REPOWER

Repower in Prettin

The cyclists brave the winter wind that turns the wind turbines in the Repower wind farm in Prettin, Germany.

Comments on the consolidated financial statements

Strong operating income, good group result

The Repower Group faced a challenging economic environment during the 2010 financial year. The energy and financial markets continued to be strained. The euro lost around 16 % of its value against the strong Swiss franc. Still, the Repower Group posted a good Group profit of CHF 80 million in 2010. Total operating revenue increased by 16 % to CHF 2.3 billion (previous year: CHF 2.0 billion). This increase is attributable to the continuous expansion of national and, in particular, international trading and sales activities. We also successfully entered the Romanian market with the acquisition of Elcomex EN, a distribution company. Generation capacity was boosted with several wind farms in Germany and Italy and significant progress was made in various power plant projects. The strong operating income (EBIT) of CHF 163 million (previous year: CHF 137 million) is confirmation that the Repower Group is firmly established in the energy business.

Implementation of Repower's growth strategy is proceeding according to plan and is continuously being adapted in response to the changing market environment. Business with supplier profiles was massively expanded during the year under review. A margin of CHF 45 million (previous year: CHF 18 million) was achieved with held-for-trading transactions. The gross result generated by the energy business (net sales less energy procurement) increased by a total of CHF 33 million to CHF 359 million (previous year: CHF 326 million).

Operating expenses rose from the same period last year by CHF 14 million to CHF 200 million. This figure also includes an increase of CHF 5 million for personnel expenses which is directly related to the growth strategy. An additional CHF 9 million was also reported under expenses for material and third-party services as well as other operating expenses. This increase was also in part due to the strong growth. These positions also contain expenses incurred for the renaming of all companies belonging to the Repower Group (previously Rätia Energie).

Depreciation/amortisation and impairment of CHF 56 million (previous year: CHF 59 million) include ordinary annual amortisation/depreciation and smaller individual value adjustments related to projects.

During the business year just ended, income before interest and income taxes (EBIT) rose by CHF 26 million (+ 19 %) to CHF 163 million (previous year: CHF 137 million). CHF 17 million resulted from the sale of real estate no longer required by the company. The operating result can be considered very good particularly if the difficult market environment in the energy sector is taken into account.

Currency factors had a strong adverse effect on financial income. The precautions taken to hedge currency risks positively impacted income in the Repower Group. In addition to currency losses of around CHF 30 million, CHF 20 million in interest paid on non-current liabilities was reported.

Income taxes in the year under review do not contain any special items as in the previous year where tax income of CHF 21 million was reported mainly as a result of statutory provisions regulating the single-entity financial statements of SET, owner of the gas-fired combined-cycle power plant in Teverola near Naples.

Healthy balance sheet

Non-current assets rose year-on-year by CHF 55 million to CHF 1.3 billion. The increase comprises CHF 19 million for plant and equipment and CHF 35 million for intangible assets. The latter figure is related to Elcomex EN where goodwill of CHF 19 million and other intangible assets of CHF 12 million were acquired.

Current assets ended the year CHF 29 million lower. This includes an increase of CHF 16 million in cash and cash equivalents. The liquidity of CHF 350 million at year-end enables high flexibility and ensures continued growth.

Non-current liabilities rose by CHF 27 million to CHF 752 million (previous year: CHF 725 million). Under current liabilities, a reclassification was reported in non-current provisions of CHF 36 million attributable to the obligation for reversion waiver compensation to be paid within the space of a year. On the other hand, there was an increase in non-current financial liabilities of CHF 66 million. In addition to repayments for notes falling due, a debenture bond amounting to CHF 115 million with a term of 12 years and an annual interest rate of 2.375% was successfully placed on the market in the year under review.

The balance sheet total remained stable at CHF 2.3 billion.

Equity of CHF 922 million (previous year: CHF 912 million) and an equity ratio of 41 % continue to provide a solid basis for the vigorous implementation of the Group strategy.

Trade accounts receivable from customers who are also suppliers are offset by trade accounts payable if the respective contract terms provide for this and the intention to offset exists and is legally permitted. The offset trade accounts receivable and payable totalled CHF 233 million (previous year: CHF 141 million). These offsets were applied for the first time in the year under review and were adjusted for the previous year (restatement).