefore reporting a decline in revenue as well as in operating expenses. The shares of results from equity accounted investees with operation nature increased. This was supported by the earnings contribution from the wastewater treatment project in Umm al-Quwain.
I would also like to point out that results from equity accounted investees also included the final share result contribution from the wastewater project in Graz. The plant was already commissioned in September 2018, but we had a contract to operate the plant for the first 12 months. In total, this development led to a decrease in EBITDA by 11% to EUR 26.8 million. EBIT was up at EUR 15.2 million due to the change segment reporting for our wastewater treatment plant in Lower Austria. Our outlook for the environment segment is always subject to the further acquisition and realization of assignments in the international project business. Assuming the contract for the Kuwait project will be signed within the next week, segment earnings in 1920 are expected to exceed the previous year. With this, I conclude the presentation of the segments.
On the next slide, I will continue with the development of our group cash flows. Gross cash flow declined by 1.8% to EUR 550.5 million. Positive developments such as the improvement in the result before income tax were offset by lower depreciation due to the revaluation after impairment testing. Due to the negative development of working capital as of the balance sheet date, cash flow from operating activities amounted to EUR 429.7 million, which corresponds to a decline compared to last year. Cash flow from investing activities reflected a reduction of investments in cash funds and securities in the R138 fund. Net investment slightly increased year on year. The focus remains on CapEx and wind parks networks and drinking water supply. The cash flow from financing activities mainly reflects dividend payments to the shareholder of EVN AG and minority shareholders, as well as scheduled repayment of loans.
The net change in cash and cash equivalents amounted to EUR 31.5 million. The cash position stood at EUR 246.2 million at the end of September. I would like to conclude the call with the outlook for the group. Today's group net results include positive valuation effects from impairment tests and derivatives of roughly EUR 110 million after tax. Assuming average conditions in the energy business environment, we expect that the operating results will remain constant. This brings us to expect that the group net result for 2019/2020 will be in the range of EUR 200 million-EUR 230 million. Finally, I would like to inform you that based on the information provided by EnBW-Trust e.V. On the 30th of September 2019, we note that their stake has decreased further from previously 29.4% to 28.6%. This brings us to a free float of 20.5%, including our treasury shares of 1.1%.
I've now reached the end of my presentation of EVN's results for 2018/2019 financial year. I'm now looking forward to answering your questions.
Okay. Ladies and gentlemen, if you'd like to ask a question, please press nine followed by the star key on your telephone keypad. Please press nine star now if you'd like to raise a question. The first question comes from Mr. Peter Crampton from Barclays.
Good morning, Peter Crampton from Barclays here. One quick question on your guidance for next financial year. Does this reflect any one-off charges relating to the valuation impact of hedges, or is that effect fully washed through the accounts with the 2018-2019 financial year? Thank you.
You're right. There is a certain delay since all this procurement with the new hedging policy is coming to a neutral position, but it's not relevant anymore as it has been in the past. Therefore, you can more or less expect that this is what we're expecting from the ordinary performance.
Okay, perfect. Thank you for your answer.
Okay, ladies and gentlemen, please press 9 star if you'd like to ask a question. Please press now 9 star if you'd like to ask a question. The next question comes from Ms. Theresa Schönwald.
Hi, good morning. One question is also regarding the guidance. Where does the variation come from between the EUR 200 and the EUR 230, if you could give us a hint? That's my first question. The second one is regarding the network results. The draft tariffs have not yet been confirmed, but it seems that there is a reduction in transmission costs. If you have any figure for us, what the effect could be, and why the network guidance is still negative despite the kind of positive draft for EVN's distribution tariffs and electricity.
Theresa, regarding your first question, this range, which we give with the 200 to the 230, this is exactly reflecting on the basis of our planning, also the variations of the weather effects and other effects. This is where we live in, yeah, in a certain range of expectation how the weather can develop. If you see the Vienna weather, yeah, we had a couple of weeks which were too warm. Since last week, the temperatures went down, so hopefully the winter will develop as a real winter, then it's easier later on in a half year, maybe to further reduce the range which we are giving today. You also know that in the past, we were very cautious because the weather effects always have been quite a tricky estimation.
Therefore, please accept that this is what we see from a today's point of view as a relevant range for our yearly guidance on this. Regarding the description of the different business segments, which we are giving also in our annual report, we try to give a clear guidance on the different business segments. You are right, with the new five-year period, which the first year, 12-year period now for electricity will be included in this year, and the volume adjustments together, we are expecting that the result of the grids in the grid division will go down in the ongoing year. Later on, adjustments will be in the years to come. As you know, we have quite a track record as being an efficient grid operator, and we will try to outperform the guidance of the regulatory authorities, but it is as it is.
The backs came down, and this is what we feel now regarding the ongoing business.
Okay. Thank you very much. At least it's snowing outside right now, so there is that. Thank you.
Well, you can imagine I was not so aware about the snow outside, but we'll go have a look later on.
Thank you.
Okay. Ladies and gentlemen, please press nine star if you'd like to ask a question. Press nine star on your telephone keypad if you'd like to ask a question. There are no more questions.
Okay. Thank you. We wish you nice seasons greetings. We will publish our first quarterly results on the 27th of February. Please join us there again. Goodbye.