ANNUAL REPORT 2017 Romande Energie Group core energy businesses Generation Distribution Marketing 4 Energy services Generation from 100% renewable sources • More than 510m kWh generated in 2017 by our hydropower, solar, wind and biomass installations • CHF 405m invested in generation (electricity, heat and gas) out to 2025 Innovative, turnkey energy services 7 district heating plants in operation 380 residential photovoltaic systems installed in 3 years 700 heat pumps installed since 2009 transmission 45 stations Over 3,100 substations and 10,000 km of power lines, 85% of which are underground 600 km of fibre optic cable 300,000 direct customers IN VAUD, VALAIS, FRIBOURG AND GENEVA CANTONS • Close to 300 municipalities served • 98,000 calls and 51,000 letters and emails handled annually by our customer service department • Over 45,000 customers registered for our online customer platform UNITS CURRENCIES CHF Swiss francs EUR euros m million bn billion POWER kW kilowatt MW megawatt 1,000 kW ENERGY kWh kilowatt hour MWh megawatt hour 1,000 kWh GWh gigawatt hour 1 million kWh TWh terawatt hour 1 billion kWh VOLTAGE kV kilovolts 1,000 volts 2 Romande Energie Group 2017 Annual Report CONTENTS This English version is based on 1 ANNUAL REPORT 5 the French original. In case of doubt Letter to our shareholders 6 the original French shall prevail. Our anniversary 10 Corporate social responsibility 12 Risk management 13 Innovation - research and development 13 Average number of employees and distribution by age and gender 13 ANNUAL REPORT New Romande Energie Competence Centre on the EPFL Campus 14 2 CORPORATE GOVERNANCE 15 Group structure and shareholders 16 Capital structure 20 Board of Directors 21 Management Committee 29 Compensation, shareholdings and loans 34 Shareholders' participation 34 Changes of control and defence measures 34 Auditing body 35 Information policy 35 Romande Energie Group Directive on the Fight against Bribery and Corruption 36 Report in relation to the Review of Corporate Governance Disclosures 37 3 REMUNERATION REPORT 39 Board of Directors 40 Executive Board 41 Other benefits for members of the Board of Directors and the Executive Board 43 Report of the statutory auditor on the remuneration report 44 4 FINANCIAL REVIEW 45 Romande Energie Group financial overview 46 Key consolidated figures 46 Financial developments 47 Romande Energie Group consolidated financial statements 50 Consolidated income statement 50 Consolidated comprehensive income statement 51 Consolidated balance sheet 52 Consolidated cash flow statement 53 Consolidated statement of changes in shareholders’ equity 54 Notes to the consolidated financial statements 55 Report on the Audit of the Consolidated Financial Statements 95 Romande Energie Holding SA financial statements 100 Income statement 100 Balance sheet 101 Notes to the parent company financial statements 102 Recommended appropriation of retained earnings 105 Report on the Audit of the Financial Statements 106 CALENDAR CONTACTS PUBLICATION CREDITS Romande Energie Group 2017 Annual Report 3 1 ANNUAL REPORT LETTER TO OUR SHAREHOLDERS Guy Mustaki, Chairman of the Board of Directors Pierre-Alain Urech, CEO Our industry is changing, shaped by digitalisation and the energy revolution. In response, we are capitalising on our strengths, pursuing business agility, innovation and a customer-focused culture, all of which will open up new opportunities to us as we look confidently ahead. On 21 May 2017, the Swiss people approved amendments to the Despite the current turmoil, power generation continues to play Energy Act, instigating measures to reduce power consumption, a vital role in guaranteeing a secure energy supply for consumers improve energy efficiency and promote renewable energies – as well and ensuring Switzerland’s energy independence in the long run. as setting a course for the withdrawal from nuclear power. This Act is For Romande Energie Group, developing our network of the blueprint for Switzerland to reduce its dependency on fossil-fuel generation facilities not only puts us at a strategic advantage, it imports and promote its own renewable sources of energy. also opens the door to future value. This is why, bolstered by a Faced with increasingly unpredictable industry conditions and solid financial independence ratio, we continue to look out for ever-stronger competition in deregulated markets, Romande opportunities to purchase facilities in Switzerland and abroad Energie decided to undertake a full strategic review in 2017. In while at the same time developing our own generation and plant- short, we will continue diversifying but always from a long-term optimisation projects. perspective because we want to ensure longevity and retain the In early 2017, we successfully started up two new pump-turbine trust of both our customers and shareholders. units, each producing 120 MW, at the Forces Motrices Hongrin- Léman SA plant in Veytaux, canton of Vaud. Romande Energie’s 41% interest in this large-scale endeavour is helping to equip Developing generation and network capacity Switzerland with assets critical to ensuring the prominence of to ensure customers’ security of supply renewable energy. Switzerland’s suffering hydropower industry was hit by a further blow In addition, the smaller hydroelectric plant at La Delise, in 2017 in the guise of low rainfall. On European exchanges, producing enough electricity annually to power 1,160 households, wholesale prices remained below actual production costs for was inaugurated in September after two years of construction work hydropower in Switzerland. On the other hand, the low wholesale carried out in trying conditions. This plant supplements the existing prices led to advantageous procurement terms for our Group, which installations of the Toules dam and the Pallazuit power plant. we passed on to customers in 2017 through a further reduction in In contrast, wind power is not catching on as expected in our regulated-market tariffs. Switzerland and is instead facing staunch opposition. The Villars- le-Terroir project is currently on hold. The Sainte-Croix project has POWER GENERATION CONTINUES TO cleared further legal hurdles after receiving approval a second time for its use of cantonal land as well as its construction permit, PLAY A VITAL ROLE IN GUARANTEEING subject to appeal. The Provence project stands out through the A SECURE ENERGY SUPPLY FOR local municipality's determination to see it through. However, it is currently facing restrictions from the Federal Department of CONSUMERS AND ENSURING Defence, Civil Protection and Sport (DDPS). The news was better SWITZERLAND’S ENERGY abroad, where we seized the opportunity to acquire the Pluzunet wind farm in Brittany, thereby adding another asset to our French INDEPENDENCE IN THE LONG RUN portfolio, which saw the day with the acquisition of the Ploudalmézeau wind farm in 2014. 6 Romande Energie Group 2017 Annual Report We remain dedicated to large-scale solar installations and necessary to ensure the deployment of smart energy. For example, obtained the go-ahead for a pilot project floating solar panels on we have assessed smart energy-management solutions for the the Toules lake. Concurrently, we teamed up with Centre Industriel home and conducted full-scale testing of a smart grid on our network et Artisanal du Marais (CIAM) to inaugurate our largest-ever solar in Rolle and Onnens. farm, comprising 15,000 m2 of panels producing 2.6m kWh per In September 2017, Romande Energie inaugurated the Smart year. This represents the equivalent annual demand of 722 Lab competence centre, based at the Swiss Federal Institute of households, or 84% of the population of Yvonand, the municipality Technology Lausanne (EPFL). The Smart Lab is an incubator for that the installation serves. ventures seeking to harness the value of energy-related data. Its But amidst all of our innovative leaps and bounds, let us not forget main mission is defining the business models of the future, focusing Romande Energie’s ongoing commitment to monitoring, maintaining on developments relating to housing, connected buildings and and modernising grid infrastructure while at the same time controlling smart grids. ANNUAL REPORT vital processes and costs to ensure competitive prices. We invest In electric mobility solutions, Romande Energie has teamed up with around CHF 55m each year to keep these indispensable efforts Green Motion, the Swiss leader in charging infrastructure, in an going. In 2017, for instance, we continued replacing medium-voltage important scheme to install vehicle charging stations. lines in the Chablais, Lower Valais and Riviera regions. We also modernised the Moudon substation, which can now handle the new Aiming for top-three spot in energy services requirements demanded of the grid, representing improved quality and security of supply for the Broye area. Romande Energie Services SA continued expanding last year and was delighted to see its staff count rise from approximately 50 to 200. This recently formed company works to meet the growing Increasing emphasis on digitalisation customer demand for services and installations that enable them to Whether it is smart grids, smart meters (to collect and transmit data) manage their energy consumption and generate electricity and heat or even smart markets (to manage and control energy consumption), from renewable sources. Romande Energie Services SA offers a smart energy promises our customers high-value services while wide range of innovative turnkey solutions