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Macroeconomic and sector developments

According to the autumn survey published by economic research institutes on 18 October 2007, the German economy is forecast to show unexpectedly stable levels of economic growth in spite of the latest turbulence on the financial markets. These institutes expect gross domestic product to grow by 2.6% in 2007 and by 2.2% in 2008. Economic developments in the coming year are expected to be driven by the export sector and by consumer expenditure in Germany.

The earnings performance of the MVV Energie Group, however, is less dependent on macroeconomic factors than on weather conditions.

We expect competition in the energy sector to intensify. The second cost approval round at the regulatory authorities will increase pressure on costs in the 2007/08 financial year over and above that already seen to date. The challenging efficiency targets resulting from the introduction of incentive regulation on 1 January 2009 will require grid operators and municipal utility companies to make even greater efforts in future in terms of both revenues and costs.