UPDATE 2-Austrian utility Verbund raises 2020 targets, plans new projects

* Verbund raises group profit and EBITDA targets

* Nine-month profit increases by 6%

* Company will use subsidies for new hydropower projects

* Nearest large investments will be for hydrogen (Adds CFO comments from call, share price)

By Zuzanna Szymanska

Nov 5 (Reuters) - Austria’s largest electricity company Verbund plans new hydropower projects and future investments in hydrogen, it said on Thursday as it raised its 2020 targets thanks to a continued market recovery.

Verbund generates more than 90% of its energy from renewable sources and analysts have said they expect leading renewable power providers to continue performing well thanks to energy transition policies.

“The incentives for small hydro are interesting,” finance chief Peter Kollmann told a conference call, adding other benefits included faster depreciation and pandemic-related investment subsidies.

“We have some projects which are now more interesting than they were before and those projects we will build,” he said.

He also said Verbund’s grid development plan was worth nearly 3 billion euros.

Kollmann added he saw Verbund’s recent acquisition of Gas Connect Austria as an important step in its transformation strategy.

Production costs of energy are getting cheaper, but the lack of a price-effective storage system makes gas an important bridge technology for power backup systems until hydrogen technology becomes more developed, the CFO said.

With Gas Connect Austria, capital expenditures are mainly related to maintenance and large investments will only occur when Verbund invests in the hydrogen economy, which will “obviously” happen in the future, Kollmann said.

Shares in Verbund were up 6% at 1130 GMT, above the increase of 3% that followed the company’s results and guidance update earlier in the morning.

Verbund increased its full-year group profit target by about 10% after continued market recovery, strong generation from storage power plants and better conditions in Germany and Romania balanced out a pandemic-related demand decline in Austria and low water supply at the company’s hydropower plants.

The Vienna-based company reported nine-month group profit up 6% year on the year at 477.7 million euros.

$1 = 0.8523 euros Reporting by Zuzanna Szymanska in Gdansk Editing by David Goodman and David Evans