The energy business110th Annual Report 2004

Head office:

Aare-Tessin Ltd. for Electricity

Bahnhofquai 12

CH-4601 Olten

Tel. +41 62 286 71 11

Fax +41 62 286 73 73

www.atel.ch

“The energy business” is the titleof Aare-Tessin Ltd. for Electricity’s110th annual report. The term “busi-ness” is represented in various ways.On the one hand, as enterprise, en-trepreneurial sprit and adventure,daily challenges, carefully weighingup risks and opportunities, planningfor the future based on the present,realising innovation and vision – char-acteristics and qualities that Atel hassuccessfully demonstrated since itsinception.

On the other hand, it is repre-sented as organisations that design,produce and sell services and prod-ucts. A series of photographs follow-ing the route from Rome in the heartof Italy – a key market for Atel – toOlten shows the most diverse indus-trial and commercial uses of electric-ity. Whether electricity is used fortourist attractions or to manufactureregional specialities, to transportgoods and products in Italy, Switzer-land or anywhere else in the world –we cannot imagine any aspect of ourmodern daily life without it. “Theenergy business” does not just trackthe route from the Apennine penin-sula over the Alps to Atel’s headquar-ters. The concept principally docu-ments electricity as a source of finan-cial productivity, social prosperity anddevelopment. In brief, entrepreneur-ial activity. And this completes the“Atel business” circle.

Rome–Olten

Rom

Florenz

Genua

Neive

Olten

Energy is fundamental to social and economic de-velopment. In this respect, Atel is making its contri-bution to continuous and sustained progress. Our po-sition as a major player in the European electricity in-dustry is a responsibility we acknowledge by usingour experience, know-how and commitment for thecommon interest of our customers, shareholders, em-ployees and the general public. Atel is a Swiss-basedpan-European company, offering its customers tailor-made solutions and products.

Electricity trading and supply

Atel is Switzerland’s leading electricity company,with a sales volume of around 93 TWh from the tra-ditional physical electricity business and around 109TWh from trading in standard products. It operateson a pan-European basis, with wholly-owned sub-sidiaries and business partnerships in a number ofcountries. Atel supplies power exchange companies,sales partners, urban utilities, industrial and servicecompanies throughout Europe. As a production-sup-ported specialist trader, Atel also offers derivative in-struments for customers’ individual risk hedging andmanages complex energy portfolios.

Power generation

Atel is one of Switzerland’s largest power genera-tors with its own production capacities in Italy, Hun-gary and the Czech Republic. Every year the companyproduces approx. 13 TWh from these large power sta-tions. Atel’s market-oriented production portfolio com-prising of storage and run-of-river power stations aswell as thermal facilities gives customers continued,dependable peak and band energy supplies and playsa significant part in providing secure supplies.

Energy is our business

Electricity transmission

Atel transports a significant portion of the elec-tricity to customers via its own grid. The strategic po-sition of our high-voltage grid is important for Euro-pean electricity trading. Atel controls close to 17% ofthe Swiss transmission grid and over 42% of trans-mission line capacity from Switzerland to Italy.

Energy services delivery

Atel addresses a full range of customer needs inthe areas of electricity, power, lighting, cooling andheating, communications and security. The Atel Ins-tallationstechnik Group (AIT) and GAH Group jointlyoperate a dense branch network, particularly inSwitzerland, Germany and Italy. Energy Services offersEnergy Supply Technology, Communications Technol-ogy, Industrial/Plant Technology and Building Services/Technical Facilities Management. Our services rangefrom project planning, through construction, to op-eration and maintenance.

An energy power-house

Atel aims to continue extending its position as aleading independent electricity trader and major en-ergy services provider based at the heart of Europe.The energy markets offer new opportunities all thetime – we are exploiting them together with our cus-tomers.

Key Figures . . .

January: Generating power in Italy

The tolling agreement signed in autumn 2003 cameinto force at the beginning of the year. Under theagreement, Edipower runs technical operations, whileas a partner, Atel is responsible for fuel procurementand management as well as selling the generatedpower based on its share in Edipower.

April: Integration of Navisence with new concession

Following intensive negotiations, Kraftwerke Gou-gra AG was granted a new concession for the lowestlevel in Val d’Anniviers, as a result of which the Navi-sence power station was integrated into KraftwerkeGougra AG’s facilities. Water supplies for the wholevalley will now be provided from one source. In additionto financial compensation, the concession-grantingcommunities receive a 10% stake in Kraftwerke Gou-gra AG while Atel retains its 54% holding. Over the longterm, Atel may also exploit 65% of the related power.

April: Shareholding increased

UBS acquired RWE’s 20% holding in Motor-Colum-bus as well as its 1.23% share in Atel, making the bankMotor-Columbus’s majority shareholder and indirectlythat of Atel. This has created the right conditions tosell the shareholding in an effort to find a long-termindustrially viable solution.

April to December: Capacities increased

In Italy, Atel generates another 100 MW of its ownpower now that the two gas-combi power stations inNovara and Vercelli have started operating commer-cially. Existing facilities were also repowered quickerthan planned, becoming modern, highly efficient pow-er stations under Edipower’s scheduled repowering

. . . and Facts for 2004

Atel Group+/– variance

2003–2004 in % 2003 2004 2003 2004(based on CHF) CHF mn. CHF mn. EUR mn. EUR mn.

Energy sales (GWh) 36,3 68 476 93 306 68 476 93 306Net turnover 31,6 5 285 6 955 3 477 4 516

Energy 44,3 3 839 5 540 2 526 3 597Energy Services –7,6 1 535 1 418 1 010 921

Earnings before interest, tax,depreciation and amortisation (EBITDA) 9,3 616 673 405 437

in % of net turnover –17,1 11,7 9,7 11,7 9,7Group profit 24,6 272 339 179 220

in % of net turnover –3,9 5,1 4,9 5,1 4,9Net investments* –84,8 605 92 398 60Free cash flow –59,7 481 194 316 126Shareholders’ equity 10,9 1 811 2 009 1 161 1 305

in % of total assets 3,5 28,7 29,7 28,7 29,7Total assets 7,2 6 315 6 768 4 048 4 395Employees** –2,9 8 105 7 872 8 105 7 872plus trading in standardised products

in GWh 63,2 66 627 108 761 66 627 108 761in CHF mn. or EUR mn. 85,5 2 714 5 035 1 786 3 269

** Excluding variance in time deposits and securities** Average number of full-time equivalent employees

Per share information+/– variance 2003 2004

2003–2004 in % CHF CHF

Nominal value – 100 100Share price at 31.12. 68,4 980 1 650Highest 69,4 980 1 660Lowest 34,2 730 980Group profit 26,5 83 105Shareholders’ equity 10,9 597 662Dividend 9,1 22 24Average trading volume/day 94 478

programme. As a result, new 1900 MW gas blocks cameinto service in Chivasso and Sermide.

May: Management structure streamlined

The management of the Energy Services Northern/Eastern Europe and Southern/Western Europe divisionsmerged. Giovanni Leonardi became Atel’s new CEO on29 April, succeeding Alessandro Sala who had success-fully run the company since 1999. More changes to theorganisational structure were approved in August andthese came into force on 1 January 2005. Atel now hasa market-oriented structure that strengthens the Group’sFinance and Management Services.

June: Revision required

Along with other energy providers, Atel is in fa-vour of orderly market opening for all electricity con-sumers and is keen to see a lean legal framework with-out excessive regulatory intervention. The FederalLaw on Power Supply (StromVG) and Electricity Law(EleG) did not fulfil these requirements, so Atel reject-ed the drafts under the review procedure and de-manded their revision.

November: Excellence on several fronts

Atel Csepel Business was the recipient of threeawards. Firstly, it received the Healthy Workplace Am-cham Award, then it was voted the second-best placeto work in Hungary. The subsidiary’s third accoladewas for its exceptional communication of its environ-mental activities, thereby completing an encouragingall-round picture.

Atel operates all over Europe

Subsidiaries and offices

Electricity tradingPower generationEnergy Services

Sales regions

Energy SwitzerlandSwitzerland market

Energy Southern/Western EuropeSouthern Europe marketWestern Europe market

Energy Northern/Eastern EuropeCentral/Eastern Europe marketNorthern Europe marketScandinavia market

Atel operates in electricity trad-ing, power generation and energyservices throughout Europe throughsubsidiaries and offices. It introduceda new market-oriented organisation-al structure throughout the Groupon 1 January 2005.

Editorial by the Chairman of the Board of Directors Page 4

Interview with the CEO Page 6

Annual General Meeting Page 9

Atel and its dialogue groups Page 10

Corporate governance Page 14

Capital structure and shareholders’ rights Page 14Board of Directors and Executive Board Page 15Remuneration and shareholdings Page 20External auditors Page 21

Energy segment Page 24

Electricity trading and sales Page 26Switzerland region Page 27Southern Europe region Page 27Central/Eastern Europe region Page 28Northern Europe region Page 29Scandinavia region Page 30Trading Page 31

Power generation and grid Page 32Power generation Switzerland Page 33Power generation Italy Page 35Power generation Central/Eastern Europe Page 36Grid Page 38

Energy Services segment Page 42

Energy Services Southern/Western Europe Page 44Atel Installationstechnik Group

Energy Services Northern/Eastern Europe Page 46GAH Group

Glossary Page 52

Addresses Page 54

Contact/Dates Page 54

1

Table of contents

A few hours ago, pilgrims, believers and tourists from all over the world were thronging through secu-rity controls. Now St. Peter’s Square is calm and dark. Occasionally the screen of a mobile phone lights up, afire engine races past, there is brief laughter, whispering. This contrasts starkly with the illuminated, majes-tic dome of the basilica, the colonnade and fountain in the middle of the square. There seems to be a calm overthis little state until the hubbub begins again the following day.

But on the other side of the Tiber, the masses are making their way through broad, well-lit streets anddark, narrow alleys, passing alongside testimonies to past eras – the Colosseum, the Trevi Fountain, the SpanishSteps or the Forum, dazzling headlights perfectly illuminating these glories of human creation. Shops andrestaurants with all their wares are also competing for attention, trying to attract customers with flashy, luridneon lights in all different languages. Light is used as a navigational aid through the myriad of shop windowsand window displays. Light is a guide and pacemaker through the traffic – it is almost impossible to imagineRome without electricity.

Monuments in focus

Rome

5

place a burden on its operation andexpansion. If suitable changes aremade, such as revising water protec-tion legislation, hydroenergy couldplay a greater role in our electricitysupplies.

The European electricity market isalso changing on the demand side,with all commercial electricity cus-tomers in the EU having had freemarket access since mid-2004. InSwitzerland, the Federal SupremeCourt confirmed that cartel law ap-plied to the electricity market whichwas tantamount to opening it up.Also, the Federal Council approved adraft law on power supply (StromVG)which is designed to liberalise theSwiss electricity market in two stages,i.e. from 2007 for industrial and com-mercial customers, then 5 years laterfor household customers. Atel stilladvocates quicker and full marketopening without an optional refer-endum on the basis of strong Euro-pean integration.

Alongside the StromVG, the Feder-al Council also published the revisedElectricity Law (EleG) which regu-lates cross-border electricity tradingand advocates the introduction of a Swiss grid company and marketopening regulator. In Atel’s view,

Switzerland should enter into nego-tiations with the European Unionsoon so that it can reach a longoverdue agreement about mutualfree grid access on a level playingfield.

The seven Swiss transmission gridoperators have already taken thematter in hand by setting up swiss-grid, an independent national trans-mission grid company to run theSwiss grid from the beginning of2005. An in-depth investigation bythe Competition Commission meansthat it will be several months beforeswissgrid can begin operating.

The Atel Group performed well inthis dynamic environment in 2004,posting more strong growth and re-porting record earnings. The AnnualGeneral Meeting will therefore beasked to increase the dividend againfrom CHF 22 to CHF 24 per registeredshare.

Our energy business was the maindriver of this success, with signifi-cant rises in both turnover and elec-tricity sales. An advantageous com-bination of European-wide sales andtrading activities with our own pow-er stations in various countries and asignificant electricity grid in Switzer-

E D I T O R I A L

Editorial by the Chairmanof the Board of Directors

4

The worldwide demand for ener-gy is growing by more than 1.5% an-nually and this trend continued in2004. Energy prices around theworld rose at the same time. Higherenergy prices hold back economicgrowth and dampen economic ex-pectations, all of which thrusts theenergy sector back onto centre-stage in terms of the economy, pol-itics and public awareness. Invest-ment in adequate, secure energysupplies, either in power stations orgrids, are long-term projects andmust therefore be addressed in goodtime.

From this perspective, last year’srather tentative discussions on thepossibility of building new powerstations should be welcomed. Thechoice of future generation tech-nologies is at the heart of this de-bate on energy policy and the solu-tion demands realism and farsight-

edness. A political wish-list is not ap-propriate, but technical feasibility,security of supply and cost-efficiencywould be useful tangible criteria toconsider.

It is vitally important that a prac-tical political solution to the CO2

problem be found following thecurrent discussions. Atel is in favourof a swift political decision, as thiswill strengthen the market oppor-tunities for CO2-free energy sourcessuch as hydro energy, nuclear energy,solar and wind power. In Atel’s view,nuclear energy will be particularlyimportant for securing future elec-tricity supplies, as reflected by re-cent decisions taken in several Euro-pean countries. In France and Fin-land, the way now seems clear forbuilding pressurised water reactors.A new nuclear power law (KEG)came into force in Switzerland on 1February 2005, bringing new restric-tions but still supporting nuclearpower. Politicians and the publicalike increasingly recognise the im-portance of nuclear energy, but evenafter extensive investigations, theissue of disposal still has to be re-solved. Apart from the challenges ofnuclear energy, the parameters forhydroenergy must be optimised. Taxlevies and environmental provisions

land allowed Atel to operate appro-priately in all European markets andoffer its customers tailored prod-ucts. And although the state of theconstruction industry was still de-pressed, our Energy Services divisionstill increased its turnover. The re-sults reflect how we have carefullycontinued to follow our adoptedcorporate strategy. We also under-went internal restructuring and re-organisation on 1 January 2005 sothat we are now systematically mar-ket-oriented.

Atel’s business operations havemade the company more attractiveover the past few months. Since UBSbecame the majority shareholder inMotor-Colombus and indirectly thatof Atel in April 2004, UBS has rein-forced its objective of disposing ofthe share package. UBS intends tofind a solution that makes sense froman industrial point of view and is ex-amining various models. The ulti-mate aim is to keep on developing thecompany and increase its value.

Atel’s business was extremely wellrun in all respects in 2004. I wouldlike to thank all employees for theirhard work as well as the ExecutiveBoard, headed by Giovanni Leonar-di. He took over responsibility from

Alessandro Sala, who had run Atelsuccessfully and enthusiastically since1999, at the end of April 2004. But I would also like to thank our cus-tomers and business partners, mycolleagues on the Board of Direc-tors, and all of our shareholders fortheir trust and excellent level of co-operation. Their support is a majorfactor in Atel’s success.

Walter BürgiChairman of the Board of Directors

7

Atel generates around 8 TWh inSwitzerland and approx. 6 TWh inItaly. Eastern Europe should reachthese levels in the future. Whatsteps did Atel take to achieve thisobjective?

We are fulfilling our expecta-tions on expansion in Central andEastern Europe. We decided to in-crease the size of our power stationin Kladno near Prague (Czech Re-public) by adding a 50 megawattgas turbine. Numerous other proj-ects are under way at the moment,but not yet ready for implementa-tion.

New power stations came into serv-ice in Italy and the competition is in-creasing. How do you assess oursouthern neighbour’s situation?

Italy continues to be an attrac-tive market and we expect energyconsumption to keep on rising atabove-average rates.

There will be more bottlenecksin the Italian grid, but we have nu-merous projects in hand for newand existing power stations all overItaly to overcome them. We are inthe analysis stage, after which wewill decide which region to focus on.

Last year there were fresh discus-sions about building nuclear powerstations. Where do you stand on thisissue?

We have to face the full realityof this issue. The alternatives to thecurrent electricity mix are limitedand there is only restricted scope forexpanding hydroenergy, for politi-cal and technical reasons. Some ofthe expectations of alternative en-ergies have been grossly exaggerat-ed. It is hard to imagine a coal-firedpower station as a real alternativeto a new nuclear one. From today’sperspective, the only option would bea gas-combi power station – with allits advantages and disadvantages.At the end of the day, politics andthe people will lay down the param-eters for us. We are trying to engageconstructively in the initial discus-sions and will operate as best we canwithin the prescribed guidelines.

The electricity market in the EU areahas opened up. Switzerland is creat-ing its own island. How do you viewthe situation?

There is no way that we can avoidan adjustment to the EU’s liberalisa-tion programme. Greater isolationcould have tangible consequences.

We will prepare early for the newrules, as new rules also mean newopportunities.

What do you expect from swissgrid,the new Swiss grid transmissioncompany?

swissgrid will gradually assumeresponsibility for operating the Swisstransmission grid. This is an importantfunction which we believe should notbe the government’s direct responsi-bility. We think that the right condi-tions are now in place for very impor-tant cross-border electricity tradingto flourish.

The investigation by WEKO, thecompetition commission, is a stan-dard process that came as no sur-prise to us. We only regret that oneof the electricity industry’s initia-tives has been delayed. Ultimately,swissgrid will benefit everyone.

Atel reported excellent trading re-sults in 2004. How do you see thisarea performing in 2005?

By its very nature, trading centreson selective business that arises ac-cording to season, weather conditionsand availability of power stations.These conditions are therefore dy-

I N T E R V I E W W I T H T H E C E O

“New rules always mean new opportunities”

6

Mr Leonardi, what are your per-sonal conclusions after 9 months incharge of the Atel Group?

Let me first give you my conclu-sions from a business point of view.Atel was quick to identify the mar-ket potential of liberalisation in Eu-rope and has exploited it through aseries of targeted investments. Thecompany is extremely well-positionedtoday and is ready for the next phas-es of development, armed with itsnew, market-oriented organisation-al structure.

Personally, I feel comfortable inmy new position. I am keen and mo-tivated to lead Atel into a successfulfuture with the help of a strong team.

The top priorities for the AtelGroup in 2004 were to increaseearnings power and strengthen thebalance sheet. Were these objec-tives achieved?

2004 was a very good year forAtel, with turnover, sales and incomerising to record levels. Despite therelated consequences, such as theincrease in receivables as a result ofhigher turnover, we also increasedshareholders’ equity.

What were the key moments of2004 for you?

We were able to set our plans in motion swiftly and systematicallyfrom a position of strength. For ex-ample, under the tolling agreementwith Edipower, we were able to di-rectly market our energy portionfrom the power stations in Italy forthe first time, thus significantly boost-ing energy sales. This was supportedby generation optimisation stepsthere (repowering programme) andthe high availability of all powerstations.

It was also a very good year forour trading companies which re-sponded swiftly to changing marketconditions.

The Energy Services division re-vised its service portfolio. Its com-panies operated well in a difficulteconomic environment, with theconstruction sector recovering onlyslowly.

Finally, we managed to changeour internal organisational and man-agement structure which required amonumental effort from all partici-pants.

Rome

Annual General Meeting

9

The 109th Annual General Meet-ing was held on 29 April 2004. MarcBoudier, Ulrich Fischer and Urs B.Rinderknecht were re-elected to theBoard of Directors for a furtherthree-year term. Rolf Büttiker, UrsSteiner and Heinz-Werner Ufer wereelected as new members. Mr Uferresigned his position on 1 July 2004,as RWE sold its share package in MCto UBS. Ernst & Young Ltd. were re-appointed as Auditors and GroupAuditors for a one-year statutory pe-riod. In addition, the Annual GeneralMeeting approved the 2003 annualreport, annual financial statementsand consolidated financial state-ments, discharged the members ofthe Board of Directors and agreedto the Board of Directors’ proposedappropriation of retained earnings.

The next ordinary General Meet-ing marks the end of the statutoryterms of office on the Board of Direc-tors for Dr. Hans Büttiker, Dr. RainerSchaub and Christian Wanner. TheBoard of Directors proposes that theGeneral Meeting re-elect Messrs. Dr.Hans Büttiker, Dr. Rainer Schaub andChristian Wanner for a further termof office.

A N N U A L G E N E R A L M E E T I N G

8

namic and were positive for ourtrading activities in 2004. I believethat our trading operations will pro-fessionally exploit also the opportu-nities that arise in 2005.

The Energy Services segment hasbeen badly hit by tough conditions,primarily in the construction sector.How has it been performing nowthat the economy is strengthening?

The consolidation at the Atel Ins-tallationstechnik Group in Switzer-land has been paying off. We didour homework and are now oncourse. Consolidation is still the toppriority at our GAH subsidiary inGermany. Earnings for the whole di-vision are good and have exceededour expectations. Given the high or-der intakes and large work back-logs, we expect this segment to turnin another satisfactory performancein 2005.

Atel reorganised its managementstructure in the reporting year. Whatwere the aims of this move and howhave you found it so far?

We know that we earn money inmarkets and regions, so we madesystematic changes to our structure tomake it more market-oriented. The

initial results have been positive. We have now created the right con-ditions to help us make furtherprogress. Our two central providers,Financial Services and ManagementServices, were also part of the re-structuring. They support the busi-ness as a whole and also the deci-sion-making processes.

What are Atel’s objectives for 2005and what are your priorities?

We will carry on implementingour Group strategy which is aimedat maximising our ability to meetcustomers’ requirements all over Eu-rope. This applies to both businesssegments. We will also aim to ensurethat our organisational and man-agement structure becomes well es-tablished, particularly by simplifyingprocesses. Our objective is to keepon improving earnings and strength-ening our equity capital ratio.

How do you rate Atel’s outstandingannual results?

Atel had a very successful yeardespite the enormous challenges ofconsolidation. This success was downto the outstanding performance ofour employees and of course goodteamwork – that is not always a fore-

gone conclusion. I would primarilylike to thank our customers and allour employees, but also the Boardof Directors, with whom I have en-joyed working, and our shareholdersfor their confidence.

Perugia

Atel and its dialogue groups

10 11

Atel and its customers

Atel regards electricity suppliesand energy services as anything butstandardised, which is why we gearour products and services towardsour customers’ needs, irrespective ofwhether the customer wants us tosupply a schedule, derivatives, con-tact lines for transport or house in-stallation. We develop tailored solu-tions for our customers and expand-ed our product range in 2004. Ourcustomers are just as diverse as ourproducts. We supply electricity tourban and regional utilities, tradersand industrial companies, but apartfrom utility companies, our energyservices customers also include indus-try, commerce and private individu-als.

We are committed to buildinglong-term partnerships with our cus-tomers based on mutual trust. Geo-graphic and cultural proximity to ourcustomers is therefore very impor-tant to us. We have a close networkof sales companies that help us un-derstand and service our customersbetter. This is how we guarantee top-quality services as a professional, ex-perienced and pan-European Swiss-based energy trader and serviceprovider.

Atel and the financial community

Atel’s share price continued risinglast year, closing at CHF 1650 at year-end which is an annual performanceof almost 70%.

Atel was written about very fav-ourably in various studies by eminentfinancial analysts. Several banks im-proved their rating of us last yearwhich helps support our efforts tosecure cost-effective capital. Ourconstant dialogue with players onfinancial markets promotes theirunderstanding of Atel and the ener-gy sector in general. We also set outour strategy and the Group’s pros-pects to interested parties at variousevents. We believe that carefully nur-turing capital providers is crucial fora company the size of Atel. We willcontinue to increase the confidenceshown in us by fostering reliable com-munication with the capital markets.

Our activities on those marketscentred on consolidation last year.We reviewed and optimised existingfunding concepts and are now readyto meet the increasing requirementsof capital providers.

Atel and its employees

The markets and political envi-ronment are changing all the time.This poses enormous challenges forAtel and its employees, in that tasksand work processes, organisationand clarity of roles have to be exam-ined and adapted more and morefrequently.

Guidance in this permanentchange process comes from the val-ues that give Atel its unmistakableidentity. Atel also practices these val-ues internally in its day-to-day deal-ings with its employees.

Our management culture workson the basis that new ways must al-ways be found to achieve the rightbalance between the interests ofemployees and those of the compa-ny. This is why our personnel man-agement systems are flexible andoffer room for manoeuvre for indi-vidual solutions.

Our personnel policy is not basedon short-term trends but on tried andtrusted principles, such as makingtime for employees, agreeing chal-lenging goals, paying fair salary lev-els and promoting professional de-velopment.

We see the working relationshipas give-and-take based on reliabilityand mutual trust.

Atel and the public

Atel is a pan-European energycompany that can claim to be pres-ent on all relevant regional electric-ity markets, especially at the loca-tions of our own power stations,lines and trading and sales compa-nies. We hope that the public has apositive view of Atel there. Contactwith the media and politics is there-fore important for Atel. The princi-ple of an open and continuous in-formation policy has paid off. Atel’sbusiness performance over the pastfew years has raised our profile and,as a result, we have had to intensifyour PR work. Especially as a listedcompany, Atel is committed to first-class communication with the pub-lic.

Last year, discussions focusedheavily on the future of power gen-eration and electricity market liber-alisation, two topics that are of in-terest to a broad public. This madeAtel a popular point of contact againfor politics and the media. Atel adoptsa clear position on energy policy is-sues and is involved in shaping fair

and transparent operating condi-tions. When asked, Atel specialistsalso support politicians and the ad-ministration with their specific ex-pert knowledge or appear as speak-ers at conferences.

We feel committed to society.Tours of our power plants are popu-lar with school classes, associationsand other groups. Visitors to ourwebsite www.atel.ch can access awide range of information aboutthe Atel Group as well as the elec-tricity sector in general. Atel alsosupported numerous cultural, sport-ing and charitable activities in 2004through sponsorship.

ATEL AND ITS D IALOGUE GROUPS

Montepulciano Badia al Pino

Kneading, shaping, drying

The battle for the best position with the shortest waiting time begins just a few hundred metres fromthe payment point. Digital figures show the distance covered. Payment is made and change given automati-cally. There are very few friendly faces, if any, just the same old tinny sound of “arrivederci”. Travelling on theperiphery. Like in the capital city, industry and commerce in Florence are being increasingly pushed towardsthe outskirts until work disappears into cheaper areas. The centre belongs to tourists in their shorts and train-ers as well as office workers in dark suits, elegant ties and light leather shoes.

Only a few metres from the dusty, loud and congested arterial road to Prato, there is almost clinicalcleanliness and the rhythmical noise of machinery. Machines do all the kneading, rolling out, shaping, dryingand cooling, human involvement is limited to quality control and moving the pasta from one machine to an-other. It is only for special orders that the owner reaches for his knife and bag of filling to fill and shape tortel-loni, albeit with minimum effort. There is just one secret that he does not share with even his most expensivemachines and employees: the recipe for his pasta fillings.

Corporate governance

14 15

The principles and rules on cor-porate governance of the Atel Groupare laid down in the company’s Arti-cles of Association, OrganisationalRegulations, Executive Board Regu-lations, Group guidelines and theorganisational chart with the alloca-tion of subsidiaries. The Board ofDirectors and Executive Board regu-larly review and adapt them to meetrequirements.

Capital structure and shareholders’ rights

Capital structureUnchanged since 1992, the share

capital of Aare-Tessin Ltd. for Elec-tricity is CHF 303,600,000 divided in-to 3,036,000 registered shares at CHF100 nominal value each. The sharesare fully paid in. At the Annual Gen-eral Meeting, every share representedis entitled to one vote. There are norestrictions on transferability or vot-ing rights. The Statement of Changesin Equity can be found in the Finan-cial Report on page 13 for the AtelGroup’s consolidated financial state-ments and for those of Aare-TessinLtd. for Electricity on page 56.

Under the Articles of Association,the Board of Directors is authorisedto increase share capital up to a max-imum of CHF 30,360,000 by issuingup to 303,600 registered shares, atCHF 100 nominal value each, to bepaid up in full. This authorisation ex-pires on 23 April 2005.

Shareholders’ rightsShareholders’ financial and co-

determination rights are regulatedby law and the Company’s Articles ofAssociation, which stipulate a 50-daytime limit for submitting motions foragenda items at the General Meet-ing.

The major shareholders as en-tered in the Share Register are givenon page 35 of the Financial Report.

Majority shareholders in Aare-Tessin Ltd. for Electricity are obligedto take part in a public purchase of-fer under the Swiss Federal Law onStock Exchanges and Securities Trad-ing (no opting-out clause).

Stock exchange listingShares in Aare-Tessin Ltd. for Elec-

tricity are listed on the SWX SwissExchange under international se-curities identification number ISINCH0001363305. Market capitalisa-

tion at the end of 2004 was CHF 5billion.

Società Elettrica SopracenerinaSA, Locarno, of which Atel owns59.5%, is also listed on the SWX SwissExchange (ISIN CH0004699440). Mar-ket capitalisation at the end of 2004was CHF 275 million.

Information policyAtel keeps its shareholders, po-

tential investors and other stake-holder groups fully, promptly andregularly informed through its an-nual, interim and quarterly reports,at conferences for balance sheetmedia and financial analysts and at the General Meeting. Atel pub-lished quarterly results for the firsttime in conjunction with Motor-Columbus Ltd.’s consolidation intoUBS and UBS’s announcement ofMC’s /Atel Group’s quarterly results.Our communication channels arecompleted by our constantly updat-ed website www.atel.ch and by pressreleases which detail importantevents. Key dates for the current fi-nancial year are listed on page 54.

Board of Directors and Executive Board

The Board of Directors is respon-sible for the Atel Group’s overallguidance and strategic matters aswell as for supervising the ExecutiveBoard.

The Board of Directors has giventhe CEO responsibility for the AtelGroup’s overall operating manage-ment. The CEO is Chairman of theExecutive Board and has delegatedsome of his management responsi-bilities to members of the ExecutiveBoard.

The Organisational Regulationsand Executive Board Regulationsgovern the competencies and divi-sion of tasks between the Board ofDirectors and CEO/Executive Board.

The major consolidated Groupcompanies are listed in the FinancialReport on pages 46 to 50.

C O R P O R AT E G O V E R N A N C E

Florence

FinancialServices**

K. Baumgartner*

ManagementServices***

H. Saner*

Energy Switzerland

H. Niklaus*

Energy Southern/WesternEurope

A. M.Taormina*

Energy Northern/EasternEurope

N. Dostert*

Energy Services

S. Hatt*

Switzerlandmarket

A.Widmer

Southern Europemarket

S.Colombo

Central/EasternEurope market

Dr. A. Stoltz

Northern Europemarket

Dr. H.Clever

Southern/WesternEurope region

P. Limacher

ThermalPower generation

P. Hirt

Western Europemarket

R. Pozzi

Scandinaviamarket

N. Dostert

Northern/EasternEurope region

Th. Bruder

HydroPower generation

J. Aeberhard

Trading

Dr. D. Brunner

Trading

S.Wolf

Grid

H. Niklaus (a.i.)

Power generation

R. Sturani

Power generation

S.Wolf

Settlement andSystems

Dr. R. Schroeder

GeneralManagement

G. Leonardi*

General ManagementFunctional DivisionBusiness DivisionBusiness Unit

* Member of the Executive Board

** Corporate Accounting + Reporting, Corporate Taxes, Corporate Treasury + Insurance, Corporate Planning + Controlling, Corporate Risk Management, Corporate IT, Internal Audit

*** Corporate Public Affairs, Corporate Communications, Corporate Legal,Corporate HR, Corporate Development + Organisation

Position as of 1 January 2005

porate Development + Organisation.This division is headed by Heinz Sanerwho is on the Executive Board. TheFinancial Services functional divisionmanaged by CFO Kurt Baumgartner,was also restructured and now incor-porates the Corporate Accounting +Reporting, Corporate Taxes, Corpo-rate Treasury + Insurance, CorporateRisk Management, Corporate Plan-ning + Controlling, Corporate IT andInternal Audit function units. Group-wide management, coordination andsupport of the business units are thusstrengthened by these functional di-visions.

16 17

OrganisationThe Board of Directors appoint-

ed Giovanni Leonardi as the AtelGroup’s new CEO at the 2004 Annu-al General Meeting. He assumed thisfunction on 29 April 2004.

The Board of Directors made thefollowing changes to the organisa-tional and management structure.

At the end of April 2004, the for-mer Energy Services Southern/West-ern Europe and Energy ServicesNorthern/Eastern Europe businessdivisions were merged as businessunits in one joint Energy Servicesbusiness division which was headedas a dual function by the CEO. StefanHatt will run this division and jointhe Executive Board from 1 January2005.

On 1 November 2004, the formerLegal Services and Communicationand Energy Policy staff units plusthe Corporate Development and HRSegment Energy functional units al-located to the Finance and Servicesfunctional division, were merged intothe new Management Services func-tional division and are now struc-tured under Corporate Legal, Cor-porate Public Affairs, Corporate Com-munications, Corporate HR and Cor-

C O R P O R AT E G O V E R N A N C E

Florence

Board of DirectorsInitially elected in End of term of office

Dr. Walter Bürgi, CH-Grenchen, Chairman 1981 2006

Christian Wanner, CH-Messen, Vice-Chairman 1996 2005

Marc Boudier, FR-Sèvres 2001 2007

Dr. Hans Büttiker, CH-Dornach 1988 2005

Rolf Büttiker, CH-Wolfwil 2004 2007

Ulrich Fischer, CH-Seengen 1986 2007

Dr. Marcel Guignard, CH-Aarau 1988 2006

Urs B. Rinderknecht, CH-Ennetbaden 1995 2007

Dr. Rainer Schaub, CH-Binningen 1996 2005

Urs Steiner, CH-Laufen 2004 2007

Dr. h.c. Heinrich Steinmann, CH-Uitikon 1994 2006

Dr. Giuliano Zuccoli, IT-Sesto San Giovanni 2003 2006

Board of DirectorsThe Board of Directors comprises twelve members who have no manage-

ment function within the company.

All energy areas were adapted on1 January 2005 to become systemat-ically market-oriented. The EnergySwitzerland, Southern/Western Eu-rope and Northern/Eastern Europebusiness divisions were divided on amore regional basis and include Pro-duction, Market (sales, trading, sup-ply), Trading, Grids and Settlementand Systems. Herbert Niklaus hasbeen in charge of Energy Switzer-land since 1 January 2005, replacingStefan Breu on the Executive Board.

The curricula vitae, details on theprofessional backgrounds and otheractivities of the individual membersof the Board of Directors can be foundon the Atel website:www.atel.ch/en/about_us/Corporate_Governance/index.jsp.

Shareholders have the right ofnomination for the election of newmembers. The crucial criteria in elec-tions are particularly general andspecific professional knowledge ofAtel’s business areas, a wealth ofexperience and business foresight.Particular emphasis is placed onachieving a balanced compositionon the Board of Directors.

The term of office for members isthree years. Resigning members maybe re-elected. Members elected as re-placements during a term of officetake over the replaced member’s termof office.

How the Board of Directors worksThe Board of Directors constitutes

itself. Each year it elects a Chairmanand Vice-Chairman from amongst itsmembers and a Secretary who doesnot need to be on the Board of Di-rectors.

The Chairman determines theagenda for Board of Directors’ meet-ings after consultation with the CEO.Any member of the Board of Direc-tors can make a written request fora particular item to be included onthe agenda.

Prior to meetings, the membersof the Board of Directors receivedocumentation that helps them pre-pare for items on the agenda. TheBoard of Directors met nine times inthe last financial year.

Members of the Executive Boardnormally attend Board of Directors’meetings in an advisory capacity. Theyleave the meeting if the Chairmanso orders.

The Board of Directors’ proposalsare passed based on a majority ofvoting members present, with theChairman having the casting vote.Should conflicts of interest arise, therelevant member(s) shall leave themeeting.

Minutes are kept of all the Boardof Directors’ negotiations and reso-lutions. These are distributed to mem-bers of the Board of Directors andapproved at the following meeting.

The CEO updates the Board of Di-rectors at every meeting on currentbusiness performance, variations fromtargets, important transactions andkey development projects.

The CEO also gives the membersquarterly interim reports. Extraor-dinary incidents are immediatelybrought to the attention of mem-bers. If a major transaction is invol-ved, the CEO produces a written re-port that contains a proposal requir-ing the Board of Directors’ approval.He informs members on the prog-ress of these transactions verbally,but produces a written final reporton major projects.

18 19

C O R P O R AT E G O V E R N A N C E

Lucca

Outside of these meetings, anymember may request informationfrom the CEO on business perform-ance and, with the Chairman’s au-thorisation, on individual transac-tions. Any member may ask the Chair-man for access to accounts and filesshould these be required to com-plete a task.

The auditors compile annual notesto the consolidated financial state-ments, detailing their most impor-tant findings. From 2005, the newlycreated Internal Audit functionalunit will report the findings of its ac-tivities to the Board of Directors.

Herbert Niklaus (rear row left)

Head of Energy SwitzerlandDipl. El.-Ing. ETHZ, Swiss citizen, born 1955;Joined Atel in 1996, member of ExecutiveBoard since 2005.

Heinz Saner (rear row, 2nd from right)

Head of Management Services,lic. jur., solicitor and notary,Swiss citizen, born 1957;Joined Atel in 1988, member of the Executive Board since 2004.

Antonio Matteo Taormina (front row right)

Head of Energy Southern/Western EuropeDipl. Math. ETHZSwiss and Italian citizen, born 1948;Member of Executive Board since 1999;Member of the Board of Directors of Società Elettrica Sopracenerina SA, Locarno

Kurt Baumgartner (front row left)

Head of Financial Services, CFOLic. rer. pol., Swiss citizen, born 1949;Joined Atel in 1975, member of ExecutiveBoard since 1992

Nico Dostert (rear row right)

Head of Energy Northern/Eastern EuropeDipl. El.-Ing., Luxembourg citizen, born 1942;Joined Atel in 1992, member of ExecutiveBoard since 1999

Stefan Hatt (rear row, 2nd from left)

Head of Energy ServicesDipl. Ing. ETHZ; lic. oec. HSGSwiss citizen, born 1964;Joined Atel in 2005 as member ofExecutive Board.

Giovanni Leonardi (front row centre)

CEODipl. El.-Ing. ETHZ,Swiss citizen, born 1960;Joined Atel in 1991, CEO since 2004;Member of the Board of Directors of Società Elettrica Sopracenerina SA, Locarno.

Executive BoardThe Executive Board comprises seven members.

The curricula vitae and details on other activities ofthe individual members of the Executive Board can befound on the Atel website: www.atel.ch/en/about_us/Corporate_Governance/index.jsp.

20 21

Based on the information avail-able to us, members of the Board ofDirectors held a total of 633 Aare-Tessin Ltd. for Electricity registeredshares as at 31 December 2004.

The member of the Board of Di-rectors with the highest overall re-muneration received remunerationof CHF 0,5 million.

Executive BoardThe total remuneration paid to

members of the Executive Board wasCHF 5,3 million in 2004. This alsoincludes remuneration for thosemembers who stood down duringthe year.

Based on the information avail-able to us, members of the ExecutiveBoard held a total of 116 Aare-TessinLtd. for Electricity registered sharesas at 31 December 2004.

C O R P O R AT E G O V E R N A N C E

Lucca Carrara Sarzana

Remuneration and shareholdings

Members of the Board of Direc-tors receive fixed remuneration anda lump-sum expense allowance whichis based on a staggered scale for theChairman and other Board members.The amount of remuneration is de-termined by the Board of Directors.

Remuneration for members of theExecutive Board comprises a basicsalary and a bonus linked to compa-ny and personal targets. The bonuspaid in the reporting year is basedon the prior year’s performance. TheAtel Group’s senior managers alsobenefit from non-obligatory insur-ance. The amount of remunerationfor members of the Executive Boardis determined by the Chairman of theBoard of Directors and one othermember of the Board of Directors.

Board of DirectorsIn 2004, the overall remunera-

tion for members of the Board of Di-rectors totalled approx. CHF 1,6 mil-lion. This also includes remunerationto those members who stood downduring the year.

External auditors

Ernst & Young Ltd., Zurich havebeen the auditors and Group audi-tors for Aare-Tessin Ltd. for Electric-ity since 2002. The auditors and Groupauditors are elected for a one-yearterm of office by the General Meet-ing. Their performance and fee arereviewed annually. Ernst & YoungLtd.’s current mandate manager hasbeen in charge of the Atel auditsince 2004.

In the financial year, Ernst &Young Ltd. as auditors and Groupauditors received remuneration forthis service of approx. CHF 2,3 mil-lion. Fees paid for additional audit-related work, tax advice and gener-al advice totalled approx. CHF 1,1 mil-lion.

Ferries lie in the harbour like giant, stranded fish. Piers that stretch out into the sea like artificialtongues of land are shaking from the vibrations of the diesel engines of steel monsters below. Once the pas-sengers have left the decks, cleaning equipment is brought out to clear up, as the return crossing will be in justa few hours. The ferry lies tied up, exhausted from its tiring journey.All the hustle and bustle around the open,brightly lit hull is reminiscent of the activity of a beehive. In apparent chaos, towing vehicles pour onto theship only to emerge into the limelight moments later attached to a trailer.

Every few seconds, the lighthouse beam flits over the water. A brief reminder of a time when there wasno sonar or satellite navigation, a time when seafarers set sail to explore unknown lands and far-off continents.The humming of a plane landing drowns out the thought, position lights divide the dark blue sky – modern-dayexplorers will soon be on terra firma again.

Bright memory, dark night

Alessandria

25

E N E R G Y S E G M E N T

Energy segment

24

Successful performance in all areas

With sales of around 93 TWh (in-crease of 36%), the Energy segmentreported a record turnover of CHF5540 million. Compared to 2003, thisrepresents a CHF 1701 million rise or44%. Earnings (EBIT) in the sameperiod grew 18% to CHF 433 million.One of the main reasons for this in-crease was the fact that we wereable to market Edipower’s poweroutput for the first time. Edipowergenerated 4,3 TWh in 2004 which is equivalent to a sales turnover ofaround CHF 0,4 billion. Other rea-sons for these good results were thedynamic growth in European trad-ing and excellent turnover in all oth-er areas.

+/– variance2003–2004 in % 2003 2004 2003 2004(based on CHF) CHF mn. CHF mn. EUR mn. EUR mn.

Energy sales (GWh)* 36,3 68 476 93 306 68 476 93 306Net turnover* 44,3 3 839 5 540 2 526 3 597Earnings before interestand tax (EBIT) 17,7 368 433 242 281

in % of net turnover –18,8 9,6 7,8 9,6 7,8Net investment in tangible fixedand intangible assets –48,4 161 83 106 54Number of employees asat balance sheet date 5,5 1 092 1 152 1 092 1 152plus trading in standardised products

in GWh 63,2 66 627 108 761 66 627 108 761in CHF mn. or EUR mn. 85,5 2 714 5 035 1 786 3 269

* Excluding trading in standardised products; for definition of turnover see page 17 of the Financial Report

In addition to the physical busi-ness, trading in standard productsamounted to some CHF 5035 millionor approx. 109 TWh (2003: CHF 2714million and around 67 TWh). As inprior periods, trading profit is ac-counted for under net turnover.

Business was again extremelybuoyant in Italy in 2004. Firstly, thetargeted increase in marketing ac-tivities in the first year of the tollingagreement with Edipower helpedboost sales and turnover there. Andsecondly, the two gas-combi powerstations in Northern Italy (Novel andVercelli) successfully came into serv-ice during the second half of theyear. Production output is now soldon the Italian market by Atel’s localorganisation which is also active onIPEX, the Italian electricity exchange.In France, marketing activities wereconsolidated by increasing the cus-tomer base. The Switzerland regionrenewed its long-established part-nerships with retailers in north-west

Switzerland, while the NorthernEurope region repositioned itselfstrategically and substantially ex-panded its customer base. Followingacquisitions in 2002/03, the Central/Eastern Europe region reported con-solidation at high turnover/incomelevels. Higher sales/turnover con-trasted with a trend towards lowerprices. Overall, Atel achieved suc-cessful regional risk diversificationby setting up in Central/Eastern Eu-rope. Atel Trading fared extremelywell on the European spot market byprofitably exploiting its own avail-able production capacities and ex-ceptional price movements.

Outlook 2005

The main focus of 2005 will be toconsolidate the strong growth in theenergy business both financially andorganisationally. Stronger tradingand sales activities on all relevantmarkets should primarily result inhigher energy sales and turnover. InItaly, we will concentrate on inten-sifying local marketing activitiesthrough the generation and pro-curement channels we have estab-lished there. Atel will also increasetrading activities in Central andEastern Europe by setting up anoth-er sales company in Hungary.

Atel expects prices to stabilise toa certain degree in 2005. However,the relatively poor liquidity of ener-gy markets and numerous bottle-necks in the European grid may leadto strong, short-term price fluctua-tions. Export business to Italy maybe affected by possible capacity re-strictions, but at present we do notexpect these to be significant orlong-lasting.

Overall, we expect the Energysegment to perform at 2004 levels interms of sales, turnover and earn-ings.

Energy sales 1994–2004Without standards business

1994

1996

1998

2000

2002

2004

100

90

80

70

60

50

40

30

20

10

0

Energy sales 2000–2004Transacted standards business

110

100

90

80

70

60

50

40

30

20

10

0

2000

2001

2002

2003

2004

Energy procurement 1994–2004Without standards business

Overseas marketSwiss marketOverseas productionSwiss production

1994

1996

1998

2000

2002

2004

100

90

80

70

60

50

40

30

20

10

0

TradingNorthern Europe regionCentral/Eastern Europe regionSouthern Europe regionPower exchange Switzerland (wholesale)Regional suppliers Switzerland

26 27

Electricity trading and salesAtel is in favour of the Swiss market opening up both

for cross-border trading (horizontal marketing opening) and

through domestic liberalisation (vertical market opening). The

tolling agreement signed in the previous year came into force

in Italy. Under the agreement, Edipower is responsible for

operations and Atel takes over fuel and energy management.

Edipower’s repowering programme continued as planned.

Sales rose sharply in Italy compared to 2003. In Central and

Eastern Europe, Atel increased its stake in Entrade and ex-

tended its leading position in the region. In Germany, Atel

managed to establish a long-term presence in an extremely

challenging environment. Atel Trading again exploited mar-

ket opportunities to the maximum to report excellent results.

Switzerland region

Relationships intensifiedIn the reporting year, partner-

ships in the north-western region ofSwitzerland were formalised onto anew, stable and contractual basis inview of market opening. Relation-ships with industrial companies, salescompanies and local communitieswere developed further in terms ofenergy delivery and supply. Overall,industry and commerce find them-selves in a difficult economic envi-ronment. There is intense price pres-sure in Switzerland despite risingprices in the European environment.

The draft Federal Law on PowerSupply (StromVG) and Electricity Law(EleG) went out to consultation in2004. Atel used this process to speakout against the proposals and con-tinues to lobby for full market open-ing. The company assumes that in-tense market pressure will persist inthe future and political discussionsabout the StromVG will help shapethis notion.

Success in the regionsThe economic climate in Ticino in

2004 was slightly worse than therest of Switzerland, as wages andmargins were badly hit by the freemovement of people. Given thisbackground, Società Elettrica So-pracenerina SA (SES) posted a smallrise in turnover principally due toincreases among household cus-tomers. This more than cancelledout the falling revenues in the prop-erty sector, as nearly all propertieswere sold. In addition to the in-creased stake in Metanord and re-newal of the power supply contractwith Azienda Elettrica Ticinese (AET),SES is preparing to work closer to-gether with Aziende industriali diLugano (AIL). The former expects themarket to stagnate in the securedsales area in 2005. Activities will cen-tre on a modern IT system going liveand constructive dialogue with theconcession-granting communities.

Atel Versorgungs AG (AVAG) hada successful year. All operating taskswere processed through Aare En-ergie AG (a.en) which is a subsidiaryof AVAG and sbo (Städtische Betrie-be Olten). The contracts with 11 ofthe 14 local communities were re-newed and a stake in AVAG offeredto the concession holders. The ac-

quisition of ElektrizitätsgesellschaftSchönenwerd (EGS) was pursued atthe same time as the negotiations.

AEK Energie AG can look back ona good year. It broke new groundfor the long-term, both ecologicallyand economically, with innovativeprojects, such as the long-distancesteam pipeline from the waste incin-eration plant in Zuchwil to the M-realpaper factory in Biberist.

Southern Europe region

Local energy business expandedThe 2003 tolling agreement gov-

erning the management of Edipow-er’s energy output came into forceon 1 January 2004. Atel owns a 20%energy portion (around 1,500 MW),for which Atel Energia is responsiblefor fuel procurement and manage-ment (oil, gas, coal) as well as sellingthe generated power.

In the reporting year, the Euro-pean market moved closer to fullliberalisation, so now all customersexcept households are free. AtelEnergia took the necessary steps toprepare for this move and max-imised the opportunities arising fromthis new segment. Atel also supplieda number of major Italian customers

E N E R G Y S E G M E N T

E L E C T R I C I T Y T R A D I N G A N D S A L E S

Alessandria

Further information:

www.aare-strom.chwww.aek.chwww.aem.itwww.aem.torino.itwww.aen.chwww.atel-energie.dewww.ecoswitch.dewww.edipower.itwww.eex.dewww.egt-triberg.dewww.energipartner.nowww.entrade.chwww.multipower.atwww.powernext.frwww.repower.chwww.ses.ch

28 29

with foreign energy, exploiting out-put capacities as much as possible.Transit increased during the yeardue to closer collaboration betweenItalian and Swiss grid operators. TheItalian electricity exchange begantrading on 1 April 2004, but only onthe supply side. The demand sidewas taken over temporarily by Ac-quirente Unico which buys the ener-gy for the whole of the tied market.Atel Energia played a successful parton the exchange from the very be-ginning with its power allocationfrom Edipower’s power stations. Thedemand side is due to start operat-ing at the beginning of 2005.

Work was completed on the CCGTNovel and ACTV power stations in2004 and attention turned to thepower they would generate. In thisregard, Atel Energia signed a tollingagreement for Atel’s energy portion,under which gas procurement andsales of the power output are regu-lated.

Overall, sales of power generat-ed in Italy improved five-fold over2003, boosting Atel Energia’s posi-tion and share of the free market.Medium and long-term supply con-tracts signed with Italian customersalso represent another importantstep in selling power generated inItaly.

Electricity sales doubledIn 2004, the barrier for free cus-

tomers in France fell to include allnon-household customers, provid-ing additional market opportunitiesof 270 TWh/a. Atel Energie SAS opti-mised the company’s organisationalstructure so that it could systemati-cally exploit all emerging opportu-nities. It expanded its position somuch on the French market thatelectricity sales almost doubled com-pared to 2003. Atel Energie SAS’scustomers now include medium-sizedcompanies from all over France.

As in previous years, Atel success-fully took part in the auction forElectricité de France’s (EDF’s) virtualpower station capacities, while stillsupplying the French grid operatorRéseau de transport d’électricité.

Together with Entrade, Atel ismarket leader in electricity tradingin Central and Eastern Europe, theBalkans and Greece. 2004 showedthat Entrade was an important ac-quisition in these regions if Atel is toreach strategic goals. Efforts werestepped up to coordinate and inte-grate Entrade into the Atel Group.Atel increased its stake in Entrade to100% on 1 January 2005, giving theformer an efficient and effective in-frastructure for energy trading andrisk management in the region.

The market in Hungary took ma-jor steps towards liberalisation. AtelEnergia Kft. was granted its tradinglicence and is now steadily expand-ing its sales activities in Hungary. LikeAtel Energia Kft., Atel Polska Sp. z o.o.posted excellent better-than-expect-ed results. Atel Hellas S.A. also signifi-cantly expanded its supplies. Overall,Atel exceeded its 2004 targets andincreased traded sales volumes byaround 20%.

Atel expects a growing numberof bottlenecks in border capacitiesin future. Continued market open-ing will present additional opportu-nities for new business. Atel’s goalfor the coming year is to continueexpanding the contract portfolio in

E N E R G Y S E G M E N T

E L E C T R I C I T Y T R A D I N G A N D S A L E S

Central/Eastern Europe region

Position expandedThe economic environment in the

Central/Eastern Europe region wasmarked by strong growth. Countriessuch as Poland, the Czech Republic,Slovakia, Hungary and Slovenia be-came more attractive to many mar-ket participants following their ac-cession to the EU. Atel expanded its position in the region despitemore intensive competition andeven greater price pressures.

Alongside liberalisation, anothersignificant feature of 2004 was theresynchronisation of the 2nd UCTEzone. It was reunited on 10 October2004 following division in the Bal-kans war. Trade with the synchro-nised second zone began on 1 No-vember, creating new business op-portunities.

Volumes markedly increased2004 saw the market for indus-

trial customers gradually open up innearly all countries in Central andEastern Europe. The circle of estab-lished trading partners widened andnumerous basic agreements weresigned.

Montà

these growth markets, exploit syn-ergies from synchronisation in theBalkans and increase processingefficiency to reach set sales and in-come targets.

Northern Europe region

Positive trend in GermanyAtel Energie AG continued per-

forming well and won new industri-al customers and secondary distribu-tors as customers. This helped it sub-stantially boost business volume in avery challenging environment. At thesame time, it successfully marketednewly developed and tailored energyproducts and services, such as struc-tured procurement. Atel Energie AGalso expanded its sales partnershipsand bought in surplus volumes of in-dustrial power generation. Overall,it managed to establish a long-termpresence in Europe’s largest andmost complex energy market.

Atel Energie AG’s shareholdingsperformed well in 2004 and achievedtheir set sales, turnover and earn-ings targets. Supplies to propertiesin Baden Württemberg were extend-ed to 2007 with the support of EGTEnergiehandel GmbH. It soon emer-ged that potential customers stillhad close ties with their previous

30 31

E N E R G Y S E G M E N T

E L E C T R I C I T Y T R A D I N G A N D S A L E S

suppliers and this only served to in-tensify the competition for customerswho were willing to change suppli-ers. At the same time, however, thedelay in implementing EU guidelinesinto national law obviously delayedthe start of the regulator’s officialwork.

The German electricity market isthe largest in Europe and acts as abarometer for all others there. Ener-gy prices are expected to continuerising in the next few years, particu-larly due to higher fuel costs. In2005, Atel Energie AG intends to fo-cus on selling energy to large indus-trial customers and secondary dis-tributors as well as expanding itsrange of products. The aim is to helpour customers become more com-petitive by buying energy efficient-ly. In addition to tailored solutions,another important facet to energysupply is providing efficient supportfor structured procurement. AtelEnergie AG is also looking to contin-ue developing its successful partner-ships. Against this background, thecompany is confident of going fromstrength to strength.

Scandinavia region

Strong position maintainedEnergipartner AS in Oslo manages

large energy portfolios for thirdparties and is therefore geared to-wards large companies and utilities.Services range from developing andimplementing individual procure-ment strategies, through support foroptimising contracts to in-depth mar-ket and price analyses. EnergipartnerAS maintained its strong position inScandinavia in the reporting year.Business activities there are beingsubstantially expanded under an ex-tended business concept.

Montà

Trading

Defined profit targets reachedExcellent earnings from both stan-

dard and structured product tradingas well as spot trading/optimisationwere particular highlights of the year.Atel predicted the major develop-ments on wholesale markets and wasalways correctly positioned. Thanksto its proximity to all major marketsand the flexibility of its own powerstations, it was able to fully exploitemerging opportunities on spot andbalancing power markets.

Atel Trading’s customer base com-prises mainly wholesale companies,but increasingly includes major in-dustrial customers and retailers. Thecompany continually developed itspersonnel resources, processes andsystems to meet its customer needsas much as possible.

Its view is that the oligopolisa-tion of European electricity compa-nies will initially increase. As smalland medium-sized customers becomemore professional in their approach,it will be even more important toprovide goal-oriented and timelysolutions. The company is constantlydeveloping existing business fields,particularly structured electricitytrading products. For the future,Atel Trading intends to focus on ex-panding financial coal trading aswell as establishing gas trading for standard products. It will alsostrengthen electricity trading activi-ties by expanding its knowledgebase and identifying new businessopportunities. 2005 is expected tosee the growing influence of theregulator in European countries.There is likely to be greater trans-parency, particularly in cross-borderbusiness, through auctions.

32 33

Power generation Switzerland

Concessions extended2004 was marked by below-aver-

age water flows, with precipitationonly reaching high watermark levelson very few days. This resulted in hy-dro Power generation being around10% lower than last year.

2004 featured a new concessiongranted for the lowest level of Kraft-werke Gougra AG with Navisencepower station. The concession-grant-ing communities receive financialcompensation as well as a 10% stakein Kraftwerke Gougra AG. To this end,all shareholders endorsed a propor-tionate shareholding for the com-munities. In return, Atel may use therelated power, giving it a 54% stakeor 65% energy portion. The 80-yearconcession still needs to be approvedby the cantonal authorities.

As UBS sold its 10% stake in Kraft-werke Mattmark AG, Atel’s energypurchase right for this facility expiredat the end of September 2004.

The question of whether to ex-pand hydroenergy is still an issue. Asthere are limited locations in the Alpsfor building new power stations, themain focus is on targeted expansion

and developing existing facilities.Due to the rising need for balancingpower in European electricity sup-plies, the issue of whether to buildmore pump storage stations is beingexamined in more detail. Atel is in-volved in related projects, but realis-ing them depends crucially on whathappens to the price of peak energy.

Low-emission generation tech-nologies such as hydroenergy aretaking on increasing significance inthe context of climate protection.Given this background, residual wa-ter requirements are rightly beingexamined. Corresponding parliamen-tary moves are under way as part ofthe political opinion-forming process.

Secure even in anniversary yearsThe Thermal Power generation

business unit’s year was marked bythe 20th and 25th anniversaries ofLeibstadt (KKL) and Gösgen (KKG)power stations respectively. Anothermilestone was the granting of plan-ning permission for KKG’s fuel ele-ment wet store. Investment in thisproject is around CHF 70 million,while current expenditure for re-newal and maintenance per facilityis around CHF 20 million p.a.

The two power stations were alsoable to guarantee secure and reli-able operation in 2004, both reach-ing very high annual generationlevels. Higher raw material priceshelped make nuclear power muchmore competitive.

2005 marks the end of KKG’s up-grading programme during a plann-ed and prolonged review. Buildingthe wet store and auxiliary facilitybuilding are additional projects.

The main concern for both facili-ties will still be to maintain secureand reliable operations.

E N E R G Y S E G M E N T

P O W E R G E N E R AT I O N A N D G R I D

Montà

Power generation and gridBelow-average water flow resulted in lower hydro Power

generation in Switzerland compared to 2003. As the demand

for balancing power and low-emission generation technologies

continues to grow, Atel is looking at various alternatives for

expanding hydroenergy. Leibstadt and Gösgen nuclear power

stations helped maintain reliable supplies in their respective

anniversary years (20 and 25 years respectively). Two gas-

combi power stations came into commercial service in Italy,

giving Atel another 100 MW of its own generated power.

Power stations in the Czech Republic and Hungary had excel-

lent better-than-expected availability levels. The swissgrid

start-up project was Atel Transmission Ltd.’s main focus.

Further information:

www.atel.huwww.eckg.czwww.ekwoee.chwww.etrans.chwww.khr.chwww.kkg.chwww.kkl.chwww.kwz.chwww.refuna.chwww.swissgrid.ch

34 35

E N E R G Y S E G M E N T

P O W E R G E N E R AT I O N A N D G R I D

Neive

Gösgen

KKWLeibstadt

Ruppoldingen

Ryburg-Schwörstadt

Klingnau

Simplon

Massa

MattmarkEmosson

Gougra

Lucendro

Zervreila

Hinterrhein

Blenio

Maggia

Engadin

Flumenthal

KKW Gösgen

9000

GW

h

8000

20001000500100

Hydroelectric power stations SwitzerlandPower Power

generation generation Atel shareAtel holding Capacity GWh GWh Variance GWh

Company in % MW average 2003/2004 in % 2003/2004

Atel Hydro AG 100,0 92 554 536 –3,25 490Atel Hydro Ticino SA 100,0 60 100 119 19,0 119Aarewerke AG 10,0 43 230 203 –11,74 20Blenio Kraftwerke AG 17,0 391 882 692 –21,51 118Electra-Massa AG 11,5 340 543 548 0,92 63Electricité d’Emosson SA 50,0 360 860 796 –7,44 398 Energie Electrique du Simplon SA 1,7 42 244 220 –9,73 18Engadiner Kraftwerke AG 22,0 410 1377 1230 –10,68 271 Kraftwerke Ryburg-Schwörstadt AG 25,0 110 752 719 –4,39 180Kraftwerke Gougra AG 54,0 159 575 588 2,26 318Kraftwerke Hinterrhein AG 9,3 651 1422 1209 –14,98 112 Kraftwerke Zervreila AG 30,0 250 554 497 –10,29 149Maggia Kraftwerke AG 12,5 626 1389 1311 –5,6 164Total Atel share 2003/2004 (prior year 2 534) 2 419

Thermal power stations SwitzerlandPower Power

generation generation Atel shareAtel holding Capacity GWh GWh Variance GWh

Company in % MW average 2004 in % 2004

Kernkraftwerk Gösgen-Däniken AG 40,0 970 7 297 8 016 9,9 3 206Kernkraftwerk Leibstadt AG 27,4 1165 7 837 8 692 10,9 2 147Total 2004 15 134 16 708 5 353

Power generation in Switzerland

Own hydroelectric power stations

Holdings in hydroelectric jointventures, including subscription rights

Holdings in thermal joint ventures

Power generation Italy

New facilities come into serviceOne particular highlight of 2004

was the beginning of commercial op-erations for both gas-combi powerstations Novel S.p.A. and Atel Cen-trale Termica Vercelli (ACTV) whichboosted Atel’s own generation capac-ity in Italy by another 100 MW. AtelOperation & Maintenance (AT O&M)was set up to operate Novel, ACTVand another facility. It is clear thatoverall, all major players on the en-ergy market are investing a greatdeal in production facilities in re-sponse to increasing energy require-ments on the Apennine peninsula.

The possibility of new project de-velopment is being considered for2005. All activities are not only evi-dence of Atel’s strong presence inItaly, but its investment and in-creased production capacities meanthat it is also expanding its positionagainst the competition.

We can assume that Italy’s ener-gy requirements will remain high inthe future, but as production capac-ities are limited, the market will stayextremely attractive. Apart from op-erating both state-of-the-art powerplants in Northern Italy and plan-

Turbigo

Sermide

Nucleo di Mese

Piacenza

ACTV

Novel

Chivasso

Nucleo di Udine

Nucleo di TuscianoBrindisi

San Filippo del Mela

8000

GW

h

5000

30001000500100

Power generation in Italy

Own thermal power stations

Holdings in thermal power stations

Holdings in hydroelectric power stations

*

**

* Excluding BKW share KW Flumenthal

** From 21.4.04 including Navisence level

ning a new project, Atel intends toconcentrate on developing Atel Op-eration & Maintenance (AT O&M).

36 37

E N E R G Y S E G M E N T

P O W E R G E N E R AT I O N A N D G R I D

Neive

Hydroelectric power stations ItalyPower *Power

generation generationAtel holding Capacity GWh GWh Variance

Company in % MW average 2004 in %

Edipower S.p.A., Nucleo di Mese 16,7 375 1148 944 –18,0Edipower S.p.A., Nucleo di Tusciano 16,7 95 225 215 –4,0Edipower S.p.A., Nucleo di Udine 16,7 295 768 793 3,0Total 2004 1 952

Thermal power stations in ItalyPower

generationAtel holding Capacity GWh

Company Atel in % MW 2004

Edipower S.p.A., Brindisi 16,7 640 1 989Edipower S.p.A., Chivasso 16,7 1 140 1 709Edipower S.p.A., Piacenza 16,7 620 2 577Edipower S.p.A., S. Filippo 16,7 1 280 5 128Edipower S.p.A., Sermide 16,7 1 140 7 107Edipower S.p.A., Turbigo 16,7 1 650 4 699Novel S.p.A. 51,0 100 313Atel Centrale Termica Vercelli S.r.l. (ACTV) 95,0 50 210Total 2004 23 732

Power generation Central/EasternEurope

Outstanding resultsThe Czech Republic still has the

most open and transparent marketfor selling and placing products fromthe electricity sector, principally interms of power generation and gridservices. With high prices, this is thesecond successive year that double-digit percentage increases have beenrecorded. Under these advantageousoperating conditions, Atel success-fully supplied the Czech market fromits Kladno site near Prague. The 343MW power station sold a wide rangeof grid services in addition to gener-ated power, enabling it to reach anunprecedented 97% availability lev-el. Other highlights were the excel-lent results on security and environ-ment as well as a new contract forcomprehensive refinancing.

Atel Csepel in Budapest posted astrong, better-than-expected per-formance in 2004 and reported highprofits. The availability of full capac-ities was secured for the entire year.The Csepel II power station beganoperating in 2000 and now has anoutput of 396 MW based on mod-ern, reliable and flexible gas tech-nology. The liberalisation of energy

markets continued in Hungary. Long-term supply contracts will give Csepelthe necessary stability during theupcoming transition phase. The enor-mous success of its existing powerstations strengthens Atel as it seeksto take advantage of new opportu-nities and secure more productioncapacities in the region.

In the reporting year, Kladno andCsepel concentrated mainly on theirorganisational integration into theAtel Group. Both complexes workedto plan and exceeded expectations,helping Atel strengthen and expandits own electricity trading and sell-ing activities in the region.

ECKG

Csepel I + II

7000

GW

h

20001500

Thermal power stations Central/Eastern EuropePower Power

Capacity Capacity generation generationAtel holding electric thermal electricity heating

Company in % MWe MWth 2004 GWh 2004 TJ*

Csepel I + II, Budapest 100,0 389 116 1 663 1 300ECK Generating s.r.o. (ECKG), Kladno 89,0 343 173 1 644 1 422Total 2004 3 307 2 722

Power generation in Hungary and Czech Republic

Own thermal power stations

Holdings in thermal power stations

** Excluding production of CIP 6 and mini-hydro facilities** below-average water flow

* Heating output only into the heating distribution system (i.e. without heating generated and used for power generation)

**

38 39

E N E R G Y S E G M E N T

P O W E R G E N E R AT I O N A N D G R I D

Neive

Winkeln

GrynauBenkenMettlen

Gösgen

BickigenGerlafingen

BassecourtFroloo

Lachmatt

Ormalingen

Asphard

Laufen-burg

BeznauBreite

Mühleberg

Mathod

RomanelVaux

Vouvry

St. Triphon

VallorcineLa Bâtiaz

Creux de Chippis

Chamoson

Wimmis

Innertkirchen

Airolo

Bonaduz Sils

Lavorgo

Magadino

Manno

SoazzaRobbia

Pradella

Flumenthal

Mörel

Riddes

Atel’s transmission lines in the e.h.v. grid

380 kV 220 kV

Own transmission lines, partners, long-term rights

Limited duration transport rights

Third parties

Upgrading

Substations

International connections of Atel and partners

Grid

Important stages reachedAtel Transmission Ltd. achieved its

set targets for 2004 by completingthree projects: civil engineering workfor the new 380-kV line over the Nu-fenen Pass, new schedule processingintroduced with all Swiss transmis-sion grid operators under the Euro-pean ESS standard and the new de-pot at Niedergösgen. Furthermore,cross-border grid capacity also in-creased for Atel with the construc-tion of the new 380-kV partner lineover the Bernina Pass. Income fromthe transmission grid, including com-pensation for exploiting cross-bordertrading (CBT), was similar to last year.

In the reporting year, the part-nership for operating a joint sched-ule and balance sheet managementsystem was extended to include alltransmission grid operators. Thelong-distance operators’ decision inAugust led to the creation of swiss-grid which runs the Swiss transmis-sion grid. Involvement in this projectcreated significant expenditure at alllevels. The problem of externally cre-ated load flows utilising the trans-mission grid still remains unsolved.At the same time, the rules on gridsecurity are forcing Swiss trading

companies to regularly reduce theirinternational import and export pro-grammes. In mid-2004, the Italianauthorities’ withdrawal of the Ordi-nance on the Construction of Mer-chant Lines resulted in the suspen-sion of a fairly large cross-divisionalproject.

Atel Transmission Ltd.’s main aimfor 2005 will be to complete the Nu-fenen line, replace pylons on theLukmanier line and undertake civilengineering work on the Arbedoline. Investment to replace plant andequipment is necessary to maintainvalue, so preparatory work will be-gin on projects under long-term gridexpansion plans. The company aimsprimarily to consolidate its positionas owner of key grid elements in thetransmission grid and secure incomefrom exploiting the grid during thetransition period before the marketopens up. To safeguard Atel’s long-term interests, setting up and ex-panding swissgrid will take up agreat deal of time and require us toexert influence and show commit-ment.

Bottles in three-four time

By hand out of the box onto the belt, by hand from the belt into the box. The fully automated filling andlabelling machine controls everything that happens in between. Bottle after bottle is filled, sealed with a corkand covered, then turned round on its own axis in three-four time to have its identification label stuck on. Inthe wine cellar, electricity not only provides light but also ensures that temperatures are kept constant to pro-duce perfect wines – green LED displays monitor the processes in metallic vats. It is only in the oak barrelswith their precious liquid where time seems to have stood still. Apart from a flickering light bulb, the onlyrequirements are know-how and a long time.

It is a completely different picture only a few kilometres away: time is money. The more units themachine can process in an hour, the better. A robotic arm moves the components onto the conveyor belt forassembly into one unit. Moments later after a few production steps, the process is complete, including qualitycontrol. Once fully developed, the machine will manufacture glass stoppers for decanters for expensive winesin China.

Energy Services segment

42 43

Much higher earnings

Given the change in the scope ofconsolidation and effects of currencytranslation, the Energy Services seg-ment generated turnover of CHF1418 million which was similar to lastyear. Consolidated earnings (EBIT) im-proved year-on-year by CHF 5 millionto CHF 21 million thanks to efficiencysavings.

The Swiss Atel InstallationstechnikGroup (AIT) also came under strongprice pressure in 2004. Improvementwas slow, particularly in the BuildingServices/Technical Facilities Manage-ment (GT/GM) area. The number ofempty offices and commercial prem-ises fell only marginally in large conur-bations. Building activity in this arearemained weak, but the housingsector enjoyed a tangible and signif-icant recovery. Business was brisk for Energy Supply Technology (EVT)thanks to the acquisition and pro-cessing of large-volume infrastruc-

ture projects. Given the generallytougher operating conditions, AIT’searnings were better than expected.

The German GAH Group benefit-ed only marginally from the growthin real gross domestic product. Cus-tomers in industry, the service indus-try and public sector were extreme-ly reluctant to invest, but incomingorders and turnover still rose year-on-year. Systematically implement-ed restructuring measures helpedimprove overall results. The energysector’s restrictive investment andmaintenance policy characterisedthe difficult situation for the EnergySupply Technology business unit.The GAH Group substantially boost-ed its earning power in the Commu-nication Technology (KT) businessfield despite the tense situation inprocurement and transmission tech-nology. The Industrial/Plant Technol-ogy business unit (IAT) reported aneven higher turnover compared tolast year. The Building Services/Tech-

nical Facilities Management (GT/GM)field achieved the turnaround bysystematically implementing restruc-turing measures introduced in 2003.

Outlook 2005

In Switzerland, the situation ap-pears to be easing slightly for theGT/GM area in the first few monthsof 2005. Generally better capacityutilisation at the beginning of theyear offers the prospect that thearea will be successfully positionedin 2005 when operating conditionsbegin to improve. EVT assumes thatbusiness will be stable due to itslarge current order book for majorprojects.

On the cost side, the AIT Groupexpects the exploitation of synergiesto have another positive effect onresults.

In Germany, the construction sec-tor is expected to be rather weak in2005 and investment activity by in-dustry, service companies and thepublic sector to be modest. The GAHGroup is tackling these market con-ditions by means of a carefully craft-ed strategic realignment. Its healthyorder book makes a good startingpoint.

EVT expects the market environ-ment to be tight, with modest de-mand from energy suppliers. KT ex-pects a slight downturn in invest-ment activity. This business unit willin future be managed by EVT as partof the aforementioned strategic re-alignment. IAT expects further sta-bility in 2005. At the same time,there will be challenges ahead forthe newly integrated GT/GM busi-ness unit due to the weak buildingsector. Group-wide organisationalstructures will be systematically op-timised and simplified.

E N E R G Y S E R V I C E S S E G M E N T

DomodossolaNovara

+/– variance2003–2004 in % 2003 2004 2003 2004(based on CHF) CHF mn. CHF mn. EUR mn. EUR mn.

Order intakes –3,8 1501 1 444 988 938Net turnover –7,6 1535 1 418 1010 921Earnings beforeinterest and tax (EBIT) 31,3 16 21 11 14

in % of net turnover 50,0 1,0 1,5 1,0 1,5Net investment in tangible fixedand intangible assets –21,1 19 15 13 10Number of employees asat balance sheet date –2,6 7 038 6 858 7 038 6 858

Further information:

www.gah-ag.dewww.group-ait.com

44 45

Offer volumes increase

The consolidation of the EnergyServices Southern/Western Europeregion was concluded in the report-ing year, resulting in a new and simp-lified legal structure introduced on1 January 2004. This brought verypositive feedback from customersand AIT employees and has alreadystarted to pay off.

Overall, the economic environ-ment was dominated by overcapaci-ties in the market which inevitablyaffected prices. Prices in the Build-ing Services/Technical Facilities Man-agement (GT/GM) area were verylow on the Swiss and Italian mar-kets, in some areas even below 2003levels. The overall sector felt the in-creased pressure on margins causedby the lack of public sector invest-ment. One badly hit area was Ener-gy Supply Technology (EVT), but itmade up for this by systematicallytapping into new markets. There wasreal improvement in investment ac-tivity in the services segment whereorder levels were higher than in2003. The situation eased slightly inthe last quarter of 2004, as illustrat-ed by the tentative increase in offervolumes. In 2004, the GT/GM andEVT business units accounted for

E N E R G Y S E R V I C E S S E G M E N T

E N E R G Y S E R V I C E S

S O U T H E R N / W E S T E R N E U R O P E

Iselle Simplon

Energy Services Southern/WesternEuropeAtel Installationstechnik Group

The Atel Installationstechnik Group (AIT) operates in the

transport, energy supply, communications and building tech-

nology sectors, focussing geographically on Switzerland and

Northern Italy.

After successfully reviewing its structures and processes,

AIT was able to tap into other markets in an environment

characterised by collapsing prices and pressure on margins.

74% and 26% of overall earningsrespectively.

Increase in market shares expected

In Switzerland and Italy, AIT asan overall supplier is getting to gripswith expansion in the GT area aftera period of consolidation. EVT is ex-pecting demand to remain stable.Here AIT is concentrating on broad-er support for its services and in-creased expansion of its export busi-ness in contact line technology. How-ever, it is not clear what the publicsector’s policy will be on outsourc-ing and project financing. The GT/GM unit expects growth in thebuilding sector to be modest andthe pricing situation to be tough.

The Energy Services Southern/Western Europe region is focussingits activities for the coming year. It should secure additional marketshare by expanding in selected areasand regions, seeking growth prima-rily in technological areas. Simpli-fied structures at group level andexploitation of the group’s uniformimage within the GT/GM area willhelp it reach its specific targets.

Winterthur

Aadorf

Berg TG

St. Gallen

WolfhaldenHerisau

BuchsVaduz (FL)

Sargans

ChurDavos Platz

Bodio

BellinzonaLocarno

Mendrisio

Savosa

Milano (IT)

BrigVisp

Zermatt

Martigny

Vernier

LausanneRenens

Fribourg

Bern

ZürichWallisellen

KlotenBaden

Spreiten-bach

Aarau

Basel

Liestal

Aesch

DänikenOlten

Rothrist

Langenthal

Biel

Solothurn

Matzendorf

Niedergösgen

Luzern

TegnaLumino

Domat/Ems

Pfäfers

Untervaz

Mels

Weite

Wila

Bülach

DinhardArbon

Thal

Niederwangen

Emmenbrücke

Building Services/Technical FacilitiesManagement

Energy SupplyTechnology

Atel Bornet Ltd.

Vernier

Kummler +Matter Ltd.

Zurich

Atel Building Tech-nology West Ltd.

Olten

Mauerhofer +Zuber Ltd.

Renens

Atel BuildingTechnology Ltd.

Zurich

Atel Elettro-impianti SA

Savosa

Atel Sesti S.p.A.

IT-Milan

Atel Installationstechnik Ltd.

Locations of the AIT Group

Building Services/Technical Facilities Management

Energy Supply Technology

46 47

E N E R G Y S E R V I C E S S E G M E N T

E N E R G Y S E R V I C E S

N O R T H E R N / E A S T E R N E U R O P E

Simplon Kandersteg

Energy Services Northern/EasternEuropeGAH Group

With 35 companies in 120 offices and branches, the GAH

Group is one of Germany’s leading service companies for en-

ergy business, industry and communications.

Despite German industry’s reluctance to invest, the group

managed to significantly increase profit from stable turnover

in the reporting year.

GA-tecGebäude- undAnlagentechnikGmbH

Heidelberg

GA LeitungsbauSüd GmbH

Fellbach

KraftanlagenMünchen GmbH

Munich

Dr. Herfeld GmbH & Co. KG

Neuenrade

Building Services/Technical FacilitiesManagement

Energy SupplyTechnology

CommunicationsTechnology

Industrial/Plant Technology

Other Holdings

KraftanlagenHamburg GmbH

Hamburg

FrankenlukEnergie-anlagenbau GmbH

Bamberg

GA-comTelekommunikationund TelematikGmbH

Bietigheim-Bissingen

KraftanlagenFertigungs-betrieb GmbH

Reinsdorf

KraftanlagenHeidelberg GmbH

Heidelberg

GA Energie-anlagenbau GmbH

Hohenwarsleben

te-com Tele-kommunikations-Technik GmbH

Backnang

ECM Ingenieur-Unternehmen fürEnergie- und Um-welttechnik GmbH

Munich

Kamb Elektro-technik GmbH

Ludwigshafen

Caliqua Gebäude-technik GmbH

AT-Wiener Neudorf

GA LeitungsbauNord GmbH

Hannover

DigiCommunicationSysteme GmbH

Gifhorn

KEU GmbH

Krefeld

IngenieurbüroKiefer & Voß GmbH

Erlangen

ElektroStiller GmbH

Ronnenberg

InterServiComGmbH

Backnang

KraftanlagenNukleartechnikGmbH

Heidelberg

Kraftszér Kft.

HU-Budapest

Franz Lohr GmbH

Ravensburg

DIGICOSSp. z o.o.

PL-Poznan

Kraftszér Bratislava s.r.o.

SK-Bratislava

KALFRISA S.A.

ES-Zaragoza

GAH Beteiligungs AG, Heidelberg

Significantly better than expected

The Industrial/Plant Technologybusiness unit (IAT) improved its turn-over by 10% year-on-year which wassignificantly better than expected.This was due primarily to the im-proved situation in nuclear technol-ogy, but also to major projects in en-ergy technology, the petrochemicalsector, power station and supplytechnology.

The IAT business unit expects turn-over and earnings to be stable in2005 and it will continue expandingits foreign business.

Turnaround achieved

2004 was the tenth consecutiveyear in which building investmentfell in Germany. This meant that theBuilding Technology and Manage-ment (TGA/TGM) business unit alsoreported a slight reduction in turn-over. The package of measures in-troduced in 2003 for GA-tec Gebäu-de- und Anlagentechnik GmbH wassuccessfully implemented, helpingTGA/TGM achieve the turnaroundand report positive results once more.

48 49

E N E R G Y S E R V I C E S S E G M E N T

E N E R G Y S E R V I C E S

N O R T H E R N / E A S T E R N E U R O P E

and infrastructure project business,capitalise additional cost and pro-ductivity reserves, forge strategicpartnerships and embark on region-al market expansion to strengthenits position.

Sharp rise in earning power

The Communications Technology(KT) business unit significantly boost-ed its earning power while turnoverremained stable. Although it regis-tered significant increases in turn-over in the mobile phone sector andmaintained high levels in the cableequipment and railway security en-gineering area, turnover fell againin supply and transmission technolo-gy. As a result, more personnel andstructural measures had to be imple-mented in the middle of 2004.

Weak demand in supply and trans-mission technology is set to continuein 2005. All other areas are expectedto see a slight downturn in demandand investment activity. The struc-tural and organisational changesmean that the KT business unit willin future be managed under EVT.

Bern

Ceska Lipa (CZ)

Bremen

HannoverRonnenberg

GifhornWolfsburg

Leiferde

Irxleben

Halberstadt

Göttingen

Dortmund

Holzwickede

MaintalFrankfurt

EppertshausenMörfelden-WalldorfNeu-Isenburg

Ludwigshafen

Bietigheim-Bissingen

Baden-Baden

Ludwigsburg

HeidelbergUbstadt-Weiher

BacknangUrbach

FellbachNeuhausen

Biberach

Ravensburg

Aschheim Moosinning

Essenbach

Pentling

Wackersdorf

Nürnberg

Bamberg

München

Innsbruck (AT)

Würzburg

Essen

Neuenrade

Köln

Krefeld

GenthinHohenwarsleben

Bernau

Berlin

Reinsdorf

HalleMarkranstädt

Erfurt

DresdenNünchritz

Demmin

Hamburg

Plzen (CZ)

Linz (AT)Burghausen

Leipzig

Erlangen

Locations of the GAH Group

Head offices

Branches, offices

Other foreign locations:Brussels (BE), Budapest (HU), Törökbálint (HU), Suchy Las/k. (PL), Warsaw (PL), Münchendorf (AT), Vienna Neudorf (AT), Wolkersdorf (AT), Zaragoza (ES)

High level maintained

Real GDP grew by 1.7% in Ger-many in 2004 buoyed by high exportdemand. The GAH Group benefitedonly marginally from this, as thelargest customers were still very re-luctant to invest. Nevertheless, theGAH group’s incoming orders andturnover remained at 2003’s highlevel. Systematically implemented re-structuring measures helped signifi-cantly improve its results.

Critical factors for 2005 will bethe weak building industry, the pub-lic sector’s lack of finance and mod-est investment activity by industryand the energy sector.

More positive results

For the Energy Supply Technology(EVT) business unit, 2004 was domi-nated by a more restrictive invest-ment and maintenance policy in theenergy sector and weak demandfrom industry as well as capex cutsby one key customer. Nonetheless, itincreased its turnover and postedpositive results.

EVT also expects the market en-vironment to be tough again in 2005.It will expand industrial marketing

The construction industry is notexpected to recover in 2005, so meas-ures introduced will be carried for-ward. Unprofitable areas or any indeficit will be reorganised or sold.The TGA/TGM business unit will infuture be managed under IAT.

The roads and rails running alongside the Jura mountains are full of cars and trains moving towardsOlten, looking as if they are being pulled along by an invisible cable. All of a sudden the modern features andcharacteristics of a town come into view: signals and signs regulating the flow of road users, notices about freeparking and special offers in supermarkets. Electricity helps provide entertainment and amusing pastimes insports halls, bars, cinemas and restaurants. It guarantees healthcare provision – and in some cases survival –in the hospital at the edge of the city.

An MRI scanner makes the layers of a human body transparent to reveal diseases. A few floors higherup, modern equipment monitors pulse, blood pressure and other important life functions. The catacombs arethe hospital’s heart and brain. Kilometres of wires spread out from here like pathways carrying electricity andcommunication.

All cables and information also converge on the other side of the River Aare. Atel specialists at its head-quarters are responsible for providing professional products and services. This know-how and experience arethe basis of Olten’s position as a junction for a Swiss-based pan-European energy company.

Olten junction

Glossary

52 53

Band energy

The basic demand for electricitythat exists every day, around theclock. In Switzerland, band energy issupplied by run-of-river power sta-tions and thermal (nuclear) powerstations.

Hydroelectric Power generation

Power generation by water power.

Merchant line

Cross-border line that increasesthe transit capacity between twoneighbouring grids. The additionalcapacity can be used exclusively byinvestors in the line, offering an in-creased investment incentive.

Nuclear power station

Nuclear power stations are a typeof thermal power plant. Nuclearpower stations generate heat fromcontrolled fission of uranium atomicnuclei, during which radioactive fis-sion products are formed. Nuclearpower stations therefore incorpo-rate multiple containment zones toprevent hazards to the surroundingenvironment. Nuclear power stations,like run-of-river ones, generate bandenergy.

Peak energy

Peak energy is the proportion ofthe daily electricity requirementwhere demand exceeds the basiclevel. Heavy swings in peak demandare primarily met by highly control-lable storage power stations locatedin the Alps.

Portfolio management

Active management in centrallocation of various products tradedon the market in order to gain sus-tained increase in profits using apredefined risk/return profile, tak-ing account of additional boundaryconditions.

Repowering

Replacing old power stations withmodern, highly-efficient and moreprofitable ones.

Storage power station

Storage power stations are hydro-electric power stations fed by atleast one mountain reservoir. Whenrequired, they can commence oper-ation within a few minutes. Theirpower is dictated by the differencein height between the reservoir andthe generator vault, and the turbineflow rate. Storage power stationsmeet approximately one third ofSwitzerland’s electricity needs.

Thermal Power generation

Power generation in thermal pow-er stations (nuclear, coal, gas or oil-fired).

Tolling agreement

The tolling agreement governsthe relationship between power plantoperators and their partners (tollers).The partners provide the fuel anddraw the generated power, whereaspower plant operators are solely re-sponsible for the availability, opera-tion and technical renewal of the fa-cilities, for which they are paid ac-cordingly by the tollers.

UCTE

The Union for the Co-ordinationof Transmission of Electricity (UCTE)in Brussels coordinates the interestsof transmission system operators inmore than 20 European countries.The common aim is to guaranteethe safe operation of the grid.UCTE’s members are 35 transmissionsystem operators from 20 Europeancountries. Swiss members are Atel,BKW, EGL Grid, EOS, ETRANS and NOK.

The companies working togeth-er in UCTE together run the world’slargest synchronised grid that tech-nically stretches from Jutland toGreece and from Morocco to Poland.It currently serves 400 million peopleannually with approx. 2,100 TWh.

Addresses

54 55

Aare-Tessin Ltd. for ElectricityBahnhofquai 12CH-4601 OltenTel. +41 62 286 71 11Fax +41 62 286 73 73www.atel.ch

Atel Bohemia, s.r.o.Husova 5CZ-110 00 Prague 1Tel. +420 224 401138Fax +420 224 401 541

Atel CZ, s.r.o.Husova 5CZ-110 00 Prague 1Tel. +420 224 401138Fax +420 224 401 541

Atel Energia Kft.Károlyi Mihály u.12HU-1053 BudapestTel. +36 1 486 22 00Fax +36 1 486 22 01

Atel Energia S.r.l.Via Alberto Mario, 65IT-20149 MilanoTel. +39 02 433351-1Fax +39 02 433351-66

Atel Energie AGFranz-Rennefeld-Weg 2DE-40472 DüsseldorfTel. +49 211 17 18 06-0Fax +49 211 17 18 06-90www.atel-energie.de

Atel Energie SAS8-10, rue VilledoFR-75001 ParisTel. +33 1 53 43 84 20Fax +33 1 53 43 84 29

Atel Hellas S.A.38, Averof StrGR-14232 Perissos AthensTel. +30 210 258 60 22Fax +30 210 258 68 18

Atel Installationstechnik Ltd.Hohlstrasse 188P.O. BoxCH-8026 ZürichTel. +41 1 247 41 11Fax +41 1 247 40 01www.group-ait.com

Atel Polska Sp. z o.o.Al. Armii Ludowej 26PL-00609 WarsawTel. +48 22 579 93 70Fax +48 22 579 93 72

Atel TradingBahnhofquai 12CH-4601 OltenTel. +41 62 286 75 54Fax +41 62 286 76 80

a.en Aare Energie AGSolothurnerstrasse 21CH-4601 OltenTel. +41 62 205 56 56Fax +41 62 205 56 58www.aen.ch

Energipartner ASOslo AtriumP.O. Box 26NO-0051 OsloTel. +47 22 81 47 00Fax +47 22 81 47 01www.energipartner.no

EntradeOltnerstrasse 63CH-5013 NiedergösgenTel. +41 52 620 15 40Fax +41 52 620 15 42www.entrade.ch

GAH Beteiligungs AGIm Breitspiel 7DE-69126 HeidelbergTel. +49 62 21 94 10Fax +49 62 21 94 25 48www.gah-ag.de

Multipower Beteiligungs-und Energiemanagement GmbHPalais EsterhazyWallnerstrasse 4/MT 37AT-1010 WienTel. +43 1 535 30 66Fax +43 1 535 30 66 11www.multipower.at

Società Elettrica Sopracenerina SAPiazza Grande 5CH-6601 LocarnoTel. +41 91 756 91 91Fax +41 91 756 91 92www.ses.ch

Contact

Corporate CommunicationsMartin BahnmüllerTel. +41 62 286 71 11Fax +41 62 286 76 69info@atel.ch

Investor RelationsKurt Baumgartner, CFOTel. +41 62 286 71 11 Fax +41 62 286 76 67investors@atel.ch

Dates

28 April 2005 2005 Annual GeneralMeeting

May 2005 Quarterly results 1/05August 2005 Interim report 2005November 2005 Quarterly results 3/05February 2006 Press announcement

on 2005 annual resultsApril 2006 Balance sheet media

conference27 April 2006 2006 Annual General

Meeting

Units

Currency

CHF Swiss francsCZK Czech kroneEUR EuroHRK Croatian kroneHUF Hungarian forintNOK Norwegian kronePLN Polish zlotyROL Rumanian leuSIT Slovenian tolarSKK Slovakian kroneUSD US dollar

th. thousandmn. millionbn. billion

Energy

kWh kilowatt hourMWh megawatt hour (1 MWh = 1000 kWh)GWh gigawatt hour (1 GWh = 1 million kWh)TWh terawatt hour (1 TWh = 1 billion kWh)TJ terajoule (1 TJ = 0,2778 GWh)

Power

kW kilowatt (1 kW = 1000 watts)MW megawatt (1 MW = 1000 kilowatts)GW gigawatt (1 GW = 1000 megawatts)

MWe electrical megawattsMWth thermal megawatts

Publication data

56

Published by:Aare-Tessin Ltd. for Electricity, Olten

Concept, design and text:BrandNew AG, Zurich

Photos:Matthias Auer, ZurichMarcel Studer, ZurichComet Photoshopping GmbH, Zurich

Lithography:Hürlimann Medien AG, Zurich

Printing:Dietschi Print & Medien AG, Olten

The 2004 Annual Report is published in English, French, German and Italian. The 2004 Financial Report is published in English andGerman. The German original text is authoritative.

Atel would like to thank the following companies that made themselves available for photos: Vitalfrigo, Rome; Gruppo Cadini S.r.l., Florence; Pastificio LaBolognese, Florence; Traversa Giuseppe Remo azienda Vitivinicola,Neive; C.S.T. Macchine Speciali S.r.l, Alessandria; vonRoll hydro,Oensingen; Kantonsspital, Olten.