Financial Review
Financial Review
The Alpiq Group generated operational EBITDA of CHF 80 million in the first half of 2021, which is below the figure of the previous year, as expected. All three business divisions made positive contributions to earnings. Although Swiss power production and energy trading did not reach the previous-year level, international power production generated earnings exceeding the previous-year period.
In order to allow transparent presentation and demarcation of the exceptional items, the consolidated income statement is presented as a pro forma statement. The commentary on the financial performance relates to an operational EBITDA view, in other words, to earnings development before exceptional items. The categories of exceptional items are described in the “Alternative performance measures of Alpiq” section.
Alpiq Group: results of operations (before exceptional items)
In the first half of 2021, the Alpiq Group generated net revenue before exceptional items of CHF 2.7 billion (up CHF 0.9 billion on the previous year) and EBITDA of CHF 80 million (down CHF 39 million).
Consolidated income statement (pro forma statement before and after exceptional items)
|
|
|
|
|
|
|
|
|
|
Half-year 2021/1 |
Half-year 2020/1 |
||||
|
CHF million |
Results of operations before excep- tional items |
Exceptional items 1 |
Results under IFRS |
Results of operations before excep- tional items (adjusted) 2 |
Exceptional items (adjusted) 1 / 2 |
Results under IFRS |
|
Net revenue |
2,660 |
– 6 |
2,654 |
1,802 |
23 |
1,825 |
|
Own work capitalised and change in costs incurred to fulfil a contract |
2 |
|
2 |
3 |
|
3 |
|
Other operating income |
20 |
13 |
33 |
9 |
1 |
10 |
|
Total revenue and other income |
2,682 |
7 |
2,689 |
1,814 |
24 |
1,838 |
|
Energy and inventory costs |
– 2,458 |
100 |
– 2,358 |
– 1,556 |
– 154 |
– 1,710 |
|
Employee costs |
– 99 |
|
– 99 |
– 89 |
6 |
– 83 |
|
Other operating expenses |
– 45 |
– 2 |
– 47 |
– 50 |
|
– 50 |
|
Earnings before interest, tax, depreciation and amortisation (EBITDA) |
80 |
105 |
185 |
119 |
– 124 |
– 5 |
|
Depreciation, amortisation and impairment |
|
|
– 66 |
|
|
– 65 |
|
Earnings before interest and tax (EBIT) |
|
|
119 |
|
|
– 70 |
|
Share of results of partner power plants and other associates |
|
|
– 13 |
|
|
– 16 |
|
Finance costs |
|
|
– 32 |
|
|
– 38 |
|
Finance income |
|
|
10 |
|
|
3 |
|
Earnings before tax |
|
|
84 |
|
|
– 121 |
|
Income tax expense |
|
|
– 30 |
|
|
37 |
|
Net income |
|
|
54 |
|
|
– 84 |
1 For more information, please refer to the explanations in the “Alternative performance measures of Alpiq” section
2 Due to the sale of Flexitricity Ltd. in the second half of 2020 and Alpiq’s decision to no longer pursue the e-mobility business, the EBITDA effects from these two businesses are classified as exceptional items in internal reporting. The previous year’s figures were adjusted to improve comparability. As a result, the Alpiq Group’s EBITDA before exceptional items increased by CHF 3 million in the first half of 2020 from CHF 116 million to CHF 119 million.
Generation Switzerland business division
At CHF 15 million, EBITDA of Swiss power production was down year-on-year by CHF 33 million. The main drivers of this development were the lower production volumes. In the area of hydropower, these are mainly attributable to the decline in inflows on account of the later thaw. The lower production volumes in the area of nuclear power were primarily due to maintenance work at the Leibstadt nuclear power plant being postponed from 2020 to 2021 as a result of the COVID-19 pandemic. By contrast, the increased electricity prices on the wholesale markets compared to the previous year had a positive impact on the half-year results, as expected.
Generation International business division
At CHF 42 million, EBITDA of international power production was up year-on-year by CHF 14 million. As in the previous years, the plants made a positive and stable EBITDA contribution from operating activities. The increase in EBITDA is primarily attributable to insurance payments received in connection with unexpected repairs required at the Spanish gas-fired combined-cycle power plant Plana del Vent.
Digital & Commerce business division
At CHF 41 million, EBITDA of energy trading was down year-on-year by CHF 20 million. Alpiq successfully leveraged market opportunities in trading. In the context of the optimisation of the power plant portfolio in both Switzerland and Italy, higher earnings were generated than in the previous year. The optimisation in Italy benefited from higher income from ancillary services in particular. The (industrial and commercial) customer business, which was negatively impacted by the COVID-19 pandemic in the previous year, recovered and therefore developed positively. Due to the significant increase in energy prices in the first half of 2021, the credit risk associated with several counterparties increased significantly, which had a corresponding negative effect on results of operations.
Alternative performance measures of Alpiq
To measure and present its operating performance, Alpiq also uses alternative performance measures through to the level of “Earnings before interest, tax, depreciation and amortisation (EBITDA)”. Alpiq makes adjustments to the IFRS results for exceptional items, which Alpiq does not consider part of the results of operations. These performance measures do not have a standardised definition in IFRS. This can therefore limit comparability with such measures as defined by other companies. These measures are presented in a pro forma statement in order to give investors a deeper understanding of how Alpiq’s management measures the performance of the Group. However, they are no substitute for IFRS performance measures. Starting from 1 January 2021, Alpiq no longer presents any exceptional items on amortisation, depreciation and impairment in its internal or external reporting, as EBITDA is decisive for measuring performance. Alpiq still does not use any alternative performance measures in the balance sheet and cash flow statement.
Overview of exceptional items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value changes (accounting mismatch) |
Development of decommissioning and waste disposal funds |
Effects from business disposals |
Onerous contracts |
Restructuring costs and litigation 1 |
Total exceptional items 1 |
||||||
|
CHF million |
Half-year 2021/1 |
Half-year 2020/1 |
Half-year 2021/1 |
Half-year 2020/1 |
Half-year 2021/1 |
Half-year 2020/1 |
Half-year 2021/1 |
Half-year 2020/1 |
Half-year 2021/1 |
Half-year 2020/1 (ad- justed) |
Half-year 2021/1 |
Half-year 2020/1 (ad- justed) |
|
Net revenue |
– 3 |
8 |
– 6 |
4 |
|
|
|
|
3 |
11 |
– 6 |
23 |
|
Other operating income |
|
|
|
|
13 |
|
|
|
|
1 |
13 |
1 |
|
Total revenue and other income |
– 3 |
8 |
– 6 |
4 |
13 |
|
|
|
3 |
12 |
7 |
24 |
|
Energy and inventory costs |
|
|
87 |
– 67 |
|
|
15 |
– 77 |
– 2 |
– 10 |
100 |
– 154 |
|
Employee costs |
|
|
|
|
|
|
|
|
|
6 |
0 |
6 |
|
Other operating expenses |
|
|
|
|
|
|
|
|
– 2 |
|
– 2 |
0 |
|
Earnings before interest, tax, depreciation and amortisation (EBITDA) |
– 3 |
8 |
81 |
– 63 |
13 |
0 |
15 |
– 77 |
– 1 |
8 |
105 |
– 124 |
1 Due to the sale of Flexitricity Ltd. in the second half of 2020 and Alpiq’s decision to no longer pursue the e-mobility business, the EBITDA effects from these two businesses are classified as exceptional items in internal reporting. The previous year’s figures were adjusted to improve comparability.
Alpiq has defined the following categories of exceptional items:
Fair value changes (accounting mismatch)
Fair value changes of energy derivatives entered into to hedge future power production do not reflect the operating performance of business activities because they are economically linked with the changes in value of production plants and long-term purchase contracts. Rising forward prices cause the future production volumes to increase in value and the corresponding hedges to lose value. According to IFRS guidelines, the fair value changes of hedges have to be recognised in the reporting year. As the future production volumes are not measured at fair value and these changes in value therefore cannot be recognised in the reporting year, this results in an accounting mismatch.
Development of decommissioning and waste disposal funds
The operating companies of Switzerland’s nuclear power plants are required to make payments into the decommissioning fund and the waste disposal fund to ensure that decommissioning and waste disposal activities are funded. Investments in these funds are exposed to market fluctuations and changes in estimates, which cannot be influenced by Alpiq but which do influence electricity procurement costs. The difference between the return actually generated by the funds and the return budgeted by the nuclear power plants of 2.75 % is classified and recorded as an exceptional item.
Effects from business disposals
The result from business disposals does not affect Alpiq’s operating performance and reduces comparability with other periods.
Onerous contracts
Effects in connection with onerous contracts relate to effects that are attributable to changes in expectations regarding future developments. Management does not therefore take these into account for the assessment of Alpiq’s operating performance.
Restructuring costs and litigation
Under restructuring costs, Alpiq includes expenses incurred for creating new structures in existing areas, company disposals as well as business closures. These expenses do not reflect the operating performance as they are incurred when the measures are implemented and therefore before any benefit is generated. Costs in connection with litigation, which comprise legal and litigation costs as well as any payments in connection with legal cases, are classified as exceptional items if they appear to be one-off and limit comparability between various periods.
Consolidated balance sheet and cash flow statement (after exceptional items)
Total assets amounted to CHF 9.2 billion at the 30 June 2021 reporting date, compared to CHF 7.4 billion at the end of 2020. Non-current assets decreased by CHF 28 million and came to CHF 4.4 billion. Amortisation, depreciation and impairment exceeded net investments in property, plant and equipment and intangible assets.
Current assets rose by CHF 1.8 billion, amounting to CHF 4.8 billion at 30 June 2021. The rise is primarily due to the higher replacement values of energy derivatives and receivables from realised energy derivatives, mainly driven by the significant increase in energy prices. Current liabilities increased at a similar rate to CHF 3.7 billion for the same reason.
Equity stood at CHF 3.9 billion at 30 June 2021, and is CHF 93 million higher than at the end of 2020. The increase chiefly stems from the net income and the effects from remeasurements of defined benefit plans. The equity ratio decreased from 51.2 % to 42.1 % due to the increase in total assets as a result of energy prices.
Current and non-current financial liabilities declined by CHF 49 million and came to CHF 1.2 billion at 30 June 2021. The decrease is primarily due to the repayment of loans. Net debt decreased from CHF 249 million to CHF 145 million. Together with higher results of operations, the gearing ratio (net debt / EBITDA before exceptional items) of 1.0 at 31 December 2020 improved to 0.7 at 30 June 2021.
Non-current liabilities declined by CHF 249 million compared to 31 December 2020, amounting to CHF 1.6 billion. The main reason for this are term-related reclassifications of financial liabilities and other non-current liabilities, the decrease in defined benefit liabilities due to the return on plan assets as well as the decrease in provisions.
Net cash flows from operating activities of continuing operations declined slightly from CHF 180 million in the first half of 2020 to CHF 172 million despite improved earnings before tax from continuing operations. This is primarily due to the lower realisation of trading items. Compared to the previous year, net cash flows from investing activities of continuing operations decreased by CHF 101 million to CHF 6 million. For one, fewer term deposits were due, for another, more investments were made in property, plant and equipment and intangible assets. Cash and cash equivalents increased by CHF 67 million to CHF 407 million at 30 June 2021.
Outlook
For the 2021 financial year as a whole, Alpiq still expects positive results of operations, albeit down on the previous year. While the electricity and CO2 prices on the wholesale markets hedged in Swiss francs will also have a positive effect on Alpiq’s earnings in 2021, the overhaul of the Leibstadt nuclear power plant postponed from 2020 to 2021 will negatively impact earnings. The effects recorded in the first half of 2021 in connection with the increased credit risks of individual counterparties will also be reflected in the year as a whole. Furthermore, the effects of the COVID-19 pandemic cannot yet be fully assessed at present.