The Alpiq Group maintains its position within a demanding market environment with net revenue of CHF 3,300 million (2014: CHF 4,070 million) and EBITDA of CHF 234 million before exceptional items (2014: CHF 285 million), CHF -14 million after exceptional items, respectively. These lower results are due mainly to the continued low level of wholesale prices and the strong Swiss franc. The currency effect at EBITDA level amounts to CHF -30 million before exceptional items. Stringent cost management cushioned the decline in results. As announced, Alpiq will save CHF 100 million per year from the end of 2015.
The strong Swiss franc, the one-off CHF 28 million charge for the bond repurchase, the interest rate environment, and the temporarily weak performance of the nuclear funds exerted a negative impact on the financial result. This fed through to a net result of CHF -52 million before exceptional items. After including exceptional items for impairment losses applied to plants, and provisions for loss-making contracts, the net result stood at CHF -886 million compared with CHF 21 million in the previous year.
Focus on liquidity management and net debt reduction
Operating cash flow improved by CHF 52 million year-on-year to CHF 278 million, reflecting consistent net working capital management. The company is also divesting the entire portfolio of its non-strategic interest in Swissgrid. Alpiq has generated CHF 363 million of cash inflow to date as part of implementing this disposal. The company has also launched its announced portfolio rationalisation of selected minority investments. The capital that has been freed up has enabled Alpiq to reduce its net debt by CHF 495 million to CHF 1,444 million. Alpiq also repurchased CHF 340 million of bonds with maturities between 2016 and 2019, while at the same time placing a new CHF 175 million bond on the market. Alpiq continues to rely on a solid liquidity position of CHF 1.5 billion.
Wholesale prices and Swiss franc additionally exert pressure on hydropower
Low wholesale prices placed a heavy burden on the results of Swiss power production. Additional production and consistent cost management partially offset this decline. The strength of the Swiss franc after the SNB relinquished the minimum exchange rate level reduces the expected future profitability of the Swiss production park. This resulted in CHF 834 million of impairment losses and provisions after taxes. This particularly affects the Swiss hydropower plants. International power production reported slightly improved results after adjusting for currency effects, which is mainly due to the cost reduction programme. In new renewable energies, Alpiq benefited from better wind conditions, achieving higher year-on-year results.
Expansion of international origination and natural gas business on track
Power production, including currency risk, is consistently hedged for the medium term. In the short term, by contrast, the strong franc is placing a burden on the optimisation of the Swiss power plants. Growing competition on international system services market is also exerting pressure on results. The wholesale business in Central and Eastern Europe generated slightly higher year-on-year results, despite currency effects. Alpiq further expanded its international origination and natural gas business as part of strategy implementation. In addition, Alpiq has been utilising opportunities from volatile wind and solar electricity production in the context of 24/7 intraday trading since early 2015.
Energy Services exploits market opportunities and invests in growth areas
In building technology, Alpiq achieved an operating result that was slightly below the previous year's level. However, higher employee benefit costs burdened the result. The order book position for new projects grew significantly, by contrast. As part of implementing strategy, Alpiq targeted an extension of its market leadership in energy services: in building technology, Alpiq acquired the largest Swiss solar specialist, the Helion Solar Group, and smart building provider IReL AG. The company also pushed ahead with industrialisation of the GridSense technology with pilot projects – a technology that has received an award from the Swiss Federal Office of Energy. In transport technology, Alpiq secured its leading position as a Swiss provider of transport technology solutions, and diversified geographically with the acquisition of rail technology specialist Balfour Beatty Rail Italy S.p.A. These acquisitions offer an optimal starting point for future growth.
The plant construction and service business outside Switzerland lies solidly at the previous year's level after adjusting for currencies. Although this area felt the effect of the reticence to invest in power plant technology due to continued electricity overcapacities in Europe, this effect was offset by cost optimisation. Alpiq is exploiting new opportunities in its plant construction business in line with its strategy. With Swiss Decommissioning AG, founded in March 2015, Alpiq is positioning itself at an early stage on the Swiss market to offer integrated solutions for post-operation and dismantling of nuclear facilities, among other services. In the service business, Alpiq is concentrating increasingly on the industrial area, where important new orders have been won.
The 2015 operating result will continue to be affected by an extremely challenging market environment with low wholesale prices. The strong Swiss franc presents additional challenges to Alpiq. The CHF 100 million cost reduction programme is confirmed from the end of 2015, and will partly compensate for both of these effects. Alpiq anticipates that its EBITDA before exceptional items will be lower than in the previous year.
The company is continuing to consistently implement the Group's restructuring. Alpiq is focusing in this context on liquidity management and further net debt reduction in order to secure capital market viability. Despite these difficult conditions, Alpiq is making an important contribution to implementing Switzerland's energy future, especially as a hydropower specialist and leading energy service provider. For this reason, the company continues to argue in favour of Swiss hydropower, is expanding the market presence of energy services geographically, and will continue to make targeted investments in growth areas.
Due to low wholesale prices and the strong Swiss franc, Alpiq is examining additional structural measures. These will be communicated during the course of the first half of 2016.