Repower's half-year result meets expectations

Overall conditions remain uncertain

Poschiavo, (PresseBox) - In view of the ongoing challenging conditions on the energy markets, Repower posted an operating income in line with expectations for the first half year of 2013. With a slight rise in total operating revenue, EBIT totalled CHF 43 million (- 17%) and Group profit was CHF 29 million (+ 53%). Repower expects that overall conditions will also be difficult to predict for the second half of the year and market prices to remain low.

Repower posted revenue of CHF 1.195 billion (+ 2%) in the first half of the year. EBIT fell to CHF 43 million (- 17%) and was in line with expectations. At CHF 29 million (+ 53%), profit came in higher than expected, which can be attributed to the positive financial result. Operating cash flow of CHF 31 million considerably exceeded the previous year's figure.

Electricity sales in the first half of 2013 increased by nine per cent to 8,287 gigawatt hours (GWh) from the same period last year. While trading volume grew by 26 per cent, sales in supply and distribution fell by 11 per cent, which can be attributed, on the one hand, to lower demand as a result of the difficult economic situation in Italy and to further optimisation in the customer portfolio on the other. The gas business saw a positive trend, with sales growing 32 per cent. Repower's own generation of hydropower (321 GWh) was similar to the previous year's level. Wind power generation (57 GWh) increased year-on-year by 54 per cent. Electricity generation from the gas-fired combined-cycle power plant in Teverola, on the other hand, was considerably lower than the previous year(- 31%) due to the market situation.

There were positive signs on the Romanian market. Repower posted a profit in Romania in the first half of 2013 after it had stabilised the situation in the previous year.

Half-year result in view of the strained market environment

Repower's results reflect the very uncertain overall conditions and the challenging market environment. Generally weak economic momentum in many European countries is compounded by the consequences of misguided subsidy models for the renewable energy generation. The current subsidy models are putting pressure on hydropower, which is explicitly desired as an environmentally friendly source of energy. Existing plants are reaching the limits of profitability, and new, unsubsidised projects are at risk under these circumstances. This ultimately hinders energy reform because it weighs down further development of hydropower, which is firmly anchored in Switzerland in particular. Repower is expressing its concerns in the current discussions about Switzerland's 2050 Energy Strategy and pleads the case for a market-oriented quota model.

As a result of the extremely challenging conditions, Repower introduced a programme to boost efficiency at the end of last year and announced the associated measures in January. The full effects of the measures currently being implemented will be felt in 2014. The target announced last January of annual savings of CHF 10 million will be considerably exceeded. The first positive effects, however, were already noticeable in the last half year. Operating expenses were reduced by CHF 6 million and Repower was more cautious with investments in 2013 (CHF - 41 million).

Investment decisions are difficult

The economic and regulatory environment for power plant projects is currently very challenging and the outlook is difficult. Repower is moving forward with the Lagobianco project because it is well-positioned in terms of the foreseeable concession and project approval. Further project development decisions will be taken during the course of the second half of the year. For the Chlus project, work on the concession project and the environmental impact statement pushed ahead in the first half of 2013. A referendum is scheduled for spring 2014 in the thirteen concession municipalities. An important sub-goal was reached in the combined-cycle gas turbine power plant project in Leverkusen. In March the district government in Cologne made a preliminary decision on emissions control requirements and by doing so signalled the project's eligibility to receive approval.

The project to build a modern coal-fired power plant in Italy is forging ahead on the approval side. However, the project is the subject of political discussions particularly in Graubünden where a popular initiative is threatening to block the project. The referendum will be held on 22 September 2013. The Graubünden cantonal government and the overwhelming majority of the cantonal parliament reject the initiative and support the reasonable counterproposal. The project in Italy is consistent with the corporate strategy and the direction of energy policy in Italy.

Innovative systems in the interest of the energy reform

To enhance its proven business model as a vertically integrated energy company, Repower is making a stronger commitment to intelligent energy management and new technologies. For example, a project to build a virtual power plant is being carried out in partnership with Swisscom. Connecting controllable facilities like heating systems to one other contributes to grid stability and thus to a more efficient supply. In the area of e-mobility, initiatives have been undertaken especially in Italy, where the PALINA charging station was developed, along with electricity products that combine the buying of electricity with e-mobility solutions.

Environment remains difficult

The extremely strained market environment will also persist in the second half of 2013 and in 2014. As a result, Repower assumes that conditions will continue to be very challenging and difficult to forecast in both the 2013 financial year and in 2014. Repower does not expect market prices to recover in the short and medium term. From the present vantage point, Repower stands by its stated expectation that the 2013 operating results will reach a level similar to the previous year. Other regulatory and political decisions can have a significant impact on the energy market in Switzerland and Europe and thus on the operating results as well. Existing generation facilities and ongoing projects are continuously assessed for their profitability based on new policy decisions.

Note

The interim financial statements and Semi-Annual Report 2013 as well as additional information are available on the website at www.repower.com.

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