Alpiq : Net debt reduced significantly in 2016

• As announced, EBITDA before exceptional items of CHF 395 million is down on the previous year. Main drivers: Swiss electricity production negatively impacted by low wholesale prices and unscheduled downtime at the Leibstadt nuclear power plant.
• Cost management counters the decrease in earnings.
• International electricity production, Commerce & Trading and Energy Services operating profitably.
• Disposals reduce net debt from CHF 1.3 billion to CHF 0.86 billion.
• Net debt/EBITDA improved to 2.2x.

Lausanne - In the 2016 financial year, the Alpiq Group generated net revenue of CHF 6,078 million (2015: CHF 6,715 million) and EBITDA before exceptional items of CHF 395 million (2015: CHF 480 million) in an extremely demanding market environment. The main driver of this development is the drop in wholesale prices in previous years. Alpiq secures its energy production on a rolling basis. The decrease in earnings thus reflects the price erosion over the past years. Furthermore, there is the unscheduled downtime at the Leibstadt nuclear power plant. By contrast, systematic cost management and the successful use of market opportunities, particularly the flexible power plant portfolio, had a positive effect on earnings.
The financial result is up on the previous year due to the lower interest charge caused by fewer financial liabilities as well as positive currency effects.
Net income before exceptional items amounts to CHF 115 million (2015: CHF 46 million).

Structural measures being implemented

Alpiq continued on track with the disposal of non-strategic assets. Shares in AEK Energie AG, Romande Energie Commerce SA, Alpiq Versorgungs AG and Swissgrid AG, among others, were successfully sold as part of the current portfolio streamlining. The funds resulting from these disposals have reduced net debt from CHF 1.3 billion to CHF 0.86 billion as at the end of 2016, where it is under the one-billion mark for the first time. The company also has sound liquidity of CHF 1.5 billion.

Generation: Switzerland's large-scale power plants under pressure - process to open up the hydropower portfolio not complete

In spite of further cost reductions, the Generation business division performed considerably lower than in the previous year. The main driver of this development is the drop in wholesale prices in previous years. Alpiq secures its energy production on a rolling basis. The decrease in earnings thus reflects the price erosion over the past years. In addition, the unscheduled downtime at the Leibstadt nuclear power plant had a negative effect on earnings development.
The process to open up to 49 % of the hydropower portfolio is not complete. Alpiq will not conclude the transaction unless all three criteria - price, contractual conditions and transaction security - have been fulfilled.
International electricity production and the regulated, new renewable energies achieved a profit.

Commerce & Trading: flexible power plant portfolio leveraged successfully

After the disposal of Alpiq Versorgungs AG, the Commerce & Trading business division was as a whole slightly under the previous year's level. Swiss and international power plant management was up on the previous year on account of the successful use of the flexible power plant portfolio. Eastern and South-Eastern Europe were down on the previous year.
Commerce & Trading expanded its business and invested in smart technologies as part of the strategy implementation. New products and services relating to connected energy markets that are increasingly dominated by digitalisation were developed further. Alpiq is thus addressing the challenges of the changing energy market.

Energy Services: large-scale projects won

The Energy Services business division developed steadily in a competitive market. As part of its strategy implementation, Alpiq expanded its market leadership among energy services providers in a targeted way. The company successfully carried out several building technology projects in Switzerland and Europe. For instance, Switzerland's newest large-scale research facility, the X-ray free-electron laser SwissFEL, was inaugurated at the Paul Scherrer Institute. Alpiq played the lead role in the construction consortium and was responsible for the complex building technology. The acquisition of the building technology provider Jakob Ebling GmbH also expanded Alpiq's market presence in Germany.
Alpiq bolstered its leading position in transportation technology. The project of the century, the Gotthard Base Tunnel, for which Alpiq led the railway technology consortium, was completed on schedule. The company also successfully acquired additional orders in Europe, including the high-speed rail from Milan to Genoa.
Alpiq also won new large-scale orders in the energy and industrial services business. The company focuses on ground-breaking, decentralised power plant technologies and diversified further in the industrial area. Alpiq leveraged opportunities in the corresponding growth areas using targeted acquisitions. The purchase of Romanian engineering company IPIP S.A. secured geographical market access for energy services in Eastern Europe and increased competitiveness. The company's international market presence for the dismantling of nuclear facilities was expanded by concluding a cooperation agreement with STEAG Energy Services GmbH, Germany.

Outlook

The regulatory framework conditions continue to distort competition in Switzerland. Here, Alpiq operates as a pure electricity producer on a free market. Without access to bound end customers, the company is therefore missing monopolist's income as well as regulated income from distribution grids.

Results of operations for 2017 will firstly be influenced by negative currency effects as a result of expiring hedges that were concluded on the minimum EUR exchange rate before the decision taken by the Swiss National Bank. Secondly, the shutdown at the Leibstadt nuclear power plant will continue to negatively impact earnings. Thirdly, earnings will continue to be influenced by the extremely challenging market environment and low wholesale prices.

Against this background, the company will drive forward the implementation of structural measures, comprising the process to open up to 49 % of the hydropower portfolio, disposals of non-strategic assets and stringent cost management. Based on industry criteria, Alpiq is also focusing on the profitable growth areas and sharpening its profile into three individual business divisions: 'Digital & Commerce', 'Industrial Engineering' and 'Building Technology & Design'. This means that Alpiq is laying the foundation for future growth, creating added value and offering investors the opportunity to make targeted investments in the growth areas. Alpiq will retain control over these three business divisions. More information on this will be communicated in a separate press release on 6 March.

By introducing all these measures, Alpiq will further reduce net debt. Maintaining access to capital markets remains a priority.

Zero dividend and no interest on the hybrid loan to the consortium shareholders

Due to the fact that the company's profitability situation remains strained, the Board of Directors of Alpiq is submitting a proposal to the Annual General Meeting that no dividend be paid out. In addition, Alpiq will pay no interest on its hybrid loan to the Swiss consortium shareholders. However, the hybrid bond that was placed publicly will be serviced. The next interest payment on this bond is due on 15 November 2017.

Changes to the Board of Directors and Executive Board

After reaching the age of 70, Christian Wanner is no longer available for re-election to the Board of Directors at the upcoming Annual General Meeting. Heinz Saner from the canton of Solothurn, which is entitled to a seat on the Board of Directors pursuant to the Articles of Association, will be dispatched and proposed for election. The Annual General Meeting of Alpiq Holding Ltd. will take place on 18 May 2017 in Olten.

In connection with strengthening the company's industrial growth areas, the Board of Directors has appointed Peter Limacher as Head of the Building Technology & Design business division and as a member of the Executive Board. He was previously in charge of Alpiq InTec.

Financial results

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