Alpiq held up well in 2010 in a difficult market environment characterised by excess capacity throughout the European electricity market, generally low electricity prices and a weak euro. “Compared with our predictions in the middle of last year, we performed better than expected”, says Alpiq CFO Kurt Baumgartner. “Our measures to improve cost efficiency had a positive impact as well.”
While the total volume of energy sales increased by 7.6 per cent to 145.6 terawatt hours, consolidated revenue fell by 4.8 per cent to CHF 14.10 billion because of the lower prices. Declines were also seen in EBITDA to CHF 1.47 billion (down 4.7 per cent), EBIT to CHF 970 million (down 8.8 per cent) and Group profit for the year to CHF 645 million (down 4.6 per cent). The financial statements for 2010 present the Group’s results for its first full year since the merger between EOS and Atel to form Alpiq in early 2009.
Energy business weighed down by excess capacities across Europe
In 2010, the European electricity markets were characterised by persistent excess capacity, coupled with low electricity prices and margins. Nevertheless, Alpiq succeeded in growing the volume of energy sales by 7.6 per cent to 145.6 terawatt hours. However, the drop in prices and weak euro eroded revenue from energy business by 5.8 per cent to CHF 12.0 billion. Performance was fuelled by the excellent availability of the hydroelectric and thermal power stations in Switzerland and Eastern Europe, coupled with proficient optimisation and marketing of the power they generated. Another positive contributor was the flexibility in capitalising on opportunities and niches in sales and trading. Consistent cost management in all areas of energy business also helped to lift profits.
At the same time, adverse factors were the general drop in prices and low margins, coupled with the weak euro. The weak euro alone had an estimated impact of approximately CHF 90 million on operating profits. In addition, the extended plant overhauls at Gösgen and Leibstadt nuclear power stations and reduced revenue from balancing energy in Italy had a negative effect. Added to that, the trading volumes and results of Proprietary Trading also fell short of expectations.
Another stable contribution from Energy Services
The Energy Services segment made a stable contribution to operating performance, supported by strong backlogs of orders that it successfully fulfilled. Its satisfactory result was also driven by efficient project and cost management. Revenue from the energy services business matched the year-earlier level of CHF 2.1 billion.
Stable dividend payment
The Board of Directors will propose that the Annual General Meeting of Alpiq Holding Ltd. to be held in Olten on 28 April 2011 approve payment of an unchanged dividend of CHF 8.70 per registered share or a total of CHF 236.6 million. This represents a payout ratio of 36.7 per cent (2009: 35 per cent) of the reported Group profit of CHF 645 million for the year.
Outlook for 2011
Alpiq expects market conditions to remain very challenging during 2011 as a sustainable recovery in the key profit drivers is not in sight. Alpiq still anticipates good availability of its existing power generation facilities and additional revenue from the new power stations in Italy, France and Spain, as well as from its investments in renewable energy, together with a solid contribution from the realigned Asset and Proprietary Trading units. However, the excess power generation capacity in Europe will persist for the time being and keep electricity prices, margins and volatility down. Uncertainty will continue to surround the regulatory environment in Switzerland and other countries. Given this backdrop, movements in electricity and fuel prices in the European markets and the rate of exchange between the euro and Swiss franc will again be the key drivers and risk factors in 2011.
Energy Services should continue to see a stable order situation, accompanied by unabated competitive and pricing pressure. Efforts to enhance efficiency and increase financial flexibility throughout the Group will be consistently pursued. Given this scenario, Alpiq expects revenue and operating profits for 2011 to be at a similar level to 2010.
Alpiq Group highlights
| 2009 | 2010 | % change | |
|---|---|---|---|
| Energy sales (TWh) | 135.248 | 145.569 | 7.6 |
| Net revenue (CHF millions) | 14,822 | 14,104 | -4.8 |
| Energy | 12,756 | 12,012 | -5.8 |
| Energy Services | 2,127 | 2,122 | -0.2 |
| Profit before interest, tax, depreciation and amortisation (EBITDA) (CHF millions) | 1,545 | 1,472 | -4.7 |
| Depreciation and amortisation (CHF millions) | -481 | -502 | -4.4 |
| Profit before interest and tax (EBIT) (CHF millions) | 1,064 | 970 | -8.8 |
| Group profit for the period (CHF millions) | 676 | 645 | -4.6 |
| As a percentage of net revenue | 4.6 | 4.6 | |
| Number of employees at the reporting date | 10,795 | 11,443* | 6.0 |
*Growth mainly in the Energy Services segment