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2013 Financial Results: Result adversely impacted by impairments - otherwise favourable operating result in a difficult environment
Already in December 2013, Repower announced that it did not expect electricity prices, which are low due to ongoing market distortions and weak demand, to recover in the foreseeable future and that it would consequently recognise extensive impairment losses on its 2013 result. These impairment losses are in response to the general market situation and total CHF 232 million. They relate to all current power plant projects, existing plants and long-term procurement agreements. The market distortions are a result of the inexpedient subsidisation of new renewable energies, which currently makes it impossible to make any profitable investments in non-subsidised technologies.
Favourable operating result
Repower posted total operating revenue of CHF 2.4 billion in 2013. Due to the impairment losses, the company reported EBIT of negative CHF 150 million and a loss of CHF 152 million for 2013. Adjusted for exceptional items, the results are as follows: EBIT of CHF 74 million (2012: CHF 112 million, -34 per cent) and profit of CHF 33 million (2012: CHF 51 million, -35 per cent). Operating cash flow of CHF 69 million increased over the previous year by 29 per cent (previous year: CHF 54 million). "Against the background of an extremely challenging market environment, low prices and politically complex underlying conditions, we view this as a favourable result," commented CEO Kurt Bobst.
The efficiency programme launched at the beginning of 2013 is on track and already had a significantly positive impact of around CHF 7 million in the reporting year. The full effects of the programme will be felt in 2014 and entail annual savings of at least CHF 15 million. As announced, at CHF 67 million (-48 per cent) Repower also made considerably fewer investments in 2013.
Repower continues to have a very solid balance sheet, which is manifested in an equity ratio of 39 per cent.
Repower increased electricity sales by 7 per cent to 17,012 gigawatt hours, of which 10,751 gigawatt hours were accounted for by trading business, which grew by 19 per cent. Sales business sold 9 per cent less to customers than in the previous year. In gas business, Repower sold 1.5 billion cubic metres, which is 135 per cent more than in the previous year; trading registered a growth rate of 176 per cent and sales one of 22 per cent.
Repower introduced segment reporting for the first time in accordance with international financial reporting standards (IFRS 8). Markets Switzerland and Italy are segments subject to reporting requirements.
Markets with different characteristics Repower is concentrating on its well-known key markets of Switzerland, Italy, Germany and Romania. In summary, the following statements can be made about the 2013 reporting year:
Market Switzerland: Repower generated an impressive 730 gigawatt hours of its own electricity in Switzerland. Its participations generated an additional 660 gigawatt hours of energy (hydropower).
Repower invested a total of CHF 35 million in the maintenance and upgrading of its own power plants and grids in Switzerland - this is a challenge given the backdrop of the difficult hydropower situation. Repower was successful in optimising own electricity generation and cross-border capacities at its trade site in Poschiavo in particular. Sales to end customers were around 800 gigawatt hours in Switzerland, where customers have had a free choice of products since 2013.
Repower continued to pursue its cooperation strategy, and successfully launched various projects in the area of "New Tech Business": the joint project launched with Swisscom to build a "virtual power plant" has already attracted more than 4,000 customers. Market Switzerland contributed CHF 51 million to adjusted EBIT.
Market Italy: In Italian sales business, the network of around 500 sales consultants proved extremely helpful in expanding gas sales and placing innovative new products with customers. The Teverola gas-fired combined cycle power plant was primarily deployed in the ancillary services market; the wind power plants generated the expected volume of power. Repower also worked on interesting pilot projects in Italy in the area of "New Tech Business". Repower has already achieved market success with "PALINA", a charging station for electric vehicles. Market Italy contributed CHF 38 million to adjusted EBIT.
Market Germany: The wind power plants in Germany generated less volume than expected in 2013 due to wind conditions. In sales, Repower focused on the recognised high quality of its customer service and, as a result, was once again included on the list of the "Most customer-oriented service providers in Germany".
Market Romania: Energy sales in Romania were at a similar level to the previous year. Thanks to optimised electricity procurement and careful management of the customer portfolio, Market Romania made a positive contribution to EBIT.
Progress in generation projects despite a problematic environment In 2013, Repower started carrying out an extensive situation analysis of its project portfolio that is extending into 2014. This is necessary in light of the adverse environment; it is currently virtually impossible to make decisions about investments in non-subsidised projects. The key projects continued to be developed further nonetheless to enable Repower to make use of its good starting position should conditions change. Planning work concentrated on the following projects in 2013:
- Lagobianco pumped storage power plant: Further planning steps were successfully completed, and work on the planning project is already at an advanced stage. However, work on the project is being reduced to the necessary minimum, as the project is expected to be subject to several years' delay.
- Combined-cycle gas turbine power plant in Leverkusen: In 2013 the project reached an important milestone in the approval process when the authorities issued the preliminary decision under the terms of the German Immission Control Act. The power plant is in an excellent position given its flexibility, the subsidies for plants that combine the production of heat and power and the extensive supply of steam for the Leverkusen industrial site. An investment decision is scheduled to be made within a year.
- Saline Joniche coal-fired power plant: The Repower Board of Directors decided in December 2013 to no longer consider interests in coal-fired generation plants and to withdraw from the project on a controlled basis by the end of 2015, while complying with the contractual obligations that are in place.
- Chlus hydropower plant: This largest Swiss hydropower plant project (with the exception of pumped storage power plants) is also facing difficult conditions. In 2013, however, the concession project was largely completed, which will make it possible for the municipalities affected to vote on granting the concession in 2014. The power plant was declared a project of national importance by the Federal Office for Energy and can make a considerable contribution to achieving the federal government's energy strategy.
- Campolattaro pumped storage power plant: Similar to Lagobianco in Switzerland, the 570-MW pumped storage power plant in Campolattaro in southern Italy could supply valuable storage capacities in the interest of renewable energies. The approval procedure is under way; negotiations are currently in progress with potential investors.
The Board of Directors will propose to the Annual General Meeting on 14 May 2014 distribution of a dividend of CHF 2.00 per share or participation certificate. This distribution is lower than in previous years. The Board of Directors is thereby pursuing a long-sighted dividend policy which is good for the company.
Repower anticipates that the strained market environment will persist. There are no indications of any improvement in the short to medium term. There is also no prospect of any rapid political reform of the energy markets in Germany and Switzerland. Repower therefore currently anticipates that the 2014 operating result will be 30 to 40 per cent below the adjusted operating result for 2013.
Repower will continue to place great emphasis on consolidating and optimising its core business and continue to strengthen its position by pursuing the partnership model. It will also go on to rigorously apply its efficiency programme and implement the defined measures. Repower does, however, also see opportunities in the changing energy environment: the increasing importance of the interplay between generation, storage and consumption opens up opportunities for innovative solutions aimed at intelligent system integration. Repower will drive forward the further development in this area and by doing so also establish the conditions for its long-term success in the future.
Domenico De Luca and Peter Molinari nominated for election to the Board of Directors
Dr Hans Schulz and Christoffel Brändli have announced that they will be stepping down from the Repower AG Board of Directors with effect from the next Repower Annual General Meeting on 14 May 2014. Dr Hans Schulz has been a member of the Board of Directors since 2008, Christoffel Brändli since 1996.
Domenico De Luca (*born 1966), Head of International Trading & Origination at Axpo Trading AG, from Thalwil, has been nominated for election as the successor to Dr Hans Schulz. Peter Molinari (*born 1948), former managing director of Engadiner Kraftwerke AG, from Zernez, has been nominated for election as the successor to Christoffel Brändli.
The Board of Directors will propose to the Repower AG Annual General Meeting on 14 May 2014 in Landquart the election of Domenico De Luca and Peter Molinari to the Board of Directors of Repower AG.
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