Consolidated Financial Statements of the Repower Group

Among partners:

Gerald Marxer, CEO of Liechtensteinische Kraftwerke (left), and Samuel Enggist, Head of Market and Sales Switzerland at Repower, discuss Repartner Produktions AG.

Comments on the Consolidated Financial Statements of the Repower Group

Group result impacted by market situation and exceptional items

Challenging market conditions necessitate exceptional non-cash-relevant adjustments – Equity remains solid

In its press release dated 16 December 2013, Repower announced that a reassessment of future energy price trends has resulted in the need to record extraordinary impairment charges on projects, contracts in progress and existing generation assets in its 2013 financial statements. In addition, it announced a controlled withdrawal from the Saline Joniche coal-fired power plant project by the end of 2015 at the latest.

The aforementioned adjustments significantly reduced the results by around CHF 232 million before interest and income tax, resulting in a loss of CHF 150 million before interest and income taxes. The Group loss including minority interests amounted to CHF 152 million. These impairment losses are non-cash-relevant.

The following comments on the financial statements of the Repower Group refer exclusively to operating results before exceptional items in order to provide a true picture of the financial figures in the year under review. The comments on the balance sheet are based on the figures obtained after extraordinary impairment losses. The comments in accordance with IFRS accounting standards and the related explanations can be found on page 49 ff of the 2013 Financial Report.

At CHF 2,325 million, energy sales remained stable (previous year: CHF 2,330 million). Energy sales in the Swiss and Italian markets remained largely unchanged compared with the previous year. Gross margins before exceptional items decreased by CHF 46 million to CHF 305 million (previous year: CHF 351 million), equivalent to a decline of 13 per cent.

Concession fees, personnel expenses and other operating expenses before exceptional items were around CHF 8 million lower year-on-year at CHF 217 million: these reductions primarily concern the reduction in personnel, administrative and IT costs as a result of the efficiency programme launched in early 2013. The aforementioned exceptional items consist of: gain due to change in pension plan to defined contribution and reduction in the conversion rate totalling around CHF 12 million, impairment losses of around CHF 12 million recognised in other operating expenses for the Saline Joniche project, and other exceptional items related to the efficiency programme, IT and adjustments in the value of receivables totalling CHF 5 million.

At CHF 54 million before exceptional value adjustments, scheduled depreciation, amortisation and impairment was on a par with the previous year (CHF 55 million).

At CHF 74 million before exceptional items, the Repower Group's operating result (EBIT) was some CHF 38 million or 34 per cent below the prior-year figure of CHF 112 million adjusted for exceptional items. Given the market distortions in the energy sector, this result can be considered favourable.

The financial result and the share of results of associates improved by CHF 22 million to end the year at CHF 9 million (previous year: CHF31million). This strong rise is almost exclusively attributable to the euro's slight recovery against the Swiss franc and to currency risk management activities. Income taxes before exceptional items were largely in line with expectations.

Group profit including minority interests and before exceptional items amounted to CHF 33 million (previous year: CHF 51 million).

Cash flow from operating activities was 29 per cent higher at CHF 69 million. Repower was able to use these funds for investments and dividend payments and to significantly reduce net debt.

Balance sheet structure remains strong

Non-current assets were CHF 143 million lower at CHF 1,074 million, primarily due to impairment losses totalling CHF 220 million recognised for tangible assets and adjustments in the value of other financial assets. The latter concern an impairment of around CHF 50 million recognised for long-term contracts and a gain of around CHF 50 million from the transfer of Repower's transmission grid to Swissgrid in return for shares in Swissgrid AG and a loan to Swissgrid AG. Deferred tax assets also rose by around CHF 20 million. Current assets were CHF 15 million lower at CHF 969 million (previous year: CHF 984 million). At 31 December 2013, the Repower Group enjoyed a comfortable liquidity situation with cash and cash equivalents of CHF 273 million (previous year: CHF 262 million).

Non-current liabilities fell by CHF 47 million, mainly due to a reduction in pension provisions (- CHF 14 million), deferred tax liabilities (- CHF 10 million) and non-current financial liabilities (- CHF 23 million; additional repayments related to financing for the Teverola gas-fired combined cycle power plant). Current liabilities dropped by CHF 47 million to CHF620million, mainly due to a reduction in negative replacement values for held-for-trading positions (CHF 21 million) and in other current liabilities (CHF 26 million).

While total assets narrowed by 11 per cent to CHF 2,034 million (previous year: CHF 2,302 million), with shareholders' equity at CHF 805 million (previous year: CHF 957 million), the equity ratio remained solid at 39 per cent.