27 January 2010

Axpo Group posted a consolidated result for the 2008/09 financial year (as of 30 September 2009) of CHF 568 million (- 43%). The weak performance of the domestic business, reduced income from electricity exports and the international financial market crisis contributed to this unsatisfactory result. Axpo is nevertheless continuing to invest in supply facilities as planned. In view of the need to finance these investments, Axpo Group is preparing a bond issue. With an increase in the number of jobs in Switzerland by 371 (394 in total), Axpo is one of the companies that created the largest number of new jobs in Switzerland in 2009.

In spite of the substantial drop in profit, Axpo has set a milestone for the security of supply in Switzerland with its Linthal 2015 project (1 000 megawatt Limmern pumped-storage plant). After the Canton of Glarus issued the building permit in July 2009, the boards of directors of Axpo and Kraftwerke Linth-Limmern AG (KLL) gave the green light for the project in September 2009. "At a total of CHF 2.1 billion, Linthal 2015 represents the largest investment in Axpo's history. It is also the largest Swiss hydropower project to date. To enable us to continue to guarantee a reliable and secure supply of electricity in future, we also invested an additional CHF 510 million in the maintenance and expansion of our power plants and grids, preparations for the replacement nuclear power plants and new renewable energies in the 2008/09 financial year," said CEO Heinz Karrer.

Driven by the continued expansion of Axpo's business activities in Switzerland and abroad and the large number of ongoing projects in Switzerland, the number of employees rose by a total of 394, of which 371 were in Switzerland. "Axpo has thus joined the ranks of the Swiss companies that created the largest number of new jobs in the 2008/09 financial year," emphasized Heinz Karrer. Axpo also puts its social responsibility into practice by providing professional training for young people. In the 2008/09 financial year, the Group employed 345 apprentices (+ 1.8%).

Higher electricity sales in supply area

Axpo Group improved its energy sales in its supply area by 0.8% year-on-year to 20 000 million kilowatt-hours (kWh), primarily as a result of a colder winter and in spite of the economic downturn. As the capacity utilization of the nuclear power plants remained very good, production was high at 22 276 million kWh. Hydropower production was almost 3% higher than in the previous year, and the electricity produced by Axpo from renewable sources rose by 24.5% to 237 million kWh.

Challenging economic environment

Axpo posted a consolidated profit of CHF 568 million (previous year: CHF 1 003 million). The profit contracted noticeably as a result of the heavy financial burden arising from changes in the regulatory and political environment and the impact of the financial crisis on the real economy and the energy markets. The drop in the profit contribution of the domestic business and the loss of income from the export of electricity was only partially compensated by the good performance of the international energy trading business. At CHF 7 550 million, Axpo Group's revenues were almost on a par with the previous year. However, the impact of regulatory and political changes in Switzerland, investments in replacement and new nuclear power plants and grid capacity, as well as rising operating expenses, pushed up the costs. In the wake of the financial crisis, the financial result was also much weaker, as reflected in the cash flow from operating activities, which at CHF 901 million was down 11% from the previous year.

The Board of Directors will request the annual general meeting to approve the payment of a dividend of CHF 3.75 from the balance sheet profit (previous year: CHF 4.30) per share, which equals a total dividend of CHF 139 million.

Further investment in security of supply

To ensure the security of supply for Northeastern and Central Switzerland, the subsidiaries Axpo AG and CKW, together with BKW-FMB Energie AG, submitted general licence applications for the replacement of the Beznau and Mühleberg nuclear power plants to the Swiss Federal Office of Energy (SFOE) on 4 December 2008 as planned. On 30 October 2009, Axpo and BKW followed the instructions of the Swiss Federal Nuclear Safety Inspectorate ENSI and filed the revised documents to support the general licence applications with the SFOE. According to the SFOE, the Federal Council is expected to take a decision on the three general licence applications in mid-2012, which is around five months later than planned. The project work regarding the new concession for the hydropower plant at Beznau has also started.

EGL: Commissioning of gas-fired combined cycle power plant imminent

EGL has completed the commissioning work for the SE Ferrara gas-fired combined cycle power plant in Italy, and the plant is expected to be fully operational from June 2010. With this, EGL will reach its objective of 2 000 MW own production capacity in Italy. In the reporting year, EGL also initiated other projects to pave the way for the future exploitation of additional opportunities in the natural gas business, whether by establishing subsidiaries in Southeastern Europe or intensifying its liquefied natural gas business.

New energies: Investments to total CHF 3 billion by 2030

Axpo is continually strengthening its position as the Swiss market leader in new renewable energies. The Group aims to invest a total of CHF 3 billion in the expansion of its domestic production capacities by 2030. Since 2006, Axpo has already invested approximately CHF 500 million in the production of electricity from new renewable energies. Axpo is committed to achieving its ambitious target of acquiring a 40% share of the market for electricity generated from new renewable sources in Switzerland by 2030. To this end, Axpo is focusing on small-scale hydropower as well as fermentable and combustible biomass in Switzerland, and on wind and solar energy in its foreign markets.

Axpo Kompogas AG has expanded its position further and strengthened its sales of power plants, in particular abroad. Three new plants were built in Switzerland. With the environmental declaration for the Kompogas plant in Otelfingen, Canton of Zurich, Axpo underlined its commitment to the sustainable, socially acceptable and economically viable production of energy. The technology for the fermentation of solid biomass developed by Axpo Kompogas AG is the most environmentally friendly way of generating energy from fermentable biomass. This is confirmed by the life cycle analysis of energy production using the Kompogas process, which has been prepared and certified in compliance with the international ISO 14 025 standard. In the field of combustible biomass, Axpo, via its subsidiary Axpo AG, acquired a majority stake in Tegra group (now called Axpo Holzenergie Group), the largest operator of wood-fired power plants in Switzerland. Axpo is planning to build two wood-fired power plants to generate ecological, carbon-neutral electricity and heat in Bischofszell, Canton of Thurgau and Kaiseraugst, Canton of Aargau.

By acquiring a stake of 51.6% in the Swedish developer of wind farms, HS Kraft AB, Axpo Group, via EGL, secured its access to a number of wind farm projects in Southern Sweden. In Germany, EGL acquired a 24.1% stake in Wetfeet Offshore Windenergy GmbH, which is planning to build an offshore wind farm along the North German coast with a total capacity of 400 megawatt. Construction work on a planned EGL wind farm with a capacity of 66 MW in the Campania region in Italy has started.

Axpo issues bonds

In order to finance its planned investments, Axpo Group is preparing a bond issue. The historically low interest rates provide a good opportunity to finance the upcoming large investments via the capital market. Axpo Holding AG and some of its partner plants will issue bonds with different terms to maturity in order to borrow up to CHF 1 billion in the next few weeks.

Uncertain outlook

Given the uncertain economy, unstable regulatory conditions and stagnating prices in Switzerland as well as on the international energy markets, Axpo Group is likely to find it difficult even to repeat its performance for the 2008/09 financial year.

Resignation of CFO Rolf Bösch

Rolf Bösch (59), CFO of Axpo Holding AG, intends to resign his position as head of Finance on 31 December 2010. A successor will be recruited to act as CFO of Axpo Holding AG from this date. As CFO, Rolf Bösch has been in charge of the Finance department at Axpo Holding AG since 2002, during which time he also served on the Executive Board. After introducing his successor to the intricacies of the job, he will continue to serve on various boards of directors and boards of trustees on behalf of the Group until his retirement. Rolf Bösch will also continue to serve as a special consultant to the Finance department in his capacity as Senior Expert Finance.

Additional information:

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