Dr Eduard Rikli, Chairman of the Board of Directors (right), and Kurt Bobst, CEO:

“In 2014 Repower optimised its core business while moving forward with innovative projects that will help shape the energy business of the future. The net loss reflects an extremely challenging market environment.”

In 2014 Repower achieved a number of gratifying successes that underscored the company's recognised know-how and innovatory power. At the same time the economic environment remained extremely challenging. This is also evident in the low price of Repower shares, which reflects the difficult conditions on the market. The group posted operating income (EBIT) of CHF 26  million and a net loss of CHF 33 million on total operating revenue of CHF 2.3 billion. EBIT before exceptional items came to CHF 39 million.

Highlights of 2014

In 2014, Repower managed to win various outside contracts for its generation, grid and trading services. Worthy of particular mention are a contract from national grid operator Swissgrid to replace the 220-kV Avegno substation in Canton Ticino, collaboration with Engadiner Kraftwerke (EKW) on grid operation and the refurbishment of a switching station, trading services delivered to various power providers in Switzerland, and, last but not least, a contract from Swiss Federal Railways (SBB) to optimise deployment of their comprehensive portfolio of power generation assets.

In 2014 the Canton Graubünden authorities approved the concessions for the Lagobianco pumped-storage power plant project. Local communities voted overwhelmingly in favour of the Chlus hydropower plant. Plans to build a combined-cycle gas turbine plant in Leverkusen took a major step forward with the signing of the construction and supply contracts with the preferred bidder.

In the year under review Repower moved decisively ahead with its newly created New Tech business in all its key markets, with innovative projects related to energy efficiency, electric mobility and intelligent uses of electricity well on course. Finally, in 2014 Repower signed an agreement with an intercantonal consortium to sell its Swissgrid shares and convertible bond.

Operating environment

The reporting period was marked by intense debate on energy policy. The Swiss parliament (the National Council) recognised in part the important role of hydroelectric power, which despite representing a renewable resource par excellence has been hardest hit by official schemes to promote and subsidise new renewables. But as the process of setting up a new legal and regulatory framework for the energy business continues, it will be necessary to create a good, efficient basis for competition without ignoring the need for free market mechanisms.

There was another dramatic year-on-year decline in prices on the European energy markets in 2014. This affected other commodities – oil, coal and gas – as well as electricity. Low prices were compounded by the weak euro; doing such a substantial amount of business in the European currency, Repower is tangibly affected by fluctuations in the EUR/CHF exchange rate. The situation will become even more challenging in the wake of the Swiss National Bank's decision in January 2015 to remove the cap on the exchange rate. Apart from this, declining interest rates eroded the value of existing interest rate swaps on the one hand, but at the same time had a positive impact on Repower's refinancing efforts.

Results

Repower's financial results reflect the challenging environment. With total operating revenue of CHF 2.3 billion, Repower posted operating earnings (EBIT) before exceptional items of CHF 39 million (down 47% on adjusted EBIT in 2013) and an adjusted net loss of CHF 22 million (adjusted net earnings for 2013: CHF 33 million). Results were negatively impacted by around CHF 6 million in provisions for long-term agreements, translation differences from the disposal of non-Swiss subsidiaries (CHF –8 million) and other smaller exceptional items (CHF –4 million). On the positive side was an exceptional item of around CHF 5  million in connection with the new pension fund arrangement. Repower continues to enjoy very sound finances, and has a strong equity base of CHF 766 million. Various measures led to an improvement in cash flow.

Strategy

Repower continues to focus on its key markets in Switzerland, Italy and Romania, but is abandoning the sales business in Germany. Once again this geographic diversification worked in Repower's favour in 2014, with the various country organisations all reaping the benefits of know-how transfer. In addition to optimising its core business, Repower is also increasingly seeking to sell its services outside the company. Added to this, the various areas of its New Tech business continue to take shape. These efforts to supplement the company's core business will also include cooperation with outside organisations.

Efficiency programme

The ongoing efficiency programme is having a beneficial effect, with measures to optimise costs resulting in savings of around CHF 17 million in 2014, and savings of more than CHF 20 million anticipated for 2015. Preparations are also under way for another optimisation measure: the merger of Repower Schweiz AG with Repower AG has already been announced, and will take place in 2015.

Gratitude

A company's stakeholders are particularly important in a challenging environment. We would like to take this opportunity to thank our shareholders for their trust, our customers for their loyalty, and our employees for their dedication and hard work.

Outlook and objectives

The market situation will remain extremely challenging in the short to medium term. It is hard to predict how market prices and the political and regulatory framework will develop going forward. The outlook is even less clear given the uncertainty on the international front. The EUR/CHF exchange rate is likely to remain volatile at a low level following the removal of the cap. And with market conditions in flux, we have to constantly assess impairment of our plants and projects. The efficiency programme and clearly focused capital expenditure will continue to underpin our business. Repower will continue to consolidate its robust core business and build its New Tech business, an area still in its infancy. These factors, coupled with stable financing, our recognised know-how and ability to forge partnerships, will help assure Repower's good positioning, even through this challenging phase.

Dr Eduard Rikli
Chairman of the Board of Directors

Kurt Bobst
CEO