CKW Group has been hit hard by the turmoil on the energy and financial markets. However, it is mainly affecting the two major shareholders.
CKW Group, headquartered in Lucerne, i.e. the former Central Swiss Power Plants, has posted an extremely poor 2021/22 financial year.
While total electricity output rose by around 30 percent to 1.2 billion Swiss francs, both operating profit and net profit has really collapsed.
In operational terms, EBIT fell by almost 100 percent to a meager 5 million Swiss francs. The Lucerne-based electricity group even slumped into the red below the line, posting a loss of 12 million Swiss francs, as the company announced in its annual report on Tuesday.
In the previous financial year, a profit of almost 160 million Swiss francs had been made. Earnings per share slid from a plus of almost 26 Swiss francs per share to a loss of 4 Swiss francs per CKW share.
Nuclear power plant as reason
The company says the main reason for the development is that higher electricity procurement costs burdened the Energy segment by 85 million Swiss francs compared with the previous year.
In addition, the longer major overhaul of the Leibstadt nuclear power plant at the end of 2021 had a negative impact of 41 million Swiss francs. However, these costs could only be partially offset by 45 million Swiss francs higher earnings in energy sales, it said.
However, these are all developments that energy companies have to reckon with.
Profit turns into loss
CKW was also particularly hard hit by the financial result, which went from a profit of 4 million Swiss francs to a loss of 18 million Swiss francs.
The weak financial markets had caused the performance of the decommissioning and waste disposal funds to fall by 125 million Swiss francs compared to the previous year, CKW explained.
In addition, the high energy market prices had led to temporary valuation losses on hedging transactions for the coming financial years. These amounted to 169 million Swiss francs as of the balance sheet date.
At the time of the valuation losses, however, this would be compensated for, it said, putting the situation into perspective.
As a positive special effect, the sharp rise in energy market prices led to the reversal of impairment losses on production facilities and the release of provisions for energy procurement contracts amounting to 163 million Swiss francs.
However, cash flow from operating activities was strongly negative for the first time in years at minus 125 million Swiss francs. The increased energy procurement costs lead to an immediate cash outflow, CKW said of the effect.
This is happening immediately, while energy tariffs will only be higher in the future and should only then lead to rising sales. As a result of this effect, the cash flow from operating activities is significantly negative.
Equity in reverse gear
The loss leads to a significant drop in the equity ratio, as muula.ch also discovered. This falls by a high 24 percentage points to a mere 40 percent.
As a result of the negative developments in the past financial year, the Group’s dividend payout is expected to fall by around 70 percent to only around 35 million Swiss francs.
This will hit the two major shareholders in particular. On the one hand, it is Axpo, Switzerland’s largest energy company, which has a stake in CKW of around 80 percent and is itself publicly owned.
And on the other hand, the Canton of Lucerne – which has a direct stake of almost 10 percent in the CKW Group – is suffering.
With the two owners, that negative spiral is now likely to continue.