Group transformation proceeding as planned

Lausanne – The Alpiq Group closed the first half-year of 2014 with net revenue of CHF 4,070 million and EBITDA of CHF 285 million. The results are in line with expectations, as already communicated with the first quarter results. Low wholesale prices put pressure on conventional power plant production. The trading business developed stably and energy services increased. Transformation of the Group is proceeding as planned.

In the first half-year, Alpiq generated consolidated net revenue of CHF 4,070 million (previous year: CHF 4,791 million) and EBITDA of CHF 285 million (previous year: CHF 401 million). EBIT amounted to CHF 162 million (previous year: CHF 257 million); net income totalled CHF 21 million (previous year: CHF 115 million). The main reason for lower results is the repeated decline in wholesale prices compared to the same period in the previous year, which put pressure on the entire power plant portfolio. Cost reduction measures and their effects are on target.

Low wholesale prices put pressure on electricity production

The massive subsidy of wind energy and photovoltaic abroad, low coal and CO2 prices, as well as overcapacities led to a drop in wholesale prices and put conventional power plant production under pressure. In particular, the economic viability of Swiss hydropower is being increasingly impacted by the current low price level.

In the previous year, the wholesale business in Central and Eastern Europe benefited to a greater extent from extraordinary trading opportunities. The operating business reported an overall stable trend due to the cost savings that have already been achieved.

Energy services on course

Alpiq made significant gains in the energy service business in Switzerland as compared to the previous year. In building and transport technology, Alpiq benefited from its excellent market positioning and professional project management for large customers. In addition, Alpiq strengthened its presence in the Basle region through the acquisition of Schwarz + Partner.

In the power plant construction and services business, Alpiq diversified in the industrial sector, and was able to acquire various contracts despite cautious investment activity in the power plant areas.

With the acquisition of the British market leader Flexitricity, Alpiq has gained access to innovative know-how in the area of decentralised energy management, one of the most advanced markets in Europe. Alpiq will continue developing these innovative solutions and transfer them to other markets under the new strategic direction. With GridSense, Alpiq will achieve a major step in the area of smart homes. The new technology manages energy consumption in buildings by means of artificial intelligence.

Outlook

As already communicated with the first quarterly results, Alpiq expects 30 to 40 percent less EBITDA in 2014 as compared to the previous year due to lower wholesale prices.

The transformation of the Group is proceeding as planned: Alpiq is transforming from a capital-intensive power producer into an energy service provider offering innovative full-service solutions; the above-mentioned acquisitions are a first step. We will consistently expand this business.

If wholesale prices were to remain at the present low level in the long term, this would negatively affect the intrinsic value of power plants, particularly hydropower, and the profitability of energy companies. Alpiq has, therefore, placed the economic viability of Swiss hydropower on the political agenda. Together with policymakers, a solution must be found in order for hydropower to count among the winners of the energy turnaround in the future.

At the end of July 2014, Alpiq repurchased bonds due 2015 – 2018 and amounting to CHF 543.4 million. At the same time, a CHF 300 million bond with a ten-year maturity period and an attractive 2.625 per cent coupon rate was launched on the market. The proceeds from the announced divestment of Swissgrid shares will be used to further reduce net debt and for investment in the growth areas under the new strategy.

Key financial indicators for the Alpiq GroupHalf-year 2014Half-year 2013
Energy sales (GWh)50,02250,062
Own production* (GWh)9,99510,214
Net revenue (CHF million)4,0704,791
EBITDA (CHF million)285401
  as % of net revenue7.0 %8.4 %
EBIT (CHF million)162257
  as % of net revenue4.0 %5.4 %
Net income (CHF million)21115
  as % of net revenue0.5 %2.4 %
   
Employees (FTE; on 30 June)7,9777,951
Net debt (30 June 14/31 December 13)2,0192,050

*including long-term contracts