OMV's Graz Geothermal Go-Ahead Meets Shareholder Payout Uncertainty from BGI Delay

Graz council approves OMV's deep geothermal project after months of deadlock, but delayed Borouge IPO and weak Q1 earnings threaten dividend levels.

The city council of Graz has ended months of deadlock by approving the contractual framework for OMV's deep geothermal project "Tiefenkraft," a key piece of the Austrian energy group's diversification push. The green light comes at a time when the company's dividend outlook is clouded by the delayed stock market listing of its lucrative chemical joint venture Borouge Group International (BGI).

The Graz agreement resolves a blockage that halted the project late last year. The original structure collapsed in November 2025 because Graz could not shoulder liability risks of around €200 million. OMV put the plans on ice. The rescue came from regional utility Energie Steiermark, which early in 2026 agreed to pre-finance seismic surveys costing roughly €5 million, reopening talks and paving the way for the current deal.

Under the new three-way arrangement, a joint venture owned 75% by OMV and 25% by Energie Steiermark will handle drilling and power generation, absorbing the main project risk. Energie Steiermark will build the pipeline network to Graz, and Energie Graz will manage last-mile distribution to households. Seismic measurements across eastern Styria ran from February to April, and the data is now being processed into a two-dimensional subsurface model. The ambition is to supply half of Graz's district heating demand from regional geothermal sources by 2035, with at least 80% of the city's heating from renewables permanently after that.

Yet the long-term promise of the geothermal push collides with near-term shareholder pain. OMV had counted on an initial public offering of BGI in Abu Dhabi this year to generate about $500 million in cash flow for the group. That listing has now slipped to 2026, slashing the expected 2025 cash contribution in half. The BGI float is central to OMV's revamped dividend model: under the new policy approved by the board, half of the payout will come from the Borouge venture's distributions, while the other portion will be tied to a range of 25% to 33% of the operating cash flow from the rest of OMV.

Market watchers now anticipate a dividend cut of €0.60 to €0.70 per share versus earlier expectations. For the 2024 business year, shareholders are still set to vote on a total distribution of €4.40 per share at the upcoming annual meeting — a figure that includes a special dividend of €1.25 already decided by the supervisory board. But the BGI delay casts doubt on the sustainability of that level.

The short-term pressure is compounded by a weak start to 2025. OMV's adjusted first-quarter earnings fell 12% year-on-year to roughly €1 billion, hit by disrupted supply routes in the Middle East that triggered heavy hedging losses and a sharp drop in refinery margins. The group expects a stable quarterly contribution of about €140 million from its Borouge stake from the second quarter onward, a cash flow that management hopes will underpin confidence in the new strategy.

September brings a change at the top: Emma Delaney, a veteran of more than three decades at bp, will become OMV's first female CEO. She is tasked with steering the transformation toward an integrated chemical and energy company — a mandate that now involves juggling a delayed IPO, a geothermal rollout, and a resetting of shareholder expectations.

The stock has so far shrugged off the headwinds. Trading around €61.60, OMV shares have gained roughly 27% since the start of the year and sit close to their 52-week high. The annual general meeting in May will be the first real test of investor sentiment, where the board will face questions on both the BGI growth story and the long payback of the Graz geothermal bet.