The environmental protection objectives of the European Union and of the German government have resulted in healthy growth in environmentally sustainable energy. Expansion of this forward looking market has been fostered by a favourable legal framework.

The Renewable Energy Act (REA) has provided investors with a reliable foundation for their investments. Currently, 8% of Germany’s electric power is derived from renewable energy sources (roughly 14% Europe-wide); this figure is to be increased to 12.5% by 2010 (22% Europe-wide) and to 20% by 2020. MVV Energie has many years of experience in generating energy in decentralized plants and as such has attached a great deal of importance to environmentally sustainable energy, thereby taking advantage of the opportunities afforded by this forward-looking market. Until now, our focus has been directed towards bioenergy, wind energy and solar energy. However, these markets have recently become significantly more difficult so that we are also expecting a consolidation process.

A New Business Segment

In order to do justice to these undertakings, we have had our own renewable energy business segment since the beginning of fiscal year 2002/03. This segment bundles all of MVV Energie’s activities and projects that earn the lion’s share of their sales from long-term solutions for generating electric power from renewable resources as defined in the REA and/or other similar European legislation. This includes bioenergy plants as well as project development and operation of wind turbines and solar energy systems.

Via MVV RHE AG, MVV Energie AG has an indirect participation of 33.33% in Biomasse Rhein-Main GmbH, the project company for the Flörsheim-Wicker biomass powerplant. This company has not been consolidated. Projects such as biomass heat-only plants, which are primarily used to generate district heating, have been assigned to our value-added services segment.

Sales and EBIT Affected by Build-up Phase

Segment sales of nearly Euro 2 million largely resulted from revenues from Eternegy’s wind-farm business, which has developed several smaller projects and has successfully sold them before construction was begun. We founded Eternegy in October 2000 along with wind-turbine manufacturer DeWind AG; the company became a wholly-owned subsidiary in fiscal 2001/02, thereby making it independent with respect to manufacturers. As a result, we were able to improve our return on capital employed (ROCE) by redesigning a few wind-energy projects using turbines made by other manufactures; this, however, meant prolonging the development phase for such projects, including obtaining building permits, by six to twelve months. As a result, Eternegy could not complete any turnkey plants and/or put any plants on-line in fiscal year 2002/03.

During 2002/03, our biomass powerplants were still under construction and as a result could not generate any sales. We anticipate sales revenue from power pooling during the course of fiscal year 2003/04.

A negative EBIT of Euro 6 million reflects the high level of investments required for biomass powerplants as well as for the build-up phase in which this segment is currently engaged.