16/12/2013

Repower sees no quick turnaround in the difficult market trend and is taking one-time impairment charges — controlled withdrawal from Saline Joniche by end of 2015

In the light of a reassessment of the future development of energy prices, in its 2013 financial statements Repower will be recording one-time impairment charges of around CHF 220 million on projects, contracts in progress and existing generation assets. The result of this is that contrary to previous expectations, there will be a substantial net loss for the 2013 financial year. In addition, Repower’s Board of Directors has resolved not to take interests in coal-fired power plant companies in the future. Given the contractual obligations that are in place, the company will have completed its controlled withdrawal from the Saline Joniche project by the end of 2015 at the latest.

In the light of the outcome of the German elections, any systematic, effective reform of the energy market does not look set to happen soon. Promotion of new renewables is likely to continue on the basis of market-distorting feed-in tariffs. Not only this, but so far there has been no sign of any firm course in Swiss energy policy towards market-oriented systems of promotion. For this reason it must be assumed that electricity prices, currently running at very low levels, will not recover in the foreseeable future, and that the market will continue to be flooded with subsidised power.

Because the fundamentals for investing in non-subsidised technologies are no longer in place in the current energy policy environment, the impairment charges affect ongoing power generation projects in particular (impairment of around CHF 110 million). The next steps will be defined on the basis of each specific project. Reflecting the reassessment of future price expectations, there will also be impairment charges in connection with long-term contracts (around CHF 55 million) and existing generation assets in Switzerland and abroad (around CHF 55 million).

Given that the energy market environment has remained difficult in the fourth quarter of 2013, previous estimates of operating results (EBIT) will also have to be adjusted in the 2013 financial statements. Before one-time impairment charges, the operating results for 2013 will be around 10 per cent below the prior year. On the positive side, the systematic implementation of the efficiency programme announced in January 2013 is already having an impact. The programme is running to plan, and will take full effect in 2014, with annual savings of CHF 10 to 15 million.
Despite the one-time impairment charges, Repower will continue to have a strong balance sheet and solid finances. It is important to emphasise that these corrections will have no impact on Repower’s operating business.

In terms of interests in coal-fired power plants, Repower will be adhering to the overall strategic approach formulated by the government of Canton Graubünden, its majority shareholder. This owner strategy, combined with overall developments in the environment, has prompted a resolution from Repower’s Board of Directors not to consider any more interests in coal-fired generation plants.

Repower will withdraw from the Saline Joniche project on a controlled basis by the end of 2015 at the latest while complying with the contractual obligations that are in place.

 


 

 


Contact:

Kurt Bobst
CEO
7742 Poschiavo, Switzerland
T +41 81 839 7111
M +41 79 221 4655
kurt.bobst@repower.com


Stefan Kessler
CFO
7742 Poschiavo, Switzerland
T +41 81 839 7111
M +41 78 774 1419
stefan.kessler@repower.com


Werner Steinmann
Head of Media Relations
7742 Poschiavo, Switzerland
T +41 81 839 7111
M +41 79 831 5213
werner.steinmann@repower.com

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