In the 2019/20 financial year (1 October 2019 to 30 September 2020) the Axpo Group achieved a positive result despite the challenges posed by the COVID-19 pandemic. The solid contributions of the other sectors added to the positive performance of the Trading & Sales sector, as in previous years.
axpo benefited from guaranteed electricity prices slightly higher than the previous year and took advantage of the opportunities offered by volatility on the energy markets. After the recovery of the financial markets in the second half, the operating result (EBIT) amounted to 791 million Swiss francs, only slightly lower than the result of the previous year (850 million Swiss francs) in which the company had benefited of writebacks of over 300 million Swiss francs.
Operating profit adjusted for impairment losses and fluctuations in the Nuclear Decommissioning and Disposal Fund (STENFO) increased by 332 million over the previous year to 826 million. Strengthened by this result, the Board of Directors will propose to shareholders to return to distributing dividends of 80 million Swiss francs one year ahead of schedule.
Quick and effective reaction to the determined braking of the COVID-19 pandemic
As of March 2020, the exercise was marred by the COVID-19 pandemic. Axpo took effective measures in good time, which enabled the company to protect its employees from illness and continue business operations in all areas at all times, without restrictions. The lockdowns imposed in the spring by the governments of many countries to counter the pandemic led to a drastic decrease in economic activity, and therefore also in the demand for energy. Furthermore, the uncertainty about the future trend of the pandemic and its effects has led to high volatility on the energy markets and a contraction in investment activity.
Excellent cash inflow thanks to good operating result
At CHF 4.808 million, Axpo's overall performance in the 2019/20 financial year remained stable compared to the previous year. The decline in electricity demand amid the COVID-19 pandemic was more than offset by higher guaranteed electricity prices and a positive result in energy trading. All of this results in an EBIT operating result of CHF 791 million. Compared to the previous year's performance, adjusted for extraordinary factors, the operating result increased by 67 percent.
After the result for the first half year ended March 2020 suffered the strong negative impact of the fluctuations in the value of the STENFO, by the end of the year at the end of September 2020 this effect was almost completely offset by the recovery of the financial markets. Overall, the company result was CHF 570 million. The previous year's operating result of CHF 865 million includes write-backs of more than CHF 300 million. The operating result is underlined by the clear improvement in free cash flow compared to the previous year (CHF 319 million compared to CHF -273 million).
The positive result in trading and a lower net working capital commitment were the main factors in this respect. After the acquisition of Urbasolar in the previous year and the postponement of individual projects due to the pandemic, net investments fell to CHF 275 million (previous year: CHF 419 million). The good operating result also led to further growth in the equity ratio of 31,1 percent. Thanks to the inflow of funds, the net financial position improved to CHF -1181 million. Axpo is therefore well funded and has sufficient liquidity to ensure operations in extraordinary situations and continue strategic growth.
Success in trading and with clients
The Trading & Sales sector also confirmed the good performance of recent years in the 2019/20 financial year. Once again, operating income EBIT improved year-on-year to CHF 498 million (previous year: CHF 198 million). In customer service and energy trading, Axpo is active in 30 countries and 40 markets. Proximity to the market and disciplined risk management enabled us to take advantage of a dynamic market environment in our own business and asset-backed trading and achieved a positive result. The uncertainty in the markets has also reinforced the need for tailor-made risk management solutions among clients.
The trend towards long-term supply agreements (Power Purchase Agreements; PPAs) continues in the field of renewable energies, where Axpo is one of the leaders in Europe. Particularly noteworthy are the PPA with the Green Investment Group for two wind farms in Norway and a 2-year PPA with the Spanish photovoltaic developer Solaria. Also increasing was the demand for natural gas, which will play an important role in the transition to a carbon-neutral energy future in many regions of the world. Axpo has further strengthened its market position in this area and opened an office in Singapore.
Growth in renewable energy continues
Axpo is the Swiss company that invests the most in new renewable energies and boasts the greatest capacity in this sector. After the acquisition of Urbasolar in 2019, the photovoltaic sector has performed very well. The total power of photovoltaic plants rose from 249 MW to 373 MW. An additional 250 MW is expected to be installed in the current year, while the total pipeline includes projects for 1000 MW. It was also possible to sign, together with a partner, a long-term supply contract with the company that manages the three Parisian airports of Charles de Gaulle, Orly and Le Bourget. To this end, Axpo is building three solar plants with a capacity of 40 MW which will go into operation in 2021.
Also in the wind sector, Axpo has successfully pursued a profitable growth strategy. This year, the priorities have been to further grow the portfolio and secure future development projects. In France, Axpo won the first rounds of sales 19/20, thus securing 27 percent of the total auction volume and forfeiting 10 projects for a total of 201,5 MW. Axpo manages 130 wind farms for a total of 300 MW. In addition, 143 wind turbines are managed for third parties. In all, Axpo is developing projects for around 4000 MW.
In Switzerland, the conditions for major investments in the field of renewable energies still remain insufficient. For this reason, Axpo is actively promoting a floating market premium based on the market price as part of the revision of the Energy Act. Furthermore, a risk guarantee that protects long-term investments in existing hydropower plants is missing from the revision. In order to make better use of the potential of renewable energies in Switzerland too, particularly in the light of the emerging scarcity in winter, clear incentives are needed for investors.
Swiss hydropower is not yet economically attractive
The Generation & Distribution sector also achieved a good result. Overall performance increased from CHF 1.925 million to CHF 1.960 million and operating income stood at CHF 164 million. Adjusted for prior-year reversals and STENFO fluctuations, operating income was slightly higher than prior-year. This improvement is mainly attributable to higher electricity prices than in the previous year. In hydroelectricity, Axpo benefited from a good hydrological year, although Swiss hydroelectricity is not yet economically attractive and, under current conditions, investments in this sector are not paying off. In nuclear, the low availability of the French power plant fleet was compensated for by the high availability of the Swiss plants, which experienced few planned production outages and no unexpected outages. With an output of around 29 billion kilowatt hours, Axpo remains highly exposed to the risk of price fluctuations on the international electricity markets.
CKW: one new solar installation per day
Axpo's subsidiary Centralschweizerische Kraftwerke AG (CKW) performed well. Operating result EBIT amounted to CHF 124 million. Adjusted for extraordinary factors, operating income increased from CHF 87 million to CHF 133 million. The growth of the Solar technology sector was also strong in the last financial year and was well above the market average. CKW connects an average of one new solar system per day to the grid. Solar contracting (installation and operation of solar systems at customers' premises) was also successfully expanded within a short time. CKW is already among the leaders in the field of solar energy in Switzerland and intends to consolidate this position for the Axpo Group.
Strategy update: 20x more PV
The first steps have been taken in updating the strategy. Axpo will focus on three pillars: in Switzerland on its leadership role in the transition to a carbon-neutral energy future, internationally on its trading and customer activity as well as the expansion of renewables. In this field, in addition to hydroelectric, wind and solar energy, accumulators and the energy source hydrogen will also play a leading role in the future. In photovoltaics, for example, Axpo has set itself the ambition of increasing installed power by 2 GW by 10 − 2030 times more than today. In wind, the ambition is 20 GW of additional capacity. Furthermore, Axpo intends to quadruple the volume of long-term supply contracts for renewable energy (PPA) by 3. In order to free up additional resources for this growth, high cost efficiency is crucial. Targeted divestments are also being evaluated.
