Business Results and Finance Figures

The structure of the organisation in Hungary of Atel significantly changed as of 1 January 2009 because Atel Csepel Zrt. and Atel Hungária Kft. had merged into Csepeli Áramtermelő Kft. effective on 31 December 2008. As the result of the move, the 100% business shares of Atel Energia Kft. and Csepeli Erőmű Kft. transferred into the ownership of Atel Csepeli Áramtermelő Kft. In addition, the 100% ownership of Csepel III Kft. was acquired by the Company during the year, and that provided the framework to start the preparations for a new power station project.

Due to modifications in the organisation of the parent company, the names of the Companies were changed as follows, effective from 1 February 2010:

• Alpiq Csepel Kft. (former Atel Csepeli Áramtermelő Kft.)
• Alpiq Csepeli Szolgáltató Kft. (former Atel Csepel Energia Kft.)
• Alpiq Csepeli Erőmű Kft. (Csepeli Erőmű Kft.)
• Csepel III Erőmű Kft.

In 2009, focus of our Company has remained on recognising and meeting the continuously changing demand of key business partners, that is, MVM, FŐTÁV and E.ON. However, changes taking place in the market environment have required us to carry on with preparing the Business Group for the ongoing conversion of domestic energy market while establishing deeper commercial relations. Both such aims have been supported by flexibility and reliability, two features which have become the trademarks of the Csepel Business Group in recent years and which are regarded our top values in the search for either technical or business solutions. The economic crisis has reached global dimensions and has had its impact on our Company, as well, appearing mainly in the drop in sales volumes. Since the start of commercial operation, 2009 has been one of most difficult years in terms of plant operation where annual, monthly, weekly and daily negative generation records have fallen although plant availability has been excellent. We trust that the good reputation of the Company, earned by our business activities, will remain the key to future business success.

Earnings and profitability

Earnings
Although sales volumes have decreased owing to the crisis, the Business Group closed a successful year in 2009. Like in previous years, the foundation of our reliable performance has been the excellent availability of Csepel II Station, an outstanding high availability even by world-class standards. We moved out to the liberalised gas market, and that step, although it meant undertaking substantial extra risks, has resulted in a good bottom line in terms of reduced fuel costs. As a result, we have proven to be the most reliable and flexible gas-fired power station in Hungary, and in addition, being a gas-fuelled regulating plant, we are proud of having supplied the cheapest power to customers. Those achievements have been realised thanks to the committed efforts of a very skilled and enthusiastic team who are experienced in working together.

In 2009, we have generated 975 GWh of power while in previous year that figure was 2171 GWh. There has been no substantial reduction in heat production. The operating result of the Business Group has significantly decreased from the level of previous year. Nevertheless, profits before taxation have been well above the level of previous year due to the positive effect of the outcome of financial transactions and the extraordinary profit. The owners of Alpiq Csepel Kft invested USD 260 million into Csepel II Station in the period between 1997 and 2000. The Power Station started  operation on 1 November 2000 to supply MVM and, through it, the public utility consumers.

Project return rates (ROA) are presented in the next graph:

It was first on 20 January 1999 that Hungarian Treasury issued bonds for a 10-year term with a reference yield of 9.44%. The usual investment return in the industry would normally equate to that of state securities plus a 5-8 % risk premium, and therefore, the return figures in past years may not at all be considered outstanding high. As the result of the drop in demand owing to the economic crisis, in 2009 the ROA-figure has reduced below the level seen in previous years and also below the guaranteed yield of long-term state securities.

Production, sales and supply

Business units within the Alpiq Csepel Business have again reliably performed their contractual liabilities in 2009, providing excellent quality of services. Settlement with our customers and suppliers has been performed smoothly just like in previous years. In 2009 our companies have realised sales revenues 34% below the 2008 figure. The main reason for the decrease has been the large reduction in power generation by the Business Group caused by the world economy crisis. Focus in power generation has been on producing electricity for the peak periods and on the provision of balancing and system-level reserves. The following figures reflect how factors that have a strong effect on sales revenue tendencies have changed since previous year:

Sales revenue factor	2007	2008	2009
Generation (GWh)	2,166	2,171	975
Heat production (GJ)	1,120,729	1,118,930	1,053,615
Percentage of CHP operation	87.00%	87.00%	66.89%
Availability	99.83%	99.30%	99.66%
Forced outage (MW)	6	2	1.2
Number of starts (No.)	139	145	178
Distillate firing	0.04%	0.00%	3.89%
Annual average spot of Brent crude (USD/Bbl)	72.44	96.94	61.74

Cost management

As a consequence of the economic crisis , electricity and heat production of the Business Group has decreased from the levels normal in previous years. Regarding cost structure, the most appearing effect of the drop in production is that the percentage of gas cost and the cost of other materials, the cost types accounting for the majority of variable costs, have reduced to 70.9% from the 2008 figure of 76.7%. The reduction in our maintenance costs has been due to the pre-planned periods of subsequent major outages. The level of costs incurred has reflected the fact that 2009 has seen just a smaller-scale inspection and repair programme causing an outage of a few days only, while in 2008 there had been a major outage lasting for more then 4 weeks and including refurbishment and efficiency upgrade actions.
In other costs incurred, a cost saving of HUF 1.1 billion has been achieved against the level of previous year, dominantly due to the substantial and rapid reduction of interests on loans, and to a smaller extent, due to our cost efficiency measures.

Liquidity and financial position

Group finance position has been steady in 2009 with liabilities met in due time. In spite of the economic recession, the Company has successfully maintained its solvency, and has not been forced to introduce any such cost saving scheme that would have resulted in the termination of jobs or the reduction of production capacities. Loans  have been repaid  and interests have been paid at the rate and to the extent as stated in the contracts, and without involving a new current account or other credit source.