Repower: Good interim results in an unsettled market environment

In the first half of 2011 we grew total operating revenue by 12 percent year-on-year to CHF 1.23 billion. As expected, EBIT fell slightly short of the prior-year value, ending the first half of 2011 at CHF 58 million (- 5 %). Given the extremely difficult market environment, however, this can be regarded as a good result.

Nervous markets and uncertain exchange rate situation
Since 80 percent of Repower’s business is conducted in euros, the unfavourable exchange rate situation had a strong impact on margins. Following the events in Japan, which rekindled and intensified discussions on the future of energy supply, the markets became increasingly nervous. The market environment in Romania is particularly challenging at present. Repower’s Romanian subsidiary Elcomex EN has been faced with significant changes in the procurement market, which, compounded by a fundamental shift in the gas sales market, has resulted in negative margins in some areas. The reassessment of the company has resulted in extensive impairments, which weighed on the interim results. However, these negative factors were largely offset through skilful exploitation of opportunities in the international electricity market.

At CHF 32 million, Group profit has doubled since the figure recorded for the first six months of last year. Thanks to extensive currency hedging, financial expenses were limited to the cost of financing borrowings and the usual costs for bank transactions.

In terms of volume, electricity sales and procurement were 8 percent higher and thus within the prior-year range. Repower saw marked growth in own generation. This was due to the larger volumes of electricity generated by the Teverola gas-fired combined-cycle power plant and to the fact that the dry spell at the beginning of the year was not a relevant factor for Repower as the reduction in reservoir levels for revision purposes resulted in higher generation volumes. Further growth was recorded in gas sales, in line with the Repower strategy of expanding gas trading and sales to end customers.

Progress in strategic projects
In the first half of 2011 Repower’s strategic projects progressed according to plan, with the focus on hydro and wind power. Work on the concession application for the Lagobianco project progressed so well that it will be ready for submission to the canton of Graubünden government in late summer. At the same time, work is being carried out on the application for project approval. Moreover, this summer saw the start of construction of an exploratory tunnel on the planned power station site. Since April 2011 all activities related to the project have been carried out by the new company, Lagobianco SA. Construction work on the Taschinas power plant was also completed on schedule in spring, following which the plant was connected to the grid. This latest addition to Repower’s power plant portfolio has an installed capacity of around 10 megawatts and generates sufficient electricity to meet the needs of around 10,000 households. The power of water is also going to be harnessed in lower Prättigau for the purposes of generating electricity. In recent months, work has been stepped up on the concession application for the Chlus-Rhine project, which should be ready for submission to the affected communities in the spring of 2012. Finally, work was started on the construction of the Lucera wind farm in Italy. The project was developed entirely by Repower, and the 13 wind turbines with an overall installed capacity of 26 megawatts will start generating electricity in the second half of 2012.

Repower’s project to set up an investment company to provide small and medium-sized utilities with access to its generation and project portfolio is attracting keen interest. The company, in which Repower will be the majority shareholder, is scheduled to go into operation in 2012.

Despite the aforementioned changes in the Romanian market, Repower believes this country has excellent development prospects. Romania is increasingly taking on the role of an energy hub, and the growing dynamism of the country’s economy will drive up demand for energy and offer Repower opportunities for electricity generation. This summer the Romanian sales company Elcomex EN changed over to the Repower name and visual identity, so that Repower now has a cohesive presence in all key markets.

Outlook
We abide by the statement we made this spring, and expect to end 2011 with lower operating income than in 2010. Uncertainty will continue to reign over the markets, and we do not expect either exchange rates or energy prices to stabilise to any significant extent. The second half-year will therefore be highly challenging. Thanks to our strategy, which has been confirmed not least by recent events, and to the high dedication and commitment of our employees, we also view the difficult market environment as an opportunity.

Contact
Repower Via da Clalt 307 7742 Poschiavo Werner Steinmann Head of Corporate Communications Tel. 081 839 7111 Mobile 041 79 831 5213 werner.steinmann@repower.com