GLOSSARY

Asset allocation

The willful and meaningful distribution of assets across different investment vehicles.

Bear market

Negative price development on the stock exchange over a longer period of time.

Base load

Constant electrical output over all hours of one day.

Benchmark

Term used to describe a reference value to which a fund or portfolio is compared for orientation purposes.

Bottleneck capacity

The maximum long-term output of a power plant under normal conditions.

Capital-to-assets ratio (adjusted)

Shareholder’s equity in relation to total capital adjusted for closed items on the assets and liabilities side (e.g. in the case of cross border leasing transactions).

Cash flow

Balance of cash inflows and outflows; usually broken down into cash flows from operating activities, investing activities and financing activities.

Corporate Governance Code

Code for corporations which sets down standards of good corporate management. The provisions do not take the form of a statute law. The code contains a set of rules to which companies may commit themselves at their own discretion.

Cross border leasing

Lessor and lessee are based in different countries.

Discounted Cash Flow Method

Determination of goodwill through capitalization of cash flows which can be defined differently depending on the accounting method used. At Verbund, the gross accounting method is used (equity approach).

E-Control (Energie-Control GmbH)

Set up by the legislator on the basis of the Energy Liberalization Act. The main task involves monitoring and, if necessary, regulating the deregulation of the Austrian electricity and gas market.

Earnings Before Interest and Taxes (EBIT)

Operating Result before Interest and Taxes.

Earnings Before Interest, Taxes,

Operating Result before Interest, Taxes, depreciation of property, plant and equipment and

Depreciation and Amortization (EBITDA)

amortization of intangible assets.

Economic Value Added (EVA®)

Difference between the return generated by the company on the entire net interest-bearing capital and the total capital costs; EVA® = Invested Capital Employed x (ROiC – WACC).

ElWOG

Electricity Industry and Organisation Act.

Emission rights

Emission rights were introduced in the European Union effective January 1, 2005, as part of the drive to implement the Kyoto accords, which aim to reduce the emission of greenhouse gases. The rights are allotted in Austria within the framework of the »National Allocation Plan«, depending on the company’s past level of emissions. Firms requiring more than their designated volume have to acquire additional rights from companies which have met the commitments to reduce emissions and thus require fewer such emission rights.

Equity method

Method applied to consolidate associated companies that are not included in the group financial statements as fully consolidated companies with all assets and liabilities. Here, the carrying amount is adjusted on the basis of the changes in the pro-rated shareholders’ equity of the interest. This change is recognized in the income statement or directly in the equity of the parent company.

EV

Enterprise Value is the market capitalization plus interest-bearing net debt. Reflects the overall corporate value at market prices.

Financial guarantee contract

A financial guarantee contract is a contract that requires the issuer to make specified pay- ments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument.

Free cash flow

Operating cash flow plus cash flow from investing activities; the free cash flow is available for payments relating to financing activities (e.g. dividend distribution and loan repayments).

Funds from Operations (FFO)

Operating result adjusted for depreciation and amortization, interest income and current taxes.

Gross debt coverage

The ratio of funds from operations (FFO) to interest-bearing gross debt.

Gross interest cover

The ratio of funds from operations (FFO) to interest expenses.

Hydro coefficient

The hydro coefficient is the ratio between the actual volume of electricity generated in one (or a series of) hydropower plant(s) within a defined period and the average (calculated on the basis of historical water supply volumes) generation capacity of this/these hydropower plant(s) over the same period. This long-term average comes to 1. Consequently, 1.1 represents a 10 % increase in production.

IAS/IFRS

International Accounting Standard/International Financial Reporting Standard; the designa- tion IAS was changed to IFRS in 2001. Standards published up to that date are still referred to as IAS.

Interest rate swap

Agreement to exchange cash flows with different terms over a specified period of time; these cash flows are based on fixed and variable interest rates; provides security against interest rate fluctuations.

Invested capital

Employed interest-burdened capital adjusted for closed items on the assets and liabilities side (e.g. in the case of cross border leasing transactions).

Kyoto protocol

International climate protection agreement of the UN organization UNFCCC. Defines goals for reducing greenhouse gas emissions and thus the risk of global warming. Signed in 1997, the Kyoto protocol came into force on 16 February 2005.

M&A

Abbreviation for Mergers & Acquisitions; describes all mergers through acquisitions, divestments and fusions, etc.

Monte Carlo Simulation

Suitable for displaying a large number of realized risks within a model with a freely selectable number of simulations. This produces a distribution trend.

(n-1) criteria

Rule which states that the safety of grid operation cannot be endangered by a single event, e.g. the failure of a line.

Net gearing

Net interest-bearing debt in relation to shareholders’ equity. Measure of company’s indebtedness.

Peak loadfn

Refers to the load type for electricity supply or electricity purchases of constant output over a period of 12 hours from 08:00 to 20:00 on each weekday (Monday to Friday) of a supply period.

Performance

Describes the value development of a security or portfolio over a given period, e.g. 12 months, on the basis of a defined risk level.

Phase shifting transformers

Controllable transformers used to influence or control the load flow. The load between two parallel lines can be distributed and the existing line capacity can be used more efficiently.

Over the Counter (OTC)

Trading outside of the stock exchanges

Pay-out ratio

Proposed dividend per share in relation to earnings per share.

Portfolio

Entirety of the investment in securities held by a customer or investment fund; primarily used for the distribution of risk.

Rating

Evaluation of issuers and borrowers in relation to their economic strength. Internationally recognised rating agencies include Standard & Poor’s and Moody’s.

Risk management

Systematic approach for identifying and assessing potential risks as well as for selecting and implementing appropriate measures to manage such risks.

ROE

Return on Equity; profit after income taxes in relation to average shareholders’ equity.

ROIC

Return on Invested Capital; profits after taxes increased by tax-adjusted interest expenses in relation to the average invested capital.

Scoring procedure

Procedure employed to evaluate and compare various alternatives on the basis of computed utility values.

Standard capacity

The volume of electricity that can be supplied by a power plant in a specific period (usually a year).

Value at Risk (VaR)

Procedure for calculating the loss potential resulting from price changes in the trading position. The loss potential is calculated on the basis of market-oriented price changes and is quoted subject to the specific level of probability (e.g. 98%).

Volatility

Range of fluctuation of share or foreign currency prices or the price changes of bulk commodities compared to the market development.

Weighted Average Cost of Capital (WACC)

Weighted average capital cost that the company has to pay for its borrowings and share- holders’ equity on the capital market.