Foreword from the board of directors and CEO
The year 2017 was dominated by Repower’s rigorous positioning as a sales and service organisation. With an internal realignment and the development and launch of innovative products and services, Repower is putting customer needs even more firmly at the centre of its business. At CHF 33.8 million, operating income (EBIT) was substantially higher than the previous year thanks to positive market effects and the new strategic positioning.
The most important events of 2017
Besides concentrating on optimum operations in its core business, during the year under review Repower focused on its ongoing development into a sales- and service-oriented organisation. The goal is to draw on the company’s 100-plus years of experience to offer one-stop services along the entire value chain − all revolving around the customer. Repower further honed its organisation in Switzerland to be able to respond even more quickly and effectively to the needs of its customers. In addition to the Market corporate division, at the end of the year the company restructured the Service Provision corporate division and divided it into the following units: Generation Asset Management, Grid and Supply Asset Management, Planning, Execution, Operations and Trading. This new organisation, which applies as of 2018, will facilitate even more effective and efficient implementation of the relevant work processes. It optimally equips Repower to provide its customers with a seamless range of services.
Alongside efforts to expand its offerings, Repower’s business was dominated by digitalisation, which is increasingly relevant in terms of both internal processes and external services. Against this backdrop Repower launched new products including EASYASSET and ENERGYSPACE, both for its own use and to be marketed to other energy utilities. Further products are under development and will be ready for market in 2018.
Repower continued to drive forward its electric vehicle (EV) activities in 2017. In addition to extending its PLUG’N ROLL EV charging network, Repower launched a new product called E-LOUNGE, an attractive, modern charging station for electric bikes that can also be used as a bench to sit on.
Successful implementation of the growth strategy in the sales business and positive economic developments on the economic front helped ensure that developments in the Italian business remained positive. Efforts to substantially expand the offering continued with the addition of energy services, notably electric vehicle-related services.
Besides developing new areas of business, Repower is also concentrating on maintaining and where possible expanding its hydropower generation capacity. The acceptance of Energy Strategy 2050 reinforces hydropower as a pillar of the Swiss energy supply, and thus works in Repower’s interests.
A good example is the Morteratsch hydropower plant near Pontresina, which resumed operation back at the end of 2016 and was officially inaugurated with an open day in 2017. For this project Repower devised an innovative financing and operating model and entered into partnership with an infrastructure fund.
Again in 2017 Repower in Italy was named the best company in the SME segment of the energy market in terms of customer satisfaction. This was the result of a market analysis conducted by market research institute Cerved Group SpA. Repower Italy also ranked first in terms of net promoter score, in some cases leaving its rivals far behind. The net promoter score is an indicator of customers’ willingness to act as ambassadors for Repower.
At the beginning of 2017 Repower also placed two green bonds (Schuldscheindarlehen) as part of the regular refinancing of parts of its portfolio of renewable generation assets− the first Swiss company to do so.
The Teverola combined cycle gas turbine plant was successfully deployed for both the ancillary services and day-ahead markets, making a substantial contribution to the good results. Refurbishment work originally scheduled for 2017 was postponed to the beginning of 2018 at the request of the Italian grid operator Terna, and will therefore have a negative impact on 2018 results.
Accounts receivable management in Italy was further optimised, and the portfolio of old overdue receivables was completely sorted out.
In 2017 there was a recovery in prices on the energy market and an improvement in the EUR/CHF exchange rate. The outlook is better than in 2015/2016. More stable economic developments contributed to good price developments in 2017. However, it is too early to speak of a sustained recovery. Even so, there should be signs of an improvement in the price environment in the next few years. One reason for this is that neighbouring countries are removing generation capacity from the grid, which should have a positive influence on prices.
In addition to this, various political discussions continued to disconcert the electricity industry last year. On the political agenda in Switzerland, besides full market liberalisation and the bilateral agreement with the EU, was the new design of the electricity market. New arrangements governing water rates from 2020 will also play a key role in the economic viability of hydropower. Things continue to develop on the regulatory front in Italy too, requiring constant adjustments to the changing framework. Repower also sees opportunities in this, but would naturally welcome a more stable environment.
At CHF 1.8 billion, Repower’s 2017 total operating revenues were 7.2 per cent up on the previous year’s figure. At CHF 33.8 million, operating income (EBIT) was substantially higher than in 2016, and significantly better than the expectations communicated with the half-year results. The main reasons were gratifying earnings on asset portfolio management, a general slight improvement in the market situation, and a more favourable EUR/CHF exchange rate. Other positive factors included the economic recovery in Italy, which led to rising prices, and lower volumes of energy generated by French nuclear power stations, which likewise underpinned prices. Also worthy of mention is cost-awareness within Repower, which contributed to the good results in 2017, and not just because of reorganisation efforts and improvements to internal processes.
The equity ratio is a solid 42.2 per cent. Cash flow from operating activities came to CHF 42.6 million, significantly exceeding investment of CHF 32 million.
total operating revenues in 2017
operating income (EBIT) in 2017
Besides the ongoing optimisation and targeted expansion of its traditional core business (power generation, trading and supply), Repower’s strategy involved systematically building its energy services business. In Switzerland the focus is on energy utilities and partners all over the country, to which Repower provides its expertise and services, and on basic supply in the company’s own network area. In Italy the company is endeavouring to substantially increase its share of the SME market. During the last financial year it added 183 new salespeople to its agent network, and the plan is for this expansion to continue in 2018.
Repower will also continue efforts to optimise internal process initiated last year. In addition to this Repower is driving forward the development of new products that it not only offers to third parties, but uses itself. Repower’s goal is to position itself as an expert service provider, drawing on know-how gathered over more than 100 years to offer customers services along the entire value chain.
Another cornerstone of its strategy is safeguarding the value of its hydropower generation assets. In 2017 Repower also achieved important goals in this respect with a plant-based energy supply agreement for Repartner Produktions AG revolving around the energy produced by the Prättigau cascade.
In its electric vehicle-related business the company also uses partnerships to bundle know-how and provide an extensive network of charging points. Repower is on the right track, with around 100 charging stations installed in Switzerland.
Electric transportation is also an important theme in Italy. For example Repower has entered into partnership with BMW subsidiary Mini in connection with electric vehicles. This is a valuable cooperation, and not just in technical terms. The emphasis is more on the fact that Mini-Repower is seen as a technical and artistic partner, clearly positioning Repower as a provider of service design.
The people who work for Repower, including our sales consultants in Italy, are at the heart of the progress without which the business could not have developed last year. We would like to express our warm thanks for their contribution. We would also like to thank our customers, partners and shareholders for the trust they have placed in us.
Outlook and objectives
Repower can look to the future with confidence. The company is systematically pursuing its goals on the basis of a strong capital base. Implementation of corporate and sales strategy is proceeding according to plan. The restructuring is bearing fruit, enabling even more efficient collaboration and helping Repower further optimise costs. There should be no doubt, however, that the market environment will remain challenging. By developing and refining new, innovative products Repower is increasingly taking the path of digitalisation and thus positioning itself for the future. For 2018 Repower anticipates lower operating income than in 2017.