REPOWER

Report on activities and outlook

Blue gold

The concept of blue gold has lost some value over the years: if domestic hydropower is to contribute to energy transition as planned, it must be able to profit from improved overall conditions.

EFFICIENCY PROGRAMME: ADDITIONAL MEASURES TAKEN

The ongoing programme to enhance efficiency in the company provided key support for results in the first half of 2014. Operating expenses were reduced considerably. For the current year, Repower expects savings from the efficiency programme to total about CHF 17 million. The measures implemented in the first half of 2014 included streamlining the Executive Board, simplifying internal structures, continued cost optimisation in various areas such as administration, IT and marketing, a cautious hiring policy and a reduction in investments. In addition, the simplification of Repower's legal structure in Switzerland was completed. This merger of Repower Holding Surselva AG and Repower Klosters AG into Repower Schweiz AG will reduce administrative expenses and improve the efficiency of dealing with regulatory requirements. In Italy, the integration of Repower Holding Italia S.p.A. into Repower Italia S.p.A. also laid the foundation for leaner processes.

QUALITY OF POWER PLANTS AND SERVICES REMAIN INTACT

Repower sets great store in maintaining the high quality of the services it provides to customers, also in the current situation. It also works hard to keep its generation plants and grids in Graubünden in good condition through careful and regular maintenance and refurbishment to ensure that all regions can be guaranteed a stable supply of electricity. For example, the substations in Schiers and Disentis were subjected to a major upgrade. At the Campocologno power plant, a total overhaul of the first machine group was completed, while the second machine group upgrade will take place this winter. The substation at Pros da God near Pontresina is also undergoing refurbishment, which should be completed this autumn. The high voltage power lines in Disentis and Silvaplana are also being renewed.

MAJOR PROJECT MILESTONES REACHED – OUTLOOK REMAINS MIXED

Repower made good progress on its power plant projects in the first half of 2014. In the spring, the government of the Canton of Graubünden approved the concessions for the Lagobianco pumped storage power plant. This move was a very important step in the approval procedure. Repower is currently working on the inspection project and on the second stage of the environmental impact statement. The goal is to submit by the end of the year the request for the project approval as the second step in the cantonal approval process. Due to the unfavourable general conditions, Repower will afterwards place its project development priority on upgrading the existing power plants in Valposchiavo, which are also part of the concessions.

Repower completed the concession project last spring for the planned Chlus hydropower plant in Prättigau/Graubünden Rhine valley. Eleven of the twelve municipalities involved in the project have already given their clear approval to the granting of the concession. The last vote will be held at the end of September. Apart from the pumped storage projects, Chlus is currently the largest planned hydropower plant in Switzerland. The Federal Office of Energy has thus rated it as a “project of national importance”, as it could contribute eleven percent of the proposed increase in the use of hydropower in Switzerland by 2035, according to the government's energy strategy.

There is no question that new and flexible hydropower capacities are needed to implement the energy strategy. However, the general conditions are currently not conducive to making investment decisions on major hydropower projects. Repower therefore hopes that the Swiss federal government will move quickly to find suitable solutions that are as market-driven as possible in the interests of reinforcing hydropower.

The project details for the combined-cycle gas turbine power plant project in Leverkusen are currently being worked out with the preferred provider. The planned power plant is excellently positioned thanks to its flexibility, high level of efficiency, its location in CHEMPARK Leverkusen with the supply of steam and subsidies for plants with heat and power cogeneration. Repower expects decisions to be made about the project's next steps within one year.

The environmental impact assessment for the Campolattaro project in Italy, which involves the construction of a pumped storage power plant, is at an advanced stage and the approval process is under way. In addition, talks with potential investors are also ongoing.

Progress was also made on the project for the construction of a merchant line between Bergell and Italy. In Italy, the approval process was started with the submission of the construction and operation permit application to the Economic Development Ministry. In Switzerland, ewz, as owner of the switching station Castasegna, approved the grid connection, and the Federal Office of Energy granted its approval to waive the sectoral planning procedure. The next move is to submit an approval request to the Federal Inspectorate for Heavy Current Installations (ESTI) for the construction and operation of the new 220 kV cable.

EXPERTISE PROVIDED FOR EXTERNAL CONTRACTS AS WELL

The important progress that Repower has made in its projects and in its operational activities confirm that the company is in a position to successfully develop large and complex projects while also giving due regard to the various interests of different stakeholders. Repower is using its vast experience and expertise to participate in more public tenders. Some initial external orders have already been received: in Avegno in the Canton of Ticino, Repower will plan the replacement of a 220 kV substation for Swissgrid. The total order value is approximately CHF 1.3 million. Repower has also received a maintenance order from Swissgrid for six substations in southern and central Graubünden for the period 2015-2020. The order volume is approximately CHF 1.4 million annually. Repower has also received an order from St. Moritz Energie for electro-engineering services and the planning of the refurbishment of the Islas substation.

In addition to generation and grid work for third parties, Repower is increasingly also providing services for Swiss utilities. These services include balance group management and other trading services, along with procurement, sales and advisory in portfolio management matters.

KNOW-HOW + COOPERATION = INNOVATIVE SOLUTIONS

The creation of “New Tech Business” took a real step forward in the first half of 2014 when the new business area was given a place in Repower's organisational structure. New Tech Business plans to make sensible additions to Repower's core business. Repower believes that innovative technical solutions and products are needed to make energy transition a reality. The increasingly decentralised and inflexible electricity generation from wind and solar energy requires flexible capacities on the customers' side, storage capabilities and energy-efficient applications in order to make intelligent system integration possible.

In addition, Repower expects that fuels such as oil and gas will be replaced increasingly by electricity, with oil-heating systems, for example, to be replaced by electric heat pumps or by the up-and-coming electromobility systems. Efficient solutions and products are needed in these areas as well.

One example of intelligent management of electricity consumption is the BeSmart project, which provides control energy through the networking of electric heating systems of numerous end-users. The project is being jointly developed by Repower and Swisscom, and has attracted a lot of interest from both customers and the energy sector. Installations are currently in progress for customers who have signed up for the project.

In Italy, Repower sells the PALINA charging station and the Verde Dentro service, which combines the supply of eco energy with e-mobility services. These two electromobility products are already offered throughout the country. Following this successful entry in Italy, Repower is now undertaking some initial efforts to offer electromobility solutions in Switzerland. This is to be offered in partnership with Swiss Hotel Association Graubünden hotelleriesuisse. The cooperation aims to promote more energy-efficient and sustainable solutions in the tourism industry.

eFFettiva and VAMPA are the names of two other innovative and energy-efficient Repower products that will soon be launched on the Italian market. eFFettiva monitors and analyses energy consumption using the innovative ELetto system. The careful analysis of the data allows Repower to optimise energy use and to thereby discover ways of cutting back on its consumption. VAMPA is an infrared thermography service for use in electrical plants that allows customers to recognize problems at an early stage and to monitor the correct installation of new electrical systems.

With its New Tech Business, Repower is emphasising cross-industry cooperation with partners. The company believes that this cooperation strategy is productive in the changing energy environment. The technological knowledge of its partners, combined with Repower's energy know-how, will produce solutions for energy issues going forward.

OUTLOOK

Repower is well positioned thanks to the proven expertise of its employees, its strong connections through cooperation with other firms and its innovation. The general market situation is likely to remain very challenging over the short to medium term, however. The development of the energy markets is difficult to predict due to the lack of clarity with regard to energy policy. Based on the current situation, Repower expects its operating result (EBIT) at the end of 2014 to be, as previously announced, below the 2013 level (before exceptional items). The strengths of Repower mentioned earlier in combination with its rigorous implementation of the efficiency programme provide it with the foundation necessary to tackle the current major challenges.




Dr Eduard Rikli
Chairman of the Board of Directors

Kurt Bobst
CEO