Comments on the consolidated financial statements

Comments on the consolidated financial statements

Corporate objectives met – solid group result

The Repower Group's business performance in 2011 can be described as good given the extremely challenging overall economic conditions in the national and international energy environment. The Group successfully achieved the set objectives by vigorously pursuing its strategy. Group profit including minority interests of CHF 54 million is a good result in the current economic environment. Several special effects were reported in the last period but they virtually cancelled each other out and thus only had a minor impact on the overall Group result. Due to a regulatory requirement arising from the Electricity Supply Act, the figures for Repower Transportnetz AG are reported separately under “Assets held for sale” and “Liabilities held for sale”. It was not necessary to adjust the carrying amounts. Repower was affected by two financial offences in 2011. The previous year's figures had to be corrected (restatement) as a result. The corrected values are used for year-on-year comparison. EBIT stands at CHF 130 million, which is CHF 30 million lower than the corrected prior-year figure and in line with expectations. In light of the difficult conditions, this result can be seen as a good performance.

While energy sales rose by 12 per cent to CHF 2.5 billion (previous year: CHF 2.2 billion) despite the weak economic situation, an increase in the gross result generated by the energy business (net sales less energy procurement) of CHF 22 million to CHF 381 million was reported (previous year: CHF 359 million). This result contains the positive effect brought about by the reversal of transport rights in the amount of CHF 54 million. Repower's trading transactions at the sites in Milan and Poschiavo made a key contribution to the good result.

Operating expenses (without energy procurement) saw a rise from the same period last year by 6 per cent to CHF 216 million (previous year: CHF 204 million). This figure contains the total operating expenses for one year of Repower Furnizare Romania S.r.l. (formerly Elcomex EN S.r.l.) which was acquired in the middle of November 2010. It also contains the costs for an entire year of operation of the Prettin and Lübbenau wind power plants that were purchased the previous year and the expenses for the financial offences mentioned above which are reflected in the year under review.

In addition to ordinary depreciation and amortisation, the values of Repower Furnizare Romania S.r.l. were fully adjusted by CHF 27 million. Narrow margins in Romania's extremely difficult market and the resulting downturn in the company's earnings led to this value adjustment in the half-year financial statements. An impairment of around CHF 7 million was also made for a trading system.

Financial expenses in the first half of the year were lower thanks to effective precautions in currency hedging. It was not possible to carry this positive effect into the second half of the year due to the interventions by the Swiss National Bank. The value adjustment of approximately CHF 7 million for the Brunsbüttel project is linked to the economic and energy policy situation in Germany which will prevent any investment decisions in favour of coal-fired power plants in the foreseeable future.

The tax rate for income taxes rose by 6 per cent to 31 per cent year-on-year (25 %). The reason for this increase is Italy's substantial contribution to the result. The maximum tax burden in Italy is around 42 per cent.

Solid balance sheet

Non-current assets fell from the same period last year by CHF 79 million to CHF 1.2 billion. This decrease is mainly because Repower Transportnetz AG is reported under “Assets held for sale” and due to the value adjustments for Repower Furnizare Romania S.r.l. and the Brunsbüttel project.

Current assets rose by CHF 96 million. This increase can be primarily attributed to the higher sales volume and the increased number of receivables as a result. Other items have not changed significantly.

Non-current financial liabilities were lower by CHF 99 million and reached a level of CHF 653 million. Repayment of part of the SET bank loan of around CHF 26 million and the reversal of the residual purchase obligation for Repower Furnizare amounting to approximately CHF 13 million led to the decrease in non-current financial liabilities. Other non-current liabilities declined by CHF 54 million, which can mainly be attributed to the reversal of the transport rights which can no longer be justified.

The balance sheet total rose by 4 per cent to CHF 2.4 billion. Equity amounted to CHF 965 million, which represents an equity ratio of 41 per cent. This ratio serves as a solid basis for upcoming investment projects.