“We are very well positioned in the financial markets”

With this move, Alpiq is underpinning its conviction in its strong financial capacities, allowing a pay back and a strong strategic evolution towards more flexibility and storage capacities as well as energy and portfolio management.  

But why has this move been made now? In this interview with Alpiq CFO Luca Baroni, we discussed what prompted the decision, how it was arrived at, and what we can expect from it. 

Luca, first things first, why did we decide to pay back the hybrid bond?  
Luca Baroni: From today’s perspective, the hybrid bond no longer brings the support it used to and it became more expensive last year. As we have sufficient liquidity to repay the bond, it makes both financial and strategic sense to do so.

We are not the only company paying back a hybrid bond. Other Swiss companies have recently decided to pay back theirs, too. Have hybrids gone out of fashion?  
The reasons may vary from one company to the next, I only know ours. The way the Alpiq hybrid bond was designed meant that it could be recognised as an economic equity under IFRS. At the time, a relatively simple and quick solution was found to strengthen the net financial situation on the one hand and the equity on the other. With an equity ratio of 58% in August 2024, including the hybrid, a net cash situation of around CHF 700 million and the economic medium-term outlook, the reasons for maintaining the hybrid no longer applied.  

Are we planning to pay back every bond?  
Only the hybrid bond had a call option. The other bonds are normal bonds that cannot be paid back ahead of time. Whether we issue a new bond to replace one that has run out is decided on a case-by-case basis, based on Alpiq’s financing strategy, the current financial situation as well as on the mid- and long-term financial planning and related liquidity risks. 

How will Alpiq’s balance sheet change with the calling of the hybrid?  
A quick back-of-the-envelope calculation based on the actual figures in August 2024 illustrates the effect on Alpiq's balance sheet:  

• As is: equity ratio 58.0% / net cash CHF 711 million 
• Hybrid showed as debt: equity ratio 51.1% / net cash CHF 61 million 
• Hybrid repaid: equity ratio 54.8% / net cash CHF 61 million 

So, as before, Alpiq retains a very stable equity base and, thanks to the expected positive operating cash flow, the net cash figure will also increase again by the end of the year.  

What short- and long-term objectives are we pursuing with the financing of Alpiq?  
Alpiq’s financing strategy needs to be fit for our purpose, providing us with the necessary funds and flexibility for our operational and investing requirements while being in sync with our corporate strategy.  

You once said that we need headroom of CHF 2 billion for you to sleep easy. Is that still the case?  
The headroom consists of our operational liquidity, available cash and unused committed credit lines. It should always be higher than the target liquidity, our liquidity at risk, which in addition to the risk capital, our EBITDA at risk, is defined within the annual financial planning process. At the moment, we are working on the mid-term planning and the target liquidity will of course change, which in turn will potentially change the level of required headroom, too. I don’t expect to lose sleep over this either way, as we are very well positioned in the financial markets and we can raise additional funds in the capital or credit markets if needed.