3W Power/AEG Power Solutions Reports Preliminary Results for Fiscal Year End and Q4 2012

LUXEMBOURG & ZWANENBURG, Netherlands--(BUSINESS WIRE)--3W Power/AEG Power Solutions:

“In the past, our participation in polysilicon systems through POC was a leading contributor to positive free cash flow for the Company, though for the foreseeable future we do not anticipate a return of this lucrative business”

(in € million)	12M 2012	12M 2011	Δ in %
Order backlog	126.9	150.3	-15.6
Orders	371.3	380.8	-2.5
Revenue	368.0	402.5	-8.6
Book to Bill	1.01	0.95	6.6
EBITDA	18.3	53.9	-66.0
EBITDA margin	5.0%	13.4%
Normalized EBITDA	27.0	52.7	-48.6
Normalized EBITDA margin	7.3%	13.1%

(in € million)	Q4 2012	Q4 2011	Δ in %	Q4 2012	Q3 2012	Δ in %
Order backlog	126.9	150.3	-15.6	126.9	135.3	-6.2
Orders	111.0	73.9	50.3	111.0	89.2	24.4
Revenue	113.4	120.0	-5.5	113.4	81.0	40.0
Book to Bill	0.98	0.62	59.0	0.98	1.10	-10.9
EBITDA	2.2	12.6	-82.3	2.2	11.0	-80.0
EBITDA margin	2.0%	10.5%		2.0%	13.6%
Normalized EBITDA	7.4	12.7	-41.3	7.4	13.7	-46.0
Normalized EBITDA margin	6.6%	10.6%		6.6%	16.9%
Historical numbers have been represented for comparative purposes to reflect the classification of the telecom converter business (CVT/LED) as a discontinued operation during Q3 2012.

3W Power SA (Prime Standard, ISIN GG00B39QCR01, 3W9), the holding company of AEG Power Solutions B.V., a leading global provider of power electronic systems and solutions for industrial power supplies and renewable energies, today announced preliminary results for fiscal year end and Q4 2012.

Group results for fiscal 2012

AEG Power Solutions finished fiscal 2012 with €371.3 million of orders, €368.0 million of revenue and a 7.3% Normalized EBITDA margin. Compared to fiscal 2011, orders were down 2.5% (2011: €380.8 million) and revenue was down 8.6% (2011: €402.5 million). Normalized EBITDA of €27.0 million (2012 EBITDA: €18.3 million) was down 48.6% (2012 EBITDA: down 66.0%) from 2011 Normalized EBITDA of €52.7 million (2011 EBITDA: €53.9 million).

Normalized EBITDA fell short of the Company’s guidance following management’s decision to take a reserve provision for past due receivables of €8.5 million. The provision is held against overdue receivables in relation to several solar projects. Excluding this provision, the Normalized EBITDA margin for 2012 would have been 9.1%. 2012 EBITDA was also impacted by a significant drop in highly profitable polysilicon systems in POC within RES and the initiation of multi-faceted cost improvement initiatives aimed at increasing structural profitability within EES. The initiatives consist of a global EES headcount reduction of more than 100 employees in Q4 2012, principally in Warstein-Belecke, Germany, product clinics aimed at reducing complexity, implementation of global purchasing aimed at achieving economies of scale and improved efficiency. Taken together, these initiatives are expected to achieve run-rate cost savings of approximately €7 million per annum. In addition, the Company has further focused on reducing its central overhead cost to approximately €10 million per year. Restructuring provisions and one-off costs for all of these initiatives totaled €9.0 million for 2012. In addition, the Group incurred one-off costs (e.g., professional fees) in relation to the failed Andrem take-over and reported a capital gain of €1.4 million on the sale of premises in Malaysia.

With the ongoing weakness in the polysilicon market and with no recovery expected for POC in 2013, the Company has adjusted its business plans, which has led to an impairment charge on goodwill, intangibles and accelerated amortization charges of €175.3 million for the full year 2012. The Q4 RES charges comprise €72.1 million against goodwill (fully written off) and €54.9 million against intangibles (€40.0 million - customer relationships and €14.9 million - technology). These amounts are in addition to the €43.3 million RES accelerated amortization charge already taken in Q3. In Q4, the Company also took an accelerated amortization charge of €5.0 million against customer relationships within EES. AEG Power Solutions continues to diversify the POC business beyond polysilicon applications into promising new areas.

The Group maintained €42.9 million cash and cash equivalents as at 31 December 2012.

Regarding the publication of its annual report, AEG Power Solutions issued an ad hoc release today announcing that the Board of Directors and management of AEG Power Solutions will be finalizing and publishing the Company’s annual report within two weeks instead of tomorrow (March 21, 2012) as previously announced. Additional time is needed to prepare the Outlook and Risk Factors sections of the annual report given payment delays from a European customer, which have been exacerbated by the current banking situation in Cyprus. As of December 31, 2012 this customer, who centralizes its procurement through a Cyprus subsidiary, represented 37.5% of AEG Power Solutions’ €124.5 million receivables. The customer’s past due amounts as of December 31, 2012 have been fully reserved for. Given the size of the customer’s receivables, failure to collect a material amount owed from the customer could present significant financial difficulty for the Company. However, the Company at present fully expects to collect on the outstanding amounts due and to continue its strong business relationship with this customer.

Group and segment results for Q4 2012

Order intake in Q4 2012 was €111.0 million, up 50.3% year-on-year as a result of a significant increase in Solar orders in areas outside of Western Europe which continue to show steady growth. Compared to the prior quarter, orders were up 24.4% driven by growth in Solar, while order backlog in Q4 2012 was €126.9 million, down 15.6% year-on-year and down 6.2% compared to Q3 2012.

Revenue in Q4 2012 was €113.4 million, up 40.0% compared to the prior quarter (Q3 2012: €81.0 million) but down 5.5% compared to Q4 2011 (€120.0 million) with increases in Solar revenue offset by lower POC and EES revenue. Normalized EBITDA in Q4 2012 was €7.4 million, which excludes one-time charges of €5.2 million. This corresponds to Normalized EBITDA of €12.7 million in Q4 2011 and €13.7 million in Q3 2012.

Renewable Energy Solutions (RES)
(in € million)	Q4 2012	Q4 2011	Δ in %	Q4 2012	Q3 2012	Δ in %
Order backlog	57.2	79.2	-27.8	57.2	54.5	5.0
Orders	70.5	28.1	151.0	70.5	42.1	67.5
Revenue	64.0	66.3	-3.4	64.0	42.3	51.3
EBITDA	8.6	17.4	-50.5	8.6	11.8	-27.1
EBITDA margin	13.4%	26.2%		13.4%	27.9%
Normalized EBITDA	8.6	17.4	-50.5	8.6	11.8	-27.1
Normalized EBITDA margin	13.4%	26.2%		13.4%	28.0%
Historical numbers have been represented for comparative purposes to reflect the classification of the telecom converter business (CVT/LED) as a discontinued operation during Q3 2012.

Orders in RES were €70.5 million in Q4 2012, up 151.0% year-on-year (Q4 2011: €28.1 million) and up 67.5% compared to the prior quarter (Q3 2012: €42.1 million), with both increases resulting from strong order intake from Solar (up 219.3% year-on-year and up 75.1% compared to the prior quarter). RES order backlog was €57.2 million in Q4 2012, down 27.8% year-on-year and up 5.0% compared to Q3 2012.

RES revenue was €64.0 million in Q4 2012, up 51.3% compared to the prior quarter (Q3 2012: €42.3 million) driven by Solar (up 77.6%), but down 3.4% compared to Q4 2011 (€66.3 million) with increases in Solar revenue (up 29.0%) not sufficient to offset the weakness in POC (down 52.4%). RES EBITDA was €8.6 million in Q4 2012, down 50.5% from Q4 2011 (€17.4 million) and down 27.1% from Q3 2012 (€11.8 million).

Energy Efficiency Solutions (EES)
(in € million)	Q4 2012	Q4 2011	Δ in %	Q4 2012	Q3 2012	Δ in %
Order backlog	69.8	71.2	-2.0	69.8	80.8	-13.6
Orders	40.5	45.8	-11.5	40.5	47.1	-14.0
Revenue	49.4	53.7	-8.0	49.4	38.7	27.6
EBITDA	-1.5	2.7		-1.5	2.5
EBITDA margin	-3.0%	5.0%		-3.0%	6.5%
Normalized EBITDA	1.7	2.9	-42.2	1.7	4.0	-57.5
Normalized EBITDA margin	3.3%	5.3%		3.3%	10.3%
Historical numbers have been represented for comparative purposes to reflect the classification of the telecom converter business (CVT/LED) as a discontinued operation during Q3 2012.

Order intake in EES was €40.5 million in Q4 2012, down 11.5% year-on-year (Q4 2011: €45.8 million) due to lower DC Telecom (DCT) volume. Compared to the prior quarter, EES orders were down 14.0% (Q3 2012: €47.1 million), again mainly due to lower DCT business. The order backlog stood at €69.8 million in Q4 2012, down 2.0% year-on-year (Q4 2011: €71.2 million) and down 13.6% compared to Q3 2012 (€80.8 million).

Revenue was €49.4 million in Q4 2012, down 8.0% compared to the prior year (Q4 2011: €53.7 million) due to lower DCT but up 27.6% compared Q3 2012 (€38.7 million) driven by seasonally strong EMS revenue in Q4. EBITDA for EES in Q4 2012 was - €1.5 million including restructuring charges of €3.0 million, down from €2.7 million in Q4 2011 including 1.1 million income as a result of a reversal of a restructuring provision and €2.5 million in Q3 2012. This corresponds to Normalized EBITDA for EES in Q4 2012 of €1.7 million, compared to €2.9 million in Q4 2011 and €4.0 million in Q3 2012.

During Q3 2012, the Company decided to divest the loss-generating telecom converter and LED business in Lannion, France within EES classifying the business as a discontinued operation and asset held for sale. For the twelve months ending December 2012 and Q4 2012, the Company’s loss from discontinued operations was €9.6 million and €1.6 million, respectively. The decision is consistent with the Company’s ongoing effort to minimize complexity within the Group and to reduce its exposure to telecommunications.

AEG Power Solutions continues to focus on improving the profitability of EES with expected margin improvements to come from the multifaceted cost improvement initiatives initiated during 2012.

Outlook

“The diversity of the Company’s business mix and its exposure to the solar market makes accurate forecasting in the current economic environment difficult,” affirms Horst J. Kayser, CEO of 3W Power and AEG Power Solutions. “While AEG Power Solutions is well diversified and excellently positioned both technologically and also geographically to capture opportunities in its key global industrial vertical markets as well as in the renewable energy markets, we expect 2013 to be a challenging year.” Aside from the continued global macroeconomic issues, the most significant challenge in the business in the past year was the lack of investment in new polysilicon capacity in the market. “In the past, our participation in polysilicon systems through POC was a leading contributor to positive free cash flow for the Company, though for the foreseeable future we do not anticipate a return of this lucrative business”, says Horst J. Kayser. “Despite this market volatility, the POC business remains profitable on the basis of other systems and applications, though at much lower revenue levels.” In the meantime, POC will continue to be a center of innovation and technological strength. The Company continues to develop and redirect its efforts into promising new systems and applications such as advanced industrial applications and power control systems for energy storage and Smart Grid applications. These activities should contribute meaningful growth and profitability in the medium-term.

AEG Power Solutions’ Solar business is well positioned and less exposed to the challenging Western European markets than many of its competitors. The Solar business has a strong footprint in growth regions around the world. In Eastern Europe, the Company was awarded its third large solar contract covering photovoltaic utility scale equipment and services for 240 MW as well as in India where the Company was awarded a 30 MW solar power plant project providing inverters and monitoring and control equipment. The Company continues the drive for growth in key Solar end-markets of Asia, Africa, the U.S., South America and Eastern Europe. While the Solar business has continued to grow and the Company has maintained healthy margins, the growth has also required a sizeable investment in working capital. Much of this working capital is tied to large projects in Eastern Europe.

AEG Power Solutions’ industrial business continues to provide a solid and resilient base that helps to insulate the Company from the more volatile and cyclical business segments within RES. AEG Power Solutions continues to focus on improving the profitability within its industrial UPS business of EES whilst supporting the growth and development of Solar. The Company expects EMS to grow moderately and with incremental margin improvements resulting from the business improvement initiatives introduced in 2012. Profitability in the telecommunications sector will remain challenging and the Company is seeking ways to reduce exposure to this market.

For the Group, replacing the cash flows and profitability of polysilicon systems business will be a challenge. The company has aggressively adapted to the changing dynamics by actively managing our capital spend and redirecting our efforts to capitalize on market opportunities around the world. For 2013 AEG Power Solutions expects to achieve overall sales volumes near 2012 levels and Normalized EBITDA comparable to 2012 performance. On a segment level for 2013, AEG Power Solutions currently anticipates the following:

• EES, excluding the telecom converter business (CVT/LED), will achieve modest year-on-year revenue growth but with modest profitability improvement given the significant cost improvement initiatives;
• Solar orders and revenue will grow profitably year-on-year;
• POC orders and revenue will fall short of 2012 levels on continued weakness in the polysilicon market; POC will remain profitable even at substantially lower volumes;

“AEG Power Solutions is fortunate to have such a diversified business both geographically as well as across industries and markets,” emphasizes Horst J. Kayser. “With a focus on both cash flow and exciting new growth areas we are uniquely positioned for the future.”

-- End of Announcement –

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About 3W Power/AEG Power Solutions:

3W Power S.A. (WKN A0Q5SX / ISIN GG00B39QCR01), based in Luxembourg, is the holding company of AEG Power Solutions Group. The Group is headquartered in Zwanenburg in the Netherlands. The shares of 3W Power are admitted to trading on Frankfurt Stock Exchange (ticker symbol: 3W9).

AEG Power Solutions Group is a global provider of power electronic systems and solutions for all industrial power supplies and offers one of the most comprehensive product and service portfolios in the area of power conversion and power controlling. The two complementary operating business units Renewable Energy Solutions (RES) and Energy Efficiency Solutions (EES) are serving customers worldwide. The RES product and service portfolio consists of systems and solutions for solar power plants like solar inverter, monitoring and control systems as well as power controller. The EES product and service portfolio includes high performance uninterruptable power supplies (USPs), industrial power controller and DC-converter.

Thanks to its distinctive expertise, bridging both AC and DC power technologies and spanning the worlds of both conventional and renewable energy, the company creates innovative solutions for smart grids.

AEG Power Solutions’ footprint is global including 17 subsidiaries and competence centers around the world, employing 1,600 employees.

For more information go to: www.aegps.com

This communication does not constitute an offer or the solicitation of an offer to buy, sell or exchange any securities of 3W Power. This communication contains forward-looking statements which include, inter alia, statements expressing our expectations, intentions, projections, estimates, and assumptions. These forward-looking statements are based on the reasonable evaluation and opinion of the management but are subject to risks and uncertainties which are beyond the control of 3W Power and, as a general rule, difficult to predict. The management and the company cannot and do not, under any circumstances, guarantee future results or performance of 3W Power and the actual results of 3W Power may materially differ from the information expressed or implied in the forward-looking statements. As a result, investors are cautioned against relying on the forward-looking statements contained herein as a basis for their investment decisions regarding 3W Power.

3W Power undertakes no obligation to update or revise any forward-looking statement contained herein.