Alpiq has successfully achieved an important basis for the transformation of the Group by extending and optimising its debt maturity profile. Among other things, Alpiq bought back outstanding bonds before maturity in the amount of CHF 543.4 million and replaced these with a new 10-year bond with a nominal value of CHF 300 million. The ongoing cost reduction programme is also showing results: Of the CHF 100 million targeted to be saved per year by the end of 2015, CHF 65 million have already been realised. The improved financing structure as well as one-off expenses for ongoing restructuring will together have a positive effect on the financial statements of Alpiq in the future.
Reduced gross debt – solid liquidity As part of the company’s strategy, Alpiq has initiated additional measures to strengthen the balance sheet. Alpiq expects proceeds of CHF 363 million from transactions from the successfully started divestment process of Swissgrid interests. The first transaction of CHF 75 million was successfully concluded at the end of 2014. The proceeds will be used to reduce net debt. In 2014, Alpiq decreased net debt from CHF 2.1 billion to CHF 1.9 billion and gross debt from CHF 4.5 billion to CHF 3.5 billion. The company continues to have a solid liquidity of CHF 1.6 billion at its disposal and unused, confirmed bank credit lines in the range of CHF 700 million are also available.
Conventional electricity production below previous year – energy trading optimised Low wholesale prices diminished the results of the entire conventional power plant production in 2014, particularly impacting hydropower in Switzerland. Alpiq has consistently reduced controllable operating costs for hydropower. Public duties, water rights rates and taxes, which make up about 40 percent of production costs, remained at an unchanged high level. Due to continued low wholesale prices and the challenging regulatory environment, Alpiq was forced to make impairments and provisions amounting to CHF 1,047 million after taxes, primarily on Swiss hydropower. In the course of its strategy implementation, Alpiq has been advocating relief for Swiss hydropower. To ensure that hydropower remains a pillar of Swiss electricity supply, it must be recognised as a renewable, flexible energy source. Based on the market conditions, operating hours of gas-fired combined-cycle power plants in Europe were again lower than in the previous year.
The wholesale business in Central and Eastern Europe delivered satisfactory results. However, they did not match those of the previous year, which offered exceptionally good trading opportunities. Last year, the 24/7 intraday business was successfully initiated based on the strategy. In the meantime, Alpiq is active on the market around the clock in order to take advantage of the increasing need for short-term flexibility arising from the inadequate prediction of wind and solar production. In addition, Alpiq is optimally valorising its flexible hydropower capacities with its new 15-minute product, which was introduced to the market in 2014.
Opportunities utilised in the energy service business In building and transport technology, Alpiq again exceeded the high level of the previous year. In building technology, Alpiq strengthens its presence through acquisitions; like for example last year in Northwestern Switzerland. Alpiq is the leader in Switzerland in the area of building technology and, in line with the strategy, continues to expand in the areas of energy efficiency, smart buildings, energy contracting and e-mobility. A milestone was achieved in transport technology with the laying of the last railway sleeper in the new Gotthard Base Tunnel at the end of October 2014.
Subdued investments in power plant technology shaped the power plant construction and services business outside Switzerland due to continued overcapacities in Europe. Alpiq has diversified in the industrial sector and acquired various contracts in this area in 2014.
Alpiq continued to expand the energy management business in line with its strategy. Last summer, GridSense was presented to the energy community. The new technology anticipates user behaviour through artificial intelligence to control electricity consumption in buildings and optimise grid load management. In addition, Alpiq acquired Flexitricity, which is Great Britainꞌs market leader in load management. Thus Alpiq has gained access to innovative solutions and expertise, as well as new markets in the area of decentralised energy management.
Outlook The operative result for 2015 will be impacted by low wholesale prices. The reasons are the high subsidies for new renewable energies, which have promoted an increase of wind and photovoltaic systems, low prices for primary energies such as oil, gas and coal, as well as weak CO2 prices. In addition, rising duties, particularly elevated water rights rates, will impact the operative result for 2015.
The Swiss National Bank’s (SNB) decision to lift the Euro peg and introduce negative interest rates will be financially manageable in the short term because Alpiq has hedged the currency risk for energy exports from Switzerland. However, EBITDA of the subsidiaries in the euro zone will decrease accordingly. The consequences of the SNB decision will be reviewed in the course of publication of the half-year results for 2015.
These framework conditions confirm the necessity for the transformation of the Group. Alpiq is focusing on the capital market capability, with the primary goal being the reduction of net debt and to make targeted investments in the future.
Alpiq will continue the dialogue with Swiss policymakers to achieve rapid improvement of the framework conditions for Swiss hydropower, so that it is recognised as a renewable, flexible energy source. Hydropower is a key solution to meet the current challenges of pan-European energy policy issues.
Scrip dividend to strengthen capital base The Board of Directors has decided to retain the dividend of CHF 2 per share. To strengthen the capital base and to improve the financial flexibility of the Alpiq Group, the Board of Directors will propose a scrip dividend to the General Meeting. Shareholders can elect to a dividend payment in cash or to receive newly issued shares. The dividend will be remitted as an attractive tax payout from capital reserves. The precise terms and conditions will be presented to shareholders at the Annual General Meeting 2015, at which the optional dividend will also be put to vote. The syndicated shareholders EOS Holding SA and EDF Alpes Investissements Sàrl, as well as EBM, EBL, Canton of Solothurn, IBAarau and WWZ, have elected to receive newly interest shares. They have entered into an agreement to subscribe to new Alpiq shares in line with their current holdings in place of a cash dividend.
Changes on Alpiq’s Board of Directors Board Members Michael Baumgärtner, Damien Gros and Gérard Roth will not stand for re-election at the Annual General Meeting taking place on 30 April 2015. Nominated as new Members of the Board and as representatives of EDF are Heiko Berg, Philipp Büssenschütt and Tilmann Steinhagen. Shareholders will vote on these nominations at the upcoming Annual General Meeting.
The media release and the Annual Report 2014 will be available on 9 March 2015 from 7.00 a.m. under www.alpiq.com/reports. The presentations for the Annual Results Media Conference will also be available on the Alpiq website from 7.00 a.m.
Note: Due to the long-term nature of its business, Alpiq will only communicate half-year and annual results in the future. On 28 August 2015, Alpiq will present the figures for the half-year 2015 at the media breakfast and financial analysts telephone conference.