ANNUAL REPORT2007/2008THE GROUPGROUP MAN<strong>AG</strong>EMENT REPORTTHE ENERGY SEGMENTTHE WASTE MAN<strong>AG</strong>EMENT SEGMENTTHE WATER SEGMENTCONSOLIDATED FINANCIAL STATEMENTSResearch and DevelopmentResearch, development and innovation are integralcomponents <strong>of</strong> the entrepreneurial activities <strong>of</strong> the<strong>Energie</strong> <strong>AG</strong> Group.During the expired business year, the expenses forresearch, development and innovation amounted toabout EUR 2.4 million. In the various entities <strong>of</strong> theGroup, about 235 staff members were responsiblefor performing this work, in addition to their day-todayduties.In addition to the activities within the company, the<strong>Energie</strong> <strong>AG</strong> Group contributes decisively to researchactivities by participating actively in the energy re -search group <strong>of</strong> the Austrian Association <strong>of</strong> ElectricityCompanies and, on top <strong>of</strong> this, in the research policybodies <strong>of</strong> the European Commission, DirectorateGeneral Research, that deal with electricity issues. Inthis context, the company contributes expert knowledge and also assumes project tasks.In addition to a general technical orientation <strong>of</strong> re -search and development activities and <strong>of</strong> innovationprocesses, developments focusing on business ad -min istration aspects, socio-political topics and newforms <strong>of</strong> staff development and staff managementalso assume special priority.During the year under review, research, developmentand innovation were promoted, inter alia, in the followingprojects:●●●When constructing the new corporate head <strong>of</strong>fice<strong>of</strong> <strong>Energie</strong> <strong>AG</strong>, i.e. the Power Tower, the necessarypreparatory work was performed so that verifiablebasic data can be compiled, and the relevant re -search data can be supplied for the innovativeenergy supply systems.In connection with the distribution grid, specials<strong>of</strong>tware was designed and programmed extern -ally, which considerably improves the transmissionby Internet <strong>of</strong> commercial and technical data bythe plant builders and thus reduces transmissiontimes. Completeness <strong>of</strong> the data is mandatory,which ensures a secure and complete archiving <strong>of</strong>the data for subsequent processing jobs.In cooperation with other electricity distributionsys tem operators and research institutions in Aus -tria, first studies were begun concerning verifiablebasic data. The objective is to obtain reliable informationon grid stability by way <strong>of</strong> a higher level <strong>of</strong>integrating de centralized generation plants, whileusing the exist ing grid on an expanded scale. Withthe growth scenarios for decentralized productionfacilities in the medium-voltage system, regulatingprocesses were developed as alternatives tostronger lines. These were validated in simulationscovering one-year periods. Another test was toestab lish how a performance balance can be ob -tained by actively managing decentralized generationfacilities and major loads.●●●●The integration tests for AMIS, the new digitalelectricity meter generation, begun during the previousbusiness year, were successfully completedduring the expired business year. In the course <strong>of</strong>this test, the system was further developed and isnow ready for roll-out. In the next few months, alarge-scale trial operation with 10,000 meters willbe started.An innovative combination <strong>of</strong> operating radio transmissionand transmission technologies with fiberoptic lines was applied to study improvements <strong>of</strong>the range <strong>of</strong> radio transmissions. The result is toachieve a high transmission quality, both duringregular operations and during default incidents.New evaluation systems for selected energy efficiencymeasures in households were developedin cooperation with an external research institute.Saving potentials, costs, requirements for implementationand accountability, as defined by thedirective on energy end-use efficiency, were evaluated. By using values based on technical experience,plausible and transparent estimates, as wellas data from literature were validated.Together with an external institute, the natural gasbusiness area is engaged in a research project toexamine to what extent and under what frameworkconditions the fermentation process in bio-gasplants can be accelerated, thus reducing through -put times considerably.●●Together with an applied-science university, thewaste-management business area conducted a co -operation project on the use <strong>of</strong> residual materialsas energy sources for sterilization purposes. In particular,it was analyzed what process controls arenecessary so that the phosphor-rich ash, obtainedin the process, can be further processed into fertilizerand thus into a raw material.The business area water succeeded in a cooperationprojection with EU co-financing in ensuringthat a so-called water safety plan provides an on -going quality assurance for drinking water, at thesame time identifying and preventing possible risks.● In the course <strong>of</strong> further developing the perform -ance-oriented salary system, systems were devel -oped that allow the equal evaluation <strong>of</strong> similarfunctions throughout the Group on the basis <strong>of</strong>abstract model job clusters. This will improve thepossibility to plan personnel costs. The specificnational framework conditions <strong>of</strong> industries andorganizations were especially taken into account.7879THE NATURAL GAS BUSINESS AREACONDUCTS ACTIVE RESEARCHINTO OPTIMIZING THE TIME REQUIREDFOR THE FERMENTATION PROCESSIN BIO-GAS PLANTS.
ANNUAL REPORT2007/2008THE GROUPGROUP MAN<strong>AG</strong>EMENT REPORTTHE ENERGY SEGMENTTHE WASTE MAN<strong>AG</strong>EMENT SEGMENTTHE WATER SEGMENTCONSOLIDATED FINANCIAL STATEMENTSOutlook80The <strong>Energie</strong> <strong>AG</strong> Group will continue to pursue itsvalue-based growth strategy with consistency in thecoming business year. The goal is to be a major supplier<strong>of</strong> infrastructure services in the core business sectorsenergy, waste management and water in Aus triaand additional countries in Central and Eastern Europe.All business sectors contribute towards increasingthe value <strong>of</strong> the Group, combined with a major ex -pansion <strong>of</strong> the operating result, which is in line withthe objectives <strong>of</strong> a balanced corporate portfolio:●●Building the 400 MW combined-cycle gas turbinepower plant at Timelkam was the answer <strong>of</strong> thegeneration business area to the challenge <strong>of</strong> continuouslyrising electricity prices and higher elec -tricity demands, with production units in Europebecoming scarcer at the same time.At the beginning <strong>of</strong> the 2008/2009 business year,the power station took up its trial operation.Once the power station has begun its full-scaleoperation, the Group’s coverage rate for own electricitywill go up to about 70%. The existing powerstations on that site, i.e. a hard coal power-stationblock, as well as a gas-turbine unit, will becomestandby facilities after full-scale operation has be -gun. As compared to these latter plants, emissionscan be greatly reduced, and efficiency can be in -creased significantly.We continue to look into and secure further locationsfor thermal power station projects.With regard to hydro power production, the focusis on enhancing the efficiency <strong>of</strong> existing plants, aswell as on utilizing further hydro power potentialsin the defined geographical area.The first period <strong>of</strong> incentive-based regulation forelectricity distribution system operators in Aus triawill end at the end <strong>of</strong> the 2009 calendar year. Thecoming business year is therefore under theimpact <strong>of</strong> preparations for a second period whichwill cover 01/01/2010 to 31/12/2013. By applying aconsistent cost management, we continue to strive●●●for the position <strong>of</strong> benchmark leader in the peergroup <strong>of</strong> Austrian distribution system operators.At the same time, a target-oriented investmentstrategy will contribute towards ensuring that thesecurity and quality <strong>of</strong> supplies for customers ismaintained and improved. In this context, replac -ing overland lines by ground cables is a priority, inorder to reduce the exposure to incidents causedby meteorological influences, which occurred in -creasingly in recent years.We counter the competitive pressure on the electricitydistribution market by positioning the Groupas a quality supplier and by our high level <strong>of</strong> competenceconcerning energy efficiency. Our goal isto keep customer levels stable, with only a fewcustomers changing over to competitors, and byexpanding our market area.The priorities <strong>of</strong> the coming business year are thefurther consistent and customer-oriented implementation<strong>of</strong> the statutory efficiency targets andthe expansion <strong>of</strong> add-on services.The many years <strong>of</strong> experience in building andoper ating heating-supply plants is used to ensurefurther stable growth. While the focus in UpperAustria is on expanding and intensifying the exist -ing networks, activities in the Czech Republic andSlovakia concentrate on acquisitions.The goals for the 2008/2009 business year are tointegrate the recently acquired participations, t<strong>of</strong>urther optimize the organizational and cost structuresand to utilize synergies within the businessarea and the Group.By taking over the majority in OÖ. Ferngas <strong>AG</strong>, the<strong>Energie</strong> <strong>AG</strong> Group established the new businessarea natural gas. During the coming business year,the task will be to integrate the structures and toachieve synergies among the business areas.After introducing incentive-based regulation for gasnetwork operators as <strong>of</strong> 01 February 2008, theneces sary provisions concerning the investment fac-●tor for Network Levels 2 and 3 are still open. A newtariff ordinance is expected to enter into force as<strong>of</strong> 01 January 2009.With regard to natural-gas supply, more com petitionis expected from natural-gas substitutes. Ourgoal is to increase the number <strong>of</strong> customers whenoperating in this environment.The concentration process that has set in on thewaste-management market in Central and EasternEurope continues. AVE is securing and expandingits leading position in Austria and Hungary by pursuingan <strong>of</strong>fensive market and growth strategy, aswell as stepping up efforts to acquire further sharesin the other countries. It holds control over theentire value chain in the waste-management in -dustry, on account <strong>of</strong> a vigorous organic growthand continuing acquisitions.For the 2008/2009 business year, AVE plans furthermergers <strong>of</strong> subsidiary companies, in order to keepthe organizational structure lean and effective, aswell as to optimize the density <strong>of</strong> its locations, andto utilize the resulting potential <strong>of</strong> synergies.In the course <strong>of</strong> the coming business year, AVE willimplement numerous projects, as part <strong>of</strong> its in vestmentactivities. They range from starting productionat the pelletizing plant at Wels, to buildingwaste-material sorting and processing plants, as wellas to beginning landfill operations. Depending onthe specific country, the high AVE standards willbe implemented.●Linz, 28 November 2008In the water segment we will pursue the statedgrowth strategy with consistency, by way <strong>of</strong> or -ganic growth and the acquisition <strong>of</strong> further companiesin the CEE countries.The focus in southern Bohemia in the Czech Re -public will be to strengthen or expand the marketposition by participating in the expected tendersfor operating contracts, as well as by obtaining synergiesbetween the two neighboring companies,i.e. VaK JČ and 1. VJS. We also aim at expandingthe market shares <strong>of</strong> the other companies in theCzech Republic, as well as increasing their eco -nomic performance.In Austria, activities will focus on the further de -velopment <strong>of</strong> water and sewage services, on ex -panding the operating business and on furtherwater-supply projects.The further market development in the CzechRepublic, Slovakia and Hungary will be dependstrongly upon possible EU grants and the thenresulting readiness <strong>of</strong> the political decision-makersto continue privatization.For the 2008/2009 business year, the <strong>Energie</strong> <strong>AG</strong>Group is once again geared to enhance the companyvalue on a lasting basis by pursuing a clear growthstrategy and systematic value-based man age ment.Sound financial strength, a strong market position,committed staff and an experienced managementteam will make sure that this target is reached.The Board <strong>of</strong> Management <strong>of</strong> <strong>Energie</strong> <strong>AG</strong> OberösterreichLeo Windtner Werner Steinecker Roland Pumberger81