The EGL Group achieved a solid gross margin of CHF 420.9 million (-4%) in the
first half of 2009/10. However, various significant effects on costs led to a
net profit of CHF 38.4 million, significantly lower than in the prior-year
period (-69%).
Against the backdrop of a difficult economic climate and
low energy prices, EGL achieved a gross margin of CHF 420.9 million in the first
half of the 2009/10 financial year, 4% lower than the prior-year period.
Additional expenses for electricity procurement due to the outage of the French
nuclear power plant in Bugey also had an impact on the gross
margin.
Net
profit fell by 69% compared with the prior-year period to CHF 38.4 million as a
result of various significant effects: termination fees incurred following the
failure to sell the Energy Plus power plant project, a poor financial result due
to lower interest income, the negative performance of the euro and higher income
taxes. In the first half-year EGL reported cash flow from operating activities
of CHF -66.3 million.
Successful trading
business
In
the Trading division, EGL’s hub strategy, the decentralised organisation of
activities in various trading regions in Europe, proved its worth.This
geographical diversification and EGL's proximity to its markets and customers as
well as its trading expertise enabled the company to significantly improve its
trading result. The Energy Trading & Origination division achieved an
overall operating result of CHF 208.3 million (previous year: CHF 152.4
million).
Expenses tarnish result in the Assets
division
The
abovementioned effects related to the Energy Plus power plant project and the
nuclear power plant in Bugey put a strain on results in the Assets division. The
remaining assets proved reliable in production and were successfully integrated
in trading activities. The SE Ferrara gas-fired combined cycle power plant
underwent a test phase and is expected to go into full operation in July 2010.
At CHF -25.3 million, the operating result of the Assets division was well below
the prior-year level (CHF 72.2 million).
Decoupling of natural gas and oil prices
continues
EGL’s
natural gas business was characterised by low demand coupled with excess supply
in the market as well as the resulting continued decoupling of natural gas and
oil prices. Sales margins for natural gas from long-term procurement contracts
dropped as a result. In contrast, EGL reported progress in the further expansion
of its liquefied natural gas business. Progress was also made in the
negotiations with potential new partners for the Trans Adriatic Pipeline
project, and E.ON Ruhrgas’ 15% stake in TAP AG was announced on 20 May 2010. The
Gas Supply & Southeast Europe division, which is responsible for the
long-term natural gas business and electricity trading activities in Southeast
Europe, achieved an operating result of CHF -19.3 million in the first half of
2009/10 (previous year: CHF -21.7 million).
Grid valuation and EU electricity agreement: decisions
still pending
A
definitive evaluation of the EGL transmission system in Switzerland, which is
crucial for defining chargeable costs, is still pending. Appeals lodged by EGL
with the Federal Administrative Court are still in progress. An electricity
agreement between Switzerland and the EU, which would regulate grid access for
cross-border electricity trading among other things, is currently being
negotiated. A solution needs to be found that will protect EGL's
investments.
Even more strongly focused strategy
implementation
EGL
is continuing to implement its strategy despite the difficult economic
situation. However, as a result of the current situation, the prospects of
returns from projects and business ideas have changed, leading to a stronger
focus. Additional growth will be reviewed with moderation and an acute awareness
of costs and will be implemented within the financial possibilities of
EGL.
Forecasting price trends in the energy markets and
making predictions about trading results has become more challenging in recent
times. One of the main reasons for this is the somewhat unpredictable effect of
the financial and economic crisis which, in addition to other known factors, has
an impact on energy prices. As things stand at present, EGL anticipates that its
net profit for the 2009/10 financial year will be about half that of the
previous year (2008/09: CHF 186.7 million). It has stepped up its cost reduction
measures that were introduced last year. Despite the short-term negative
effects, EGL is sticking to its long-term strategy in order to further
strengthen its position in the European energy trading
business.