Economic condition of Swiss electric utility companies – 2022 update

We share EY’s analysis of how Swiss utilities performed amid growing pressure on electricity supply and what drivers have recently affected them.

This study is downloadable as PDF in English, French and German.

In brief

• Electric utility companies are operating in an environment characterized by disruption, geopolitical instability and concerns over procurement.
• High electricity and gas prices have led to a significant revenue increase for utilities, but their EBIT has generally decreased.
• While large electricity producers were able to limit the increase of their energy tariffs in 2023, small utilities remain the ones who have offered the lowest energy tariffs on average since 2007.

Against the backdrop of geopolitical instability, concerns over procurement security have increased in recent months. This is likely to trigger higher credit risk for utilities, resulting from defaults on electricity bill payments. It will also increase the liquidity needs of utilities as they seek to balance their books amid higher electricity prices/costs. Disruption will force certain utilities to adapt their supply strategy and ensure reliable gas storage capacities abroad. How are Swiss electric utilities coping in this environment? In this article, we summarize the results of our analysis of the 2021 financial statements of Swiss electric utility companies.

For the analysis and presentation of results, the utilities under study are divided into five groups: large producers without captive customers (Group 1); large producers with captive customers (Group 2); large utilities (Group 3); Mid-sized utilities (Group 4); and small utilities (Group 5).

We’ll explore how revenue and debt ratio developed, how the five defined utility groups performed in terms of EBIT/EBITDA and what we can expect for FY23.

Revenues and debt ratio

The revenues of utilities increased significantly in 2021 in general as a result of higher wholesale electricity prices, driven by soaring gas prices, as well as CO2 emission certificates in the EU.

Group 1 shows the highest revenue growth with an increase of 45% following a decade of falling revenues. Group 2 also benefitted from the expansion of energy services and saw revenues rise by 36%. Groups 3 - 5 show more modest revenue growth, driven by higher gas sales (colder winter 21/22), in addition to higher electricity prices.

Overall, the debt ratio remained stable in the different groups. Group 1's debt ratio remains significantly higher than for other groups, while Group 5's debt ratio continued to decrease, reaching an unprecedented low (for Group 5) of 8.5% as of 31 December 2021.

Despite historically low tariffs, Group 5 shows strong growth in 2023, comparable to that announced by groups 3 and 4. Group 2, whose tariffs have been more volatile in the past, recorded a more moderate increase than the other groups, mainly due to its significant electricity production. Similar trends can be observed for other tariff categories such as C22/C33. Group 1 is not shown on the chart as it does not have captive clients with regulated energy tariffs.

Group 1 is not shown on the chart as it does not have captive customers with regulated energy tariffs.

EBIT and EBIDTA

EBITDA and EBIT both declined among Group 1, especially the latter, which was down 66% on the prior year. This decline in EBITDA (-26%) was partly attributable to a negative accounting impact related to the change in value of hedging instruments. Significant impairment losses at certain utilities resulted in lower EBIT (investments in renewable thermal energy).

Group 2 was the only group to record increases in both EBITDA and EBIT. Significantly higher revenue allowed the group to record a slight increase in EBITDA and EBIT. The expansion in energy services at certain utilities was partly offset by extraordinary events (i.e., technical problems in certain power stations).

EBITDA of Group 3 was stable on average, although there were some differences among utilities. Significant impairment losses at certain utilities resulted in lower EBIT (investments in renewable thermal energy).

Group 4 reported a more stable performance compared to other groups, with EBITDA up just 1% and EBIT down a modest 5%. Higher revenues related to gas sales (higher prices and colder 21/22 winter) were offset by an increase in supply and other costs (personnel costs). There was also higher depreciation at certain utilities, which pushed down the EBIT.

EBITDA and EBIT declined slightly among Group 5. Higher gas sales and electricity prices were offset by a significant increase in supply costs at certain utilities with greater exposure to market prices.