By Nicole Lundeen
VIENNA--Austrian gas and hydropower utility Verbund AG (VER.VI)
Wednesday reported a sharp fall in its net profit for the first
half of the year due to difficult trading conditions and low water
levels.
Verbund said net profit for the first six months of the year
slumped 86% on the year to 56.6 million euros ($76.0 million), down
from EUR406.4 million in the first half of last year.
The utility attributed the fall in profits to a low water
supply, which led to reduced hydropower generation, low electricity
prices and several one-off expenses relating to its shut down of
several of its thermal power plants. In addition, last year's
earnings were positively influenced by a swap deal with German
utility E.ON SE (EOAN.XE).
Revenue also suffered, falling 15% to EUR1.40 billion, while
earnings before interest, taxes, depreciation and amortization
dropped 56% to EUR354.8 million.
In May, Verbund announced plans to mothball or permanently shut
around 2.5 gigawatts in power generation capacity due to "massive
distortions in the European electricity market" that have hurt the
profitability of its power stations. It is just one of many
European utilities to follow this path in response to tough
business environment created by government subsidies for renewable
energy and cheap coal imports from the U.S., meaning turbines
powered by renewable energies and coal are cheaper to run than
natural gas generators.
The company confirmed its most recent outlook, last updated this
month when the utility issued a profit warning. Verbund expects its
2014 group result to be around EUR70 million and 2014 EBITDA to be
around EUR690 million.
Write to Nicole Lundeed at nicole.lundeen@wsj.com
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