Stable results in challenging environment

To ensure the continued competitiveness of the company, Axpo introduced measures to enhance profitability and reduce costs. Axpo Holding AG thus increased its holding in EGL AG to 100% as of autumn 2011 and had the EGL AG shares delisted from the SIX Swiss Exchange on 9th March 2012. The trading activities, management and service functions of Axpo Holding AG, Axpo AG and EGL AG were subsequently merged. The stronger integration of these parts of the company will allow skills to be concentrated, duplications of effort to be eliminated, greater earnings potential to be realised and costs to be reduced. These restructuring measures entailed staff cutbacks of approximately 110 full time equivalents in the current business year. In the period under review, headcount was reduced to 4,400 full time positions (from 4,427).

At CHF 441 million, net profit is only slightly below the previous year's figure (CHF 459 million) and was heavily impacted by regulatory decisions and price developments on the financial markets. Rulings by the Swiss Federal Electricity Commission (ElCom) on the use of auction revenues from 2009 and the transmission network value also had a negative effect on earnings. In contrast, the recovery in valuations on the financial markets since last autumn has resulted in an appreciation in value of the Swiss Federal Decommissioning Fund and Waste Disposal Fund, which led to a significant improvement in the financial result.

Axpo was able to keep sales in its supply areas in north-east and central Switzerland stable at 11,724 million kWh, as periods of relative cold and warm weather cancelled each other out during the winter months. A 12.6% increase in volume was recorded in the electricity trading market, while the gas business almost matched the previous year's level. Net sales from the energy business and grid utilisation reached CHF 3,359 million, compared to CHF 3,003 million in the previous year. The energy trading result remained unsatisfactory, despite increasing from CHF 44 million to CHF 49 million. Cash flow from operating activities fell to CHF 45 million (previous year: CHF 386 million) due to higher non cash profit shares, advance tax payments and other changes in net current assets, among other factors.

Investment in expansion and safety of plants and systems
In the period under review, Axpo invested CHF 185 million in non-current assets primarily in the maintenance and expansion of existing power plants and grid systems. The largest project is the expansion of the pumped-storage power plant in Limmern (“Projekt Linthal 2015”). Work is proceeding according to plan the machine cavern inside the mountain was successfully excavated in March, followed shortly afterwards by the opening of the 4 km connection tunnel between Tierfehd and the central cavern area. The first of four machine groups should be connected to the grid towards the end of 2015. In addition, Axpo also constantly invests in the reliable operation and safety of the plants and systems. At present, two new buildings containing four independent emergency diesel generators are being constructed at the Beznau nuclear power plant (KKB). This major project was started in autumn 2010 and is progressing on schedule.

The Winbis wind farm project of EGL AG in Italy is also developing well. The first five wind turbines were connected to the grid at the end of March, with full-scale operation of the 22 turbines planned to start this summer. According to the transmission network operator Tennet, there may be some delays in the grid connection of the Global Tech 1 offshore wind farm project in the North Sea (24.1% stake by EGL AG). Tests are currently being made as to whether the 400 MW wind farm can be connected to the grid via an existing converter station, which would then enable operation by the turn of the year as planned. Successes were reported at the geothermal project in Taufkirchen, Germany. It has now become clear that the drilled rock layer will be able to deliver enough hot water for the sustainable production of electricity and heating. Axpo has a 35% stake in the project, and will transfer the expertise gained to its own geothermal projects in Switzerland.

Outlook: Prevailing uncertainty
The new federal energy policy has brought about a fundamental change in the parameters for ensuring a secure and cost effective supply of environmentally friendly energy both now and in the future. Axpo reacted in January 2012 by adjusting its business strategy. In future, this will focus on greater diversification in the production and procurement of energy in order to gain more room for manoeuvre and facilitate faster reaction in the face of current planning and legal uncertainty.

Axpo expects the unfavourable developments on the energy markets to continue in the current business year. The influence of the eurozone debt crisis will also remain a decisive factor in the development of the economy. Given this prevailing uncertainty, Axpo is not able to offer a reliable forecast of financial developments.

The results of the 2011/12 business year will be announced by Axpo as part of the annual press conference on 20th December 2012.

media Contact:
Axpo Holding AG Zollstrasse 62 Postfach CH-8023 Zurich Tel: 044 278 41 11 Fax: 044 278 41 12 email: info@axpo.ch

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