Improved net profit, lower gross margin

Although net profit was higher in the first half-year 2010/11 due to the two factors mentioned above, the EGL Group achieved a significantly lower gross margin of CHF 252.2 million (-40%). First of all, the exceptionally good result of the prior-year period could not be reached in the trading business. In particular, this was due to the markedly weaker results in cross-border electricity trading between Central Europe and Italy because of small price differences. Secondly, sustained, moderate electricity prices led to significantly fewer operating hours of the gas-fired combined-cycle power plants in Italy.

Energy Trading & Origination
EGL was not able to match the exceptionally good result achieved in the first half year of 2009/10. Results in the trading regions Italy, Iberia, Nordic & Baltics and the UK were within expectations. However, performance in cross-border electricity trading with Italy was markedly weaker due to aligning prices between Italy and Central Europe during the winter. EGL was able to take advantage of fewer opportunities and was in fact confronted with margin erosion in this area as compared to the prior-year period. Also costs resulting from restructuring of energy trading for Central and Eastern Europe in Dietikon did not sink in line with the decrease in margin potential in these markets during the period under the review. The Energy Trading & Origination division’s operating result was distinctly lower with CHF 27.5 million as compared to the previous year (CHF 208.3 million).

Assets
The Assets division clearly improved its operating result with CHF 65.7 million as compared to the prior-year period (CHF -25.3 million), in which the exit costs from the power plant project Energy Plus, as well as the outage at the nuclear power plant Bugey weighed down the result. However, the operating hours of EGL’s gas-fired combined-cycle power plants in Italy decreased as compared to the previous year due to the small difference between natural gas and certificate prices on the one hand, as well as power prices on the other hand (clean spark spread). All total, the gas-fired combined-cycle power plants Calenia Energia (EGL share: 85%), Rizziconi Energia (100%) and SE Ferrara (49%) produced 2.7 billion kWh of electricity in the first half-year (prior-year period 3.6 million kWh). EGL’s other assets – hydropower plants in Switzerland, a wind farm in Spain, as well as participations in nuclear power plants in Switzerland and procurement contracts for nuclear energy from France – produced within expectations and were successfully integrated into trading activities. Asset projects under construction or in the approval phase – particularly the two wind farm projects Global Tech 1 and Winbis, as well as the sea cable project NorGer and the Trans Adriatic Pipeline (TAP) – were developed further and important milestones were achieved.

Gas Supply & Southeast Europe
The persistently difficult economic environment particularly in Southeast Europe, as well as decoupling of the natural gas price from the oil price due to reduced demand and continued surplus in Europe continued to burden the Gas Supply & Southeast Europe division. As a result, the division was able to take advantage of fewer opportunities, but nevertheless improved its operating result compared to the previous year
(CHF -19.3 million) to CHF -17.2 million.

Outlook
The energy markets remain challenging, whereby a growing number of external factors influence the energy business. The outcome of the pan-European nuclear power debate and its impacts on the electricity industry and on EGL are not yet assessable today. These are dependent on political decisions that should be taken in the next months and years. The definite valuation of EGL’s transmission grid in Switzerland, the current limited margin potential and the weak euro exchange rate also influence the course of business. Therefore, a prognosis on the financial result is subject to a high degree of uncertainty. On the expense side, the introduced cost reduction measures will take hold. In the medium term, EGL anticipates that power prices in Central Europe will rise, the demand for natural gas will increase, and that the clean spark spread in Italy will pick up again.

Public tender offer by Axpo Holding AG to EGL AG’s minority shareholders
Axpo Holding AG has announced that it intends to make a public tender offer for all EGL AG public bearer shares. To this end, Axpo published the respective advance notification today. The offered price is CHF 850 per EGL bearer share, corresponding to a premium of 20.8 percent as compared to the volume-weighted average share price over the last 60 trading days.

EGL’s Board of Directors appointed an independent committee, comprising of Peter Derendinger and Dominik Koechlin, to assess the offer. The committee ordered Bank Sarasin & Cie AG to carry out a fairness opinion and based on the result of the fairness opinion, assesses the offered price of CHF 850 per bearer share as fair. The committee therefore recommends that minority shareholders accept the offer. The report of the Board of Directors is scheduled to be published on 27 June 2011 together with the offering brochure and the fairness opinion.

Further information
Media Relations: Tel. +41 44 749 40 10, media.ch@egl.eu
Investor Relations: Tel. +41 44 749 41 01, investor.ch@egl.eu