Repower : 04-05-16 - Repower’s results reflect fundamental remodelling of energy landscape

2015 results: Declining prices on the international energy markets and an unfavourable EUR/CHF exchange rate were the factors dominating the 2015 financial year, which ended with EBIT of CHF -69 million and a net loss of CHF 136 million. The Repower Group saw total operating revenues decline 17 per cent in 2015 to around CHF 1.9 billion. EBIT adjusted for exceptional items came to CHF 12 million, and EBITDA to CHF 59 million. Repower is working on the implementation of the strategic realignment as previously announced. It has notched up initial successes in terms of expanding its partner strategy and developing new areas of business.

As expected, the operating environment remained extremely challenging in 2015. Prices on the energy markets continued to tumble, and are hardly likely to recover significantly in the next few years. This, combined with the strong Swiss franc, had a massive impact on Repower's 2015 results. The effects are primarily reflected by continued declines in the value of assets and long-term agreements, further reductions in margins, and eroded financial results. There were gratifying contributions to earnings from regulated markets (KEV plants, basic supply, grid and wind farms).

Results hit by market developments and EUR exchange rate
The Repower Group saw total operating revenues decline 17 per cent in 2015 to around CHF 1.9 billion. EBIT came to CHF -69 million; this figure includes CHF 62 million in impairment on generation assets, CHF 12 million in impairments on overdue receivables, and provisions for long-term energy agreements and other smaller exceptional items totalling CHF 7 million. Group result for 2015 came in at CHF -136 million, after a half-year result of CHF -115 million. Foreign currency and valuation effects relating to interest rate hedges took a total of CHF 57 million off financial results. Cash flow from operating activities came to CHF 17 million. The equity ratio is running at around 33 per cent. Net debt increased slightly to CHF 270 million; measures have been taken to reduce it. For example, as part of the strategic realignment announced in December 2015 Repower is looking into various divestments designed to generate cash inflows of between CHF 60 and 80 million in the next 12 to 24 months (including the business in Romania, the Teverola power plant and nuclear power interests).

'These results reflect what is still a difficult environment, and the fundamental remodelling of the energy landscape in Europe,' comments Repower CEO Kurt Bobst on the 2015 results. He continues: 'This vindicates our efforts to systematically expand the service component of the Repower Group's business.'
Volumes of power sold virtually constant; volumes of gas sold increase
The volume of electricity sold came in slightly higher than the previous year at around 17.7 terawatt hours, with electricity sold in trading up 4 per cent and electricity sold on the supply and sales side down a slight 3 per cent. There was another increase in the volume of gas sold (up 16 per cent) to around 2.5 billion cubic metres. Sales to end-consumers increased 6 per cent. Thanks to favourable hydrological conditions and the good condition of its power plants, generation from Repower's own hydro assets came in above the ten-year average; however, owing to the tense situation on the market it was not possible to profitably capitalise on this.

Efforts to reduce dependence on price of electricity
For a number of years Repower has been working to reduce the dependence of its business on prices on the energy markets and further streamline administrative processes. In this connection, in December 2015 the company announced a new corporate strategy. The following areas of focus were defined:

• Gradual repositioning as an energy service provider
• Strengthening sales business
• Moving over to 100 per cent renewable own generation
• Focusing on the key markets Switzerland and Italy
• Looking into selling business in Romania, combined-cycle gas turbine plant in Teverola and interests in nuclear power
• Streamlining the capital structure (delisting and introducing standard registered shares)

Repower is currently working hard on these projects.

Also as part of the strategic realignment, Repower has signed a cooperation agreement with Reichmuth Infrastruktur Schweiz AG. On the basis of an innovative plan for financing and operating the Morteratsch power plant in Pontresina, Reichmuth will finance a major portion of the renovation work and hold a majority interest in the Kraftwerk Morteratsch AG which will be newly established. Repower will be in charge of construction and the operation of the plant.

Developing new fields of business
In recent months Repower has already notched up initial successes on the path to realignment. This includes efforts to expand the third-party business: Repower is working profitably on a range of maintenance and planning contracts for other energy companies, or is providing energy services to third parties. It has also expanded its network of customers and partners, and has strengthened its market position in Switzerland accordingly. Repower will continue to develop this partnership strategy. The company is opening up new fields of business by increasingly offering additional services in areas such as electric vehicles. The aim is to make these offerings available to other partners as well as marketing them directly. In 2015 Repower developed Switzerland's first true smart grid tariff, Smartpower, and is already testing it with a number of customers. The tariff works to the advantage of both sides, helping customers to modify their usage to facilitate more balanced grid load and help achieve the objectives of the energy transition. Income from services rendered increased from CHF 17 to 22 million in 2015. The aim is to boost income from services rendered to more than CHF 30 million by 2020 by augmenting the product portfolio and increasing market presence.

In recent years Repower has been in close discussion with the Federal Electricity Commission (ElCom), which was examining energy and grid usage tariffs in previous years. Preparing the necessary documentation entailed considerable work and expense. Gratifyingly, ElCom's ruling on grid usage tariffs endorses Repower's positions. In 2015 Repower generated EBIT of around CHF 22 million from regulated businesses. Repower expects plans to step up efforts in these areas (particularly by having existing power plants included in the KEV feed-in scheme) to result in a further increase in EBIT contributions from regulated businesses in the years to come.

160 PALINA charging stations installed in Italy
Developments in the sales business in Italy have been gratifying, with a great market response to innovative offerings tailored to customer needs. Not only did Repower sell 5 per cent more electricity and 6 per cent more gas to customers in Italy, but in conjunction with the Verde Dentro green power product it has already installed more than 160 PALINA charging stations around the country. In 2015 Repower in Italy introduced tools designed to help customers, particularly small and medium-sized businesses, to improve their energy efficiency.

Repower's product and market development efforts have benefited from close collaboration between the teams in Italy and Switzerland and deliberate efforts to promote a spirit of new tech within the organisation.

Proposals of the Board of Directors
To strengthen the organisation the Board of Directors has resolved to move that the Annual General Meeting in Landquart on 12 May 2016 vote once again not to pay a dividend this year.

The number of members of the Board of Directors is to be reduced from 12 to 8. To this end Dr Myriam Meyer Stutz, Domenico De Luca, Roger Vetsch and Peter Molinari will not be standing for re-election. The other members of the Board of Directors will be proposed for re-election.

Outlook
In the next few years Repower's results will be shaped by two opposing effects. On the one hand, obligations to purchase energy under long-term agreements will have a detrimental effect on results until their expiry, and continued declines in energy prices mean that further impairments on generation assets and further provisions for long-term agreements cannot be ruled out. On the other hand, efforts to realign the business model, develop new areas of business, further boost efficiency, move ahead with the partner strategy and reposition as a sales-oriented service organisation will gradually have a positive effect. Repower expects 2016 operating earnings (EBIT) to be around the same levels as last year (before exceptional items).

'Repower has initiated steps − some of which have already been implemented − to reposition itself in the market, improve earning capacity and develop new markets,' says CEO Kurt Bobst, looking ahead. 'Other important factors including motivated people, a spirit of innovation and flat hierarchies mean that Repower is well equipped to meet new market demands and respond quickly to changing customer needs in the form of attractive solutions.'

Repower shares still to be tradeable

Repower bearer shares (Swiss securities no. 1640583) and participation certificates (Swiss securities no. 1640584) will continue to be listed on the SIX Swiss Exchange until 28 April 2016. After that they will be delisted. The AGM on 12 May 2016 will also vote on a motion to convert Repower's present securities into standard registered shares on a one-for-one basis.

As of 29 April 2016, trading in Repower bearer shares and participation certificates will move over to the BEKB OTC-X (https://www.otc-x.ch/; trading hours 8am to 5pm, Monday to Friday). This will ensure there is no interruption in trading.

The BEKB OTC-X contains the securities of more than 300 of the 400 or so Swiss stock companies traded over the counter, including many larger well-known businesses.

Investors can instruct their usual contact at their bank to conduct trades as previously.

Subject to the resolution of the Repower AGM on 12 May 2016 on the conversion into standard registered shares, bearer shares and participation certificates will be traded on the BEKB OTC-X for the last time on 20 May 2016. Following this they will automatically be converted into standard registered shares on a one-for-one basis. The new trading (under the new securities number) will commence on 23 May 2016. Shareholders who hold their securities in a bank safekeeping account do not need to take action. Shareholders who keep their securities at home or in a bank safe deposit box are requested to present their securities to a bank well before the AGM for conversion into standard registered shares.

Notes:

• The full 2015 annual report can be viewed on the Repower website at www.repower.com/investors. From around 10 a.m. there will also be documentation there containing additional information on the 2015 results. The online report can be found at onlinereport.repower.com.
• Repower will be presenting its 2015 results on 5 April 2016 at a media conference in Chur and at an investors' and analysts' meeting in Zurich. Invitations have been sent out separately.
• The annual general meeting will take place on 12 May 2016 in Landquart.
• This news release is published in German, Italian, English and Romanian. In the event of differing interpretations, the German text is definitive.
• In this text, expectations and assumptions about possible future developments are expressed. Given that these comments are subject to uncertainty and risk, actual developments may diverge from the statements contained in this news release.

Contact:

Kurt Bobst
CEO
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Stefan Kessler
CFO
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Werner Steinmann
Head of Media Relations
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www.repower.com