Record results thanks to growth across Europe
2006 was another very successful year for the Atel Group, in which net turnover rose by 32% to CHF 11.3 billion and Group profit by 118% to CHF 899 million or, excluding special effects, by 53% to CHF 630 million. This significant enhancement in corporate value is reflected in the higher share price.
Turnover higher thanks to energy business
In 2006 the Atel Group posted a year-on-year increase of 32.1% in consolidated net turnover to CHF 11.3 billion. Based on the same scope of consolidation, i.e. adjusting for acquisition effects and in local currency, turnover increased by 31.2 %. The growth is attributable to higher sales volumes as well as the rise in energy prices. At 86%, the energy business accounted for a higher share of turnover year-on-year (2005: 82%). With this strong growth, Atel has confirmed its position as a leading Swiss energy services provider.
In addition to turnover, revenue from energy transactions conducted with a view to profiting from short-term price volatility rose by 65.4% to CHF 13.7 billion, with traded volume up by 34.6% to 202 TWh.
Stable cost trend
Energy procurement and the cost of goods rose at a disproportionate rate, primarily due to the rise in market prices, higher transit costs for border capacity auctions and, above all, the increase in the cost of fuel for production operations. Despite higher sales volumes and a larger workforce, in absolute terms other expenses (personnel, material, and other operating expenses) increased at a much lower rate than energy sales and expenses. Depreciation and amortisation is up slightly year-on-year due to acquisitions.
Operating profit also impacted by special effects
As a result of Atel's successful performance in the relevant markets and the one-off special effects, consolidated earnings before interest, tax, depreciation and amortisation (EBITDA) as well as consolidated operating profit (EBIT) climbed sharply to CHF 1.051 billion (+42%) and CHF 1.106 billion (+104 %) respectively. Excluding special effects, EBIT rose by 43% from CHF 541 million to CHF 774 million.
The reason for these one-off special effects is as follows: In view of the sustained rise in market prices, the parameters for evaluating Atel's own power plants and power plant holdings in Switzerland were adjusted. This review resulted in the full reversal of former impairments. The net effect on consolidated operating profit (EBIT) was CHF 257 million or CHF 199 million after tax. In addition, revaluation of a holding and the disposal of non-strategic securities resulted in an additional CHF 75 million before tax.
Investments of CHF 245 million
Investments of CHF 245 million (2005: CHF 299 million) were made in property, plant and equipment and intangible assets as well as financial assets for operating purposes, primarily with a view to targeted growth. The largest investments were related to construction of the gas turbine in Kladno (CZ), acquisitions in renewable energy generation as well as a sales company in Italy, and the purchase of Indumo and Luwa in the Energy Services segment. Substantial investments were also made in terms of replacements and upgrades.
Balance sheet reflects growth
With an equity ratio of 38% at year-end (2005: 34%), Atel has further strengthened its balance sheet structure despite strong expansion in business volume. The ratio of net debt to equity fell sharply from 32% to 8% due to the improved cash flow situation and enhanced values for securities under current assets, increasing the balance sheet total by around CHF 2.0 billion to CHF 9.3 billion.
Energy business on course for Europe-wide success
Physical sales of energy rose year-on-year by 18% to some 116 TWh, while revenue increased sharply by 38% as a result of the price effect (+17%). The Energy Segment posted turnover of CHF 9.716 billion in 2006, thanks to an outstanding operating profit (EBIT) of CHF 1.047 billion or CHF 715 million excluding the above special effects. This corresponds to an overall increase of 147% compared to 2005, or 53% excluding the special effects.
As in the previous year, internal growth was the main driver behind the improved results. Encouragingly, all market regions contributed to this development. Atel's turnover portfolio remains well diversified, although a clear trend towards optimising and trading activities is emerging. One-fifth of turnover is generated in Southern Europe, 16% in Central/Eastern Europe, 8% in the Northern Europe market (particularly Germany), and 6% in Switzerland. 38% is attributable to Europe-wide trading activities.
Trading: Including gas and coal trading
Trading can look back on an exceptionally successful year across Europe. Asset trading activities performed particularly well, since they were able to exploit the extraordinary price situation thanks to optimised power plant deployment, making a significant contribution to Group profit. Revenue of CHF 59 million (2005: CHF 41 million) from trading in financial standard products with third parties, including market evaluation of positions open on the closing date, was accounted for in net turnover as in previous periods. The substantial contribution made by gas and coal trading to the results is encouraging.
Energy Services – benefiting from the economic upswing
The Energy Services segment posted slightly higher turnover year-on-year of CHF 1.626 billion. Based on a comparable scope of consolidation, growth was significant at around 8%. The considerably improved operating results were dampened by special effects from the sale of GA-tec, adversely impacting the segment results. Market and competitive conditions, with heavy pressure on margins, remained difficult despite the economic upswing. Altogether this resulted in a consolidated operating profit (EBIT) of CHF 56 million, 14% lower than in 2005. Adjusted by the GA-tec effect, EBIT for the segment, however, was up a significant 14% compared to the previous year.
Outlook for 2007
The Atel Group expects to close 2007 yet again with increased sales and turnover and a sizeable investment volume. Excluding extraordinary events, the Group anticipates operating results below the outstanding operating results posted in 2006.
Aare-Tessin Ltd. for Electricity Corporate Communications
Notice: The General Meeting of Shareholders will be held in the Stadthalle, Olten, on 26 April 2007.