Full of Energy - Energie AG Oberösterreich

ANNUAL REPORT2007/2008THE GROUPGROUP MANAGEMENT REPORTTHE ENERGY SEGMENTTHE WASTE MANAGEMENT SEGMENTTHE WATER SEGMENTCONSOLIDATED FINANCIAL STATEMENTSPRIVATE PLACEMENT RESULTSIN NEW OWNERSHIP STRUCTUREThe partial IPO decided by the Upper Austrian parliamentin July 2007 which was subsequently intensivelyprepared by Energie AG, was cancelled in January2008. Instead of a partial privatization in the course ofan IPO, the Upper Austrian parliament decided to sellabout 50% of its shares in the course of a private place -ment. The thorough preparatory work for the initiallyplanned IPO made it possible to ensure a rapid implementationof the private placement on a sound basis.placement in the summer of 2008 brought in additionalequity of EUR 216 million that further enhancethe financial flexibility and liquidity of the Group.Especially against the background of worldwide distortions on capital and credit markets, a strong single-A rating ensures access to funding in order to financethe next growth steps that the Energie AG Groupwill take.CROSS-BORDER LEASINGSHAREHOLDER STRUCTURE OF ENERGIE AGOÖ Versicherung 0.5%OÖ Sparkasse 0.5%Hypo OÖ 1%voestalpine AG 2%Energie AG staff members 3.475%Oberbank 5%Upper Austria 51%30By decision of the extraordinary shareholders’ meet -ing on 03 July 2008, this private placement was im -plemented. The government of Upper Austria, whichholds 51%, continues to be the majority owner withconstitutional-law guarantees.The remaining 49% are spread out among UpperAustrian financial investors, strategic partners, andshares held by the Group’s staff members (acquiredor reserved). As Energie AG has property law linkageswith other energy suppliers which acquired and/orincreased their shares, it will be possible to take firststeps in the direction of a western energy axis.A capital increase was also implemented in the courseof the private placement, as a result of which the companyreceived EUR 216 million of fresh capital. Thiscapital secures the company’s independence and supportsthe implementation of its strategy in the directionof reliable supplies and value-based growth.EXCELLENT RATING CONFIRMEDFor 2008 the Energie AG Group was once again confirmedin its credit rating "A+" (Outlook negative) byStandard & Poor’s, the international rating agency.Both in national and international comparisons ofenergy suppliers a rating of "A+" is a top value, whichdocuments the persistently positive developmentand stability of the company. Standard & Poor’s commentsthe very good rating by referring to the on -going robust financial position of Energie AG. The keydata used to assess the credit rating, such as interestcoverage and debt-service capability were continuouslyimproved. Moreover, the successful privateEnergie AG entered into two US cross-border leasingtransactions (CBL transactions) with US trusts. US trustsare special companies, secured against bankruptcy,which were founded by the respective US investors.Below are the details of the CBL transactions:●●One CBL transaction for the high, medium, andlow-voltage grid ("grid transaction") from the2000/2001 business year and a term of 99 yearsin which Energie AG has a unilateral terminationright after 25 years.A CBL transaction for 14 hydro power plants("power plant transaction") from the 2001/2002business year where Energie AG has a unilateraltermination right after 31 to 40 years. The differentterms are due to the fact that the transaction isdivided among several trusts.The assets concerned continue to be the property ofEnergie AG and, accordingly, they are included in thebalance sheet.The payment obligations, including the terminationprice, between Energie AG and the US trusts result -ing from granting each other utilization rights werepaid in advance when entering the agreement andinvested at that time with financial institutions ofhigh rating. These financial partners make sure thatthe invested money is paid in order to serve the equityshare and the ongoing leasing rates as well as the terminationprice, in conformity with deadlines, currencyand amounts. Energie AG received an ad vantagefrom the transaction at entering the agreement forgranting the utilization rights. This advantage is atVerbund 5.025%Tiwag 8%LINZ AG 10% Raiffeisen OÖ 13.5%the unrestricted disposal of Energie AG and it is re -transferred in the balance sheet of Energie AG, affectingthe result, in keeping with the remaining term ofthe lease-back.On 14 December 2007 the letters of credit ("L/Cs"),granted by German regional banks in connectionwith the power plant transaction, were replaced byfinancial default insurance from Financial SecurityAssurance Inc. (FSA). The reason behind optimizingthe power plant transaction is that the US investorwould have an uncovered default amount (equitystrip amount) in case of a premature termination ofthe agreement. The L/Cs purchased when signing theagreement covered this default amount only by about50% of the calculated value. The financial defaultinsurance from FSA (rating: AAA/Aaa) offers a productthat covers the complete equity strip amountover the full remaining term of the transaction.Since the signing of the transactions, a US financialinstitute has taken over the function as the equitypayment undertaker, both for the grid transaction andthe power plant transaction. On account of the persistingcrisis on financial markets the financial institutewas downgraded to A-/A2 during the expiredbusiness year which is a clear weakening, as a resultof which the contractual obligations of Energie AGmust be restructured.For the grid transaction the existing equity paymentinstrument was replaced by US treasury strips on 07November 2008. For the power plant transaction theexisting equity payment instrument was secured by amarket-conform L/C on 14 November 2008.THE NEW CORPORATE HEAD OFFICESETS NEW STANDARDS IN ENERGYEFFICIENCYIn September 2008 the new corporate head office,i.e. Energie AG Power Tower, was completed accordingto schedule at the historic site in the newlydesigned district of the Linz central railway station.About 620 staff members from all business segmentshave been accommodated in a modern, energyefficientbuilding, which marks the position of Ener-31