Romande Energie Aktie

Good morning, ladies and gentlemen, to our presentation of our half year results from Romande Energie Group. I'm Francois Fellay. I am the new CEO of the group. I'm joined yesterday as CEO, which is why I won't be presenting these results myself, but I'll be delighted to do it for the full year results. That's when I will be presenting results.

I'm now going to hand over to Patrick Bertschy, who is our Grids Director, and he's been serving as CEO since late last year and also our CFO, Nicolas Conne. Thank you.

Thank you very much indeed, Francois. If I have to summarize these results, I would like to say that our operating profitability is up and with a sound basis. Now as you can see on the screen, if I may use an image, you can see a brighter patch, and we are confident that we are going to attain our objectives on the -- which are on the horizon. We are convinced that our strategy is achievable, and we're going to embark on this strategy in the near future to continue with the metaphor.

We have prepared ourselves for more turbulent times. We have equipped ourselves for good weather, but also we've taken a hat and sunscreen. Up to now, Romande Energie has always adapted to this fluctuating environment. We've always adapted in a measured manner and we will continue to do so in future.

This presentation contains 5 points. I will handle the first two items, and Nicolas Conne will handle the rest. Looking at the regulatory context, if you look actually at what came into force in '25 is not very different from what we had in 2024. But nevertheless, these factors are impacting us. As you can see in the decrease of the WACC. The political world is becoming more and more aware that the conditions for Grid managers are becoming more and more difficult, and they are in the process of easing up the situation in recent years.

Many measures were taken to promote solar energy and to the development of solar energy is going at a good pace, but the consequences for the Grid are substantial, particularly in terms of the reinforcement of the Grid. So we are, of course, in favor of the energy transition, but we have to do it at a pace which is reasonable.

Looking further ahead, therefore, to 2026, we have some legislative developments, which are going to come into force. Some of them, we've been waiting for them for some time. First of all, the abandonment of the average price. And -- but a good piece of news is the single price for the balancing power. We believe that the year 2026 will be slightly better than 2025 will have been. There's one factor which will protect small generators. The feed-in price is changing. The feed-in price next year is going to be calculated quarterly and will be based on the market price ex post small generators will be protected with a minimum price for the feed-in price.

Next year, we will also have the New Canton of Vaud Energy Act. The texts are more or less final now. And for an enterprise like ours, they will bring opportunities in terms of building renovations and in terms of thermal heating in a decarbonized basis, which is going to be important for Romande Energie. But looking further ahead and more broadly at the European level, as you will know, at the end of last year, Switzerland signed agreements with the European Union, a whole package of measures. And these objectives concern supply security, stability of the Swiss transmission grid and involvement in industry-wide decision-making. These bilateral agreements have been transposed into Swiss legislation. They were published on June 13, and we have until the end of October to issue our position on these texts, of which there are 900 pages. So that will be finished by the end of October.

In the second half of next year, the parliament will debate the suggested text, and we hope that there will be a referendum by February 28, 2028. So by February 2028, and then they will come into force in 2029 or 2030. A lot of adjustments are being made to organization, and they are preparing us for this legislative development. What did Romande Energie achieve in the first half of this year? We have achieved quite a number of stages, which punctuated this first part of the year.

In April, we refocused on our core business. What does this mean? For a number of years, we were exploring new markets and new products and new target customers. And now that exploration phase is over, we are now consolidating. That will give us a much clearer view of the strategy that we want to pursue and which market segment we want to target.

Francois Fellay, our new CEO, who took up his post yesterday, has just introduced himself. And we have strengthened the management committee with new competencies and new faces, in particular, Michel Rizzo, who is a human resources expert and who has worked both in Switzerland and internationally for large companies and who has a genuine vision of development of human resources. Then Thibaud Weick, who has been appointed Head of Energy recently. And he brings us a frame of mind and a culture, which is far more performance targeted and based more on key performance indicators, KPI. So these two people will be supplementing the management, and we will continue our path with them.

We've also set up a new organization, a reconfiguration since 1st of July 2025. As we mentioned to you in April, we have put in place an efficiency plan, which is starting to bear fruit. As regards to our organization, we said that we were setting up a structure with 4 business units, energy grids, markets and property. They are supported by people and talent, digital and innovation and finance and services.

The newest one, property groups together services activities and building energy renovation activities, our aim being to make Western Switzerland, the first region of Switzerland, which will be zero carbon. We have taken a controlling interest in Centrale Hydroélectrique de Bar in France and we've also achieved a first in Western Switzerland, an Agri Photovoltaic system on fruit trees and R&D designing solutions for dealing with the sharp rise in solar power.

We are continuing to accompany our customers on the path to the energy transition, including SMEs. We have achieved the connection of the first photovoltaic installations with feed-in adjustments. And we have made investments to improve user experience and we are improving customer portals. We are continuing our deployment of smart meters. By the end of this year, we should have achieved the Swiss Federation's objective of 80% smart meters. We have broken ground at Puidoux power substation and at Echallens, construction work has been initiated.

And we also accompany our customers with property in order we do total evaluations of their carbon output and their buildings using recycled concrete, and this enables them to have neutral gases. Romande Energie Services is continuing its excellent order intake and building renovations are continuing to experience strong demand.

In terms of digitalization, this is going to be one of the basis which will enable us to make our customer flow more fluid. We are introducing analytical algorithms and IA in many areas in order to make flows more fluid.

I will now hand over to Nicolas Conne, who is going to talk to you about the more financial aspects.

Thank you, Patrick. Hello, everybody. You've noted that our half year groups -- half year results show higher profitability after a tougher 2024, and that is thanks to our solid foundations. Our foundations are more solid, as Patrick said just now. These are results -- these are actually in line with forecasts. As you can see on the screen, all three business units contributed positively to EBITDA and thanks to a series of measures we put into place, for example, mitigation in energy area or efficiency drives. We'll talk about that.

And regarding energy supply margin, it was stable. There were fluctuations and the mix -- there were fluctuations because our own generation was down, but we were able to offset by recovering losses from prior year. The operating cash flow doubled to CHF 52 million. Of course, there was strict monitoring of our working capital requirement. Our net profit was solid, thanks to our better performance and including Alpiq's contribution was there as well, but this was significantly lower this year, though, this half year.

The efforts will continue, but there is a seasonal swing in the second half of the year for us. So we can only confirm our forecast that adjusted EBITDA and adjusted EBIT will be in line with 2024. That's all we can confirm.

So let's look to the presentation looking using a bottom-up approach, starting with energy supply margin, which you can see, and that shows the stability between 2024 and the first 6 months of 2025. This is a performance factor. This has been very important to us in the past, this energy margin. So we need to explain that. So in the first green [indiscernible] CHF 7.8 million. This is in the tariffs were set for 2025, the energy component was down 13%.

But when we set these tariffs, we were able to recover prior year losses. That's why we expected a higher energy supply margin. This was beneficial, of course. But on the other hand, there was a negative effect, and that was the drop of our own production, 65 gigawatt hours. This was because of the [indiscernible] plant has been at a standstill, and that explains why there was this drop in our generation and plus weather conditions were not as good. And we had a very mild month of June and dry with low rainfall and that dragged down our energy supply margin. This will be taken into account when we set future tariffs.

In addition to this, then there is the balance in power cost, which influences, which dragged down the margin by more than CHF 1 million. So it's always difficult because we're having to deal with higher solar input and we have to manage that as best as we can. This massive amount of energy we're taking on. As Patrick said, measures have already been put into place. We talked about the overflow product, which converts electricity into thermal energy, but also teams are taking measures to adjust to forecast in generation and tying it to demand, so we can cushion the effects of that on the group margin.

So margin was stable. So we cannot commit to second half of the year because of the seasonal swings. The first half is stronger than the second half usually. As we can see on the screen, each business unit has contributed positively to EBITDA. There was a significant contribution from Energy Solutions. So in terms of revenue or EBIT, this is down, but the profitability is higher. And EBIT has actually had a fourfold increase. This doesn't come from energy margin, but this is from -- so this is some benefits from the feed-in remuneration at cost, which lifts the EBIT.

Also a better result, a strong result from Hongrin-Léman pump storage plant, which helped as well and also the profit impact, also a positive spread between the peak load and the base load and a higher spread, but also we had additional remuneration from balancing as well. So that offset lower -- an expected drop from French assets because it was planned that one of the wind farms would not be in use and also energy prices were expected to be lower as well in France. Of course, there was the weather factor.

So if these margins are higher in Energy Solutions, there was also a refocusing on core business and also the efficiency drive, which helped and also stronger efforts with regard to trade receivables. So to do something about the provision for trade receivables and make it lower.

The second business unit is Grids. This is the foundation of operating performance. So we can see a small 3% rise in EBITDA and stable EBIT at CHF 21 million. There was a regulation effect with the drop of the WACC that had a negative effect. We also note a lower contribution from non-monopoly business. But at the same time, the regulatory system was actually positive, the average price method, which actually fixes the losses. And that actually helped in addition to that was depreciation and amortization. This is a direct line with our strong CapEx in recent years. I'll get back to that later.

And the second business -- third business unit is Romande Energie Services, which has had a small drop in revenue. But remember, last year, we sold Ffitech SR with effect of the 1st of July 2024. So on a like-for-like, it was higher. And also, we saw higher profitability from EBITDA and EBIT. So we're at 3% operating margin. So this is a very competitive market. Services is very competitive and including energy refits.

And the second theme, which has been driving results higher, the energy retrofits, and we can also measure the improved result -- better results from the Canton of Fribourg. And there's also been a better efforts on -- with trade receivables, and that's been more accurate monitoring. And we have a very strong order book at CHF 60 million for that business unit.

So looking at the group, operating revenue was down. This is because of -- mainly because of Energy Solutions mainly. We can perhaps talk about the lower energy -- the 30% cut in energy tariffs. And what we note here is all of the profitability margins are higher. Gross margin is up 5%. EBITDA 9% up and EBIT up 10%. That shows the solid foundations that we've created and also the mitigation and efficiency measures that we have put in place and which will continue over the next coming months and years.

On the right-hand side of the screen, you can see the contribution from Alpiq, which on 28th of August published very sharply our results, but it's still a strong contribution for the group because you can see associates still represented CHF 24 million. That's 50% of last year's contribution from the prior year period, but enables us to have CHF 40 million net profit, which we can call solid.

Higher profitability can also be seen at EBITDA level, but we can also see the fact -- we say in the fact that our cash flow from operations has doubled and also from dividends that we received, lower tax take than expected and also the work to improve our collection of trade receivables, which lowered the working capital requirement.

Operating cash flow is essential for the group. That's what we qualified it as essential for our group when we presented results in April last year -- this year. And it's a main contribution to our CapEx policy. It's fueling our CapEx policy. So CapEx is higher compared to the year earlier period. Normally, we have invested into energy power generation and grids, and these were quite stable.

In Grids, we reinforced low voltage and medium voltage. We are still rolling out smart meters, and we expect to meet the target 2 years ahead of time by the end of the year. And also in Energy, we have a positive effect due to high investments in district heating. But all other effects, which didn't happen also, for example, the commissioning of hydro and wind power plants last year, that hasn't happened this year. In terms of -- we've had -- but we've gained 14 million megawatts have been installed. And I mentioned it usually our standard is -- there's been scope effects as well, which is buying out the minority interest. One is Romande Energie Services, which has gone from 80% to 100% and [indiscernible] 30 gigawatt hours per year, and we've gone from 60% to 100% buying out the minorities.

So we now have full control and having full control means that we can tap the profitability in future years. And also, we acquired in the Grids business, we bought Swiss [indiscernible], which specializes in overhead lines, which supports our grid teams who are already on the ground and also enables us to keep the skill in the French-speaking region and the skills in Switzerland.

I've talked about cash flow from operations, the CapEx. On the other side is debt. Debt is part of the story as well. The net debt of CHF 205 million. I think we're fully in control of debt, helped by -- supported by the green bond, which is now fully allotted. And the green loan is 50% allotted. And this helps avoiding emissions, which increased threefold between 2024 and 2025. So these different indicators show the healthy structure of the group with a debt to equity of 76%.

So let's wrap up. What you can say is that Romande Energie is in a new dynamic. It's in consolidating is refocusing core business in a regulatory environment, which is changing all the time. But I think we take decisions. We have shown that we can adapt to new things like the new Electricity Act, but also we can also get ahead of events, as Patrick showed just now, concerning -- for example, if the EU electricity deal is accepted by referendum, we are getting ahead of it. Concerning -- we're acting as well as a group level mitigation and measures -- efficiency measures. And also, we are saving money. We are -- the efficiency measures that we announced in April sets targets. We want to have an extra CHF 10 million in EBIT level in 2026 from these measures.

And at the same time, as was presented, the group has more solid basis concerning our new organization reconfigured at the 1st of July this year and also Francois Fellay, new CEO, that strengthens things as well and other executives. I said it as I introduced the financial chapter. Profitability is up and efforts will continue, and we can confirm that we can -- we believe we have stable full year earnings related to '24 with regard to adjusted EBITDA and adjusted EBIT. This is due to seasonal downswing in the second half of the year.

And also, Alpiq also announced on the 22nd of August last year that one of their plants, which is offline will stay offline until February next year. This will hit Alpiq at the revenue line it's -- they think it's going to drop -- it's going to cut OpEx revenues by between CHF 140 million and CHF 160 million Alpiq level, and it will have an impact on us, which we can't quantify right now.

Romande Energie is confident that it can regain a performance in line with its objectives through two indicators that we presented April last year through EBITDA and cash flow. So now we're now ending our presentation. You can now see the upcoming Investor Day for 2026. And Patrick and myself are here now to answer questions. Francois Fellay just joined us, and he will answer your questions at the next presentation, not now. So it will be Patrick and me answering questions.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]