OPERATING INCOME PICKS UP IN A MARKET STILL BESET BY CHALLENGES

NEW SHAREHOLDERS ENABLE CHF 171 MILLION INCREASE IN CAPITAL – 2016 RESULTS UNDERPINNED BY ONE-TIME FACTORS AND BUSINESS NOT DIRECTLY DEPENDENT ON ENERGY PRICES – LOW LEVEL OF PRICES CONTINUES TO HIT ENERGY TRADING HARD

Despite persistently low wholesale prices and their negative impact on earnings, Repower’s 2016 results exceeded expectations. This was partly due to stable earnings contributions from the energy supply business and the sale of properties in Switzerland that were no longer operational. In Italy sales of electricity and gas developed well, and the Teverola combined-cycle gas turbine plant generated very gratifying earnings, especially on the balancing energy market. The year was dominated by the successful rights issue that increased the company’s capital by around CHF 171 million, and the acquisition of new anchor shareholders.

Extraordinary items also played a role in the 2016 results, albeit to a much less significant extent than in 2015. A further CHF 22 million in impairments on overdue receivables in Italy, plus CHF 1.5 million in additional provisions for energy purchase agreements in Switzerland, had a negative impact. On the positive side were impairment gains of CHF 15 million on generation assets.

The 2016 financial year ended with earnings before interest and tax (EBIT), after exceptional items, of CHF 22 million. Income before income taxes came to negative CHF 10 million, with an annual loss of CHF 13 million for 2016.

To give a realistic picture of financial performance during the year under review, the comments on the Repower Group’s financial results for 2016 refer primarily to operating earnings before exceptional items. Comparisons with the prior year are also made on the basis of results before exceptional items. Comments relating to the balance sheet, however, are based on figures after exceptional items. Remarks related to the IFRS financial reporting standards and more detailed explanations in this context can be found on the following pages of the 2016 financial report.

In the year under review the Repower Group saw total energy sales fall 8 per cent to CHF 1,688 million from CHF 1,838 million the previous year. In both Switzerland and Italy there was a decline in sales revenues, particularly in energy trading. The disposal of the sales business in Romania also eroded revenues. Gross energy margin before exceptional items improved, up CHF 11 million from CHF 185 million to CHF 196 million, due in significant part to the gratifying performance of the Teverola plant mentioned above.

Operating expenses (without energy procurement) declined by around CHF 8 million year on year to CHF 173 million (from CHF 181 million the year before), owing primarily to a renewed decline in personnel costs (down CHF 4 million) and a slight reduction in expenses related to concession-related charges (down CHF 1 million). As previously, the reductions in personnel expenses are due to the efficiency programme that commenced in the 2013 financial year in addition to restructuring measures and business disposals that have been initiated and implemented since then.

Scheduled depreciation/amortisation came in at CHF 45 million for 2016, a decline of around CHF 3 million versus the previous year (CHF 48 million) due to one-time impairments on generation assets in previous years. One-time impairment losses and gains had a net positive effect of CHF 15 million in 2016.

Repower Group posted earnings before interest and taxes (EBIT), before exceptional items, of CHF 30 million, CHF 18 million (150%) higher than the CHF 12 million in EBIT before exceptional items recorded the previous year.

There was CHF 43 million year-on-year improvement in financial results, including the share of results of associates item, with a loss of CHF 32 million versus a loss of CHF 75 million the previous year. There was a massive year-on-year decline in currency translation losses (down to CHF 2 million in 2016 from CHF 34 million in 2015). The premature repayment of two registered bonds in summer 2016 resulted in a loss of CHF 5 million. Currency forwards and forward rate agreements for hedging purposes generated a positive contribution of CHF 2 million.

Group profit came in at negative CHF 5 million (previous year: negative CHF 46 million).

Cash flow from operating activities improved significantly, from CHF 17 million in 2015 up to CHF 69 million in 2016. The reasons for this gratifying result included an improved operating performance and a substantial year-on-year decline in financial expense.

INFORMATION ON THE BALANCE SHEET

There was a CHF 35 million year-on-year decline in non-current assets to CHF 834 million (previous year: CHF 869 million). This decline was due to a slight reduction in tangible assets (CHF 14 million), the sale of an interest in an associate (CHF 4 million), the repayment of a loan granted to third parties (CHF 10 million) and a reduction in deferred income tax assets (CHF 7 million).

There was a CHF 86 million year-on-year decline in current assets to CHF 863 million (previous year: CHF 949 million). The reduction was mainly due to declines in cash and cash equivalents (down CHF 98 million), receivables (down CHF 39 million) and inventories (down CHF 14 million). Increases in positive replacement values (up CHF 44 million) and securities and other financial instruments (up CHF 22 million) had the opposite effect.

The CHF 136 million decline in non-current liabilities was due almost entirely to the premature repayment of two registered bonds in summer 2016. Current financial liabilities were impacted by the repayment of a CHF 200 million bond.

The balance sheet total declined 7 per cent to CHF 1,705 million (previous year: CHF 1,828 million), while equity at the end of 2016 increased to CHF 763 million (previous year: CHF 600 million). This positive effect was brought about by a CHF 171 million increase in capital and the involvement of two new anchor shareholders following the successful rights issue in summer 2016.