Alpiq reports solid operating performance in demanding environment

Lausanne – In the first half of 2016, the Alpiq Group defended its position in a difficult market environment with a solid operating performance. Due to lower wholesale prices, net revenue (CHF 3.0 billion) is down on the previous year as expected (2015: CHF 3.3 billion). EBITDA before exceptional items increased to CHF 239 million (2015: CHF 234 million). This is primarily due to Commerce & Trading successfully leveraging price volatility in the markets, the steady growth of Energy Services as well as stringent cost management. The financial result was positively influenced by the lower interest burden due to the reduced level of financial liabilities as well as by foreign currency effects. Net income before exceptional items amounts to CHF 41 million (2015: net loss of CHF -52 million).

Structural measures on schedule

As part of the structural measures to secure long-term capital market viability and sustainable profitability, plans to open up a maximum of 49 % of the Group’s hydropower portfolio to investors were realised on schedule in March. The first bidding phase was concluded in July. In a second phase, the due diligence process commenced in August. The disposal of non-strategic assets in connection with the streamlining of the portfolio is also on track. In the first half of the year, the sales of the Group’s interest in AEK Energie AG and Romande Energie Commerce SA, among others, were successfully concluded. Net debt was reduced to CHF 1.2 billion (2015: CHF 1.3 billion) as a result of these divestments as well as cash inflows from operating activities. Liquidity increased from CHF 1.5 billion to CHF 1.6 billion. The agreement for the sale of the Group’s interest in Alpiq Versorgungs AG for CHF 312 million was signed in June 2016 and the deal closed at the beginning of July.

Swiss electricity production heavily under pressure, international electricity production profitable

Generation recorded a year-on-year decrease. The entire Swiss electricity production from hydropower and nuclear power was heavily under pressure in the first half of 2016. This was due to a further fall in wholesale prices below the production cost. Production costs are burdened by high government levies. The regulatory environment discriminates against electricity producers like Alpiq that operate on the free market and have no regulated grid or end customers bound by a monopoly. Thanks to higher power plant availability, international electricity production is up on the previous year and profitable.

Energy trading leverages price volatility

Commerce & Trading recorded a year-on-year increase. Alpiq successfully leveraged price volatility to optimise electricity production. International power plant management also saw a significant increase on the previous year thanks to the profitable use of the power plants in the ancillary services markets as well as successfully building up a flexible natural gas portfolio. Eastern and South Eastern Europe reported a fall in earnings on the previous year. In these markets, Alpiq remains number one in cross-border energy trading. As part of implementing its strategy, Alpiq expanded its demand response services division with a unit created specifically for that purpose.

Energy Services expanded

Energy Services reports a year-on-year increase in the traditional business. In the area of building technology, Alpiq successfully finished contracts for end-to-end energy-efficient solutions, including the new Coop distribution centre in Schafisheim (CH). Business combinations, such as Helion Solar, have been integrated and provide innovative services in the area of solar and decentralised storage technology. In the area of transport technology, the pleasing development of major projects, in particular the completion of the Gotthard Base Tunnel, contributed to the positive development in earnings. Alpiq also won follow-up orders, including the CEVA rail technology project in Geneva. Alpiq expanded the plant construction and services business. To increase the strategic presence for energy services, the Group acquired Jakob Ebling GmbH in Germany. With the purchase of the Romanian engineering company IPIP S.A., Alpiq has secured geographical market access in Eastern Europe and increased its competitiveness. For dismantling nuclear power plants, a cooperation agreement was concluded with the German company STEAG Energy Services GmbH. In doing so, Alpiq is strengthening its position in a strategic future growth area.

Outlook

The market environment remains challenging on account of persistently low wholesale prices. The price situation was exacerbated by competition-distorting conditions in Switzerland, which put electricity producers without a regulated grid and bound end customers under massive pressure. This significantly lowers the profitability of Swiss electricity production in the free market. As a result, Alpiq expects EBITDA before exceptional items to be down on the previous year for 2016. Alpiq will continue to give its highest priority to reducing net debt as well as its dependency on wholesale prices. It is therefore committed to implementing the structural measures, including opening up the Group’s hydropower portfolio to investors and disposing of non-strategic assets in connection with the strategic drive to streamline the portfolio, as well as the cost-reduction and efficiency enhancement programme. Alpiq expects its net debt to fall below CHF 1 billion in 2016. In Commerce & Trading and Energy Services, the Company will also make the most of its opportunities for growth in future. Alpiq is continuing with its transformation process from a conventional energy producer to an innovative energy service provider with a European focus.