" alt="Alpiq Banner Interim Report" />Market conditions
In 2009, the Energy Services segment experienced mixed market conditions in the different regions and business areas. Its Swiss operations were far less affected by the economic downturn than activities in the markets across the rest of Europe, especially in Germany and Italy.
In Switzerland, building services enjoyed satisfactory demand overall, with prices only coming under heavy pressure in urban centres and for large-scale projects. The first signs of declining demand became evident in the second half of the year, translating into a deterioration in contract pricing quality. The markets for transport technology remained stable, underpinned by continuous capital spending by the Swiss public sector. Conditions in the markets for industrial and power plant engineering in Germany and neighbouring countries were largely favourable due to the longer-term horizon in facilities construction. While demand for power generation capacities remained high, further growth was impeded by general investment uncertainty fuelled by the licensing problems in Germany and projects postponed by customers. Developments in the markets for energy supply technology were unsatisfactory. The regulators' pressure on grid charges, German network owners' sales plans and, again, the licensing problems had a negative impact on capital spending in spite of the technological needs. A steep drop in prices was seen in particular in the area of transmission and distribution systems.
Results of operations
In 2009, the Energy Services segment generated revenue of approximately CHF2.1 billion, a year-on-year decline of about 5 %. The Swiss Alpiq InTec Group (AIT) grew revenue by a satisfactory 5 %, while the volume of revenue in the German Alpiq Anlagentechnik Group (AAT) shrank by 6 % in local currency. As expected, the segment's consolidated operating profit (EBIT) was down year on year, dropping by 24 % to CHF101 million. This decrease is mainly due to the cyclical downturn in demand in Germany and to the some CHF 20 million in exceptional items recognised in profit for the previous year.
Performance of the units
In 2009, the AIT Group increased revenue to CHF 807 million. The 5 % growth was driven by the robust business environment in Switzerland and the acquisitions during the first half of 2009, particularly in Northern Italy.
Despite the difficult environment, the AIT Group improved margins by implementing measures to improve efficiency in project handling. The Building Services (BS) business continued to enjoy high order intake as construction activity in Switzerland remained strong, but even here the prices for new contracts deteriorated substantially due to the economic climate and heightened competition. Negative effects, coupled with margin erosion, are expected in future periods. An installation and plumbing company with strong regional roots was acquired in Verona to strengthen the market position in Northern Italy. Margins remained stable in the Transport Technology (TT) business, which was only slightly affected by the economic downturn as a result of public spending.
The AAT Group's revenue was down 6 % year on year to EUR 875 million, with much of the decline being due to the deeper economic crisis seen in Germany. The drop in revenue was softened by the large backlog of orders from the previous year.
Overall, the AAT Group's results for 2009 are satisfactory. So far, the Industrial and Power Plant Engineering (IPPE) business has proved to be resilient to the crisis, bolstered by the constant demand for generation capacities. Order intake rose by 8 % in 2009, resulting in an order book of more than EUR 1 billion at the reporting date. While this business field generated stable earnings at a high level, the weak economy brought a marked contraction and lower margins in industrial operations. With many energy supply utilities holding back on capital spending, the Energy Supply Technology (EST) business saw a marked decrease in demand in the area of power distribution and transmission networks, which consequently weighed on margins and volumes. To counteract this, the EST business was extended with a targeted entry into electrical installations for large power stations.