Report of the CEO

Kurt Bobst, CEO:

“The operating result before value adjustments shows that Repower acts favourably even in a turbulent environment.”

Result adversely impacted by extensive value adjustments – balance sheet remains solid

The energy sector is in a state of flux. Europe's energy transition project has presented it with a Herculean political and technological challenge that has wide-ranging effects on the market, to which Repower is not immune. The strengths and experience that the company has acquired over years help it to act on the market with know-how, dynamism and innovative ideas despite these turbulences.

Market prices are unlikely to recover in the foreseeable future due to the continuing distortions, the ongoing low level of electricity consumption and the similarly low CO2 prices. Repower therefore had to carry out value adjustments amounting to CHF 232 million at the end of 2013. These affected all current power plant projects (CHF 110 million), as the current energy policy environment is not conducive to investments in non-subsidised technologies. They also mean that Repower has had to take account of the anticipated price expectations in its value adjustments for existing plants in Switzerland and abroad (CHF 64 million) and long-term procurement agreements (CHF 50 million). Finally, there were value adjustments to ongoing IT projects (CHF 8 million). These exceptional items have no negative impact on Repower's operational business. Thanks to its stable financing structure and solid equity base of CHF 805 million (equity ratio of 39 %) the company continues to have a sound foundation for its activities. Details of the value adjustments are presented on pages 76 ff. of this Annual Report.

Favourable operating result before value adjustments

In 2013, Repower posted total operating revenue of CHF 2.4 billion. Due to the extensive value adjustments, the company reported an EBIT of negative CHF 150 million in 2013 and a loss of CHF 152 million. Given the challenging market situation, the result before exceptional items is favourable, with EBIT of CHF 74 million (2012: CHF 112 million = - 34 %) and profit of CHF 33 million (2012: CHF 51 million = - 35 %).

The challenging situation also affected the trading business. Market conditions have changed; the environment is subject to strong political influence which has resulted in low trading margins. Repower has, however, acted in accordance with the difficult situation and optimised its assets. In 2013, Repower traded a total of almost 11 terawatt hours of electricity (+ 19 % compared to 2012) and around 1.5 billion cubic metres of gas (+ 135 % compared to 2012).