13.11.2020 | Interview with Axpo CEO Christoph Brand

"We need energy"

Operations of the energy company Axpo were barely impacted by the corona crisis. "So far the core business has not been greatly affected," says Christoph Brand, who has been the company CEO since 1 May, in an interview with the news agency AWP. The company did not experience a substantial drop in power consumption. In addition, he refutes the criticism that Axpo is far too engaged abroad, explains why an electricity agreement with the EU is not necessarily vital for the survival of the company, and why evenfull market liberalisation would not have a great impact on the business.

 

The corona virus situation has worsened again. How has Axpo been impacted by the pandemic?

Christoph Brand: So far the core business has not been greatly affected. We don'tsee a substantial decrease in power consumption. We cannot yet say whether payment defaults will occur in the medium term.

Why were you barely impacted by the partial lock down of businesses and social life last spring?

In Italy, for example, we felt it in the industrial sector. However, consumption there only dropped in the two-digit percent range for a short time. From a Group-wide perspective the impacts on power volumes were not significant.

Nevertheless, you felt the turbulences of the crisis in the first half-year result and incurred a loss.

In the course of the crash on the capital markets, the performance of the Decommissioning and Waste Disposal funds was poor. However, this does not have anything to do with our operative performance.

So the second half-year will produce a positive result?

The exchanges have recovered and hence the performance of the funds. What sort of an impact this has will be communicated at the end of the year.

The corona crisis will not be over tomorrow. What other developments do you expect?

This is randomly speculative. If a lock down can be prevented by people being disciplined to help break the infection chain - our business will not be greatly impacted. There is a need for energy. But we are not expecting everything to go back to normal next year. That would be unwarranted.

Corona is all-dominant right now. Will long planned full liberalisation of the power market move even farther away? In Switzerland, only major customers with a power consumption of over 100,000 kilowatt-hours per year can freely select their provider.

Liberalisation would be in the interest of everyone, especially the customer. We want that to happen as quickly as possible – knowing full well that it would not be a huge opportunity nor a huge risk for Axpo.

Why?

The impact on Axpo is manageable. For one thing, our business is not limited to Switzerland alone. In addition, our local private customer business - via our subsidiary CKW in Central Switzerland - has a manageable size. Apart from that, Axpo is already on the free market with its entire production. However, we compete with market players that have captive customers and they can essentially dictate their tariffs whilst we have to purchase power on the free market.

If the market is finally liberalised for private end customers – would Axpo enter into this business?

I don't know yet because that will depend strongly on way the market is designed.

We have been waiting for an electricity agreement with EU for ages. How bad is that for Switzerland?

It's a problem on several levels. First of all, Switzerland is an important power hub for all of Central Europe. That fact that we're not part of the game is bad for the EU and bad for Switzerland. And in terms of capacities, there are scenarios where imports for Switzerland could become significantly more important. An electricity agreement would certainly be very helpful here. From an entrepreneurial perspective it is not necessarily vital to Axpo's survival. But: Axpo is one thing, and Switzerland is another.

Energy company managers regularly comment on the framework conditions in Switzerland.

Again, I have to differentiate between Axpo and Switzerland. As the Axpo CEO, I invest where I can generate the most value for the company. A project like the photovoltaic plant in Disneyland in Paris, which we have been building since June, is in a different league compared to Switzerland where I can just barely put up a wind turbine. Or, if Spain offers great framework conditions for the development of renewable energies, I take advantage of this. Ethically, I do the right thing when I invest money where I can save the most CO2, rather than building a much, much smaller and more expensive plant that isn't profitable in Switzerland. So, as the Axpo CEO I don’t have to lose sleep over this.

But looking at Switzerland?

As a Swiss citizen I ask myself: If France can build such a large plant in Disneyland, why can't we do that in Switzerland? And that is ultimately a question of the framework conditions. Large projects are dead before they get off the ground - if I may so. In addition to the combination of "it's not economical" and "everyone is against it", Switzerland has a difficult topography for wind power and less than suitable spatial conditions for large-scale photovoltaic plants. We try to realise every project we can justify in Switzerland. But it’s a difficult point of departure. From my view point, policy-makers don't think about this enough.

How so?

We expect power consumption to rise sharply. Politics underestimates this. Well founded, analytical assessments indicate that power consumption in the EU will double by the year 2050. The reason for this is de-carbonisation. I had my oil heating system replaced with a heat pump, a photovoltaic system installed on the roof, and I drive an electric vehicle. Although my total energy consumption has dropped strongly,my electricity consumption has risen massively. That's the reality.

So, could there be a power shortage in Switzerland - catchword supply security?

As soon as the nuclear power plants are shut down we will lack – under otherwise the same conditions - an enormous amount of electricity. Switzerland can, of course, rely on imports. But this will become a problem if all the other countries have the same strategy. At the moment Switzerland is not moving forward.

What does that mean for  Axpo? How will things proceed in the long run?

The nuclear power phase-out has been decided in Switzerland. From this aspect there's no need for discussion. Hydropower does not pay off and there are few opportunities to build new power plants. We also don't expect any growth in this area. When it comes to expanding capacities, we are primarily investing in two areas: Wind and solar abroad.

Using the example of the Mühleberg nuclear power plant, you could back out of nuclear power before the legal time limit is up. Has Axpo missed the energy turnaround?

Personally I would say the top priority is to reduce CO2 emissions. I think a sensible approach is to safely operate the nuclear power plants as long as possible, and avoid the construction of gas-fired power. New construction is not an option anyway. And it wouldn't pay off either. So there is no need for an ideological dispute on this issue.

Time and again there has been criticism that Axpo is too strongly engaged  abroad - as a Swiss company in the hands of the Swiss cantons.

As said, the international business is an important pillar for us. If we can't earn money with hydropower, the nuclear power plants will disappear and large-scale photovoltaic system are unprofitable - what else is there in Switzerland? The growth potential abroad is greater than in Switzerland. That also has to do with the market size in Switzerland, which is simply limited. If we invest in neighbouring countries that indirectly also helps Switzerland. And not to be forgotten, Axpo has invested much more in Switzerland than abroad in the last ten years.

A partial privatisation of Axpo is under discussion. What do you think about that and could a partial Initial Public Offering be an option?

I don't know if partial privatisation is part of the discussion. A new shareholders' agreement is being discussed, whereby the cantons could reduce their shares by up to 51 per cent. But that's in the distant future. Whether this will actually happen is up to the owners.

But would that be good for Axpo?

It might possibly be an advantage to generatethe large investments needed for the energy turnaround. Other energy suppliers go to the capital market for the money they need to advance the energy turnaround. We don't have that option and must primarily finance with debt.

You come from the media corporation TX Group and were the Head of the Marketplace division. Before that you worked in the telecom industry for several years. Do you see potential at Axpo in the areas of IT, technology and digitalisation?

Yes, definitely. I am told that the entire energy sector is not as far along in terms of digitalisation as other industries. Axpo is on a good course, but we certainly also have a great deal of potential here. An example: A hydropower plant has about 20,000 data points. This data is not recorded systematically. The new Chief Technology Officer, Thomas Gresch, who will start at Axpo in January, will have a broad field of action here.

 

This interview was conducted by the news agency AWP – Copyright: AWP/Interview: Young-Sim Song 

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