Improved results despite difficult environment - public offer for EGL shares
20.06.2011 - In the first half of the 2010/11 financial year (1.10.10-31.3.11), Axpo Holding AG reported an operating profit of CHF 511 million (CHF 416 million in the previous year). Energy sales were also significantly higher than in the previous year with an increase of 2%. Net profit increased by CHF 111 million to CHF 459 million. In order to prepare for the considerable challenges in energy markets, Axpo intends to acquire all outstanding shares of EGL.
Despite the ongoing difficult market environment, Axpo Group was able to boost its operating profit by 23% to CHF 511 million in the first half of 2010/11. The primary reasons for this positive performance include price increases implemented in the market area of Axpo AG on 1 January 2011 and cost reduction measures. Further factors that bolstered the improved results included the ending of system service charges for power plants larger than 50 megawatts (MW) and the project termination costs for Energy Plus in Italy. In addition, net profit was higher in comparison to the previous year (CHF 348 million), increasing by 32% to CHF 459 million. Heinz Karrer, CEO of Axpo Holding AG emphasised that "given the decline in profitability in the last few years, we have achieved a satisfactory result in the first half of the 2010/11 financial year with room for improvement, especially in view of the prevailing economic and political headwinds." Axpo Group's overall revenue in the period to 31 March 2011 was CHF 3,330 million (-7%).
In the first half of the 2010/11 financial year, Axpo generated energy sales of 36,265 million kWh, up 2% from the previous year. Sales during the winter months were as much as 3% higher year-on-year due to the cold weather conditions. Electricity trading was more or less on a par with the previous year. The gas business saw a significant increase with growth of 18%. The number of employees fell slightly from 4,354 to 4,327 full-time equivalents.
Stress test for new energy policy – a referendum is necessary
Following the tragic events at Fukushima, the Federal Council developed a new energy policy with the objective of not building any new nuclear power plants. It appears to Axpo that there is not sufficient foundation for the assumptions and forecasts underlying this decision. In addition, the ability to implement all the measures announced to date will have to be critically examined.
It is of the greatest importance to the Swiss economy and society that security of electricity supply can also be guaranteed in future. Even a cursory evaluation shows the assumptions and forecasts in the Federal government's scenario to be largely unrealistic, and they will have to be subjected to a serious stress test. This is necessary in order to ensure that the political decision-making process following the announcement by the Federal Council considers all possible economic and social consequences. Such an important decision should ultimately be submitted to a national referendum.
Large investments in hydro and wind energy
Construction work on the Limmern pumped-storage plant continued during the winter as part of the "Linthal 2015" project. The project has a budget of approximately CHF 2.1 billion, making it the largest hydro energy expansion project in Switzerland. The renovation project to replace the Rüchlig run-of-river plant in Aarau is progressing well. Axpo submitted the new concession and construction project for approval in summer 2010. The appeals process is currently under way and construction work is likely to commence at the end of 2011 at the earliest. In total, Axpo is planning to invest about CHF
3 billion in hydro energy by 2020.
In its projects abroad, Axpo is concentrating on the Global Tech 1 wind energy project. This project is being developed by Global Tech I Offshore Wind GmbH, in which the Axpo subsidiary EGL AG has a 24.1% stake. The offshore wind farm in the German North Sea will cost EUR 1.4 billion and produce an output of 400 MW. Construction is technically challenging but the project is developing according to schedule. The wind farm will be connected to the grid in stages commencing in autumn 2012. Planning approval for the Trans Adriatic Pipeline (TAP) natural gas pipeline project has been postponed to the end of 2013. The outcome of the project essentially depends on the political environment and, in particular, approval for the acquisition of gas from the Shah Deniz II natural gas field in Azerbaijan.
Opposition to construction of two Axpo wood-fired power plants
The wood-fired power plant project in Kaiseraugst (canton of Aargau) has been revised in line with issues raised by local communities and the municipality and can now be continued. Meanwhile, the planning for wood-fired power plants in Bischofszell (canton of Thurgau) and Würenlingen (canton of Aargau) has been halted. This represents two major setbacks to Axpo's ambitious expansion plans in the area of new renewable energies. Nonetheless, Axpo is still committed to its objective of investing about CHF 3 billion in new renewable energies by 2030.
Public offer for EGL shares
Axpo Holding AG owns 91.0% of the shares of its subsidiary EGL AG. Effective today, 20 June 2011, Axpo Holding AG is lodging an official offer for the remaining 9% of EGL shares still held on the open market. Public shareholders will be offered CHF 850 per bearer share during the offer period, which is expected to run from 12 July to 12 August 2011. This represents a premium of 20.8% to the volume-weighted average price for the last 60 trading days before the date of the announcement. The offer prospectus is expected to be published on 27 June 2011. All the documents relevant to the offer are avaiable on the internet at www.axpo.ch. A complete takeover of EGL will allow Axpo Group to take advantage of synergies in cooperation with other Group units and make it possible to assess the strategies and structure of EGL on an ongoing basis in order to make adjustments consistently and without delay.
The operating environment is difficult to forecast in terms of policy. As a result, the current financial year will be even more challenging for Axpo Group than the previous year. Axpo will announce the results of the 2010/11 financial year at a special financial results media conference on 25 January 2012.
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