2014 ANNUAL REPORT

Romande Energie Group UNITS

Currencies CHF Swiss francs EUR euros CONTENTS m million bn billion 1 ANNUAL REPORT 2 Power Message to shareholders 2 kW kilowatt Risk management 6 MW megawatt 1,000 kW Innovation in research and development 6 Average number of employees 6 Energy kWh kilowatt-hour 2 CORPORATE GOVERNANCE 7 MWh megawatt hour 1,000 kWh Group structure and shareholders 8 GWh gigawatt hour 1 million kWh Capital structure 12 TWh terawatt hour 1 billion kWh Board of Directors 13 Management Committee 21 Voltage Shareholders’ participation 25 kV kilovolts 1,000 volts Changes of control and defence measures 26 Auditing body 26 Information policy 27

3 REMUNERATION REPORT 29 Board of Directors 30 Executive Board 31 Other benefits for members of the Board of Directors and the Executive Board 33

4 FINANCIAL REVIEW 35 Romande Energie Group financial overview 36 Key consolidated figures 36 Financial developments 37

Romande Energie Group consolidated financial statements 40 Consolidated income statement 40 Consolidated comprehensive income statement 41 Consolidated balance sheet 42 Consolidated cash flow statement 43 Consolidated statement of changes in shareholders’ equity 44 Notes to the consolidated financial statements 45 Report of the statutory auditor on the consolidated financial statements 82

Romande Energie Holding SA financial statements 84 Income statement 84 Balance sheet 85 Notes to the parent company financial statements 86 Recommended appropriation of retained earnings 89 Report of the statutory auditor on the financial statements 90

CALENDAR

CONTACTS

This English version is based on the French original. In case of doubt the original French shall prevail.

Romande Energie Group 2014 Annual report 1 MESSAGE TO SHAREHOLDERS

Guy Mustaki, Chairman of the Board of Directors Pierre-Alain Urech, CEO ANNUAL REPORT

Multi-faceted strategy coming to fruition despite uncertainty in energy industry Pierre-Alain Urech, CEO, and Guy Mustaki, Chairman of the Board of Directors

Advancing globalisation in the energy sector has forced com- with a variety of business partners. We continue supporting known as CECB® certificates, and consult a veritable wealth of Western and acquired a seven-turbine wind farm panies such as Romande Energie to contend with factors that programmes and initiatives fostering innovation. We remain information and tips by visiting declics.romande-energie.ch. in Brittany, France. are no longer merely local or national, but European - or even dedicated to corporate social responsibility and have formulated In addition, we provide online tools to help customers monitor global - in scale. In recent years, drivers of changes have been a human-resources policy that both cares for and brings out energy consumption, compare the efficiency of electronic and Another important development to emphasise is the substan- proliferating and gathering momentum, leading to a paradigm the best in our staff. Operating processes are being constantly household appliances currently on the market and evaluate the tial renovation work undertaken at the hydropower plant in shift in the power industry at a time when framework conditions optimised. energy impact of their own routines and household items. Busi- Farettes (Aigle, in canton) throughout 2014. This CHF 80m are in a state of flux. nesses are offered a large variety of customised consulting, investment will boost production by 70% while allowing the plant Facilitating energy efficiency through additional training and support services. In late 2014, Romande Energie to blend in better with its surroundings. We will continue to stay the course against this turbulent back- services and guidance also signed a partnership with Agence Cleantech Suisse (act) drop by building on the fundamental facets of our strategy. They Romande Energie Group’s goal over the coming years is to to perform energy audits for high-consumption companies. It is essential to continue investing in hydropower despite include diversifying our energy portfolio, reinforcing service ­become the reference partner in Western Switzerland for all As part of these audits, all parties jointly determine a set of current market conditions that threaten the profitability of this quality and increasing proprietary power generation. In addi- energy-related issues by simplifying and making the energy energy-saving and carbon-cutting measures that are then energy source. Renovating existing hydropower installations tion, we will continue to maintain a high quality of distribution to transition profitable for our customers. The Energy Services implemented via target agreements with the Confederation. and constructing new ones is fundamental to preserving customers, help implement a smart grid and develop synergies business unit, launched on 1 January 2014, has been working our ­energy independence and ensuring a steady supply to towards this objective, with positive results thus far in the areas Continuing to invest despite unstable electricity market ­customers over the long term. of building energy systems, lighting systems, advisory services­ The ability to guarantee our customers a steady supply of elec- and thermal systems. In particular, we have strengthened our tricity is a major long-term challenge, which is why Romande The main concern today, however, lies not with the invest- position as the leading installer of heat pumps (renovation Energie Group continues to pursue a strategy of fostering pro- ment required to update and construct hydropower plants, but sector) in Vaud canton. Additionally, several municipalities and prietary production despite low electricity prices in Europe and whether Swiss hydropower plants have a viable future in the “Romande Energie Group’s goal companies have entrusted us with the construction of district Switzerland. Power plants running on renewable energies are current market. As it stands, the production cost of one kilo- over the coming years is to become heating systems. This business unit will continue intensify- given top priority, and each project undergoes a detailed risk watt-hour at a Swiss plant is up to twice as much as its current ing and diversifying its operations this year, for example by analysis that takes into account the profitability margin set by selling price on the electricity market. the reference partner in Western marketing photovoltaic solutions to residential customers in the Board of Directors. Switzerland for all energy-related addition to the current line of solar thermal installations and Hydropower is also the only energy source in Switzerland heat-pump water heaters. An investment portfolio of almost one billion Swiss francs un- subject to heavy taxation without benefiting from any subsidies issues by simplifying and making the derpins numerous production projects in Switzerland as well as or favourable framework conditions. It is therefore urgently energy transition profitable for our However, we offer our customers more than simply technical acquisitions in France and Germany. Last year, we inaugurated necessary to determine which steps must be taken to ensure solutions to walk them through the energy transition. Residential and began operations at the Agrogaz wet biomass power plant the survival of this renewable, native source of energy pro- customers.” customers can request cantonal building-energy assessments, in (Vaud canton), installed ten large solar parks in duction - a true pillar of the Swiss power-generation industry.

2 Romande Energie Group 2014 Annual report Romande Energie Group 2014 Annual report 3 Anticipating grid changes surrounding the implementation of the Confederation’s Energy Dividend in respect of 2014 A growing number of municipalities, businesses and residential “Our Group’s ability to embody key Strategy 2050. Investors’ caution regarding the energy indus- The dividend policy at Romande Energie is characterised by a customers are beginning to produce their own electricity. The values - openness, innovation and try is understandable, as several large groups - mainly power stable payout ratio, resulting in a dividend rising over the long increase in decentralised production facilities has had a no- generators - saw their profits decrease in 2014. However, their term. The highly satisfactory operating profit has prompted the ticeable impact on the power grid, which must be reconfigured responsibility - through our projects, reasons for shying away from companies such as Romande Board of Directors to propose an ordinary dividend of CHF 30.00 to handle multi-directional flows while integrating new, smart actions and relationships with Energie are less discernible, as our business focuses on energy to the Annual General Meeting. If this amount is approved by features. distribution and our procurement terms are advantageous. shareholders at the Annual General Meeting, the total dividend customers and other stakeholders is payout will be CHF 30.8m, based on the total number of shares We have laid a solid foundation for anticipating and coping with truly a great advantage.” in circulation. changes in power distribution. Our efforts include participating in

the Swiss Smart Grid Association and expanding our fibre-optics ANNUAL REPORT networks. In addition, we are part of the Datahub initiative, the goal of which to create a platform for monitoring power flows between the different agents in the power industry.

Another noteworthy commitment is our annual investment of These same principles guide the Group’s human resources pol- CHF 50 million to maintain and update grid infrastructure. One icy, which values the skills, health and safety of each employee example is the large-scale replacement of power lines and as well as their professional development. Our efforts were Guy Mustaki Pierre-Alain Urech substations on the northern shore of Lake Geneva, beginning in recognised in early 2015 by the equal-salary label, which cer- Chairman of the Board of Directors CEO 2000 and culminating in the autumn of 2014 with the entry into tifies that Romande Energie affords men and women the same service of a 125 kV connection between Gland and Vich. We also conditions and opportunities while implementing systems and worked in close collaboration with the Nyon municipal utilities cultivating a corporate culture that drive this equality forward. provider (SIN) and the inter-municipal electricity company SEIC to upgrade transformer substations in Nyon and Gland. Best operating profits in ten years The net revenues of Romande Energie Group edged up 0.9% to In recent years, to consolidate the performances of our teams CHF 583m in 2014. Additionally, continued falls in electricity and systems in the Networks business unit, strategy has been prices and reduced end-customer demand resulted in a decline focused on streamlining operations and improving customer of 12.6% in total energy-purchasing costs to CHF 190m. Gross interfaces. In 2014, these efforts resulted in a set portfolio of profit rose by a substantial 11.3% to CHF 289m. As a result, services available to other grid managers, an online portal re- EBITDA rose by a significant 22.3% to CHF 150m. Similarly, EBIT cording all grid connection requests and new computer applica- climbed by 36.5% to CHF 94m. tions for managing and maintaining distribution infrastructure. Amid an increasingly competitive energy market for which Commitment-driven performance framework conditions remain shrouded in uncertainty, this By stimulating grid performance and continuing the business excellent performance was offset by a share in the net profit of strategy launched in 2013, Romande Energie Group is able to associates at CHF -243m. This figure resulted from sizeable im- meet customer expectations with increasing efficiency. In con- pairment charges relating to the business of Alpiq and Romande­ crete terms, this means even higher quality of supply, offering Energie’s interetst in Forces Motrices Hongrin-Léman SA a wide range of innovative services and delivering impeccable ­(FMHL). A net loss of CHF 147m was reported for 2014. Despite­ customer service. this loss, the shareholders’ equity of Romande Energie Group stood at CHF 1.7bn as at 31 December 2014. In doing so, we strive to ensure simplicity for our customers while boosting Romande Energie’s competitive edge, especially Lastly, the abandonment of the minimum exchange rate ­between in light of the liberalisation of the market for all consumers as the euro and the Swiss franc by the Swiss National Bank on announced by the Federal Council. 15 January 2015 has led to a surge in the exchange value of the Swiss franc, which is the Group’s reporting currency. This The Group is therefore making large-scale investments, imple- situation will have a negative impact on the translation of the menting new resources and adopting new approaches in sever- financial statements of entities whose reference currency is al areas of our business, focusing on IT, customer relationship the euro. It will also affect some cash balances. Conversely, Acknowledgements management supply chain and new customer offerings as well euro depreciation offers the advantage of strengthening the I would like to acknowledge all members of the Board of Directors for their unwavering support and tremendous contribution in driving as risk policy, marketing and communications. Group’s competitive position in terms of open-market offers, to our business forward. I am also grateful for the skill and determination with which our senior executives lead Romande Energie Group the benefit of its customers. Based on the picture in late March every day, enabling us to surmount an ever-increasing number of challenges. Romande Energie Group is able to continue its forward and 2015, however, the Group’s operating profit is unlikely to be upward trajectory in an increasingly competitive market by materially impacted. Likewise, my appreciation goes out to our employees, whose professionalism, dedication and innovative spirit mould the success of relying on suitable and effective human, technical and financial Romande Energie. Lastly, I would like to express my heartfelt thanks to the Cantonal Government, municipalities and all of the Group’s resources. Our success also depends significantly on the effort Share price impacted by industry instability shareholders, who continue to place their trust in us and support us year after year. we invest daily as a corporate citizen, as well as our ability to The Romande Energie Holding SA share finished 2014 at a price embody key values - openness, innovation and responsibility - of CHF 1,002, down 6% from 31 December 2013. This disappoint- in our projects, actions and relationships with customers and ing performance was due primarily to the developments in the Guy Mustaki, Chairman of the Board of Directors other stakeholders. electricity market in 2014. This was compounded by uncertainty

4 Romande Energie Group 2014 Annual report Romande Energie Group 2014 Annual report 5 Risk management

The principles governing risk policy are adopted by the Board of quarterly report to the Board of Directors. The Finance and Audit Directors. The Management Committee is then responsible for Committee issues recommendations to the Board of Directors controlling risk in accordance with this policy. The Risk Manager concerning these two reports. Financial risks, including those ensures the policy is implemented in day-to-day operations and related to the energy portfolio, are managed using limits. Oper- submits half-year reports to the Executive Board and the Board ational risks are monitored individually in order to reduce their 2 of Directors. Risks are identified and catalogued in a joint effort probability and mitigate their impact in case they materialise. between the various departments and the Risk Management These risks are evaluated based on assessments by specialists team. Specific risks related to energy management are dealt with and historical data. by an ad hoc committee that meets once a month and submits a CORPORATE Innovation in research and development GOVERNANCE A large-scale innovation process, known “as idéo”, was launched universities and start-up companies. These new projects, which in 2014 to stimulate intellectual exchange within the Group. It fea- join over 30 studies or pilot projects already under way, focus on tures a collaborative platform on which anyone can share ideas the designing of solutions for improving energy efficiency, opti- and comment on specific topics with a view to increasing internal mising renewable-energy production methods and furthering the efficiency. An inter-departmental team coordinates the progress development of energy-storage methods and smart grids. These of these ideas as they develop from initials drafts to innovation are all areas that relate directly to our business. The solutions thus projects or even new business models. In 2014, we embarked on generated will be deployed within the Group, either at production or 12 new innovation projects involving institutes of higher education, distribution plants or as innovative services.

Average number of employees and distribution by age and gender

Breakdown by age and gender Average workforce (FTE) Total no. of people = 738 Total FTEs = 668.54 men = 530 women = 208 +60 32 8 Romande Energie SA 537.5 56 - 60 91 26 Romande Energie Commerce SA 91.4 51 - 55 70 23 46 - 50 86 27 EFFITEC 18.6 41 - 45 67 33 36 - 40 52 22 Tecfor 12 52 37 31 - 35 ENERBOIS 8 26 - 30 35 23 15 - 25 45 9 Re France SAS 1

6 Romande Energie Group 2014 Annual report Romande Energie Group 2014 Annual report 7 Corporate governance at Romande Energie is guided by the core values of transparency and loyalty. This approach seeks to inspire confidence in all our stakeholders. Furthermore, the principles of Romande Energie’s corporate governance aim to sustain profitability in the long run while also safeguarding the interests of our shareholders, customers and business partners.

Group’s organisational structure As at 1 April 2015 CORPORATE GOVERNANCE CORPORATE 1 Group structure and shareholders Chairman of the Board of Directors Most of the Group’s business consists of the generation, distribution was established in 1901 under the corporate name Compagnie Guy Mustaki and marketing of electricity, along with energy services. vaudoise des Forces motrices des lacs de Joux et de l’ and was originally listed on the Lausanne Stock Exchange. 1.1.1 Operational structure of Romande Energie Group Excluding holdings of own shares, market capitalisa- As at 31 December 2014, the operational structure of Romande tion amounted to CHF CHF 1.029bn as at 31 December 2014. Chief Executive Officer Energie Group was comprised of four operating areas, name- Romande Energie Holding SA has no actual operations, and Pierre-Alain Urech 1 ly the Networks business unit, Energy business unit, Ener- it is the only Group company whose shares are listed on the gy Services business unit and Romande Energie Commerce, stock exchange. The list of companies that are part of the con- along with four support areas: the Finance department, Hu- solidation of Romande Energie Holding SA as at 31 ­December man Resources department, Corporate Secretary’s office 2014 is shown in Note 35 of the 2014 Financial Review. and Corporate Communications team. The diagram opposite illustrates the Group’s organisational structure. HEAD-OFFICE DEPARTMENTS Head of Corporate 1.1.2 - Legal structure of Romande Energie Group Legal Communications 1.1.3 Romande Energie Holding SA, whose head office is located Pierre Oberson 2 Karin Devalte 2 at rue de Lausanne 53, CH-1110 Morges, Switzerland, is the top holding company of Romande Energie Group. Its secu- rities are listed on the SIX Swiss Exchange in Zurich under security number 2.560.733 and ISIN code CH 0025607331. It Chief Financial Officer 1 Head of Human Resources Denis Matthey 1 Deputy CEO Jean-Daniel Habegger

BUSINESS DIVISIONS

Networks business Energy business Romande Energie EnergyUnité Services d’affaires business unit unit Commerce SA Services uniténergétiques Philippe Verburgh 1 Christian Frère 1 Philippe Durr 1 PatrickPatrick BertschyBertschy1 1

1 Executive Board member Romande Energie Group fulfils the statutory and regulatory provisions applicable in Switzerland with regard to corporate governance. 2 Management Committee member This report complies with the terms of the Directive on Information relating to Corporate Governance, issued by SIX Exchange Regu- lation on 1 September 2014, and uses the numbering system thereof. Additionally, it takes into account the Swiss Code of Best Practice for Corporate Governance (2014 edition). Supplementary information is contained in the Remuneration Report (see page 29). Unless stated otherwise, the information contained herein relate to dealings as at 31 December 2014.

8 Romande Energie Group 2014 Annual report Romande Energie Group 2014 Annual report 9 Group’s legal structure ROMANDE ENERGIE HOLDING SA BAS-VALAIS ENERGIE SA As at 1 April 2015 Top holding company of Romande Energie Group, shares of which are Formed in June 2012 through merger of Société Electrique du Bas-Valais listed on SIX Swiss Exchange in Zurich. Owns equity interests, real SA and Société Electrique de Champéry – Val-d’Illiez SA. Owns distribu- ROMANDE ENERGIE property and intellectual property rights tion grids and hydropower facilities on Tanay-Vouvry lake HOLDING SA ROMANDE ENERGIE SA HYDRO EXPLOITATION SA Group’s operating company. Generates hydropower using conventional Offers maintenance services for hydropower installations methods; owns and manages distribution grids; manages energy port- folios; offers energy services and provides services to Group compa- SOCIÉTÉ ELECTRIQUE DES FORCES DE L’AUBONNE SA ROMANDE ENERGIE nies Owns and operates distribution grids and hydropower facilities on 100% HO63LD.5IN0%G SA 100% Aubonne river; markets electricity, indoor electrical installations and ROMANDE ENERGIE COMMERCE SA multimedia services ROMANDE ENERGIE SA ROMANDE ENERGIE ROMANDE ENERGIE COMMERCE SA RENOUVELABLE SA Joint venture. Markets power and manages customer bases of partner Distribution System Operators (DSO); provides marketing and sales FORCES MOTRICES DE SEMBRANCHER SA services to Group companies. Owns hydropower facilities on the Dranse river

100% 63.50% 100% ROMANDE ENERGIE RENOUVELABLE SA VO ENERGIES HOLDING SA GOVERNANCE CORPORATE ROMANDE ENERGIE SA ROMANDE ENERGIE ROMANDE ENERGIE Company dedicated to novel sources of renewable energy. Owns inter- Owns and operates distribution grids and hydropower facilities on COMMERCE SA RENOUVELABLE SA ests and assets in the fields of wind power, solar power, biomass, small- Jougnenaz and Orbe rivers; markets electricity, natural-gas distribu- scale hydropower and geothermics tion grid, indoor electrical installations and multimedia services EOS HOLDING SA HOLDIGAZ SA 41.14% 5% 29.71% 75% 27.98% 10.99% Manages interest in Alpiq and planned natural-gas plant in Chavalon Owns and operates natural-gas distribution pipelines; advises on build- Forces Motrices Centrale Thermique Forces Motrices du Forces Motrices EOS Holding SA* (VS). Owns interests in wind-power firms operating in France and Ger- ing techniques; offers energy services Hongrin-Léman SA de Vouvry SA Gd-St-Bernard SA de l’Avançon SA many 95% ENERBOIS SA FORCES MOTRICES HONGRIN-LÉMAN SA Owns and operates a plant for producing electricity, heat energy and 41.14% 5% 29.71% 7531% 27.98% 101.29.99%% Owns pump-turbine facilities in Hongrin-Veytaux pellets from wood by-products Forces Motrices Centrale Thermique Forces Motrices du Forces Motrices EOS Holding SA* DransEnergie SA Hongrin-Léman SA de Vouvry SA Gd-St-Bernard SA de l’Avançon SA CENTRALE THERMIQUE DE VOUVRY SA BRENT ENERGIA SA Developing a combined-cycle natural-gas plant with output of 400MW Owns hydropower facilities in Brent area 95% in Chavalon area (VS) 1.29% EOLIENNES DE PROVENCE SA 31% SOCIÉTÉ DES FORCES MOTRICES DU GRAND-ST-BERNARD SA Partnership with Zurich City Council (ewz, the city’s energy provider). 100% Effitec SA DransEnergie SA Owns hydropower facilities on Toules-Pallazuit lake (VS) Developing wind farm in the Provence municipality in Switzerland 3.32% 71.99% Bas-Valais Energie SA FORCES MOTRICES DE L’AVANÇON SA ST-GINGOLPH ENERGIA SA 100% Tecfor SA Owns and manages distribution grids; owns and operates La Peu- Operates turbines on St-Gingolph drinking-water network ffeyre-Sublin and Benjamine hydropower facilities; also active in multi- 3.32% 100% Effitec SA 7.6% HYDRO Exploitation SA media distribution VO RE-NOUVELABLE SA Joint venture with vo energies holding SA. Owns and develops produc- 3.32% 36% CISEL Informatique SA 71.99% Bas-Valais Energie SA DRANSENERGIE SA tion installations fired by novel sources of renewable energy Enerbois SA 97.7% Offers maintenance services for hydropower installations and distribu- 100% Tecfor SA 36.63% Société Electrique des Forces de l'Aubonne SA tion grids. Provides services to outside parties GAZOBOIS SA 3.3265% % Joint venture with Holdigaz SA. Developing wood-based methanation 48.89% neo technologies SA 7.6% HYDRO Exploitation SA Brent Energia SA EFFITEC SA project Forces Motrices Provides audits of indoor electrical installations 36% CISEL Informatique SA 20.6% Eoliennes de de Sembrancher SA Enerbois SA 9760.7%% AGROGAZ LIGNEROLLE SA Provence SA 36.63% Société Electrique des TECFOR SA Owns power plant fuelled by wet biomass 30% Spontis SA Forces de l'Aubonne SA Geothermal/geotechnical drilling 65% 48.89% neo technologies SA 12% vo energies holding SA Brent Energia SA 50% ENERGIE RENOUVELABLE VOUVRY SA 50% VO RE-Nouvelable SA CISEL INFORMATIQUE SA Owns Fossau hydropower facilities Forces Motrices Computer services provider owned jointly by Romande Energie, Groupe 33.34% SITEL SA 20.6% Eoliennes de de Sembrancher SA 60% E and Alpiq ROMANDE ENERGIE FRANCE SAS 50% PrGazoboovencise SA 50% 30% Spontis SA 2.52% Holdigaz SA Simplified joint-stock company under French law. Owns and acquires NEO TECHNOLOGIES SA interests in firms generating power from renewable energy sources in 12% vo energies holding SA 50% 34% Energie Solaire SA 50% StVO-Gingolp RE-Nouvelablh Energie aSA SA 25% Computer services company owned jointly by Romande Energie, Laus- France anne City Council and the municipality of Lutry 33.34% SITEL SA CENTRALE HYDROÉLECTRIQUE DE MEYRONNES SAS Gazobois SA 50% SPONTIS SA Simplified joint-stock company under French law. Owns hydropower Holdigaz SA 50% Agrogaz Lignerolle SA 40% 12.9% Cadcime SA 2.52% Joint venture between Romande Energie, BKW, Groupe E and Lausanne facilities on the Ubaye river, in the Alpes-de-Haute-Provence depart- City Council. Provides standardisation, supply chain and logistics ser- ment 34% Energie Solaire SA 100% Meyronnes SAS StEner-Gingolpgie Renouvelablh Energia SAe 25% vices for business partners Vouvry SA 35% 100% Romande Energie PLOUDALMÉZAU BREIZ AVEL 01 SAS France SAS SITEL SA Simplified joint-stock company under French law. Owns wind farm in Ploudalmézau Agrogaz Lignerolle SA 40% Company controlled by upc cablecom Sàrl. Owns TV, internet and multi- Ploudalmézeau, in the Finistère department 12.9% Cadcime SA 100% Breiz Avel 01 SAS media networks 100% Meyronnes SAS Energie Renouvelable ALPIQ HOLDING SA Vouvry SA 35% ENERGIE SOLAIRE SA Founded in 2008 as a result of merger between Atel and EOS along with * EOS Holding10 SA0% has a 31.38%Romand intereste Ener giine Alpiq Holding SA Provides thermal solar solutions the Swiss assets of EDF. Generates power in Switzerland and abroad; France SAS trades and markets energy; provides energy services Ploudalmézau 100% CADCIME SA Equity interest exceeding 50% Breiz Avel 01 SAS Owns and operates district heating system Equity interest equal to or less than 50%

10 Romande Energie Group 2014 Annual report Romande Energie Group 2014 Annual report 11 1.2 Significant shareholders 1.3 Cross-shareholdings 2.6.1 Limitations on transferability and nominee registrations shareholders based in Switzerland the option to deposit As at 31 December 2014, the significant shareholders entered in the Romande Energie Holding SA has no knowledge of The following rules apply: shares at SIX-SAG free of charge. share register of Romande Energie Holding SA were as follows: cross-shareholdings, on either side, exceeding 5% of equity • There are no transfer restrictions on registered shares or shares in their entirety with voting rights. It does not own • Natural and legal persons are registered with no limitation 2.6.2 - Reasons for granting exceptions in the year under 2.6.4 as at 31 December 2014 shares in its significant shareholders, namely Groupe E SA on voting rights review – Admissibility of nominee registrations – Vaud canton * 440 047 shares * 38.60 % (Fribourg), Banque Cantonale Vaudoise (Lausanne) or BKW • Fiduciary registrations carry no voting rights Procedure and conditions for cancelling statutory Vaud municipalities * 160 675 shares * 14.09 % Energie AG (Bern). Nor is there any cross-representation on • General authorisations for registration are accepted privileges and limitations on transferability Banque Cantonale Vaudoise **, the boards of directors of listed companies. However, • The Company does not print applications for registration The Articles of Association do not contain any specific provi- Lausanne 37 731 shares ** 3.31 % Romande Energie Holding SA owns a 2.52% interest in • The Company no longer prints paper certificates sions concerning these points. Romande Energie Holding SA, Holdigaz SA, which owns a 2.52% interest in Romande Energie • Nominee SIS (NS): no entry in the share register Morges 113 437 shares 9.95 % Holding SA. It should also be stated that Romande Energie SA, • AREG-data compatible (electronic transmission) 2.7 Convertible bonds and options Groupe E SA, Fribourg 66 080 shares 5.80 % a subsidiary company of Romande Energie Holding SA, owns a The Articles of Association have been amended to comply with Romande Energie Holding SA has not issued any convertible BKW Energie AG, Bern 57 019 shares 5.00 % Holdigaz SA, Vevey 28 772 shares 2.52 % 29.71% interest in EOS Holding SA, which in turn owns 31.38% the requirements of the Federal Act on Book-Entry ­Securities, bonds or options. GOVERNANCE CORPORATE Free float 236 239 shares 20.73 % of Alpiq Holding SA. Guy Mustaki, Chairman of the Board of which entered into force early in 2010. The Company ­offers Total 1 140 000 shares 100 % Directors of Romande Energie Holding SA, also chairs the board of EOS Holding SA and sits on the Board of Directors of Movements in shareholders’ equity Total Alpiq Holding SA. Jean-Yves Pidoux, a member of the Board of Share General Reserve for Retained shareholders’ CHF thousands capital reserve own shares earnings equity * Parties to an agreement relating to reciprocal pre-emptive rights Directors of Romande Energie Holding SA, also sits on the ** Of which 9,900 shares tied to an agreement relating to reciprocal pre- Boards of Directors of EOS Holding SA and Alpiq Holding SA in Balance as at 1 January 2012 28 500 5 859 19 849 564 520 618 728 Net profit 150 446 150 446 emptive rights his capacity as Lausanne City Council representative. Michael Wider, a member of the Executive Board of Alpiq Group, is a Dividend paid -27 446 -27 446 Balance as at 31 December 2012 28 500 5 859 19 849 687 520 741 728 Three disclosures relating to shareholdings were published in member of the Board of Directors of Romande Energie Net profit 1 1 7 360 1 1 7 360 the year under review. They can be consulted by visiting the Holding SA. Acquisition of own shares 79 227 -79 227 website of the body responsible for such announcements: Dividend paid -27 717 -27 717 http://www.six-exchange-regulation.com/obligations/dis- Balance as at 31 December 2013 28 500 5 859 99 076 697 936 831 371 closure/major_shareholders_en.html. Net profit 108 334 108 334 Treasury share transactions and other 48 -49 -1 Dividend paid -30 797 -30 797 Balance as at 31 December 2014 28 500 5 859 99 124 775 424 908 907 2 Capital structure

3 2.1 Capital 2.3 Changes in capital during the past three years Board of Directors The ordinary share capital of Romande Energie Holding SA None. amounts to CHF 28.5m and is divided into 1,140,000 registered The Board of Directors of Romande Energie Holding SA, which acts implementation of this strategy. It is also the final governing body shares with a nominal value of CHF 25 each. Authorised capital 2.4 - Shares, participation and dividend-right certificates concurrently as the Board of Directors of Romande Energie SA, of the Group. Under its by-laws, it also comprises three special amounts to CHF 10.125m. Romande Energie Holding SA has no 2.5 The share capital is formed solely of registered shares. All sets out the Group’s strategy and is the highest body supervising committees. conditional capital. shares are vested with the same ownership and voting rights. There are no restrictions on the transferability of shares. 3.1 Members of the Board of Directors 2.2 Authorised capital The company has no liabilities in regard to participation and The Board of Directors comprises eleven members. The Board of Directors has an authorised capital of CHF dividend-right certificates, or concerning convertible bonds. All Board members are Swiss citizens. They have no executive management role within the companies of Romande Energie Group 10.125m, consisting of 405,000 registered shares with a nom- Net profit may be freely allocated by the Annual General and have not performed any such role over the past three years. Furthermore, they have no close business ties with any of these inal value of CHF 25 each, approval of which was renewed by a ­Meeting subject to the provisions of Article 24 of the Articles companies. resolution made at the Annual General Meeting on 27 May 2014. of ­Association, which partly incorporate Article 671 of the The Board of Directors carried out a self-assessment on the competency of its members in 2014. This resolution expires on 27 May 2016. Under Article 5 of the Code of Obligations, according to which: Articles of Association, the terms and conditions for subscrip- “ 1 Five percent of the profit for the financial year are allocated Year of Expiry of term tion of authorised capital are as follows: “The Board of Direc- to the general reserve until the reserve reaches twenty per- Name birth Since of office Functions Committee appointments tors shall decide the price and paying-in method (payment in cent of the share capital. Guy Mustaki * 1960 2005 2016 Chairman Chairman, Strategy and Corporate Development Committee cash, by set-off, in kind or by takeover of assets). The Board of 2 The following items are also be allocated to this reserve Wolfgang Martz ** 1954 2003 2015 Vice-Chairman Chairman, Appointments and Human Resources Committee Directors may exclude the pre-emptive rights of shareholders even if it has reached the statutory limit: Laurent Ballif * 1951 2007 2016 Director Member, Appointments and Human Resources Committee and confer them on third parties if the new shares are used 1. After payment of issuance costs, the proceeds of shares Laurent Balsiger * 1970 2013 2016 Director Member, Appointments and Human Resources Committee for the acquisition of companies, parts of companies, equity issued that exceed the nominal value, inasmuch as they are Christian Budry ** 1957 2003 2015 Director Chairman, Finance and Audit Committee interests or new investment projects in the energy field or re- not allocated to amortisation or to pension objectives. Paola Ghillani * 1963 2009 2015 Director Member, Finance and Audit Committee lated sectors, or to finance such transactions, or for employee 2. The balance of the payments made on cancelled shares, Bernard Grobéty ** 1950 2002 2015 Director Member, Finance and Audit Committee profit-sharing schemes”. less the loss that would have been incurred on shares Jean-Jacques Miauton ** 1951 1997 2015 Director Member, Strategy and Corporate Development Committee issued in their stead.” Jean-Yves Pidoux * 1956 2007 2016 Director Member, Appointments and Human Resources Committee As Romande Energie Holding SA is a holding company, Article Alphonse-Marie Veuthey * 1965 2011 2016 Director Member, Finance and Audit Committee 671 (2) point 3 and Article 671 (3) of the Code of Obligations do Michael Wider ** 1961 2012 2015 Director Member, Strategy and Corporate Development Committee not apply. * Director appointed by the Vaud cantonal government (Article 762 CO and 16 of Articles) The expiry of their terms of office falls under the remit of the cantonal government ** Director elected by shareholders at the Annual General Meeting

12 Romande Energie Group 2014 Annual report Romande Energie Group 2014 Annual report 13 3.1 - 3.2 Education, career, other activities and vested interests From 1994 to 2000, Laurent Balsiger worked as an environmental engineer for ESA Consultores (Honduras), Sulzer Chemtech and CSD Ingénieurs Conseils SA. He was Guy Mustaki is a practising barrister and has been lecturing on commercial law, corporate service director for the public works and utilities division of the town of Pully between law and corporate governance at the University of Lausanne since 1991. 2001 and 2013. Since 1 June 2013, he has headed up the energy directorate in Vaud He has been a member of the Board of Romande Energie Holding SA and Romande Energie SA canton. since the 2005 Annual General Meeting and took over the chairmanship on 19 May 2006. He Mr Balsiger has been a Board member of Romande Energie Holding SA and Romande also chairs the Strategy and Corporate Development Committee. Energie SA since 2013, and is a member of the Appointments and Human Resources In the power industry, Mr Mustaki is chairman of EOS Holding SA (Lausanne). He is a Committee. board member of Alpiq Holding SA (Lausanne), for which he chairs the Appointments and In the power industry, he sits on the boards of Société Electrique des Forces de Compensation Committee. He is a director and member of the executive committee of ­l’Aubonne (Aubonne) and Forces Motrices Hongrin-Léman SA (Château-d’Oex). Grande Dixence SA (Sion), and chairs the steering committee for the new hydroelectric plant Besides occupational activities, he is a parish councillor (until June 2014) and a mem- on the Rhône at Bex-Massongex. ber of the Epalinges local council. He is also on the committee of the NGO Compassion

He sits on the boards of Lausanne Palace SA (Lausanne), Société immobilière du Château Switzerland (Yverdon-les-Bains). GOVERNANCE CORPORATE d’Ouchy SA (Lausanne), Yteqam SA (Lausanne) and Rahm & Cie SA (Lausanne). He is also LAURENT BALSIGER * a committee member of the Foundation for the Centre for Corporate Law (CEDIDAC) at Degree in environmental engineering from GUY MUSTAKI * the University of Lausanne (Chavannes-près-Renens), the Théodora Foundation (Lonay), the Swiss Federal Institute of Technology, Chairman the Chassot et Guex Foundation for Medical Ethics (Lausanne) and the Théâtre du Jorat Lausanne. Certificate in public adminis- Doctorate in law from Lausanne ­University. Foundation (Mézières). tration from the Swiss Graduate School of Admitted to the bar. Public Administration, Lausanne.

Mr Budry started his career with Ernst & Young SA as an auditor. He was then made a After first working in the development aid sector in Africa for four years, Mr Martz joined partner and director of the audit department for Western Switzerland before being ap- the dairy division of Nestlé (Nestec) for a further four years before becoming a partner in a pointed head of manufacturing, technology & energy for the Swiss market (1983-2001). management consultancy, where he spent another four years. He was appointed CEO of the He was CFO and a member of the executive committee of Bobst Group, Prilly, from 2001 Minoteries Group in April 1990, a position which he occupied until 2005. to 2011. A member of the Board of Romande Energie Holding SA and Romande Energie SA since 2003, Mr Budry joined the Board of Romande Energie Holding SA and Romande Energie SA in he became Vice-Chairman in 2004. He also chairs the Appointments and Human Resources 2003 and has chaired the Finance and Audit Committee since 1 January 2005. Committee and attends all the meetings of the Strategy and Corporate Development Committee. In the power industry, he is a member of the board of directors and audit committee In the power industry, Mr Martz is a board member of Romande Energie Commerce SA and of EOS Holding SA (Lausanne). He also sits on the boards of the Vaud cantonal pension EOS Holding SA (Lausanne). fund (Lausanne) and Kriss Group SA (Nyon). He chairs the boards of CFO Solutions SA He is chairman of the boards of La Construction Services SA (Yverdon-les-Bains), the Vaud (Lausanne), Groux arts graphiques SA (Mont-sur-Lausanne), TrustStone SA (Nyon) cantonal pension fund (Lausanne) and Société Coopérative Immobilière Montreux (SOCIM, and Techdata (Bern). He is also a board member at Giovanna Holding SA (Montreux), Montreux), vice-chairman of Saline de Bex SA (Bex - until 30 September 2014) and interim Gonthier & Schneeberger (Lausanne), the group comprised of the firms Chanadela SA, chairman of the Centre Romand de Promotion du Management (CRPM, Lausanne), and a board CHRISTIAN BUDRY Cadris SA, Cofidep SA (Boncourt) and the group formed by OREADE Manufacture de WOLFGANG MARTZ member of Schenk Holding SA (Rolle). Graduate in economics and social Boîtes de montre SA and OPAL créations SA (La Chaux-de-Fonds). He is still chairman Vice-Chairman He is vice-chairman of the Swiss Employers’ Federation (until 30 June 2014) and the Vaud sciences from Fribourg University. of the Novandi ­Foundation (Boncourt) and sits on the board of the Greenbrix Investment Degree in agronomic engineering from Chamber of Commerce and Industry (until 31 May 2014). Swiss certified accountant. Foundation (Geneva). the Swiss Federal Institute of Technology Lastly, he heads the jury of the Esprix Trust (Zurich). He is member of the Oron town council. in Zurich.

After starting her career at Ciba/Novartis and spending the first part of her professional Laurent Baliff began his career as a journalist in Montreux and then worked for nearly twenty life with multinational companies, Ms Ghillani became CEO of the Max Havelaar Foundation, years as a swim coach in Vevey. After training to become a national coach, he went on to play a leading organisation in the fair-trade industry, in 1999. During the same period, she was a a leading role in this sport. Mr Ballif has been active in politics since the mid-1980s, and served board member of FLO International (Fair Trade Labelling Organisations), where she served as cantonal secretary of the Vaud Socialist Party for seven years before working as sec- as chair from 2001 to 2005. In 2005, Ms Ghillani founded her own company, Paola Ghillani retary general of the IDHEAP from 1995 to 2000. He became a member of the Vaud cantonal & Friends SA, which advises on corporate strategy and management as well as promoting parliament in 1994 and was elected to the Vevey municipal council in 2001 before becoming and implementing sustainable development and ethics in business. mayor in 2006. Since then he has devoted himself exclusively to political duties. He joined the Ms Ghillani has been a board member of Romande Energie Holding SA and Romande Energie Board of Romande Energie Holding SA and Romande Energie SA in 2007, and is a member of SA and has sat on the Finance and Audit Committee since 2009. the Appointments and Human Resources Committee. Ms Ghillani sits on the boards of the Fédération des cooperatives Migros (Zurich), Helvetia Mr Ballif is chairman of the Vevey, Ville d’Images Foundation and sits on the boards of the Holding AG (St Gallen), Transitec Ingénieurs-Conseils SA (Lausanne), the International inter-municipal pension fund and the Vevey Arts and Events Foundation. Committee of the Red Cross (ICRC, Geneva), the board of the Chênes Foundation (Vandœuvres). She also sits on expert panels advising sustainable investment funds. PAOLA GHILLANI * LAURENT BALLIF * Degree in pharmacy from Lausanne Degree in political science from Lausanne University. Degree in International University. Degree in sports management General Management for Executives, from the Swiss Graduate School of Public IMD. Degree from the International Administration (IDHEAP) in Lausanne. Program in Board Management, IMD.

14 Romande Energie Group 2014 Annual report * Appointed by the Vaud cantonal government Romande Energie Group 2014 Annual report 15 Mr Bernard Grobéty was deputy general manager of the financial division of Vaudoise Mr Alphonse-Marie Veuthey has worked as a barrister in Valais canton since 1994 and as Assu­rances. He has spent the greater part of his career with this group, which he joined a notary since 1995. He has been a member of the Board of Romande Energie Holding SA in 1972 and left in mid-2009. Following his retirement from Vaudoise Assurances, he has and Romande Energie SA since the 2011 Annual General Meeting and sits on the Finance served as a corporate director. and Audit Committee. Mr Grobéty has been on the Board of Romande Energie Holding SA and Romande Energie He also chairs the board of Bas-Valais Energie SA (Vouvry) and sits on the board of SA since 2002 and is a member of the Finance and Audit Committee. He is also a director of Romande Energie Commerce SA (Morges). He is furthermore a member of the André Romande Energie Commerce SA. In addition to his work as a magistrate at the Lausanne Manzini Foundation (Aigle), the Fondation de Soutien de l’Hôpital Riviera-Chablais et de district court, he is a board member of Hotela Assurances SA (Montreux), La Source Santé Rennaz SA (Rennaz). Foundation (Lausanne), the Coopérative romande de cautionnement PME (Pully) and Parking He was a member of the Valais cantonal parliament from 1997 to 2009 after serving as a des Hôpitaux SA (Lausanne). He is also chairman of Loginco, a housing cooperative for deputy member of parliament from 1993 to 1997. He was also chairman of the Vionnaz town industry and trade (Lausanne). In addition, he is a vice-chairman of the Coopérative council from 2000 to 2012. vaudoise de cautionnement hypothécaire (CVCH, Pully) and the Coopérative vaudoise de

promotion du cautionnement (CVC, Pully). GOVERNANCE CORPORATE BERNARD GROBÉTY ALPHONSE-MARIE VEUTHEY * Swiss certified expert in accounting and Law degree from Fribourg University. controling. Admitted to the bar.

Mr Jean-Jacques Miauton spent a large part of his career at the Miauton Group and CRH Gétaz Holding (formerly Gétaz Romang, Vevey). He served as CEO at both. Since 2008, he Mr Michael Wider began his career at Entreprises Electriques Fribourgeoises (EEF). In 1997, has acquired and developed a group specialising in micromechanics and subcontracting he was appointed to the company’s executive board as head of financial and management for the watchmaking industry: Swiss Madeness Solutions Group SA. Mr Miauton is a board services. In 2001, he oversaw the merger of EEF and ENSA (Electricité Neuchâteloise SA), member and the CEO of this group, which is based in La Chaux-de-Fonds with offices in the which led to the creation of Groupe E. He was hired by EOS (Energie Ouest Suisse) in 2003 Jura area. He also founded A+M Miauton Concept SA (Lausanne), specialising in storage and put in charge of the company’s restructuring project. From 2004 to 2007, he was chief containers, waste containers, modular buildings, equipment, fasteners and machines. operating officer before being appointed head of energy in 2007. Following the merger of He joined the Board of Romande Energie Holding SA and Romande Energie SA in 1997 and Atel and EOS, he became head of generation at Alpiq in 2009. sits on the Strategy and Corporate Development Committee. He also sits on the board of He has been a member of the Board of Romande Energie Holding SA and Romande Energie SA directors of Romande Energie Commerce SA. since the 2012 Annual General Meeting. He also sits on the Strategy and Corporate Mr Miauton is a board member of CDM Hôtels et Restaurants SA (Lausanne), Codethic SA Development Committee. (Geneva), Maison Planzer Transports SA (Satigny), Giovanna Holding SA (Chailly), Patrimoine Mr Wider chairs the boards of various power companies, namely Hydro Exploitation SA Gérance SA (Neuchâtel), CC Concept SA (Mont-sur-Lausanne) and Star Industrial Holding (Sion), Kernkraftwerk Gösgen-Däniken AG (Däniken) and Nant-de-Drance SA (Finhaut) and JEAN-JACQUES MIAUTON (Jersey). sits on the board of Kernkraftwerk Leibstadt AG (Leibstadt), Swissgrid SA (Laufenbourg), Business education, specialising in MICHAEL WIDER Grande Dixence SA (Sion) and Centrale Thermique de Vouvry SA (Vouvry). steelworks in Italy. Law degree and MBA from Lausanne He is a committee member of swisselectric (Bern). University.

Mr Jean-Yves Pidoux was an associate professor at the UNlL Faculty of Social and ­Political Sciences and also a member of the board of trustees and the executive committee of Pro Helvetia, the Swiss arts council. Mr Pierre Oberson started his career as legal counsel to a member of the Fribourg cantonal Mr Pidoux has been a member of the Vaud cantonal parliament since 2002. He was a local government in 1999 before joining the KPMG global network of audit and consultancy firms councillor in Lausanne from 1998 to 2006. He was elected to the city council’s executive in as manager in 2003. He moved to Romande Energie Group in 2008 as head of the legal 2006, with responsibility for the city’s public utilities department. department and was appointed Corporate Secretary of the Group and Secretary to the He has been a Board member of Romande Energie Holding SA and Romande Energie SA Board of Directors (non-member) of Romande Energie Holding SA and Romande Energie SA since the 2007 Annual General Meeting and sits on the Strategy and Corporate Development in September 2012. Committee. Mr Oberson has a seat on the boards of Romande Energie Commerce SA (Morges), Bas- In his capacity as head of the Lausanne public utilities department, Mr Pidoux is a board Valais Energie SA (Vouvry), Romande Energie Renouvelable SA (Morges) and Eoliennes de member of several companies in which the city has a direct or indirect financial interest; Provence SA. He is also a trustee of the Romande Energie pension fund. these include EOS Holding SA (Lausanne), Alpiq Holding SA (Lausanne), Grande Dixence SA He sits on the legal affairs committee of the Swiss Electricity Companies Association (AES), (Sion), Hydro Exploitation SA (Sion), Forces Motrices Hongrin-Léman SA (Château d’Oex), for which he chairs the group on energy law. JEAN-YVES PIDOUX * Gaznat SA (Vevey), Romande Energie Commerce SA (Morges), Boisy TV SA (Lausanne), Doctorate in sociology and anthropology Cadouest SA (Prilly), Forces Motrices de l’Aboyeu SA (Collonges), Petrosvibri SA (Vevey), from Lausanne University (UNIL). SI-REN SA (Lausanne), LFO SA (Lausanne), Swissgas (Zurich) and Transports Publics de PIERRE OBERSON la Région Lausannoise SA (Renens). Additionally, he is director of the cantonal insurance Board Secretary (non-member) institution (Pully) and a committee member for the Foundation for dramatic arts and the Law degree from Fribourg University. Lausanne chamber orchestra. Admitted to the bar. Advanced management programme for business leaders, St Gallen University.

16 Romande Energie Group 2014 Annual report * Appointed by the Vaud cantonal government Romande Energie Group 2014 Annual report 17 3.3 Number of mandates permitted (Article 12 (1) point 1 of 3.4 Elections and terms of office Strategy and Corporate Development Committee • Selection of external auditors, their terms of reference and Swiss Federal Ordinance on Excessive Pay) Pursuant to Articles 762 of the Swiss Code of Obligations and 16 The Committee consists of the Chairman of the Board, two any special assignments entrusted to them. In this respect, Pursuant to Article 22a (1 and 3) of the Articles of Association, of the Articles of Association, 6 of the 11 members of the Board of members and the Vice-Chairman. Meetings are normally held the Committee may hold discussions directly with the audi- members of the Board of Directors may each hold the following Directors are appointed by the Vaud cantonal government, 2 of four to six times a year (six times in 2014), and are chaired by tors. It analyses management letters and monitors imple- other mandates in the management and supervisory bodies of whom represent shareholding municipalities. The expiry of their the Chairman of the Board. Meetings last for three hours on mentation of any remarks contained therein legal entities which are required to be registered in the commercial terms of office falls under the remit of the cantonal government. average. The Committee is responsible for providing the Board • Proposals concerning closure of the accounts (including the register or a comparable foreign register: The other five members of the Board are elected individually to with recommendations and opinions on the following issues: valuation adjustments for 2014 necessitated by the restruc- 1. no more than five mandates as a member of a board of directors office by shareholders at the Annual General Meeting for a term • Electricity market and economic environment turing operations at Alpiq) and the draft of the annual report or as a member of a supreme governing or supervisory body of of one year, expiring after completion of the next Annual General • Group strategy for marketing, distribution and generation • Revisions to the Articles of Association and by-laws companies considered as publicly traded companies, as defined Meeting. These directors are eligible for re-election. However, along with the development of new lines of business • Any other matter that the Board may wish to assign by Article 727 (1) point 1 of the Swiss Code of Obligations; as well as directors reaching the age of 70 in the calendar year in which • Forging strategic alliances In addition, the Committee, acting upon the recommendation of 2. no more than fifteen mandates as a member of a board of dir­ the election takes place are no longer eligible. • Shareholder base the Executive Board, approves the annual internal audit pro-

ectors or member of a supreme governing or supervisory body In addition, the Articles of Association contain no clauses devi- • Relations with Vaud canton and municipalities served gramme and reviews the reports submitted to it by the auditors. GOVERNANCE CORPORATE of companies not considered as publicly traded companies within ating from the statutory provisions on the appointment of the • Any other matter that the Board may wish to assign The Committee­ may order extra audits. the meaning of the Swiss Code of Obligations and the Federal Act on Chair, members of the committee overseeing compensation and In 2014, the Committee continued to study different possibilities Collective Investment Schemes; and the independent proxy. for procuring electricity, either through proprietary generation Appointments and Human Resources Committee 3. no more than ten mandates as a member of the board of dir­ or through EOS Holding SA or Alpiq. Key points of these delibera- The Committee has four members and normally meets three ectors or member of a supreme governing or supervisory body of 3.5 Internal organisational structure tions were monitoring the Group’s strategy for 2011-2020 along to six times a year (three times in 2014). Meetings last for two other legal entities not precisely meeting the above criteria. General considerations with strategic interests, alliances and cooperation agreements hours on average. The Committee is responsible for providing The restrictions of paragraphs 1 and 2 shall not apply in the pres- The Board of Directors meets for half-day sessions, in prin- with other strategic partners, and investments in generation the Board with recommendations and opinions on the following ence of legal entities that are controlled directly or indirectly by the ciple no less than five times a year. In 2014, the Board of from renewable energy sources and the development of new issues: Company or which control the Company. Neither do they apply in Directors met six times for sessions lasting approximately activities. Furthermore, the Committee reviewed the opportuni- • Members of the Board of Directors of Romande Energie the presence of legal entities which are the occupational pension three hours. It also met for a one-day seminar. Last year, the ties for and threats to the Group arising from the second stage of ­Holding SA and its various committees, directors of subsid- funds insuring the employees of the Company or companies that Board monitored business, reviewed changes in framework liberalisation in the Swiss power industry. Lastly, the Committee iaries and delegates to the boards of other companies and it controls directly or indirectly. Furthermore, multiple mandates conditions, deliberated on strategy and looked into possible considered the issue of Romande Energie’s possible purchase of foundations exercised in several outside legal entities among which there is additional generation and procurement options to extend the Alpiq’s interest in Swissgrid SA. • The appointing of Executive Board members direct or indirect control, or within occupational pension funds Group’s existing capabilities. It also forged strategic alliances • Job descriptions of the CEO and Executive Board members insuring the employees of these companies, only count as one and oversaw the development of new lines of business. Finance and Audit Committee • General staff remuneration policies mandate within the meaning of paragraphs 1 and 2. Members of the Board of Directors faithfully attend the meet- The Committee has four members and normally meets four to • General rules concerning annual pay rises ings of both the Board and the committees of which they are six times a year (seven times in 2014). Meetings last for three • Situation of the Romande Energie pension fund members. Under the by-laws, each committee of the Board of hours on average. The Committee is responsible for providing Furthermore, the Committee decides on the remuneration of Directors is vested with a role, functions and responsibilities. the Board with recommendations and opinions on the following Executive Board members in accordance with generally ac- The committees have no decision-making powers (see excep- issues: cepted practice and the principles adopted by the Board of tions under Appointments and Human Resources Committee • Budget estimates, the budget, the investment schedule and Directors, upon recommendation of the CEO. These decisions and under the Ad Hoc Committee). They meet several times a the medium-term financial plan are subject to supervision by the Board of Directors. year, depending on the matters at hand and the opinions that • The treasury position along with investment rules need to be provided to the Board. Committee members receive • Internal control and audit procedures the necessary documents in good time for them to prepare for • Risk management, particularly with respect to the wholesale deliberations. Committee meetings are attended by committee buying and selling of energy members, the CEO and, as needed, in-house or external ex- perts who are called in to advise on particular points.

18 Romande Energie Group 2014 Annual report Romande Energie Group 2014 Annual report 19 Ad Hoc Committee 3.7 Information and control instruments with regard to the 4 Furthermore, special decision-making authority is vested in a Executive Board Management Committee group of Board members who meet as needed. The following The Board of Directors is informed of current business trends authority is granted in order to facilitate prompt action when at every meeting. Particular attention is paid to the consolidated The Management Committee is comprised of the members of the Executive Board supplemented by other executives. In principle, it meets strategic acquisition and investment opportunities arise: financial statements and the accounts of individual subsidiaries. every fortnight, either for a full or half day. Every year, it holds four or five days of seminars devoted to current issues. • Decisions up to CHF 10 million – an ad hoc committee con- Twice a year, the financial statements are accompanied by a de- sisting of the Chairman of the Board (who is also Chairman tailed projection of estimated annual results. Reports on holdings 4.1 Members of the Management Committee of the Strategy and Corporate Development Committee), the in which Romande Energie has financial interests, together with The Executive Board, whose members are appointed by the Board of Directors, consists of the following people: Vice-Chairman of the Board (Chairman of the Appointments a risk management report covering all the Group’s activities, are Position Year of Member and Human Resources Committee) and the Chairman of the also prepared by the Executive Board for the Board of Directors Name Business unit Nationality birth since Finance and Audit Committee. These transactions may not ex- twice a year. Moreover, twice per year, the Board of Directors is Pierre-Alain Urech CEO Swiss 1955 2004 ceed CHF 30 million per calendar year and are only authorised furnished a progress report on strategic projects. Denis Matthey CFO Swiss 1958 2004 if the financial situation so permits. The Executive Board submits its action plans to the Board of Deputy CEO GOVERNANCE CORPORATE • Decisions involving amounts above CHF 10 million (or the ­Directors. These are the basic reference documents that are Philippe Verburgh Head of Networks Swiss and Belgian 1957 2014 maximum annual amount of CHF 30 million), the decision has used by the Board of Directors to monitor Executive Board activ­ Philippe Durr Head of Romande Energie Commerce SA Swiss 1964 2013 to be approved by the Board of Directors in accordance with ities, supplemented with regular information on the main projects Christian Frère Head of Energy French and German 1959 2012 the normal procedure. undertaken by the Executive Board and on the Group’s business Patrick Bertschy Head of Energy Services Swiss 1968 2014 This special decision-making authority was not exercised in developments: revenues, margins by client segment, cash flow, Jean-Daniel Habegger Head of Human Resources Swiss 1965 2011 2014. capital investment, guarantees and sureties, risks and work- force numbers. The additional members of the Management Committee, who are empowered to make proposals, are as follows: Romande Energie Holding SA has an internal audit structure in Position Year of Member 3.6 Definition of areas of responsibility between Board of place to supplement the risk management function. The internal Name Business unit Nationality birth since Directors and Executive Board auditor reports independently to the Finance and Audit Commit- Pierre Oberson Corporate Secretary Swiss 1971 2012 The Board of Directors exercises the non-transferable and tee. An internal audit charter has been drawn up and is applied Karin Devalte Head of Communications Belgian 1972 2008 inalienable duties set out under Article 716a of the Swiss Code of rigorously. It is based on international standards such as those Obligations. It defines corporate policy and strategy, approves issued by the Institute of Internal Auditors and incorporates the annual operating and investment budgets, establishes financial main precepts: “The audit helps the organisation to accomplish policy, defines risk policy – particularly with respect to the its objectives by bringing a systematic, disciplined approach to 4.2 Education, career, other activities and vested interests wholesale buying and selling of energy – and is responsible for evaluate and improve the effectiveness of risk management, None of the executives act as consultants for key lobbies in the founding or disposal of subsidiaries and the acquisition or control and governance processes”. Internal audits are regularly Switzerland or abroad. None of them worked for the Group or sale of material shareholdings. Pursuant to Articles 716b of the conducted with external specialists who are not the statutory any of its companies before their current duties. Swiss Code of Obligations and 17 of the Articles of Association, auditors. the Board of Directors has delegated management of the Group The Board of Directors is kept regularly informed of the Group’s to the Chief Executive Officer (CEO) under the by-laws. The CEO business developments and receives reports at each of its meet- is responsible for organising and exercising the powers of the ings. Executive Board, in particular: making recommendations on The minutes of Management Committee meetings are submitted strategy, applying the principles of corporate policy and strat- to the Chairman and Vice-Chairman of the Board of Directors. egy, and implementing plans and projects; defining missions; A daily press review is sent to each member of the Board of managing the Company; ensuring the achievement of objec- Directors. tives, the profitability and expansion of the Company’s business, With regard to risk management, a description of the procedures and enhancing its reputation; preparing operating, investment adopted in this area can be found on page 6 of this report. For and cash budgets; hiring and remuneration; representing the more detailed information, please refer to Note 5 of the 2014 ­Company in its dealings with third parties; and organising the Financial Review. flow of information within and outside the Company. The CEO chairs the Management Committee, which consists of the mem- bers of the Executive Board plus the Corporate Secretary (who is also Secretary to the Board of Directors) and the Head of Communications. The Chairman of the Board of Directors and the CEO maintain close contact with one another in order to coordinate their actions and review ongoing business.

20 Romande Energie Group 2014 Annual report Romande Energie Group 2014 Annual report 21 CORPORATE GOVERNANCE CORPORATE

Pierre-Alain Urech Denis Matthey Philippe Verburgh Philippe Durr Christian Frère Patrick Bertschy

PIERRE-ALAIN URECH equipment for major computer manufacturers. Between 1990 and PHILIPPE DURR He chairs the boards of Romande Energie Renouvelable SA, CEO 2002 he worked as finance director and then as CEO of the Matthey Head of Romande Energie Commerce SA Enerbois SA (Rueyres) and Eoliennes de Provence SA. He is vice- Degree in civil engineering from the Swiss Federal Institute of Group, a leading European manufacturer of stainless steel pipes Master’s degree in microtechnology, Swiss Federal Institute of chairman of VO RE-Nouvelable SA (Orbe) and sits on the boards of Technology, Zurich. Postgraduate degree from the Swiss Federal for the automotive industry, which was sold to Arcelor in 2002. Technology, Lausanne Executive management training from the Forces Motrices Hongrin-Léman SA (Château-d’Oex) and Gazobois Institute of Technology, Lausanne. Mr Matthey was then finance director of a business unit at Arcelor European Institute of Business Administration (INSEAD) in (Cossonay). Lastly, he is managing director of Romande Energie from 2002 to 2003 before becoming CFO of Romande Energie Group Fontainebleau. France SAS (Paris). Mr Urech started his career working for the Swiss Federal on 1 January 2004. Railways (CFF). After exercising management and executive roles He is chairman of Spontis SA (Granges-Paccot) and CISEL Throughout his 20 years’ experience in managerial and sales/ at various strata of this company, he was put in charge of the Rail Informatique SA (Matran), and vice-chairman of Romande marketing roles, Mr Durr has held a variety of executive positions PATRICK BERTSCHY 2000 project and headed the CFF area management in Lausanne. Energie Renouvelable SA. He sits on the boards of Romande in multinational and regional companies active in the power, Head of Energy Services He became a member of the management board in Bern in 1995, Energie Commerce SA (Morges), Forces Motrices du Grand-St- environmental, clean-tech and aeronautical sectors. He was Electrical engineering, Fribourg School of Engineering. and was appointed deputy chief executive officer of CFF SA in Bernard SA (Bourg-St-Pierre), Bas-Valais Energie SA (Vouvry), sales director and a member of senior management at Geneva Executive Master of Business Administration, Fribourg School 1999. He ran the infrastructure division for nine years, with overall neo technologies SA (Lausanne) and Energie Solaire SA (Sierre). All public utilities from 2000 to 2008 and CEO of Mistral Engines (CH/ of Management. responsibility for the energy sector and power plants, and was these companies have ties with Romande Energie Group. He also USA) from 2008 to 2010. Through his work as an independent chairman or board member of numerous companies associated sits on the board of the Romande Energie pension fund. consultant in 2011 and 2012, he was closely involved in the roll- Between 1996 and 2000, Mr Bertschy worked as project engineer with CFF, the electricity business in Switzerland and railway In a personal capacity, he is board member of Chauffage Bois- out of electric mobility solutions in Western Switzerland. He has and project manager within ABB. In 2000, he joined Glas Troesch operators in Europe. On 1 July 2004, Mr Urech joined Romande Energie Anzère CBA SA. Lastly, he chairs the Genolier local council. managed Romande Energie Commerce SA since 1 January 2013 as technical director. Between 2001 and 2006, he was head of Energie Group, which he has led since that date. He sits on the boards of Bas-Valais Energie SA (Vouvry), energy customers then head of the sales division at Gruyère Mr Urech chairs the boards of Forces Motrices Hongrin-Léman SA CISEL Informatique SA (Matran) and neo technologies SA (Lausanne). Energie SA. He then moved on to become head of Morat public (Château d’Oex), Société des Forces Motrices du Grand-St-Bernard SA PHILIPPE VERBURGH Lastly, he is a member of the local council in Crans-près-Céligny utilities before joining Romande Energie in H1 2014 as head of the (Bourg-St-Pierre), Centrale Thermique de Vouvry SA, Forces Head of Networks and Services Industriels de Terre-Sainte et Environs (SITSE). Energy Services business unit. Motrices de l’Avançon (Bex) and Romande Energie Commerce SA. He Degree in electrical engineering, Faculty of Engineering at Mons Patrick Bertschy chairs the board of Effitec SA (Morges) and sits is a board member of HYDRO Exploitation SA (Sion) and DransEnergie University, Belgium. Doctorate from the Swiss Federal Institute of on the board of Cadcime SA (Eclépens). SA (Orsières). He is also a committee member of regioGrid, the Technology, Lausanne. CHRISTIAN FRÈRE federation of cantonal and regional power suppliers, and the Vaud Head of Energy canton economic council and energy commission. Aside from duties Mr Verburgh began his career as head of IT at Energie Ouest Suisse Degree in physics from the University of Essen (Germany). within the Group, he sits on the board of Télé Villars-Gryon SA and (EOS) and as project manager at ELCA Informatique, between 1983 Doctorate in natural sciences. railCare AG (Härkingen). and 1995. From 1995 to 2000, he was assistant business manager at EOS, then sales manager at Avenis Trading SA. In 2001, he joined At the start of his professional career in 1989, Christian Frère held Geneva public utilities as manager of the electricity department various positions in industry as advisor or chief project engineer, DENIS MATTHEY then head of the energy division. He was then customer manager notably at Rheinmetall in Düsseldorf and RWE in Essen (1993-1998). CFO and Deputy CEO between 2008 and 2012. Mr Verburgh became head of Romande At RWE, the main focus of his work was on waste disposal and Degree in business from the Faculty of Business and Economics Energie’s Networks business unit on 1 February 2014 He chairs recycling. In 1998, he joined Von Roll Environnement, where he of Lausanne University. Swiss certified accountant. the board of directors of HC SA (Fribourg) and sits on the boards occupied various managerial positions up to CEO level. In 2004 and of Bas-Valais Energie SA (Vouvry) and Société des Forces de 2005, he worked as an independent consultant. He then joined EGL Mr Matthey began his career as an auditor at PWC Zurich and l’Aubonne SA (Aubonne). (Dietikon), where he oversaw business development and investment KPMG Geneva (1981-1987). He then occupied the post of finance In a personal capacity, Mr Verburgh is member of the board of in power generation and transmission facilities both in Switzerland and administrative director at STS, a subsidiary of the Shipley directors of Brasserie Docteur Gab’s SA (Savigny). and abroad. In this capacity, he was seconded to several subsidiaries Group (Boston) from 1987 to 1990. During this period he was made and associates of EGL Group. In 2012, he joined Romande Energie as a director of STS, which designs and manufactures galvanoplastic head of the Energy business unit.

22 Romande Energie Group 2014 Annual report Romande Energie Group 2014 Annual report 23 the occupational pension funds insuring the employees of the 4.4 Management contracts Company or companies that it controls directly or indirectly. Romande Energie Holding SA has not entered into any Furthermore, multiple mandates exercised in several outside management­ contracts. legal entities among which there is direct or indirect control, or within occupational pension funds insuring the employees of these companies, only count as one mandate within the meaning of paragraphs 1 and 2. CORPORATE GOVERNANCE CORPORATE 5 Compensation, shareholdings and loans

Please refer to the Remuneration Report.

Jean-Daniel Habegger Karin Devalte Pierre Oberson

JEAN-DANIEL HABEGGER KARIN DEVALTE Head of Human Resources Head of Communications, Member of the Management Committee Swiss VET certificate, business employee. Degree in human 6 Shareholders’ participation resources management. Advanced training in HR management at PIERRE OBERSON CRQP. Business administration course at the Centre Romand de Corporate Secretary, Member of the Management Committee 6.1 Voting-right and representation restrictions 6.3 Convocation of the Annual General Meeting of Promotion du Management (CRPM). All shares entitle the holder to one vote. There are no restric- shareholders tions on voting rights. This is governed by law, but one or several shareholders Mr Habegger has spent most of his career at Romande Energie, Pursuant to Article 12 (4 and 5) of the Articles of Association, representing together no less than 5% of the share capital may initially as an employee of Société Romande d’Electricité (SRE), a shareholder may be represented by another shareholder or also request the convening of a general meeting. The Annual which he joined in 1984. After the merger between SRE and a third party. General Meeting of shareholders is convened by way of a Compagnie Vaudoise d’Electricité (CVE) in 1997, Mr Habegger held In 2010, the Articles of Association were amended to comply notice published in the Swiss Official Gazette of Commerce, at several positions in the HR department (personnel administration, with the Federal Act on Book-Entry Securities, which entered least twenty days prior to the appointed date, and by way of an head of recruitment and internal mobility). From 2002 to 2011, he into force on 1 January 2010. individual notice to shareholders entered in the share register. was the HR delegate and deputy human resources manager for the The Articles of Association contain no clauses deviating or An advance notice is published approximately three months Group. He has been Head of Human Resources since 1 December supplementing the statutory provisions with regard to inde- before the date of the meeting. 2011. pendent proxy instructions. Neither do they contain rules He also chairs the board of trustees of the Romande Energie relating to participation in the Annual General Meeting by 6.4 Inclusion of items on the agenda ordinary and supplementary pension funds. electronic means. One or several shareholders representing shares with an aggregate nominal value of CHF 1m or 5% of the share capital 6.2 Quorums and qualifying majorities may request that an item of business be entered on the agenda. Shareholders at the Annual General Meeting pass resolutions This request must be made to the Board of Directors in writing and conduct elections by a simple majority of the voting rights no later than thirty days before the date of the Meeting, indi- represented. Abstentions and blank or spoilt votes are not taken cating the purpose of the debates and the motions submitted. into consideration in the calculation of the majority. This does not apply to subjects requiring two-thirds of the voting rights 6.5 Entry in the share register represented, pursuant to Article 704 (1) of the Swiss Code of Shareholders must be registered in the share register no later Obligations. than eight to ten days before the appointed date in order to 4.3 Number of mandates permitted (Article 12 (1) point 1 of 2. no more than fifteen mandates as a member of a board of take part in the Annual General Meeting or appoint a proxy. The Swiss Federal Ordinance on Excessive Pay) directors or member of a supreme governing or supervisory deadline is shown in the official notice convening the Meeting Pursuant to Article 22a (2 and 3) of the Articles of Associa- body of companies not considered as publicly traded compa- and in the individual notice sent to shareholders. tion, members of the Executive Board, with the agreement nies within the meaning of the Swiss Code of Obligations and of the Board of Directors, may each hold the following other the Federal Act on Collective Investment Schemes; and mandates in the management and supervisory bodies of legal 3. no more than ten mandates as a member of the board of entities which are required to be registered in the commercial directors or member of a supreme governing or supervisory register or a comparable foreign register: body of other legal entities not precisely meeting the above 1. no more than two mandates as a member of a board of criteria. directors or as a member of a supreme governing or su- The restrictions of paragraphs 1 and 2 shall not apply in the pervisory body of companies considered as publicly traded presence of legal entities that are controlled directly or indi- companies, as defined by Article 727 (1) point 1 of the Swiss rectly by the Company or which control the Company. Nei- Code of Obligations; as well as ther do they apply in the presence of legal entities which are

24 Romande Energie Group 2014 Annual report Romande Energie Group 2014 Annual report 25 7 Changes of control and defence measures 9 Information policy

7.1 Duty to make an offer 7.2 Clauses on changes of control Romande Energie Group pursues an open information policy in The following links can be used to subscribe to our Alert There is no provision for this in the Articles of Association. This is not covered by any clause in the Articles of Association. keeping with its size and importance. The communication meas- Service, where you can select the type of news you would There is no opting-out or opting-up clause. Vaud canton, Ban- Nor is there any agreement or programme benefitting the ures adopted by the Group are designed to enhance its credi- like to receive: que Cantonale Vaudoise and 119 Vaud municipalities are parties members of the Board of Directors or the Executive Board bility and public image. Particular care is also taken to ensure to a shareholders’ agreement providing for reciprocal in such cases. The employment contract of the CEO can be that executives­ are provided with timely, accurate information to In French pre-emptive rights to their shares. These shareholders hold terminated by either party by giving one year’s notice as enable them to carry out their leadership responsibilities. Share- http://investor.romande-energie.ch/site-services/alert-service. 53.52% of the capital and total voting rights. from the end of the current month. The notice period for other holders of Romande­ Energie Holding SA are kept informed of the aspx?sc_lang=fr-FR ­Executive Board members is six months as from the end of the basic aspects of the Group’s business by the annual report, the current month. half-yearly report and press releases. Sensitive data that may In English

affect the share price is disclosed on an ad hoc basis in accordance http://investor.romande-energie.ch/site-services/alert-service. GOVERNANCE CORPORATE with the relevant directives of the SIX Swiss Exchange. aspx?sc_lang=en Information is compiled by the Corporate Communications depart- ment and the investor relations team. Information about the Group is also posted on the internet at www.romande-energie.ch. 8 Auditing body Official notices are published in the Swiss Official Gazette of ­Commerce; notices convening the Annual General Meeting are sent 8.1 Duration of the mandate and term of office of the lead corporate governance chapter and the preparation of auditors’ personally to shareholders entered in the share register. auditor reports. The Board of Directors decided at the end of 2011 that Ernst & Young SA have been the statutory auditors of Romande the external auditors would no longer be entrusted with advi- A financial calendar containing the publication dates for the annual Energie Group since the 1997 financial year. Previous to this, the sory or support services for the internal audit department in and interim financial statements and the annual report, as well as the statutory auditors were Société Fiduciaire Lémano, part of the order to ensure the utmost independence between internal and date of the press conference, is posted on the Group’s website early same group. The lead auditor, Serge Clément, took up his duties external auditing. in the year. An events calendar for the current financial year and in May 2008. The maximum rotation period for lead auditors is contact addresses are shown on the penultimate page of this report. seven years, as required by law. 8.4 Informational instruments pertaining to an external audit 8.2 - Auditing fees and additional fees See Finance and Audit Committee, Section 3.5. 8.3 The fees charged by Ernst & Young are as follows: The auditors receive all the documentation that is prepared for CHF every meeting of the Finance and Audit Committee. In 2014, they Auditing of financial statements 280’000 attended one meeting of the Committee and one meeting of the Tax advisory services 21’240 Board of Directors. Other advisory services 15’500 Their comments form the basis of action plans, and the conclu- Total 316’740 sions are all re-submitted to the Committee for verification. The auditors’ work is totally independent of the Board of Directors and the Executive Board. The auditors’ fees and services are Audit services comprise the basic work required each year also checked by the Finance and Audit Committee, which submits to audit the accounts of individual Group companies and the a report to the Board of Directors. consolidated financial statements of Romande Energie Group. The auditors fully guarantee their professional qualification This includes services rendered by auditors in connection with as required for a listed company. They have the necessary pension plans and supervision of the implementation or updating resources available to fulfil their mission. of accounting methods. This work also covers examining this

26 Romande Energie Group 2014 Annual report Romande Energie Group 2014 Management report 27 Ernst & Young Ltd Phone +41 58 286 51 11 Avenue de la Gare 39a Fax +41 58 286 51 01 P.O. Box www.ey.com/ch CH-1002 Lausanne 3 To the Board of Directors of Romande Energie Holding SA, Morges REMUNERATION Lausanne, 30 March 2015

Review of Corporate Governance Disclosures REPORT

You engaged us to review the corporate governance disclosures of Romande Energie Holding SA made pursuant to the Corporate Governance Directive of the SIX Swiss Exchange for the period ended 31 December 2014. These disclosures are made in a separate section, on pages 7 to 26 of the annual report. The board of directors is responsible for the content of these disclosures. Our responsibility is to issue a report based on our review.

A review, which provides less assurance than an audit, seeks to obtain moderate assurance about whether the corporate governance disclosures are complete and free from material misstatement. A review is limited primarily to inquiries of company personnel that participated in the preparation of the disclosures, to reviews of pertinent documents, and analytical procedures related to the corporate governance disclosures. In addition, we have requested a representation letter. We have not performed an audit, and, accordingly, we do not express an audit opinion.

In our opinion, the corporate governance disclosures comply with the formal requirements of the Directive Corporate Governance. During our review, nothing has come to our attention that causes us to believe that the disclosures are not complete or contain material misstatements.

Ernst & Young Ltd

Serge Clément Karine Badertscher Chamoso Licensed audit expert Licensed audit expert (Auditor in charge)

28 Romande Energie Group 2014 Management report 1 Board of Directors 2 Executive Board SA, Lausanne) in 2010, and concluded that the remuneration 1.1 Governance paid by Romande Energie Group is in line with customary Pursuant to Article 21 para. 3 point 2 of the Articles of Asso- business practice and can be deemed considerably lower 2.1 Introduction 2.3 Remuneration principles ciation, the Board of Directors, acting upon the recommenda- in relation to other listed companies of comparable size in The success of Romande Energie Group largely depends on Since 2010, overall remuneration has consisted of the following tion of the Appointments and Human Resources Committee, Switzerland as measured by revenues, staff numbers and the expertise and the dedication of its employees. As an em- components: determines the individual remuneration payable to the Board market typology. ployer, we aim to set the standard for attracting, retaining of Directors, bearing in mind the maximum aggregate amount Annual compensation and attendance fees are as follows: and motivating the most talented employees at every level. Components of overall remuneration Influence of compensation approved by the General Meeting. Note that We want to establish a direct, objective relationship between Profit-sharing in regard to the EBITDA+ over several approval will be sought for this total amount, for the first time, Annual compensation and fees CHF remuneration policy, the financial results of the Group and its financial results of the Group years at the 2015 Annual General Meeting, with regard to the max- Chairman 70 000 subsidiaries, and the individual performance of employees. Variable portion of Performance relating to REMUNERATION REPORT REMUNERATION imum compensation payable in relation to the 2016 financial Vice-Chairman 37 500 These same principles apply to the members of the Executive compensation targets achievement and competency in job position year, in application of Article 15 of the Articles of Association. Director 30 000 Board. Chair of special committee, on top of basic compensation 6 000 Basic salary 1.2 Remuneration principles Attendance fees since 1 July 2010: 2.2 Governance The principles governing the remuneration of the Board of - Half-day 1 200 Under the terms of Article 15 of the Articles of Association, Directors are laid down by Article 22c of the Articles of As- - Full day 1 800 the General Meeting must annually approve the aggregate sociation. Members of the Board of Directors receive a fixed amounts of compensation payable to the Executive Board in a. Annual basic salary annual allowance, which is not determined by the Group’s Board members receive an allowance of CHF 0.70 per kilo- the coming financial year. Note that approval will be sought for The annual basic salary is the cornerstone of overall remunera- financial results, and attendance fees for attending meetings metre for the journey between their place of work or residence this total amount, for the first time, at the 2015 Annual General tion and also serves as a reference for determining the variable of the Board of Directors and its committees, as well as outside and the meeting venue. There are no directors’ bonuses, and Meeting. On the recommendations of the Appointments and salary. Every year, the Appointments and Human Resources sessions or special preparatory meetings. Directors do not no allotments of shares or other forms of profit-sharing. Human Resources Committee (AHRC), the Board of Direc- Committee examines the possibility of increasing the total annu- receive a set sum upfront to defray entertainment expenses tors defines the Group remuneration policy for the Executive al payroll on the basis of economic criteria and unchanged staff but are reimbursed for actual expenses as and when these are 1.3 Total remuneration Board, in keeping with the principles laid out in Article 22d of numbers. Executive Board members receive proportionally incurred. Remuneration is not set at any particular intervals, Since the 2011 Annual General Meeting, Romande Energie the Articles of Association. The AHRC, which consists exclu- the same increase as that granted to all the Group’s employees. with no distinction made between directors. Remuneration is Group has instituted a consultative vote on remuneration pol- sively of non-executive directors, monitors the application of Adjustments are made in terms of members’ individual perfor- determined in keeping with usual amounts of compensation in icy for members of the Board of Directors and the Executive established remuneration principles, examines the periodic mance (competency in job position) relating to leadership and the Swiss business world. A comparative study was commis- Board. In 2014, Remuneration and social insurance expenses proposals relating to trends in overall remuneration and de- management qualities as well as technical and relational skills. sioned from CEPEC (Centre d’Etude de Projects Economiques of the Board of Director were as follows: termines the individual remuneration paid to Executive Board members, bearing in mind the maximum amount of compensa- b. Variable salary tion approved by the General Meeting. Remuneration practices As is the case for all Romande Energie employees, the variable Total compensation CHF in other companies serve as a basis of comparison. The last component of remuneration is determined by competency on Social Insurance Social Insurance full survey was conducted in 2013, with comparisons drawn the job and the degree to which individual objectives have been Remuneration costs Total 2014 Remuneration costs Total 2013 Board chair / from a selection of Western Swiss companies operating in the met. The level of performance therefore has a direct impact on Guy Mustaki SCDS chair 100 600 8 522 109 122 98 800 8 220 107 020 energy, banking, insurance and industrial sectors. variable salary. Board vice-chair / Wolfgang Martz 75 300 6 379 81 679 80 100 6 664 86 764 AHRC chair Individual objectives are set and weighted at the start of the year. Laurent Ballif * Director 40 200 - 40 200 46 200 - 46 200 Laurent Balsiger * Director 42 600 - 42 600 29 316 - 29 31 6 They are linked to the implementation of corporate strategy. Director / Their evaluation at the end of the year reflects the extent to Christian Budry FAC chair 52 800 4 473 57 273 55 800 4 643 60 443 which they have been achieved. Barring extraordinary cir- Paola Ghillani Director 46 800 3 965 50 765 49 800 4 143 53 943 cumstances, the weighting of objectives is not reviewed. The Bernard Grobéty Director 56 400 4 778 61 178 61 300 5 100 66 400 target values for variable remuneration are shown below. The Jean-Jacques Miauton Director 58 700 4 973 63 673 58 200 4 842 63 042 level of performance may affect these values as follows (as % Jean-Yves Pidoux * Director 54 100 - 54 100 58 700 - 58 700 of the annual basic salary): Director Daniel Schmutz until 27 May 2013 - - - 17 300 744 18 044 Alphonse-Marie Veuthey Director 77 600 6 574 84 174 77 000 6 406 83 406 Target Minimum Maximum Michael Wider ** Director 45 000 - 45 000 46 200 - 46 200 CEO 40 % 7.2 % 48 % Total 650 100 39 664 689 764 678 716 40 762 719 478 Members 30 % 5.4 % 36 %

* Paid to Vaud canton or the municipality represented However, the total amount of variable remuneration that can be ** Paid to Alpiq allotted to members of the Executive Board, excluding the CEO, cannot exceed the sum total of variable remuneration paid if all The above amounts include compensation paid by Group subsidiary companies, i.e. in which the Group’s shareholding exceeds 50%. The re- executives were to attain 100% performance. muneration paid by third parties for offices held in associates (Group shareholdings of less than 50%) are not included in the above amounts. Given that any transactions with directors in relation to products marketed by Group are conducted at the going market rate, they are not included in the above amounts.

30 Romande Energie Group 2014 Management report Romande Energie Group 2014 Management report 31 32

2.4 Romande Energie Group2014Management report

Highest compensation Highest compensation thereafter, was as follows: as was thereafter, seven then and 2014 May 31 until members six comprised which Board, Executive the of members to granted Total remuneration Members CEO salary): basic (as annual %of ranges following the within determined is Board Executive the of members the to payable amount overall maximum The otherwise. decide may Directors of Board the but level, this below payment no is there principle, In EBITDA+. by covered are amortisation and depreciation applies ordinary amount that proposed provided shareholdings (EBITDA+). of method The calculating total the Group’s the on dividends ordinary added are which to EBITDA, of basis the on Directors of Board the by year every determined is employees all for profits Group Energie Romande in share The c. purpose. this for used are consultants andcompetency achievement the of No objectives. external of degree the assesses Board, the of Chairman the with Committee, and Human Appointments The Resources year. reference the following April of month the in cash in paid is salary variable The Pierre-Alain Urech, CEO Total compensation 2013 Pierre-Alain Urech, CEO Total compensation 2014 Total remuneration occupational pension contributions. pension contributions. ­occupational and state of comprised chiefly are costs insurance Social CHF Profit-sharing Profit-sharing Minimum 0 0

% % Maximum 48 32 together ­together 1 469901 1 559293 378 612 378

612 378 % % salary Basic

• • follows: as distributed is year reference for by the amount EBITDA+ generated total the perspective, term long- a from seen be should profit-sharing that order In 68% of their basic salary; for the CEO, this total could reach 96%. 96%. reach could total this CEO, the for salary; basic their of 68% of atotal c) band representing (letters salaries variable obtain theoretically could members Board Executive cases, extreme In d. year.reference the following April of month the in cash in paid is amount The 1 061 year and the two previous years (i.e. three years). years). three (i.e. years previous two the and year reference the for EBITDA+ average the on paid is One-third full. in paid is amount the of Two-thirds Variable 320 000 942 700 338 Summary salary 312 821

remuneration 2 2 412 601 2 412

698 612 621 114 924 716 Total

allowance ifapplicable expenses andcar Entertainment 120800 101 400 000 18 18 000 18

Social insurance 506 293 149 358 149 143 629 143 898 561 costs

3 Other benefitsfor members of Board the of Directors Executiveand the Board Of which: Other shareholders There were no management transactions in 2014. 2014. in transactions management no were There (see tableandaccompanying remarksonpage12) 31 December 2014 Shares heldby Groupcompaniesasat follows: as is ownership Share 2.5 Share ownership

- - Board ofDirectors Held by members ofthe Executive Board Held by members ofthe Other allowances Other remitted in full to Romande Energie. Romande to full in remitted are directorships with connection in members by ­received All (annual amounts fees) and attendance compensation directors of boards on activities with inconnection Allowances allowance. a fixed receive instead car acompany of themselves availing not Those vehicle. the of use private any for Company the reimburse and one, want they if car acompany with provided are Members cars Company CEO). the for (CHF 75 day per 50 CHF of amount an out-of-pocketpay their recurrent up to themselves expenses members CEO). return, In for (CHF 1,500 1,250 CHF of lowance al monthly afixed of form the take expenses Entertainment expenses Entertainment

563 shares 1 026563 437 shares 113 437 20 shares 0 shares

90.05 % 9.95 % < 1 % < 0 % - 13,320 and 16,474 shares respectively. respectively. 16,474 and shares 13,320 hold executive, the of members are Pidoux and Ballif Messrs where Lausanne, and Vevey of municipalities The 2014. in them to related closely parties to or Board Executive the or Directors of Board the of members to granted were kind in benefits or advantages financial other or waivers, repayment credit, other or loans fees, additional options, shares, of form the in benefits no years, previous in As 2.6 2.6

Retirement benefits Retirement details, see point 3. point see details, more For years. insurance additional of purchases or schemes top-hat as such benefits special no are There employees. ny compa all for provided those to identical benefits receive and plan pension Energie Romande the to belong managers Senior Romande Energie Group2014Management report - 33 REMUNERATION REPORT Ernst & Young Ltd Phone +41 58 286 51 11 Avenue de la Gare 39a Fax +41 58 286 51 01 P.O. Box www.ey.com/ch CH-1002 Lausanne

To the General Meeting of 4 Romande Energie Holding SA, Morges FINANCIAL Lausanne, 30 March 2015 Report of the statutory auditor on the remuneration report REVIEW We have audited the remuneration report dated 30 March 2015 for part 1.3 (page 30) and parts 2.4 to 2.6 and 3 (pages 32 to 33) of Romande Energie Holding SA for the year ended 31 December 2014.

Responsibility of the Board of Directors The Board of Directors is responsible for the preparation and overall fair presentation of the remuneration report in accordance with Swiss law and the Ordinance against Excessive Compensation in Stock Exchange Listed Companies (Ordinance). The Board of Directors is also responsible for designing the remuneration system and defining individual remuneration packages.

Auditor's responsibility Our responsibility is to express an opinion on the accompanying remuneration report. We conducted our audit in accordance with Swiss Auditing Standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the remuneration report complies with Swiss law and articles 14 – 16 of the Ordinance.

An audit involves performing procedures to obtain audit evidence on the disclosures made in the remuneration report with regard to compensation, loans and credits in accordance with articles 14 – 16 of the Ordinance. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatements in the remuneration report, whether due to fraud or error. This audit also includes evaluating the reasonableness of the methods applied to value components of remuneration, as well as assessing the overall presentation of the remuneration report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion In our opinion, the remuneration report for the year ended 31 December 2014 of Romande Energie Holding SA complies with Swiss law and articles 14 – 16 of the Ordinance.

Ernst & Young Ltd

Serge Clément Karine Badertscher Chamoso Licensed audit expert Licensed audit expert (Auditor in charge)

34 Romande Energie Group 2014 Annual report

Financial developments ROMANDE ENERGIE GROUP Our operations in 2014 were extremely profitable, as attested to by the sharp increase in gross profit. Despite con- FINANCIAL OVERVIEW tinued political uncertainty and arduous economic conditions in Europe, Romande Energie Group is able to report growth in 2014 EBITDA and EBIT to CHF 150m and CHF 94m, respectively, representing increases of 22% and 37%. This strong showing by our own operations was unfortunately cancelled out by profit from associates, which stood at a negative CHF 243m as a result of substantial impairment charges. Hit hard by these charges, the Group ulti- Key consolidated figures mately saw a net loss of CHF 147m for 2014.

as at 31 December 2014 As a result, consolidated equity fell by 12% to CHF 1.7bn as at 31 December 2014. The Board of Directors, keen to FINANCIAL REVIEW maintain the dividend policy unchanged, recommends that the Annual General Meeting approves payment of an In CHF thousands, unless otherwise stated 2014 2013 2012 2011 2010 ordinary dividend of CHF 30 per share. Restated Restated INCOME STATEMENT Revenues Trend in gross margin (%) Net revenues 582'769 577'814 579'412 590'165 579'413 In 2014, the net revenues of Romande Energie Group edged up by 100% Gross profit 289'469 260'122 259'682 254'165 239'419 0.9%, or CHF 5m, to CHF 583m. Personnel expenses 89'881 91'319 89'032 82'181 76'033 Energy distributed on the Group's grid fell by 3.2%, or 93 GWh, to 80% EBITDA* 149'866 122'579 121'594 120'718 107'592 2,802 GWh, primarily as a result of the low -voltage segment. By 60% EBIT** 94'099 68'917 67'789 35'155 48'825 contrast, revenue generated from this business rose by 3.7%, or Share of profit of associates (243'332) 7'075 (343'210) (250'812) 65'738 CHF 5m, to CHF 152m, as a result of an increase in the regulated 40% Net profit for the year (147'149) 67'922 (278'211) (235'180) 83'994 return (WACC), which rose from 3.83% in 2013 to 4.7% in 2014. 50% Our customers were handed a 3% reduction in their power tariffs 20% 41% 43% 45% 45% associated with this component in 2014. CASH FLOW Power sales (kWh) rose by 3.0%, 95 GWh, to 3,265 GWh over the 0% Net cash provided by operating activities 175'874 186'789 168'942 166'064 174'667 year. Energy sales to end customers fell by 5.2%, or CHF 15m, to 2010 2011 2012 2013 2014 VIEW Purchase of property, plant and equipment, and intangible assets (109'194) (103'251) (79'373) (110'370) (113'008) CHF 275m following a drop in household demand, chiefly as a result Net cash provided by/used in financing activities (32'961) (109'172) (25'992) (53'080) 59'126 of the mild winter temperatures in late 2014. Operating expenses RE Other income fell CHF 3m relative to the previous year, to CHF 61m Operating expenses rose by a minor 1.5%, or CHF 2m, to in 2014. OTHER DATA CHF 140m. Personnel costs fell slightly thanks to a pension charge that was FINANCIAL FINANCIAL Total dividend (proposed for 2014) per share (in CHF) 30.- 30.- 27.- 25.- 25.- Electricity procurement CHF 1m lower tha n in 2013, resulting from the application of Total energy requirements, including proprietary power genera- IAS 19R. Lower payroll was more than offset by a CHF 3m increase Earnings per share (in CHF) (149) 62 (257) (206) 80 tion, rose by 3.0%, or 95 GWh, to 3,171 GWh. in other operating expenses. Equity attributable to parent company shareholders 1'724'694 1'958'369 1'947'441 2'279'478 2'608'065 Proprietary power generation fell by 14%, or 75 GWh, to 466 GWh, accounting for 14% of the Group's pr ocurement needs over the Increases in EBITDA and EBIT Shareholders' equity as % of total assets 78% 81% 80% 85% 85% year, as a result of less supportive weather conditions than in In 2014, Group EBITDA rose by a solid 22.3%, or CHF 27m, to Shareholders' equity per share (in CHF) 1'680 1'903 1'774 2'077 2'376 2013. CHF 150m. Continued falls in electricity prices, coupled with reduced end- EBIT increased by an equally strong 36.5%, or CHF 25m, to Romande Energie Holding SA share price as at 31 Dec. (in CHF) 1'002 1'065 1'065 1'199 1'525 customer demand, resulted in a decline of 12.6%, or CHF 27m, in CHF 94m. total energy-purchasing costs to CHF 190m. Market capitalisation 1 028 616 1 093 290 1 169 185 1 316 293 1 674 185 Lower net financial income/expense Stable gross profit *EBITDA: earnings before interest, taxes, depreciation and amortisation The low degree of fluctuation on currency markets resulted in a **EBIT: earnings before interest and taxes Based on the above, gross profit rose by 11.3% to CHF 289m. profit on forward transactions slightly below CHF 1m vs. CHF 10m in 2013. The above financial data were prepared in accordance with the International Financial Reporting Standards (IFRS). Financial expenses slightly exceeded income, resulting in a net figure in the red at CHF -2 m.

36 Romande Energie Energie Group Group 2014 Financial review Review 2014 RomandeRomande Energie Energie Group Group Financial 2014 Financial Review review 2014 3737

Profit from associates tarnished by impairment Profit from other associates (CHF 5m) slightly mitigated the effects Stable ordinary dividend Outlook for 2015 Alpiq substantially wrote down the value of its assets in 2014, of impairment elsewhere. The Group's net share of profit or loss The Board of Directors will maintain its dividend policy, which has Uncertainty surrounding political questions and negotiations with responding to the continued drop in power prices since 2009. As a from associates for 2014 was CHF -243m. featured several increases over recent years. It will therefore be the EU are still having an impact o n the Swiss electricity market. result, Alpiq took an after-tax impairment charge of CHF 1bn to its seeking approval from shareholders at the AGM to pay an ordinary The Group is doing everything it can to prepare for the changes income statement. Net loss dividend of CHF 30 per share, unchanged from the 2013 financial ahead, especially the prospect of full market liberalisation. Consequently, EOS Holding reassessed the value of its equity inter- Despite solid gains in business profitability, the Group is forced to year. Economic woes in the EU are continuing to drag on business, as est in Alpiq, resulting in a further impairment charge of CHF 360m, report a net loss of CHF 147m for 2014 as a result of the above If this recommendation is adopted, total distribution in 2015 will be are low power prices - which are no showing signs of recovering which EOS Holding carried to its income statement for 2014. impairment charges. CHF 30.8m, taking into account the number of shares held in treas- in the near term. Faced with these developments, Romande Ene r- Based on EOS Holding’s interest in Alpiq (31.4%) and, in turn, R o- ury. gie Group will continue originating products and services, most mande Energie Group's interest in EOS Holding (29.7%), the nega- Equity attributable to the Group notably under the aegis of the new Energy Services business unit, tive impact of the Alpiq-related revaluations - after taking the Following the loss from associates, the shareholders' equity of Enterprise value which was founded on 1 January 2014. The Group also plans to

ordinary business of Alpiq and EOS Holding into account - amount- Romande Energie Group contracted by 12%, or CHF 233m, to Enterprise value, which is the total amount that shareholders and continue expanding its proprietary generation network both in FINANCIAL REVIEW ed to CHF -190m on the Group's income statement. CHF 1.7bn as at 31 December 2014. third parties have invested in the Group less cash and cash equiva- Switzerland and abroad by purchasing more companies and busi- Forces Motrices Hongrin-Léman SA (hereinafter FMHL) also suf- Market capitalisation amounted to CHF 1.1bn as at 31 December lents, was as follows as at 31 December 2014: ness assets. A milestone was reached with the acquisition of the fered from developments in the power industry during 2014. For 2014, which again was substantially below the carrying value of very first wind farm in France, on 2 September 2014, through the 2014, Romande Energie Group booked an impairment charge of equity. In CHF thousands 2014 2013 purchase of the company Ploudalmézau. CHF -58m. The financial independence ratio dipped to 78% at the end of 2014, The abandonment of the minimum exchange rate between the euro and the Swiss franc by the Swiss National Bank on 15 January compared with 81% at the end of 2013. Market capitalisation 1'028'616 1'093'290 2015 led to a surge in the exchange value of the Swiss franc, which Non-controlling interests 27'868 26'854 Share price in 2014 is the Group's reporting currency. This situation will have a nega- Financial liabilities 116'293 115'556 The registered share of Romande Energie Holding SA closed at tive impact on the translation of the financial statements of entities Less cash and cash equivalents (191'157) (329'864) CHF 1,002 on 31 December 2014, representing a decline of CHF 63 whose functional currency is the euro. It will also affect some relative to the previous year-end price (CHF 1,065). Enterprise value 981'620 905'836 positions on the balance sheet and income statement. Euro depre- Enterprise value/EBITDA 6.55 7.39 ciation offers the advantage of strengthening the Group’s competi- tive position in terms of open-market offers, to the benefit of its customers. Based on the picture in late March 2015, the Group's

operating profit is unlikely to be materially impacted. Barring exceptional items, the Group expects full-year operating

profits to be in line with 2014. VIEW

RE 1 250

122%

1 200 FINANCIAL

1 150

111%

1 100

1 050 100%

1 000

HREN SPI 950 89% 31.12.13 31.01.14 28.02.14 31.03.14 30.04.14 31.05.14 30.06.14 31.07.14 31.08.14 30.09.14 31.10.14 30.11.14 31.12.14

38 Romande Energie Energie Group Group 2014 Financial review Review 2014 RomandeRomande Energie Energie Group Group Financial 2014 Financial Review review 2014 3939

ROMANDE ENERGIE GROUP Consolidated comprehensive income statement as at 31 December 2014 CONSOLIDATED FINANCIAL STATEMENTS In CHF thousands Note 2014 2013

Net profit (loss) for the year (147'149) 67'922

Change in the fair value of hedging instruments and other changes 24 (461) 2'614 Consolidated income statement Tax effects 12 35 (204)

as at 31 December 2014 Fair-value adjustment to available-for-sale financial instruments (1'356) 1'136 FINANCIAL REVIEW Tax effects 12 105 (89) In CHF thousands, except per share amounts Note 2014 2013 Exchange difference (59) - Total other items reclassifiable subsequently to the income statement, net of Revenues 8 521'936 514'326 tax (1'736) 3'457 Other income 8 60'833 63'488 Net revenues 582'769 577'814 Fair-value adjustment taken in shareholders' equity of associates 29 (11'577) 13'506 Actuarial gains and losses relating to pension plan 26 (51'936) 40'780 Purchases of energy, goods and services 9 (293'300) (317'692) Taxes 12 10'881 (9'518) Gross profit 289'469 260'122 Total other items not reclassifiable subsequently to the income statement, net of tax (52'632) 44'768 Personnel expenses 10 (89'881) (91'319) Other operating expenses (49'722) (46'224) Comprehensive income for the year (201'517) 116'147 EBITDA 149'866 122'579 Attributable to Depreciation on property, plant and equipment 19, 20 (52'009) (50'168) Parent company shareholders (207'041) 112'527 VIEW Amortisation of intangible assets 21 (3'758) (3'494) Non-controlling interests 5'524 3'620 RE EBIT 94'099 68'917 (201'517) 116'147

The accompanying notes form an integral part of the financial statements. Financial income 11 2'057 12'304

Financial expenses 11 (3'963) (3'402) FINANCIAL Share of profit of associates 22 (243'332) 7'075 Profit before taxes (151'139) 84'894

Income taxes 12 3'990 (16'972) Net profit for the year (147'149) 67'922

Attributable to Parent company shareholders (152'673) 64'302 Non-controlling interests 5'524 3'620 (147'149) 67'922

Weighted average number of shares outstanding 1'026'563 1'028'964 Earnings per share (in CHF) 13 (149) 62

Dividend per share (proposed for 2014) 30 30

The accompanying notes form an integral part of the financial statements.

40 Romande Energie Energie Group Group 2014 Financial review Review 2014 RomandeRomande Energie Energie Group Group Financial 2014 Financial Review review 2014 4141

Consolidated balance sheet Consolidated cash flow statement as at 31 December 2014 as at 31 December 2014

In CHF thousands Note 31/12/14 31/12/13 In CHF thousands Note 2014 2013 ASSETS Group net (loss)/profit (147'149) 67'922 Current assets Cash and cash equivalents 14 191'157 329'864 Non-cash items Securities and term deposits 16 229'884 97'174 - Taxes 12 (3'990) 16'972 Trade accounts receivable 17 84'111 96'712 - Depreciation and impairment charge on property, plant and equipment 19, 20 52'009 50'168 FINANCIAL REVIEW Current taxes receivable - 2 - Amortisation and impairment charge on intangible assets 21 3'758 3'494 Other current assets 18 17'617 18'446 - Share of profit of associates 22 243'332 (7'075) Total current assets 522'769 542'198 - Net profit on sale of non-current assets 8 (866) (334) - Net financial income/expense 11 1'906 (8'902) Non-current assets - Increase in pension-plan liability 26 (1'141) (2'942) Property, plant and equipment 19 1'016'755 954'482 - Other non-cash items (6'998) 1'419 Investment property 20 2'409 2'584 Dividends received from associates 36'722 53'151 Intangible assets 21 26'991 25'076 Interest received and other financial income 816 865 Investments in associates 22 603'209 861'238 Interest paid and other financial expenses (2'996) (3'173) Other long-term financial assets 23 24'960 27'066 Taxes paid (7'334) (12'433) Deferred tax assets 12 15'092 3'965 Cash flows before change in working capital 168'069 159'132 Total non-current assets 1'689'416 1'874'411 Change in net current assets and other cash flows from operating activities 15 7'805 27'657 Total assets 2'212'185 2'416'609 Net cash provided by operating activities 175'874 186'789

LIABILITIES AND SHAREHOLDERS' EQUITY Purchase of property, plant and equipment, and intangible assets 19, 21 (109'194) (103'251) VIEW Current liabilities Sale of property, plant and equipment 1'480 1'101 RE Trade accounts payable 22'756 22'399 Acquisition of equity interests, net of cash and cash equivalents (11'113) (7'674) Other short-term liabilities and derivative financial instruments 24 107'747 123'701 Acquisition of shareholdings in associates (30'840) 812 Short-term portion of long-term borrowings 25 263 262 (Purchase)/Sale of investment securities and term deposits (132'745) (52'410)

Current taxes payable 4'255 - (Increase)/Decrease in other long-term financial assets 749 (14'214) FINANCIAL Short-term provisions 27 1'189 1'980 Net cash used in/provided by investing activities (281'663) (175'636) Total current liabilities 136'210 148'342 Increase in/(Repayment of) financial liabilities 5, 25 737 (262) Non-current liabilities Acquisition of own shares - (78'227) Dividend paid to non-controllling interests (2'901) (2'966) Long-term borrowings 25 116'030 115'294 Dividend paid to parent company shareholders (30'797) (27'717) Deferred tax liabilities 12 136'236 148'823 Net cash used in financing activities (32'961) (109'172) Liabilities resulting from defined-benefit pension plan 26 70'065 16'988

Long-term provisions 27 1'082 1'939 Net effect of exchange difference on cash and cash equivalents 43 27 Total non-current liabilities 323'413 283'044 Net change in cash and cash equivalents (138'707) (97'992) Total liabilities 459'623 431'386 Cash and cash equivalents at beginning of year 14 329'864 427'856 Equity attributable to parent company shareholders Cash and cash equivalents at end of year 14 191'157 329'864 Share capital 28 28'500 28'500 Additional paid-in capital 13'111 13'111 The accompanying notes form an integral part of the financial statements. Other reserves 29 (9'547) 3'707 Retained earnings 1'791'731 2'012'104 Own shares (99'101) (99'053) Total equity attributable to parent company shareholders 1'724'694 1'958'369 Non-controlling interests 27'868 26'854 Total shareholders' equity 1'752'562 1'985'223 Total liabilities and shareholders' equity 2'212'185 2'416'609

The accompanying notes form an integral part of the financial statements.

42 Romande Energie Energie Group Group 2014 Financial review Review 2014 RomandeRomande Energie Energie Group Group Financial 2014 Financial Review review 2014 4343

Consolidated statement of changes in shareholders' equity Notes to the consolidated financial statements

NOTE 1 NOTE 2 as at 31 December 2014 General information Summary of accounting policies Equity of parent company shareholders Romande Energie Holding SA, a holding company incorporated in Key accounting policies used in the preparation of the Group’s In CHF thousands Share Additional Other Retained Own Total Non- Total share Switzerland with its registered office in Morges, is the direct or consolidated financial statements are described below. Unless capital paid-in reserves earnings shares controlling holders' indirect owner of all the companies belonging to Romande Energie otherwise stated, these policies have been applied uniformly to all capital interests equity Group (the Group). The Group is active in four businesses related the comparative figures shown. to energy: electricity distribution, energy marketing, energy man- FINANCIAL REVIEW Note 28 29 agement and energy efficiency. Basis of presentation Balance at 1 January 2013 28'500 13'111 (9'184) 2'266'877 (19'826) 2'279'478 (661) 2'278'817 The mission of the distribution business is to manage the electrici- The Group's consolidated financial statements are presented in ty grid in the allotted coverage area and ensure access to the grid CHF thousands and have been prepared under the historical cost Change in shareholders' equity 2013 for end consumers. convention, with the exception of certain property, plant and Dividend paid to parent company The marketing business covers the supply of electricity to captive equipment, long-term financial assets, and financial instruments shareholders customers in the coverage area and to deregulated customers in that are measured at fair value. They comply with International (CHF 27 per share) (27'717) (27'717) (27'717) the whole of Switzerland. Administrative and energy services are Financial Reporting Standards (IFRS) issued by the International Acquisition/(Sale) of own shares 1'000 (79'227) (78'227) (78'227) also offered in association with this business activity. Accounting Standards Board (IASB) and the Reporting Standards Change in consolidation scope 4'345 4'345 4'345 Energy management comprises the Group's activities relating to set out below. Dividend paid to non-controlling the development and management of power generation. This unit The preparation of financial statements under IFRS involves esti- interests (2'966) (2'966) is furthermore responsible for the Group's "energy" portfolio. mates and assumptions which affect asset and liability amounts, Activities relating to energy efficiency were placed temporarily either reported or contingent, at the balance sheet date, and in- Net profit (loss) for the year 64'302 64'302 3'620 67'922 under the remit of the Finance Department until 31 December 2013. come and expense amounts for the period. Although the estimates Other comprehensive income 16'963 31'262 48'225 48'225 Since 1 January 2014, the Energy Services business unit has been are based on the best knowledge available to management regard- Comprehensive income (loss) for the marketing all of the services offered by the Group in the fields of ing the Group's present situation and future operations, actual year 16'963 95'564 112'527 3'620 116'147 building energy systems, lighting systems, advisory services and reported results may differ from what has been anticipated. Cases thermal systems. involving a high degree of judgement or complexity, and those VIEW Balance at 31 December 2013 28'500 13'111 3'707 2'012'104 (99'053) 1'958'369 26'854 1'985'223 The Group’s consolidated financial statements for 2014 were where the estimates and assumptions made have a significant RE adopted by the Board of Directors of Romande Energie Holding SA impact on the preparation of the financial statements are de- Change in shareholders' equity 2014 on 30 March 2015. They will be submitted for shareholder approval scribed in Note 3. Dividend paid to parent company at the Annual General Meeting on 26 May 2015. shareholders Standards and Interpretations published but not yet applicable FINANCIAL (CHF 30 per share) (30'797) (30'797) (30'797) The Group assesses the potential impact of both new and revised Acquisition/(sale) of own shares (48) (48) (48) reporting standards, the implementation of which is scheduled for Change in consolidation scope 2'505 2'505 2'505 subsequent financial years: Dividend paid to non-controlling - IAS 1 - Disclosure initiative (amendment), applicable from 2016 interests (2'901) (2'901) - IFRS 10 & 12 and IAS 28 – Investment entities (amendment), Other changes 1'706 1'706 (1'609) 97 applicable from 2016. - IFRS 9 – Financial instruments, applicable from 2018 Net profit (loss) for the year (152'673) (152'673) 5'524 (147'149) - IFRS 10 and IAS 28 – Sale or contribution of assets between an Other comprehensive income (13'254) (41'114) (54'368) (54'368) investor and its associate or joint venture (amendment), appli- Comprehensive income (loss) for the cable from 2016 year (13'254) (193'787) (207'041) 5'524 (201'517) - IAS 27 – Equity method in separate financial statements (amendment), applicable from 2016 Balance at 31 December 2014 28'500 13'111 (9'547) 1'791'731 (99'101) 1'724'694 27'868 1'752'562 - IFRS 15 – Revenue from contracts with customers, applicable from 2017 The accompanying notes form an integral part of the financial statements. - IAS 16 & 41 – Agriculture: bearer plants (amendment), applicable from 2016 - IAS 16 & 38 – Clarification of acceptable methods of depreciation and amortisation (amendment), applicable from 2016 - IFRS 11 – Accounting for acquisitions of interests in joint opera- tions (amendment), applicable from 2016 - IFRS 14 – Regulatory deferral accounts, applicable from 2016

44 Romande Energie Energie Group Group 2014 Financial review Review 2014 RomandeRomande Energie Energie Group Group Financial 2014 Financial Review review 2014 4545

In addition, the IASB published a compilation of improvements and Financial statements of associates are adjusted in order to ensure Foreign currency translation Accounting and valuation principles amendments to IFRS/IAS (September 2014). consistency with the Group's chosen accounting policies. Transactions in foreign currencies are translated into the func- The above changes are unlikely to have a material impact on the tional currency at the exchange rate in effect at the time of the Net revenues and revenue recognition Group's financial statements, except for the introduction of IFRS 9 transaction. Monetary assets and liabilities denominated in foreign Net revenues include all income from the sale of electricity, goods - Financial instruments. IFRS 9 may have an impact on the valua- Changes in scope currencies are translated at the year-end exchange rate. Differ- and services less VAT, rebates, discounts, other agreed deduc- tion and classification of financial assets. The scope of co nsolidation pertaining to Romande Energie Group ences in exchange rates resulting from these operations are tions as well as provisions for doubtful accounts and bad debt underwent the following changes in 2014: booked to the income statement. expense. Revenues are recognised when electricity is supplied, Standards, Amendments and Interpretations applicable as - On 18 June 2014, the share capital of Forces Motrices Hongrin - The Group uses options and forward contracts to hedge against goods are delivered and services are rendered. Customers’ me- from 2014 Léman S.A. was increased by CHF 70m to CHF 100m. Romande exchange rate risks. ters are read periodically. Amendments applicable starting in 2014 had no material impact on Energie SA participated in the amount of CHF 28.8m; its owne r- The financial statements of foreign entities whose functional cur- Many customers have their electricity consumption readings the Group's financial statements. ship interest remains unchanged. Capital raising was used to rency is not the Swiss franc are translated into Swiss francs using taken once a year; this applies to roughly half of all kWh supplied

fund an increase in the production output of an existing installa- the following procedure: by the Group. FINANCIAL REVIEW Principles of consolidation tion. - The balance sheets of foreign companies are converted at the Revenues include the estimated volume of energy consumed, but The closing date for individual financial statements every year is - On 23 June 2014, 2,600 shares in Forces Motrices de l’Avançon exchange rate prevailing at the end of the reporting period. not yet billed, between the date of the last meter reading and the 31 December. SA were purchased by the Group for CHF 2.0m, raising its hol d- - The income and cash-flow statements of these companies are end of the accounting period. ing by 10.99% to 38.98%. As at 31 December 2014, the Group converted at the average exchange rate for the reporting period. Investment dividends are accounted for when the right to distribu- Subsidiaries held 9,218 shares. Its share of voting rights was 37.23%. - Any exchange differences resulting from the conversion of tion has been clearly ascertained. The Group's consolidated financial statements comprise the op- - On 9 July 2014, Energie Renouvelable Vouvry SA was founded. It foreign companies' financial statements are taken to equity un- Equipment charges collected from customers when they are con- erations of Romande Energie Holding SA and those of directly and is 35% owned by the Group. The object of this company is gener- der "Exchange difference". nected to the grid are recognised as income when the connection indirectly owned subsidiaries through which the Group is exposed ating power by harnessing watercourses in the municipality of is installed. to or has a claim on returns from its equity interest, and where the Vouvry, building reservoirs and related installations, and devel- 2014 2013 Group is able to influence such returns by its power over the com- oping a full range of businesses in the renewable energy sphere. Personnel expenses and pension plan pany. In general, this power is determined by the Group controlling The company has a share capital of CHF 0.1m. The Group’s liabilities arising from a defined-benefit plan and the Exchange rates used at year-end more than 50% of voting rights. The main subsidiaries are listed in - On 2 September 2014, the Group fully acquired the company cost of services rendered during the financial year are measured Note 35. They are consolidated from the date on which control is Ploudalmézau-Breiz Avel 01 SAS. The object of the company is 1 euro 1.202 1.225 using the projected unit credit method. Actuarial gains and losses transferred to the Group, but are excluded from the scope of co n- managing a wind farm in Ploudalmézeau, in the administrative arising from the pension plan are recognised in full by an entry to solidation as soon as such control ceases. Average monthly exchange rates used department of Finistère, Brittany (France). It has a share capital the comprehensive income statement in the period in which they All intercompany balances, transactions and profits are eliminated of EUR 0.6m. The acquisition was transacted on the basis of the for the consolidated income and cash are incurred. They are also recognised in retained earnings and flow statements on consolidation. market price of the shares, amounting to a total of EUR 6.5m. As are not reclassified to the income statement in subsequent years. VIEW 1 euro 1.215 1.231 Non-controlling interests in shareholders’ equity and net profit are the company is comprised solely of wind-power installations, Costs relating to the provision of pension benefits are booked to RE shown separately. the capital assets could be revalued to EUR 9.5m on the basis of the income statement in the period in which they are incurred. Net the company's value at the acquisition date (fair value under lev- interest is calculated by applying the discount rate to the net pen- Associates and joint ventures el 3), using a capitalisation rate of 5.5%. No goodwill, positive or sion asset (liability). Pension-related costs are divided into three A joint venture is a joint arrangement whereby the parties that otherwise, was recognised in the Group's financial statements. categories: FINANCIAL have joint control of the arrangement have rights to the net assets - On 23 December 2014, the share capital of Romande Energie - Service costs after employee contributions of the arrangement. France SAS was increased by EUR 4.6m to EUR 7.7m. This tran s- - Interest Associates and jointly controlled entities over which the Group action was used to fund purchase of the company Ploudalmé- - Administrative expenses exerts a significant influence and of which it has joint control zau-Breiz Avel 01 SAS. Gains and losses arising from revised assumptions are booked to (normally between 20% and 50% of voting rights) are accounted the comprehensive income statement. for using the equity method. These holdings are carried on the balance sheet as investments in associates and are initially recog- Impairment of property, plant and equipment and intangible nised at cost and adjusted thereafter for the Group’s share of assets retained earnings or losses after the acquisition date and any At each financial year-end, an impairment review is carried out in impairment charges. If the Group does not exert a significant influ- order to identify any factors indicating a loss in value of an asset. A ence over a company despite holding more than 20% of its s hares, loss in value is immediately recognised if the book value of an the company is treated as a long-term financial asset. asset is higher than its estimated recoverable value. Goodwill is Any impairment is recognised directly through profit and loss. tested for impairment at least once a year. Losses incurred by an associate that exceed the Group’s stake in The recoverable amount is defined as the higher of an asset’s net that company are not recognised. selling price and its value in use. When a change in net assets of an associate is booked directly to Value in use is the discounted present value of estimated future its equity, the Group’s portion of the change is recognised under cash flows expected to be derived from this asset or the smallest comprehensive income and shown separately. identifiable group of assets to which it belongs, and whose con- Balances and material transactions with investees and jointly tinuing use generates cash inflows which are independent of those controlled entities accounted for using the equity method are arising from other assets or groups of assets. Consequently, the shown separately as items relating to associates. Group must assess the overall economic conditions expected Unrealised gains arising from transactions between Group com- during the useful life of its assets. These estimates may diverge panies and associates are eliminated in proportion to the Group’s considerably from the actual values. stake in the associate. Unrealised losses are eliminated in the same way, unless the transaction involves a transfer of assets requiring an allowance for impairment.

46 Romande Energie Energie Group Group 2014 Financial review Review 2014 RomandeRomande Energie Energie Group Group Financial 2014 Financial Review review 2014 4747

Cash and cash equivalents liabilities. Property, plant and equipment Provisions Cash and cash equivalents comprise cash at banks and in postal No borrowing costs were capitalised either in 2014 or 2013. Land, buildings, machinery and equipment are recorded at cost Provisions consist of liabilities whose outcome, expiry or amount accounts, as well as money -market deposits and investments less accumulated depreciation. Leasehold improvements are are uncertain. They are recorded when the Group is under a legal with an initial term of 90 days or less. Long-term financial assets depreciated over their estimated useful life or the remaining term or implicit obligation arising from a past event, when it is probable Investments in companies in which the Group holds less than 20% of the lease, whichever is shorter. Repairs and maintenance of that an outflow of funds will be necessary to discharge the oblig a- Trade accounts receivable of voting rights or over which it does not exert a significant infl u- rented buildings are charged directly to the income statement, tion and when the amount of the obligation can be reliably estimat- Trade accounts receivable are recorded at nominal value less an ence or have joint control, are taken to the balance sheet at cost while major renovations and refurbishments are capitalised as ed. The provision amount is estimated by the Executive Board at adjustment for doubtful accounts. A provision for doubtful ac- and subsequently carried at fair value. Changes in fair value are property, plant and equipment and depreciated over their estimat- the balance sheet date on the basis of the best possible estimate of counts is made when there are objective signs that the Group will recorded in the comprehensive income statement and reclassified ed useful economic life. the expenditure required to settle the obligation. If an outflow of not be able to recover its receivable. A debtor’s financial difficul- to the income statement when the asset is sold or subject to i m- Depreciation is calculated using the straight-line method based on funds is not likely or the amount cannot be reliably estimated, the ties, default or overdue payment are considered as reliable indica- pairment. the shorter of the remaining term of the concessions and the esti- obligation is shown not on the balance sheet but under contingent

tors for booking a valuation allowance on the receivable. The Loans issued are carried at amortised cost less any impairment mated useful life of the asset, as follows: liabilities. If the impact is significant, the cash flows expected in FINANCIAL REVIEW Group issues a lump-sum provision for accounts which are more due to non-recoverable amounts. order to discharge the obligation are discounted. The provision is Useful life in years than 180 days overdue. This provision is made on the basis of discounted at the current market rate, which is increased if ne c- historical loss and represents 75% of receivables overdue by Own shares Group premises 20-40 essary by a rate reflecting the risks inherent in the liability. more than 180 days. Losses on this position are booked to the In the case of purchases of own shares, the total amount paid and Investment property 20-40 provision account. Losses on accounts receivable are recognised the costs directly related to the transaction (net of income tax) are Taxes (incl. deferred taxes) Power plants 25-80 on the basis of receiving orders and bank ruptcy adjudications or deducted from the Group’s equity until the cancellation or later sale Current taxes are determined on the basis of taxable income for any other document which can establish the debtor’s default. of the securities. If own shares are sold, the proceeds from the Electricity distribution grids 15-40 the year and are charged to the income statement. sale, net of transaction costs (but including the tax effect of income Income taxes are recorded in the same period as the revenues and Financial instruments (incl. borrowings) and derivatives tax), are allocated to the Group’s equity. Machinery, equipment, installations and tools 6-15 expenses to which they relate. Financial instruments are recognised as assets or liabilities on the Vehicles 3-8 Deferred taxes are calculated using the asset and liability method, balance sheet as soon as the Group enters into contracts involving IT hardware 3-8 i.e. based on the timing differences between the value of assets these instruments. and liabilities recognised by the tax authorities and their book value Investment securities consist of marketable equities and bonds, Land is only depreciated in the event of a loss in value, or if it is recorded in the consolidated financial statements. and money-market investments with an initial term of more than handed back in connection with the expiry of a concession con- The amount of the provision for deferred taxes is determined on 90 days. They are carried on the income statement at fair value. the basis of known tax rates at the balance sheet date which are tract. Derivative financial instruments are carried at fair value; resultant Equipment under development is treated as a fixed asset and writ- likely to be applied when the timing differences are eliminated. profits and losses are booked to the income statement. ten down beginning in the month it is brought into service. Loss carry-forwards deductible from future taxable income and VIEW

Forward contracts for purchases of energy with physical delivery If the Group has to dismantle power plants or other fixed assets other deferred tax assets are only recorded as assets if it appears RE are excluded from the scope of IAS 39. These contracts are con- and recondition the property owned by third parties on which the probable that they will be realised later. cluded as part of the Group’s normal operations. This is the case as assets are located, the estimated cost of such work is added to the soon as the following conditions are met: initial cost at the acquisition date and written down over the useful - Energy is physically delivered. economic life of the assets. FINANCIAL - The contracts are not sales of options within the meaning of the standard. Investment property Conversely, forward energy-purchase contracts entered into for Assets held with a view to obtaining a return or enhancing the the purposes of energy portfolio optimisation, or which are used value of the capital are considered as investment property. for optimisation at a later date, are treated as financial instru- Investment property is carried at cost after deduction of accumu- ments and measured at fair value. Valuation differences are car- lated depreciation. It is written off over a period of 20 to 40 years ried to the income statement at the time of recognition. using the straight-line method. As from 1 January 2012, the Group has been using hedge account- ing. Forward purchase contracts on currencies are designated as Intangible assets and goodwill cash flow hedges and serve to protect future transactions deemed The excess cost over the fair value of the acquired business assets as highly likely. is entered on the balance sheet as goodwill. Goodwill is deemed to Valuations of hedging instruments are documented at the inception have an unlimited life and undergoes an impairment review every of the hedging arrangement and continuously thereafter. The year, or more frequently if events or changes in circumstances Group determines whether a hedging arrangement has has indicate a possible loss in value. The review is based on an as- properly offset fluctuations in the hedged item or not. The portion sessment of future economic benefits. of the profit or loss realised on a hedging instrument deemed ef- Other intangible assets are valued at cost and amortised using the fective is taken directly to shareholders' equity. The ineffective straight-line method over their estimated useful life as follows: part is booked to the income statement for the period. - Concessions: duration of the concession - Customers: until the electricity market is completely deregu- Borrowings lated Borrowings are initially accounted for at fair value, adjusted for - Software: 5 years directly chargeable transaction costs. Subsequently, they are An impairment review is carried out where there are indications valued at amortised cost using the effective interest rate method. that the recoverable amount may be less than the carrying Borrowings or tranches of borrowings carrying an irrevocable amount. right to defer repayment for longer than 12 months are classified under non-current liabilities; all others are booked to current

48 Romande Energie Energie Group Group 2014 Financial review Review 2014 RomandeRomande Energie Energie Group Group Financial 2014 Financial Review review 2014 4949

Earnings per share NOTE 3 NOTE 4 NOTE 5 Earnings per share are calculated by dividing net income by the Critical valuation factors Disposals, business combinations and other Financial risk management weighted average number of parent company (Romande Energie Holding SA) shares outstanding. This indicator is shown before and important transactions after all potentially dilutive effects. Estimates and assumptions are continuously assessed and are based on experience along with other factors, such as the likeli- Acquisitions in 2014 Information on risk management Dividends hood that certain events will take place given the circumstances. As in 2013, the Group did not make any significant acquisitions or The Group has appointed committees to manage specific risks Dividends are recorded in the consolidated financial statements disposals. Smaller changes to the scope of consolidation are d e- such as those associated with electricity procurement. The work Occupational pensions once they have been approved by shareholders at the Annual tailed under Note 2. of these committees as well as risk management processes are General Meeting. Pension obligations arising from defined-benefit plans are calcu- coordinated by a risk manager, whose objective is to ensure that lated using actuarial assumptions that may diverge from reality risks are systematically identified, assessed, controlled and moni- and influence the Group’s assets and profits. As at 31 December Related parties tored. The risk manager reports directly to the Group's finance FINANCIAL REVIEW Related parties are considered to be Vaud Canton, the Romande 2014, liabilities arising from the pension plan totalled CHF 70.1m executive. Energie pension fund, members of the Board of Directors and the (2013: CHF 17.0m). Twice a year, a detailed analysis of the most significant risks is companies with which they are affiliated, members of the Group presented to the Board of Directors. This analysis comprises a Executive Board, and associates. Related parties are supplied with Valuation adjustment of property, plant and equipment, description of the risks and the measures taken to mitigate them. intangible assets and goodwill energy on terms comparable to those for customers who meet the same criteria. Vaud Canton collects fees for the use of hydropo w- The carrying value of property, plant and equipment, and intangible Risk exposure assets and goodwill, was CHF 1,046.2m (2013: CHF 982.1m). An er. The Group is exposed to market risks which derive mainly from impairment review is carried out annually or whenever there are energy prices, exchange rates and interest rates, as well as credit indications of a loss in value. These reviews are made on the basis Discontinued operations and non-current assets available for and liquidity risks. Management monitors these risks on a regular sale of estimated future cash flows resulting from the use and probable basis. Non-current assets or asset groups available for sale are valued sale of assets. However, actual cash flows may differ significantly The Group carries out transactions in derivative instruments – at the lower of carrying value or fair value less expenses relating from initial estimates. mostly interest rate swaps and forward exchange contracts – in to their sale. Non-current assets are classified as available for order to reduce the risks associated with interest rates on bor- sale if their book value is recovered mainly by selling them, rather Investments in associates rowings and with foreign currency transactions conducted in the than by using them. These conditions are met if the asset is availa- This item mainly consists of the interest in EOS Holding SA (29.7%), course of its operations. ble for sale immediately and if the sale is highly likely. which in turn owns 31.4% of Alpiq. It is sensitive both to changes in The Group does not enter into financial transactions if they involve Non-current assets designated as available for sale are no longer the euro exchange rate and energy prices on the wholesale mar- risks that cannot be estimated on their expiry date. The Group VIEW subject to depreciation or amortisation. ket. Alpiq is a company active on the international market. therefore does not engage in transactions without holding the RE underlying assets and liabilities. Hedging is only used where there Net revenues is a high probability that assets and existing or contingent liabilities A large proportion of energy revenues is generated by residential will be realised. customers, who are invoiced annually on the basis of meter rea d- FINANCIAL ings taken throughout the year. The revenue received between the Energy supply risk date of the last reading and 31 December is booked on the basis of The Group is exposed to market-price fluctuations for all the ener- the energy distributed and valued at an average price less the gy it does not generate itself, i.e. around 86% of total require- estimated grid losses. The figure thus obtained may differ from the ments. It therefore concludes long-term procurement agreements actual values. on prices and volumes with selected partners. The agreement with the longest term runs until 2020. Added to the right of purchase described in Note 33, these contracts cover practically all energy requirements based on estimated 2015 consumption The remainder of the Group's procurement is covered by forward purchases on the European Energy Exchange (EEX), following the terms of the procurement strategy and in compliance with the risk-management policy. Through these purchases, the Group endeavours to hedge total estimated requirements for the next 24 months as a way of mitigating uncertainty relating to the price of electricity. Final portfolio adjustments are conducted on the spot market, in accordance with actual customer demand and output from the Group's own generation facilities. Higher demand for electricity on the European market has led to congestion of cross-border transmission systems. Depending on the strength of demand, interconnection capacities at national frontiers are auctioned. The amount by which these auctions can push up the cost of energy purchases is impossible to estimate and can fluctuate sharply from one year to the next. No auctions were conducted in 2014, compared with a cost outlay of CHF 5m in 2013.

50 Romande Energie Energie Group Group 2014 Financial review Review 2014 RomandeRomande Energie Energie Group Group Financial 2014 Financial Review review 2014 5151

Exchange-rate risk Interest-rate risk Liquidity risk Risks relating to exchange rates chiefly arise from energy pur- Exposure to interest-rate risk is essentially due to borrowings by Liquidity risk is the risk that the Group will be unable to honour its chases on EEX, most of which are denominated in euros. The the Group and the short- and medium-term investments with commitments as they fall due. The treasury department is respon- Group uses forward and options contracts to hedge currency risk. financial institutions. On a pre-tax basis, the impact on the 2014 sible for cash flow and financing procedures. Liquidity and financ- Until 31 December 2011, gains and losses were booked to the in- income statement of an increase or decrease of 50 basis points ing risks are continually monitored by the Executive Board at come statement. This method also applies to all hedging transa c- was CHF 0.9m, compared with CHF 1.0m in 2013. There was no Group level. The Group has sufficient cash resources to meet all tions performed before 1 January 2012. As from 1 January 2012, effect on shareholders’ equity. commitments on their maturity dates. the Group has been using hedge accounting. As at 31 December The table below gives the repayment schedule for the Group’s 2014, a charge of less than CHF 1m (2013: CHF 2.6m) was reco g- Other price-related risks commitments (including interest). nised directly in equity. The ineffective part of hedging arrange- The Group is exposed to price r isks on securities connected with ments, charged to the income statement, was immaterial. investments in financial holdings. These investments are held for Below 1 1-3 1-5

If a forecast transaction or firm commitment is no longer likely to strategic rather than for trading purposes. The Group does not In CHF thousands month months 3-12 months years Over 5 years Total FINANCIAL REVIEW be performed, sums previously booked under equity are then have any material exposure to fluctuations in securities prices. carried to the income statement. Any such fluctuations are recognised in equity. 31 December 2014 Hedge accounting is no longer used if a hedging instrument lapses, is sold, is exercised or no longer fulfils conditions as a hedging Credit risk Financial liabilities 2'601 14'252 114'896 131'749 arrangement. The resulting valuation differentials under equity are Credit risk is managed centrally for the whole Group. It concerns Trade accounts payable 19'034 3'577 36 109 22'756 kept noted separately until the transaction connected with the the possibility that counterparties may not be able to honour their Other payables 23'867 41'383 41'146 1'351 107'747 hedged item is performed. commitments. Total 42'901 44'960 43'783 15'712 114'896 262'252 All else being equal, the impact of +/10% change in the exchange Customer-related risk is limited by the large number of custom- rate is CHF 9m for the income statement ( versus CHF 12m in 2013) ers, virtually all of whom are located in Switzerland. Receivables and CHF 8 million in terms of equity (versus CHF 3m in 2013). are monitored on a monthly basis (see Note 17). The Group does Derivative financial instruments not have significant exposure to any individual counterparty. The Forward currency purchases 2'103 1'436 9'984 90'399 19'291 123'213 risk associated with other financial instruments such as cash and cash equivalents, derivative financial instruments and deposits with financial institutions is managed by adhering to the Group’s 31 December 2013 in-house treasury policy and regulations. Investments are placed only with top-tier financial institutions that Financial liabilities 2'563 10'252 120'459 133'274 comply with strict selection criteria. The maximum risk on this Trade accounts payable 17'928 4'150 174 147 22'399 VIEW RE position is equal to the carrying value of the financial instruments. Other payables 30'474 47'061 44'743 1'423 123'701 Total 48'402 51'211 47'480 11'822 120'459 279'374

Derivative financial instruments FINANCIAL Forward currency purchases 5'325 4'024 36'125 63'864 37'200 146'538

5252 Romande Energie Energie Group Group 2014 Financial review Review 2014 RomandeRomande Energie Energie Group Group Financial 2014 Financial Review review 2014 5353

Information on financial assets and liabilities The following table provides an analysis of financial instruments accounted for at fair value, classified by level according to the degree of subjectivity regarding the criteria used to determine that fair value: Financial assets Financial assets at Available for sale Loans and Total - Level 1: Fair value corresponds to the price quoted on an active market. fair value through receivables - Level 2: Fair value is determined in accordance with indications other than the quoted prices mentioned in level 1. income statement - These indications are mainly obtained from data observable on the market or by other means. In CHF thousands Note 2014 2013 2014 2013 2014 2013 2014 2013 - Level 3: Fair value corresponds to a technical measurement comprising factors that are not based on observable market data.

Cash and cash equivalents 14 191'157 329'864 191'157 329'864 Level 1 Level 2 Level 3 Total Securities and term deposits In CHF thousands Note 2014 2013 2014 2013 2014 2013 2014 2013 - marketable bonds 16 29'884 7'174 29'884 7'174 Financial assets - term deposits 16 200'000 90'000 200'000 90'000

Marketable bonds 16 29'884 7'174 29'884 7'174 FINANCIAL REVIEW Trade accounts receivable 17 84'111 96'712 84'111 96'712 Derivative financial instruments 18 2'531 4'182 4'221 4'248 6'752 8'430 Other current assets Total financial assets 32'415 11'356 4'221 4'248 36'636 15'604 - derivative financial instruments 18 6'752 8'430 6'752 8'430 - miscellaneous receivables 18 1'604 1'657 1'604 1'657 Financial liabilities Other long-term financial assets Derivative financial instruments 24 4'674 11'293 4'674 11'293 - miscellaneous financial investments 23 12'343 13'575 12'343 13'575 Total financial liabilities 4'674 11'293 4'674 11'293 - loans to associates 23 12'408 13'271 12'408 13'271 - loans to third parties 23 209 220 209 220 Total 36'636 15'604 12'343 13'575 489'489 531'724 538'468 560'903 Derivative financial instruments Derivative financial instruments reflect the valuation of forward exchange contracts as well as measurements of forward energy-purchasing Financial liabilities Financial liabilities Other financial Total contracts designated for optimisation purposes. at fair value through liabilities Amount of contracts Positive fair value Negative fair value income statement In CHF thousands 2014 2013 2014 2013 2014 2013

2014 2013 2014 2013 2014 2013 Forward currency contracts 63'418 112'084 2'068 1'634 Trade accounts payable 22'756 22'399 22'756 22'399 FX forward contracts (hedge acc.) 59'795 34'454 2'153 2'614 VIEW RE Other short-term liabilities Forward power-purchasing agreements (portfolio optimisation) 22'076 47'182 2'531 4'182 4'674 11'293 - derivative financial instruments 24 4'674 11'293 4'674 11'293 Total derivative financial instruments 145'289 193'720 6'752 8'430 4'674 11'293 - current accounts with partners 24 563 (256) 563 (256)

- miscellaneous short-term liabilities 24 90'908 103'146 90'908 103'146 In 2014, the measurement of forward currency contracts resulted in recognition of a financial gain of CHF 0.4m (2013: CHF 10.4m). FINANCIAL Short-term portion of borrowings 25 263 262 263 262 The Group buys and sells power using forward agreements as a means of optimising its portfolio. As these transactions are not connected to Long-term portion of borrowings 25 116'030 115'294 116'030 115'294 deliveries to end-customers, they are measured at fair value. Any change in fair value is booked in the year of occurrence. Total 4'674 11'293 230'520 240'845 235'194 252'138 Since 2012, hedge accounting has been in place for EUR/CHF financial instruments linked to purchases of energy for own use by Group Assets and liabilities not measured at fair value (loans and receivables, and other financial liabilities) can be customers. As at 31December 2014, the total value of hedging instruments was CHF 59.8m (CHF 34.5m in 2013). Fair-value adjustments taken to approximately estimated to be worth their carrying value. equity were CHF 0.5m (CHF 2.6m in 2013).

54 Romande Energie Energie Group Group 2014 Financial review Review 2014 RomandeRomande Energie Energie Group Group Financial 2014 Financial Review review 2014 5555

NOTE 6 NOTE 7 Capital management Segment reporting The principal aim of capital management is tomaintain the ability toraise funds in order to ensure continuity of operations and maximise enterprise value. Operating segments are determined based on the business units, On 1 January 2014, Romande Energie Group set up a new bus i- ness unit, Energy Services. For comparison purposes, 2013 The Group monitors indebtedness using the gearing ratio, which corresponds to net debt divided by equity + net debt. which are required to submit regular reports to the Management Committee. figures have been restated to take this change into account. This business unit is responsible for marketing all of the services In CHF thousands 2014 2013 The Group is currently organised into the following four business offered by the Group in the fields of building energy systems units: (heat pumps, solar thermal energy and photovoltaic energy), Financial liabilities 116'293 115'556 • Marketing lighting systems (public lighting and illumination), thermal advi- Less cash and cash equivalents (191'157) (329'864) • Networks sory services and systems (heating solutions for companies and FINANCIAL REVIEW Less securities and term deposits (229'884) (97'174) • Energy municipalities, advisory service and energy audits). It houses Net debt / (Net cash) (304'748) (311'482) • Energy Services operations that were previously part of other business units, such as the aforementioned energy-efficiency business, along- Shareholders' equity 1'724'694 1'958'369 These four business units are managed as separate entities even side new services. Gearing ratio -17.7% -15.9% though they all engage in energy-related activities. As the Group operates almost exclusively in Switzerland, geographical areas Transactions between business units are carried out at a price have not been taken into account. close to market prices, except for activities where transfer

prices are determined by law.

The Marketing business unit is responsible for electricity sales, ancillary services (invoicing, call centre, etc.) as well as prod- The same accounting principles are applied in all the business ucts and services embracing all customer categories, such as units. The Group has no single client accounting for more than energy audits and public lighting systems. This business unit 10% of revenues. procures power from the Energy business unit. Virtually all operations in this business unit are housed within Romande Operating assets of each business unit mainly consist of proper- Energie Commerce SA, a subsidiary in which the Group has a ty, plant and equipment, trade accounts receivable and other shareholding of 66.7%. receivables. Operating liabilities primarily comprise trade ac- counts payable and other payables. The Networks business unit (known as Distribution until the end VIEW of 2013) aims to provide high -quality power transmission in The various support services within the Group come under the RE accordance with prevailing standards. For this purpose, it is Corporate division. This encompasses Finance, Human Re- entrusted with the maintenance and development of the elec- sources, the Corporate Secretary's Office and Corporate Com- tricity distribution grid. Most of this business unit’s operations munications. Expenses attributable to the Corporate division are are subject to regulation. Its revenues chiefly consist of the costs incurred in connection with the activities of the Group’s FINANCIAL remuneration received for making the grid available to end cus- head office. Income and expenditure that cannot be allocated to a tomers and resellers. This remuneration is governed by the specific business unit are also booked under this heading. Assets provisions of the Electricity Supply Act. and liabilities mostly comprise cash and cash equivalents, in- vestments in associates, and financial liabilities. The main tasks of the Energy business unit consist of reliable pow- er supply to customers managed by Romande Energie Commerce Segment reporting is based on IFRS. SA, energy portfolio management, hydropower generation, and the development and generation of power using novel renewable sources and gas.

56 Romande Energie Energie Group Group 2014 Financial review Review 2014 RomandeRomande Energie Energie Group Group Financial 2014 Financial Review review 2014 5757

Reporting by operating segment for 2014 Reporting by operating segment for 2013 (restated)

In CHF thousands Marketing Networks Energy Energy Corporate Eliminations Total In CHF thousands Marketing Distribution Energy Energy Corporate Eliminations Total Services Services

Net revenues from third parties 241'356 268'802 49'625 17'854 5'132 582'769 Net revenues from third parties 276'799 246'049 34'390 17'792 2'784 577'814 Net revenues from other units 10'473 2'587 221'692 1'892 44'626 (281'270) Net revenues from other units 19'505 4'564 261'229 2'246 43'483 (331'027) Net revenues of business units 251'829 271'389 271'317 19'746 49'758 (281'270) 582'769 Net revenues of business units 296'304 250'613 295'619 20'038 46'267 (331'027) 577'814

Purchases of energy, goods and services (213'371) (88'979) (200'106) (6'590) (3'874) 219'620 (293'300) Purchases of energy, goods and services (263'845) (79'635) (233'463) (6'960) (239) 266'450 (317'692)

Gross profit 38'458 182'410 71'211 13'156 45'884 (61'650) 289'469 Gross profit 32'459 170'978 62'156 13'078 46'028 (64'577) 260'122 FINANCIAL REVIEW

Personnel expenses (11'903) (44'023) (5'386) (9'591) (18'978) (89'881) Personnel expenses (10'284) (44'341) (6'827) (10'237) (19'630) (91'319) Other operating expenses (12'332) (41'018) (25'510) (5'899) (26'613) 61'650 (49'722) Other operating expenses (12'943) (41'806) (23'723) (4'471) (27'858) 64'577 (46'224) EBITDA 14'223 97'369 40'315 (2'334) 293 149'866 EBITDA 9'232 84'831 31'606 (1'630) (1'460) 122'579

Depreciation and amortisation (19) (37'379) (10'753) (263) (7'353) (55'767) Depreciation and amortisation (36'610) (9'525) (247) (7'280) (53'662) EBIT 14'204 59'990 29'562 (2'597) (7'060) 94'099 EBIT 9'232 48'221 22'081 (1'877) (8'740) 68'917

Financial income 2'057 2'057 Financial income 12'304 12'304 Financial expenses (3'963) (3'963) Financial expenses (3'402) (3'402) Share of profit of associates (243'332) (243'332) Share of profit of associates 7'075 7'075 Taxes 3'990 3'990 Taxes (16'972) (16'972) Net profit 14'204 59'990 29'562 (2'597) (248'308) (147'149) Net profit 9'232 48'221 22'081 (1'877) (9'735) 67'922

Operating assets 64'790 730'815 264'633 4'065 1'132'790 2'197'093 Operating assets 80'226 805'033 175'992 4'152 1'347'239 2'412'642

Assets unattributable to a segment 15'092 VIEW Assets unattributable to a segment 3'967 Total assets 64'790 730'815 264'633 4'065 1'132'790 2'212'185 RE Total assets 80'226 805'033 175'992 4'152 1'347'239 2'416'609 Operating liabilities 20'566 44'562 57'382 3'892 122'665 249'067 Liabilities unattributable to a segment 210'556 Operating liabilities 34'304 50'991 57'735 2'124 120'420 265'574

Liabilities unattributable to a segment 165'812 FINANCIAL Total liabilities 20'566 44'562 57'382 3'892 122'665 459'623 Total liabilities 34'304 50'991 57'735 2'124 120'420 431'386

Investments Property, plant and equipment 835 59'984 33'155 407 12'850 107'231 Investments Intangible assets and goodwill 18 1'101 (9) 853 1'963 Property, plant and equipment 86'921 12'881 197 2'556 102'555 Total investments 853 61'085 33'155 398 13'703 109'194 Intangible assets and goodwill 2'154 696 2'850 Total investments 86'921 15'035 197 3'252 105'405

58 Romande Energie Energie Group Group 2014 Financial review Review 2014 RomandeRomande Energie Energie Group Group Financial 2014 Financial Review review 2014 5959

NOTE 8 NOTE 10 Net revenues Personnel expenses In CHF thousands 2014 2013 In CHF thousands 2014 2013

Energy revenues 274'736 289'737 Compensation 69'442 68'600 Grid usage revenues from own distribution grid 151'571 146'161 Social insurance and pension costs 15'795 17'582 VHV grid usage revenues and off-grid revenues 34'957 29'634 Other personnel expenses 4'644 5'137 Reinvoiced dues, system services and Swissgrid 43'251 35'045 Total personnel expenses 89'881 91'319 Transfers of assets and contributions from clients 17'421 13'749 Total revenues 521'936 514'326 Total headcount as at 31 December (full-time equivalents) 673 673 FINANCIAL REVIEW

Other income 40'800 40'841 Internally generated asset additions 19'310 20'116 Net income from disposal of fixed assets 866 334 NOTE 11 Change in guarantees, losses on bad debts and provision for onerous contracts (143) 2'197 Net financial income Total other income 60'833 63'488 In CHF thousands 2014 2013 Net revenues 582'769 577'814 Change in fair value of financial instruments 435 10'426 Income from selling power tothe Swiss Confederation (Swissgrid)according tothe compensatory feed-in remuneration (CFR) systemwas Other financial income 1'622 1'878 previously shown under other income. As a consequence of the development of this type of operation in recent years, this income must Total financial income 2'057 12'304 nowbe classified as energy revenues. Income stemming from compensatory feed-in remuneration amounted to CHF 10.0m compared with CHF 7.1m in 2013. Figures for 2013 have been restated to reflect this change. Interest on borrowings, mortgages and bank debts (2'626) (2'789) Other financial expenses (1'337) (613)

Total financial expenses (3'963) (3'402) NOTE 9 VIEW Net financial income (expense) (1'906) 8'902 RE Purchases of energy, goods and services In CHF thousands 2014 2013

Energy purchases 190'280 217'697 FINANCIAL FINANCIAL HV & VHV grid usage costs and off-grid costs 45'014 49'031 Grid dues, system services and Swissgrid 42'711 34'495 Concessions and fees 6'838 7'278 Other purchases 8'457 9'191 Total purchases of energy, goods and services 293'300 317'692

In 2014, energy purchases comprised the change in fair value of forward energy-purchase contracts relating to the optimisation portfolio, reflecting a net gain of CHF 5.6m (CHF 0.5m in 2013).

60 Romande Energie Energie Group Group 2014 Financial review Review 2014 RomandeRomande Energie Energie Group Group Financial 2014 Financial Review review 2014 6161

NOTE 12 Deferred taxes Income taxes and deferred taxes In CHF thousands Property, plant Pension Investments in Other assets, Total and equipment obligations associates and provisions and Income taxes other intangible accrued and In CHF thousands 2014 2013 assets prepaid items Profit before taxes (151'139) 84'894 Deferred tax assets at 1 January 2014 3'965 3'965 Expenses for current income taxes 8'661 14'966 Deferred tax liabilities at 1 January 2014 (125'267) (12'349) (11'207) (148'823) (Revenues)/expenses for deferred taxes (12'651) 2'006 Net deferred taxes at 1 January 2014 (125'267) 3'965 (12'349) (11'207) (144'858) Total expenses (rebate) for income taxes (3'990) 16'972 Booked to the income statement 8'054 246 1'930 2'421 12'651 FINANCIAL REVIEW Analysis of tax rate Booked to comprehensive income statement 42 10'881 105 35 11'063 The main differences between the weighted average tax rate and the effective tax rate are as follows: Net deferred taxes at 31 December 2014 (117'171) 15'092 (10'314) (8'751) (121'144) Deferred tax assets at 31 December 2014 15'092 15'092 Applicable weighted average tax rate (%) 19.18 21.61 Deferred tax liabilities at 31 December 2014 (117'171) (10'314) (8'751) (136'236) Effects of associates (%) (27.31) (1.80) Non-deductible valuation adjustments (%) 3.57 0.00 Deferred tax assets at 1 January 2013 12'796 12'796 Exceptional items taxed at lower rates (%) 0.01 0.15 Deferred tax liabilities at 1 January 2013 (123'145) (12'464) (10'228) (145'837) Effects due to changes in tax rate (%) 5.50 0.00 Net deferred taxes at 1 January 2013 (123'145) 12'796 (12'464) (10'228) (133'041) Effects due to previous years and other factors (%) 1.69 0.03 Booked to the income statement (2'122) 687 204 (775) (2'006) Effective tax rate 2.64 19.99

Booked to comprehensive income statement (9'518) (89) (204) (9'811) Changes in the average weighted tax rate stemmed from differing rates between companies. Net deferred taxes at 31 December 2013 (125'267) 3'965 (12'349) (11'207) (144'858) No deferred taxes were recognised for tax-deductible losses, which totalled CHF 46m (2013 = CHF 46m). These losses can be carried over Deferred tax assets at 31 December 2013 3'965 3'965

annually until 2020. However, the probability of using them is regarded as low. Deferred tax liabilities at 31 December 2013 (125'267) (12'349) (11'207) (148'823)

VIEW

RE FINANCIAL FINANCIAL

62 Romande Energie Energie Group Group 2014 Financial review Review 2014 RomandeRomande Energie Energie Group Group Financial 2014 Financial Review review 2014 6363

NOTE 13 NOTE 17 Earnings per share Trade accounts receivable 2014 2013 In CHF thousands 2014 2013

Weighted average number of shares outstanding 1'026'563 1'028'964 Trade accounts receivable 103'597 109'421 Earnings attributable to shareholders of Romande Energie Holding SA (in CHF 000) (152'673) 64'302 Downpayments/non-invoiced energy deliveries and grid usage (16'622) (10'210) Earnings per share (in CHF) (149) 62 Total trade accounts receivable, gross 86'975 99'211 Provision for doubtful accounts (2'864) (2'499) No factors led to a dilution of earnings. Total trade accounts receivable, net 84'111 96'712

FINANCIAL REVIEW As at 31 December 2014, an impairment charge was booked for receivables in the amount of CHF 3.314m (2013: CHF 2.907m) The sum of the provision relating to this line itemwas CHF 2.864m as at 31December 2014 (2013: CHF 2.499m). The impairment charge for individual items NOTE 14 concerned clients whose financial circumstances make it most unlikely that the Group will ever recover the amounts due. Cash and cash equivalents In CHF thousands 2014 2013 Receivables covered by individual provisions 1'516 1'279 Receivables covered by generic provisions 1'798 1'628 Liquid assets in bank current accounts and cash in hand 181'157 319'864 Total provisions for receivables 3'314 2'907 Short-term deposits 10'000 10'000 Total cash and cash equivalents 191'157 329'864 Movement of provision for doubtful accounts

Liquid assets in bank current accounts earn variable rates of interest.Short-term deposits are placed for variable periods of between one day and three months in accordance with the Group's immediate cash-flowneeds. It should be noted that CHF 200m in cash was invested in Balance as at 1 January (2'499) (2'715) terms upwards of 90 days compared with CHF 90m in 2013 (see Note 16). Allocation (1'089) (480) Use 724 696

Balance as at 31 December (2'864) (2'499)

VIEW

NOTE 15 RE Change in net current assets and other cash Credit risk flows arising from operating activities The following table shows the degree of credit risk related to trade accounts receivable:

In CHF thousands 2014 2013 FINANCIAL Receivables that are neither due nor provisioned 79'997 92'948 Receivables that are due but for which no impairment charge was booked Change in trade accounts receivable 12'601 15'010 - Between 30 and 60 days overdue 1'785 1'781 Change in trade accounts payable 357 (10'816) - Between 60 and 90 days overdue 993 623 Change in other current assets, other current liabilities and other items relating to operating activities (5'153) 23'463 - Between 90 and 120 days overdue 228 456 Total change in net current assets and other cash flows arising from operating activities 7'805 27'657 - Between 120 and 180 days overdue 658 496

Total 3'664 3'356

Receivables for which provisions were issued 3'314 2'907

NOTE 16 Total receivables 86'975 99'211 Securities and term deposits

In CHF thousands Note 2014 2013 NOTE 18 Marketable bonds 5 29'884 7'174 Term deposits with a maturity of more than 90 days 200'000 90'000 Other current assets Total investment securities and term deposits 229'884 97'174 In CHF thousands Note 2014 2013

Prepaid expenses and accrued income 9'261 8'103 Miscellaneous receivables and miscellaneous current assets 468 578 Current accounts with partners - 256 Derivative financial instruments 5 6'752 8'430 Taxes payable in advance, withholding taxes and other recoverable taxes 1'136 1'079 Total other current assets 17'617 18'446

64 Romande Energie Energie Group Group 2014 Financial review Review 2014 RomandeRomande Energie Energie Group Group Financial 2014 Financial Review review 2014 6565

NOTE 19 NOTE 20 Property, plant and equipment Investment property In CHF thousands Land and Power Power Other capital Construction Total In CHF thousands 2014 2013 buildings generation distribution assets work in plants installations progress Acquisition cost Balance as at 1 January 4'093 3'982 2014 Acquisitions 111 Transfers 477 Acquisition cost Balance as at 31 December 4'570 4'093 Balance as at 1 January 116'333 379'277 1'351'275 60'832 133'852 2'041'569 Acquisitions 7'360 23'245 1'909 74'717 107'231 FINANCIAL REVIEW Accumulated depreciation Entry in consolidation scope 17'635 594 18'229 Divestitures (241) (577) (7'261) (3'257) (11'336) Balance as at 1 January 1'509 1'359 Transfers (1'616) 30'456 58'867 (18'377) (65'964) 3'366 Charge for the year 150 150 Exchange difference (289) (4) (5) (298) Transfers 502 Balance as at 31 December 114'476 433'862 1'426'122 41'696 142'605 2'158'761 Balance as at 31 December 2'161 1'509 Net carrying value as at 31 December 2'409 2'584 Accumulated depreciation Balance as at 1 January 65'687 225'782 743'136 52'482 1'087'087 Investment property is valued using the amortised cost method. Charge for the year 3'222 10'695 35'417 2'525 51'859 The Group estimates the fair value (level 3) of investment property at CHF 3.1m (unchanged relative to 2013). This estimate is based on Entry in consolidation scope 6'607 167 6'774 market prices for similarproperty, not on an appraisal by a property specialist. Rental income amounted to CHF 0.3m (identical to 2013) and Divestitures (241) (576) (6'979) (2'899) (10'695) the direct operating expenses involved were CHF 0.2m (identical to 2013). There were no significant liabilities relating to property Transfers (2'962) 4'057 23'172 (17'177) 7'090 investments.

Exchange difference (104) (4) (1) (109) Balance as at 31 December 65'706 246'461 794'742 35'097 1'142'006

Net carrying value as at 31 Dec. 48'770 187'401 631'380 6'599 142'605 1'016'755 VIEW RE 2013

Acquisition cost FINANCIAL FINANCIAL Balance as at 1 January 116'321 367'046 1'311'187 60'533 88'470 1'943'557 Acquisitions - transfers 21 6'528 47'892 2'621 78'246 135'308 Change in consolidation scope 8'405 8'405 Divestitures - transfers (9) (2'702) (7'804) (2'322) (32'864) (45'701) Balance as at 31 December 116'333 379'277 1'351'275 60'832 133'852 2'041'569

Accumulated depreciation Balance as at 1 January 62'453 213'425 713'671 52'169 1'041'718 Charge for the year 3'234 9'804 34'851 2'129 50'018 Change in consolidation scope 2'856 2'856 Divestitures - transfers (303) (5'386) (1'816) (7'505) Balance as at 31 December 65'687 225'782 743'136 52'482 1'087'087 Net carrying value as at 31 Dec. 50'646 153'495 608'139 8'350 133'852 954'482

Thanks to improved bookkeeping information on property, plant and equipment, intangible assets and investment property, allocations to the various capital asset classes were reviewed. On this basis, transfers were carried out in 2014, with no impact on the financial statements. The table for 2013 has not been restated as impacts are immaterial.

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NOTE 21 NOTE 22 Intangible assets Investments in associates In CHF thousands Goodwill Other Total The Group has significant interests in the following associates, which are accounted for using the equity method: intangible assets In CHF thousands Carrying value Impact on income statement

2014 2013 2014 2013 2014 EOS Holding SA 544'364 778'910 (190'301) 1'635 FMHL SA - 29'229 (58'022) - Acquisition costs FMA SA 16'210 11'376 503 1'295 Balance as at 1 January 19'900 22'443 42'343 SITEL SA 16'248 16'589 2'660 2'877 FINANCIAL REVIEW Acquisitions 1'963 1'963 SEFA SA 16'014 15'369 1'055 719 Transfers 12'121 12'121 Other 10'373 9'765 773 549 Exchange difference (39) (39) Total 603'209 861'238 (243'332) 7'075 Balance as at 31 December 19'861 36'527 56'388

Accumulated amortisation EOS Holding is a strategic holding company coordinating and representing the interests of its shareholders, one of which is Romande Energie Group, specifically in connection with its ownership interest in Alpiq as well as various projects such as new sources of renewable energy . Balance as at 1 January 4'460 12'807 17'267 The following table summarises the financial positions of EOS Holding SA and other associates (on an aggregated basis): Charge for the year 3'758 3'758 Transfers 8'372 8'372 Balance as at 31 December 4'460 24'937 29'397 In CHF thousands EOS Holding SA Other associates

Net carrying value as at 31 December 15'401 11'590 26'991 Condensed income statement of associates 2014 2013 2014 2013 Aggregate net revenues 45'490 49'149 199'505 194'053 2013 Aggregate net profit (640'637) 5'503 (43'517) 16'668

Share of profit or loss from associates (190'301) 1'635 (53'031) 5'440 Acquisition costs Other comprehensive income, total (38'949) 45'767 (17) (223) VIEW Balance as at 1 January 17'746 21'747 39'493 Share of comprehensive income of associates (11'570) 13'596 (7) (92) RE Acquisitions - transfers 2'154 696 2'850 Balance as at 31 December 19'900 22'443 42'343 Condensed balance sheets of associates Current assets 262'760 355'583 115'186 114'886

Accumulated amortisation Non-current assets 1'812'250 2'539'256 596'082 530'072 FINANCIAL Balance as at 1 January 4'460 9'317 13'777 Current liabilities 27'833 33'283 50'475 69'382 Charge for the year 3'494 3'494 Non-current liabilities 214'613 239'406 357'578 342'729 Divestitures (4) (4) Aggregate net assets 1'832'564 2'622'150 303'215 232'847 Balance as at 31 December 4'460 12'807 17'267 Share of equity of associates 544'364 778'910 58'845 82'328 Net carrying value as at 31 December 15'440 9'636 25'076 Financial statements of associates that are prepared in accordance with different accounting standards from those used by the Group were Goodwill of CHF 13.3m is allocated to the Networks business unit. The impairment review carried out over a period of five years (level 3 adjusted for purposes of comparison. fair value), using a capitalisation rate of 4.25% (4.7% in 2013), substantiated this amount. No growth rate is applied. In 2014, Alpiq was hit by a downturn in the energy market and, for 2014, booked impairment charges in the amount of CHF 1bn after tax. EOS The financial forecasts used in impairment reviews to determine recoverable values are based on factors inherent to the electricity Holding, which has a stake of 31.38% in Alpiq (unchanged from 2013), charged its share of this impairment, i.e. CHF 329m, to its own 2014 market, some of which are stable and knowable. Forecasts are based on the medium/long-term business plan, with which the Board of income statement. EOS Holding wrote down the value of its interest in Alpiq by a further CHF 360m, reducing the carrying value of EOS Directors is familiar. Holding's interest in Alpiq to CHF 4.7bn, corresponding to its share of Alpiq's consolidated equity.

Owing to its investment in EOS Holding (29.71%), the Group's share of this charge came to CHF 189m, recognised under share of profit of associates. Earnings from the ordinary business of Alpiq and EOS Holding resulted in a net impact of CHF 190m.

Onthe basis of these impairment charges, Romande Energie concluded that no further adjustment in the value of its EOS Holding interest was required.

Forces Motrices Hongrin-Léman SA (hereinafter FMHL) also suffered from developments in the power industry during 2014. For 2014, Romande Energie booked an impairment charge in the amount of CHF 58m, thus writing down the carrying value of the Group's interest in FMHL to zero.

68 Romande Energie Energie Group Group 2014 Financial review Review 2014 RomandeRomande Energie Energie Group Group Financial 2014 Financial Review review 2014 6969

NOTE 23 NOTE 24 Other long-term financial assets Other short-term liabilities In CHF thousands 2014 2013 In CHF thousands Note 2014 2013

Miscellaneous financial investments - available-for-sale securities 12'343 13'575 Accrued expenses and deferred income 64'663 75'172 Loans to associates 12'408 13'271 Salaries and other social insurance costs due 12'544 11'732 Loans to third parties 209 220 Derivative financial instruments 5 4'674 11'293 Total other long-term financial assets 24'960 27'066 Tax liability other than for income tax 3'225 5'013 Loans to associates Current accounts with partners 563 - This position comprises accounts receivable totalling CHF 7.9m from Spontis, arising from the subcontracting of logistics operations, in Discounts and duties payable to municipalities 9'124 9'806 FINANCIAL REVIEW particular the physical transfer of inventory (2013: CHF 8.9m). Other 12'954 10'685 These loans also comprise a receivable of CHF 3.2m relative to Forces Motrices de Sembrancher SA, bearing interest at 3%, as well as Total other short-term liabilities 107'747 123'701 various other loans, for a total of CHF 1.3m (CHF 1.2m in 2013). Loans are measured using the amortised cost method.

Miscellaneous financial investments Miscellaneous financial investments are measured at fair value. In the case of unlisted companies for which we do not have a recent NOTE 25 valuation (level 3), fair value is determined on the basis of EBITDA, applying a multiplier reflecting the standards used in the relevant Borrowings business sector. In CHF thousands 2014 2013

Level 1 Level 2 Level 3 Total Debts to banks and other financial institutions 114'000 113'000 In CHF thousands 2014 2013 2014 2013 2014 2013 2014 2013 Other long-term financial commitments 2'293 2'556 Total borrowings 116'293 115'556 Available-for-sales securities Short-term portion of borrowings (263) (262) Cadcime SA 90 - 90 - Total long-term borrowings 116'030 115'294 Holdigaz SA 7 493 6 770 7 493 6 770

HYDRO Exploitation SA 2 446 2 371 2 446 2 371 The Group's exposure to risks of changes in interest rates and renewals of borrowings at the balance sheet date was as follows: VIEW VO Energies Holding SA 2 314 4 434 2 314 4 434 RE Total available-for-sales securities 12'343 13'575 12'343 13'575 2014 2013

Changes in the fair value of Holdigaz SA and VO Energies Holding SA shares are based on the prices of the shares as determined by a bank Below 6 months 263 262 FINANCIAL FINANCIAL active in the Swiss market. For HYDRO Exploitation SA, this is based on an EBITDA multiple of 5.7. All changes in fair value were booked to Between 6 months and 1 year - - other comprehensive income for 2014. Shares in Cadcime SA are carried on the balance sheet at the price agreed on at the date of the Between 1 year and 5 years 2'050 1'050 transaction, 6 June 2014. Over 5 years 113'980 114'244 Total borrowings 116'293 115'556

Credit lines Amount used 78 91 Amount available 67'122 67'109

Total credit lines 67'200 67'200

Borrowings have fixed due dates with no early repayment clauses. Financial liabilities with banks are contracted at market terms. The

average interest rate paid on borrowings was 2.28% (2.27% in 2013). The main loans contracted by Romande Energie Holding SA are as

follows:

In CHF thousands Rate Period Maturity 2014 2013

AVS 2.120% 2010-2020 07.07.2020 50 000 50 000 AVS 2.120% 2010-2020 07.07.2020 50 000 50 000 Total borrowings 100 000 100 000

70 Romande Energie Energie Group Group 2014 Financial review Review 2014 RomandeRomande Energie Energie Group Group Financial 2014 Financial Review review 2014 7171

NOTE 26 In CHF thousands 2014 2013 Pension liabilities Amount recognised on the balance sheet Management of investments Basis and organisation of occupational pension provision Present value of pension liabilities (532'806) (459'443) The workforce of Romande Energie SA is affiliated to the Romande The Board of Trustees, which is the highest instance of the pe nsion Market value of plan assets 462'741 442'455 Energie staff pension fund (hereinafter, "the pension fund"). The fund, has responsibility over investing. It is comprised of five em- Amount recognised on balance sheet (70'065) (16'988) pension fund is a provident institution that is legally independent ployee representatives and five members from the employer side. and which works to apply the mandatory pension regime intro- The assets of the pension fund serve solely to cover current and duced by the Swiss Federal Act of 25 June 1982 on Occupational future liabilities. The investment policy aims to optimise the capital Analysis of costs relating to financial year Old Age, Survivors’ and Invalidity Pension Provision (hereinafter management so as to attain the stated provident goals of the pen- Service cost, after employee contributions 7'500 8'483 "OPA"). The employers affiliated to the pension fund are: sion fund. Actuarial data and requirements must be consistently Net interest on the net liability (asset) in connection with defined benefits 263 940 FINANCIAL REVIEW - Romande Energie SA represented in the investment policy objectives, which are liquidi- Administrative expenses 539 527 - Romande Energie Commerce SA ty, safety and income. Total charge to income statement 8'302 9'950 - Effitec SA The Board of Trustees defines the strategic allocation of the pen- - Enerbois SA sion fund's assets together with authorised fluctuation margins Change in the present value of defined benefit obligation that are consistent with the objectives of pension provision. Lastly, Pension plans it ensures compliance with the investment principles laid down by Balance as at 1 January 459'443 478'291 The pension fund runs a separate pension scheme for each em- legislation and its own investment guidelines. Service cost, after employee contributions 7'500 8'483 ployer. Under the terms of OPA, all pension plans are defined- Interest on pension obligations 10'073 8'866 contribution plans, with funding based on predetermined contribu- Employee contributions 4'004 3'908 tions from working insured members and employers in accord- Net benefits paid (18'668) (22'765) ance with the insured income. Each company has a specific basic (Gain)/loss due to experience 4'493 2'655 plan for covering fixed compensation. Additionally, three compa- (Gain)/loss due to changes in demographic assumptions (7'589) - nies have a plan that covers variable compensation. (Gain)/loss due to changes in financial assumptions 73'550 (19'995)

The pension fund itself manages coverage for risks relating to old Balance as at 31 December 532'806 459'443 age, death and disability. Liabilities are measured using the so-

called static method. As at 31 December 2014, the coverage ratio, The weighted average for the duration of pension plan liabilities is 14.2 years. which is fund assets relative to liabilities within the meaning of VIEW OPA, stood at 113%. If a plan were to become underfunded, OPA RE provides several remedial measures, such as modifying the con- Change in the fair value of plan assets version ratio or increasing contributions. Some features of Swiss Balance as at 1 January 442'455 423'465 pension plans lead to their categorisation as defined-benefit plans Employer contributions 7'161 7'008 within the meaning of IAS 19. An IFRS -compliant actuarial report is Employee contributions 4'004 3'908 FINANCIAL FINANCIAL drawn up every year. Net benefits paid (18'668) (22'765) Administrative expenses (539) (527) Interest income 9'810 7'926 Return on plan assets, excluding amounts included in interest income 18'518 23'440 Balance as at 31 December 462'741 442'455

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In thousands of CHF 2014 2013 Estimated expenses for 2015 In thousands of CHF 2015 Analysis of amounts recognised in other comprehensive income Loss due to changes in demographic assumptions (7'589) - Components of profit and loss for 2015

(Gain)/loss due to changes in financial assumptions 73'550 (19'995) Net service cost, after employee contributions 9'273 (Gain)/loss due to experience 4'493 2'655 Net interest on pension obligations 711 Return on plan assets excluding amounts included in interest income (18'518) (23'440) Administrative expenses 370 Total remeasurements recognised in other comprehensive income 51'936 (40'780) Total charge to income statement 10'354

Calculation of net service cost Reconciliation of net defined-benefit liability FINANCIAL REVIEW Net liability recognised, as at 1 January (16'988) (54'826) Normal cost 13'202 Charge recognised in income statement (8'302) (9'950) Interest on normal cost 145 Remeasurements recognised in income statement (51'936) 40'780 Expected employee contributions (4'074) Employer contributions 7'161 7'008 Net current service cost, after employee contributions 9'273 Net liability recognised, as at 31 December (70'065) (16'988) Employer contributions forecast for 2015 amount to CHF 7m

% 2014 2013 Sensitivity analysis to changes in principle actuarial assumptions

Change in Increase in Decrease in Actuarial assumptions used for calculating profit and loss for 2014 and 2013 are as follows: Impact on present value of plan obligations (%) assumption assumption assumption Discount rate 1.10 2.25 Discount rate 0.50 -6.60 7.50 Salary rate increase (including inflation) 1.75 2.25 Salary rate increase (including inflation) 0.50 0.50 -0.40 Return on plan assets 2.25 2.25 Rate of interest credited to retiree accounts 0.50 1.20 -1.10

Rate of interest credited to retiree accounts 2.25 2.25 Inflation 1.25 1.25 Rate of pension increases 0.00 0.00 VIEW RE Mortality table LPP 2010 GEN LPP 2010 GEN

Breakdown of plan assets by asset category

Cash and other 3.40 4.30 FINANCIAL Bonds 38.00 37.10 Equities 37.20 36.20 Commodities 2.70 2.80 Swiss property 18.70 19.60 Total 100.00 100.00

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NOTE 27 NOTE 28 Provisions Share capital In CHF thousands OIBT Onerous Dismantling Total As at 31December 2014, the issued share capital consisted of 1,140,000 fully paid registered shares with a nominal value of CHF 25 each. The contracts amount available for dividend distribution is based on the amount shown under retained earnings in the financial statements of the parent 2014 company, Romande Energie Holding SA. It is calculated in accordance with the provisions of the Swiss Code of Obligations. Consolidated equity includes legal reserves of CHF 140.8m (2013: CHF 140.4m), which are not available for distribution. Balance as at 1 January 2'347 1'572 3'919 Allocations 124 124 There is an agreement between the Vaud Canton, various Vaud municipalities and Banque Cantonale Vaudoise laying down reciprocal pre- Entry in consolidation scope 416 416 emptive rights in the event of the sale of shares held by any of these parties. Signatories of this agreement owned 53.56% of the share Discounting effect 47 148 6 201 capital as at 31 December 2014.

Use (1'310) (1'076) (2'386) FINANCIAL REVIEW Exchange difference (3) (3) The Board of Directors has an authorised capital of CHF 10.125m, consisting of 405,000 registered shares with a nominal value of CHF 25 each, Balance as at 31 December 1'084 768 419 2'271 approval of which was renewed by a resolution made at the Annual General Meeting on 27 May 2014. This resolution expires on 27 May 2016. Short-term portion of provisions (552) (637) (1'189) As at 31 December 2014, none of the shares making up the authorised capital had been issued. Total long-term provisions 532 131 419 1'082

% 2014 2013

2013 Vaud Canton 38.60 38.60 Balance as at 1 January 3'612 4'237 7'849 Vaud municipalities 14.09 14.05 Allocations 1'436 1'436 Own shares 9.95 9.95 Discounting effect 142 173 315 Groupe E SA, Fribourg 5.80 5.80 Use (1'407) (4'274) (5'681) BKW Energy SA, Bern 5.00 5.00 Balance as at 31 December 2'347 1'572 3'919 Banque Cantonale Vaudoise, Lausanne 3.31 3.41 Short-term portion of provisions (983) (997) (1'980) Holdigaz SA, Vevey 2.52 2.52 Total long-term provisions 1'364 575 1'939 Free float 20.73 20.67

VIEW RE OIBT Provision The Group has issued a provision tocover the costs incurred by the Ordinance on Low Voltage Installations (OIBT), which came into effect in NOTE 29 2002. The OIBT stipulates that inspections that should have been carried out prior toits introduction must nowbe made and paid for by the Other reserves grid operators concerned. The transitional regulations set deadlines for these inspections and require operators to bear the cost of any In CHF thousands Valuation Revaluation Total FINANCIAL inspections performed after these deadlines have expired. This provision is reviewed every year on the basis of inspection work that still adjustement of differences has to be carried out. The provision is expected to be fully utilised by the end of 2016. associates Provision for onerous contracts Since 2014, the provision for onerous contracts has separated out the business profit earned on a price plan and the performance generated 2014 by a procurement strategy. The profitabilityof each price plan is analysed on an annual basis. The provision is calculated on the basis of the Balance as at 1 January (8'375) 12'082 3'707 cash flows expected for the duration of each contract. The discount rate used for this type of operation is 6.25%. The Group expects to Exchange difference and other changes (11'892) (426) (12'318) extinguish this provision by 2017, as the contracts are basically concluded for a period of three years. Fair-value adjustment of financial instruments 315 (1'251) (936) Balance as at 31 December (19'952) 10'405 (9'547) Provision for decommissioning Following the acquisition of Ploudalmézau-Breiz Avel 01 SAS on 2 September 2014, the Group took on the provision for decommissioning from this company's financial statements. The provision was calculated on the basis of actual decommissioning costs out to expiry in 2030. The 2013 discount rate used for this type of operation is 4.5%. Balance as at 1 January (21'881) 8'625 (13'256)

Exchange difference and other changes 11'318 2'410 13'728 Fair-value adjustment of financial instruments 2'188 1'047 3'235 Balance as at 31 December (8'375) 12'082 3'707

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NOTE 30 NOTE 33 Shares outstanding Other future liabilities, contingent liabilities and 2014 2013 contingent assets

Total number of shares 1'140'000 1'140'000 In the normal course of its operations, Romande Energie has entered into various long-term commitments covering the procurement and sale of energy. Own shares held by the Group (113'437) (113'437) Shares outstanding 1'026'563 1'026'563 Right of purchase Under the agreements concluded with EOS and taken over by Alpiq, the Group may purchase electricity from Alpiq between 1 October 2007 and 31 December 2030 on the following terms: pre-defined quantities amounting to less than 20% of its annual consumption may be purchased at a price equivalent to Alpiq’s average production cost using the plants which previously belonged to EOS. The cumulative difference over the years between the average selling price at Alpiq and the average production cost for the quantities purchased may not NOTE 31 FINANCIAL REVIEW exceed a mutually agreed ceiling. The above procurement option is considered as a right of purchase which will only vest when it is Related parties exercised and will only be extinguished by the physical delivery of electricity. It is therefore a future right tothe purchase of energy that In CHF thousands Sales Purchases Amounts due Amounts depends on market conditions at the time it is exercised. This right is accounted for in the Group’s financial statements if and when it is to related from related from related due to related exercised. It represented an amount of CHF 0.6m for the 2014 financial year (2013: CHF 7m). This amount is deducted from the cost of energy parties parties parties parties purchases. In view of price trends on the electricity market, the Group expects to curb the use of this right in the coming years.

Related parties Guarantees 2014 4'929 231 644 2 The Group has issued a guarantee of EUR 19.7m (the same amount as in 2013) in order to cover payments agreed between its subsidiary Entities with significant influence on the Group 2013 5'705 9'549 1'924 59 Romande Energie Renouvelable SA and a supplier of power-generation equipment. Further guarantees for a sum of less than CHF 0.1m have 2014 6'409 36'256 1'489 1'027 been issued. Associates 2013 6'012 36'496 1'075 2'188 2014 56'145 253'710 5'547 6'080 Key management personnel 2013 48'189 265'205 2'059 6'410 NOTE 34 Taxes paid in Vaud Canton are not included in the data on related parties Post-balance sheet events Abandonment of minimum EUR/CHF exchange rate

Shareholders who own 20% or more of the share capital of Romande Energie Holding SA, the parent company, are considered as entities with VIEW On 15 January 2015, the Swiss National Bank announced that it was removing the minimum exchange rate between the euro and the Swiss

significant influence. RE franc. The news led to a surge in the exchange value of the Swiss franc, which is the reporting currency for the consolidated financial Transactions with related parties are conducted at market rates. statements of Romande Energie Group. This situation will have a negative impact on the translation of the financial statements of entities whose functional currency is the euro, as well as some positions on the balance sheet and income statement (see Note 5). Discontinuation of the minimum exchange rate had no effect on the consolidated financial statements for 2014.

The amount due to the staff pension fund as at 31 December 2014 was CHF 0.4m (CHF 0.4m in 2013). FINANCIAL

Approval of the consolidated financial statements

The consolidated financial statements of Romande Energie Group for 2014 were approved by the Board of Directors on 30 March 2015. A

dividend of CHF 30 per share will be submitted for approval by shareholders at the Annual General Meeting. If this recommendation is NOTE 32 adopted, the total dividend payment will amount to some CHF 30.8m, taking into account shares held by the Group in treasury. Remuneration of the Executive Board and the Board of Directors In CHF thousands 2014 2013

Basic salaries paid to Executive Board members during the year 1'559 1'470 Variable salaries paid to Executive Board 1'062 943 Allowances for entertainment expenses 121 101 Social insurance costs (state pension, unemployment, occupational pension, etc.) 562 506 Total remuneration, expenses and social insurance costs - Executive Board 3'304 3'020 Compensation paid to Board of Directors 650 679 Social insurance costs (state pension, unemployment, etc.) 40 41 Total remuneration, expenses and social insurance costs - Board of Directors 690 720

The Executive Board had seven members, compared with sixin 2013. Contributions paid into the pension fund for members of the Executive Board came to CHF 324,000 (2013: CHF 295,000).

The Board of Directors comprised 11 members, as in 2013.

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NOTE 35 Main business Subsidiaries and associates E) Production, distribution and sale of energy Main Cur- Share Shareholding (%)* D) Holding company business rency capital I) Installation inspections '000 2014 2013 N) Other Subsidiaries 1) Romande Energie France SAS increased its share capital on 23 December 2014 by EUR4.6m toEUR 7.7m. This transaction was used to Romande Energie SA, Morges E CHF 36'150 100.0 100.0 fund purchase of the company Ploudalmézau-Breiz Avel 01 SAS. Bas-Valais Energie SA, Vouvry E CHF 19'898 72.0 72.0 Romande Energie Commerce SA, Morges E CHF 15'294 66.7 66.7 2) Romande Energie France SAS on 2 September 2014 acquired full ownership of Ploudalmézau-Breiz Avel 01 SAS. This object of the Société des Forces Motrices du Grand-St-Bernard SA, company is managing a wind farm installation in Ploudalmézeau, in the administrative department of Finistère,Brittany (France). It has a FINANCIAL REVIEW Bourg-St-Pierre E CHF 10'000 75.0 75.0 share capital of EUR 0.6m. Eoliennes de Provence SA, Provence E CHF 6'000 60.0 60.0 Romande Energie Renouvelable SA, Morges E CHF 2'500 100.0 100.0 3) Forces Motrices Hongrin-Léman SA increased its share capital on 18 June 2014 by CHF 70m to CHF 100m. Romande Energie SA participated in the amount of CHF 28.8m; its ownership interests remains unchanged. Capital raising was used tofund an increase in the Enerbois SA, Rueyres E CHF 2'000 97.7 97.7 production output of an existing installation. Tecfor SA, Troistorrents N CHF 560 100.0 100.0 Brent Energia SA, Brent E CHF 400 65.0 65.0 4) Romande Energie Holding SA on 23 June 2014 purchased 2,600 shares in Forces Motrices de l’Avançon SA. As a result, the Group's Effitec SA, Morges I CHF 200 100.0 100.0 interest rose to 38.98%, representing a further 10.99%, through ownership of 9,218 shares as at 31 December 2014. HC SA, Fribourg N CHF 100 100.0 100.0 Romande Energie France SAS, Paris 1) D EUR 7'700 100.0 100.0 5) On 9 July 2014, Energie Renouvelable Vouvry SA was founded. It is 35%owned by the Group. The object of this company is generating Centrale Hydroélectrique de Meyronnes SAS, Meyronnes E EUR 150 100.0 100.0 power by harnessing watercourses in the municipality of Vouvry, building reservoirs and related installations, and developing a full Ploudalmézau-Breiz Avel 01 SAS, Paris 2) E EUR 600 100.0 - range of businesses in the renewable energy sphere. The company has a share capital of CHF 0.1m.

Associates EOS Holding SA, Lausanne D CHF 324'000 29.7 29.7 Forces motrices Hongrin-Léman S.A. (FMHL), Château-d'Oex 3) E CHF 100'000 41.1 41.1 Sitel SA, Morges N CHF 20'850 33.3 33.3 VIEW Forces Motrices de l'Avançon SA, Bex 4) E CHF 7'095 39.0 28.0 RE Forces Motrices de Sembrancher (FMS) SA, Sembrancher E CHF 6'000 20.6 20.6 Société Electrique des Forces de l'Aubonne SA, Aubonne E CHF 5'000 36.6 36.6 DransEnergie SA, Orsières N CHF 2'000 31.0 31.0

neo technologies SA, Lausanne N CHF 2'000 48.9 48.9 FINANCIAL Energie Solaire SA, Sierre N CHF 1'600 34.0 34.0 Cisel Informatique SA, Matran N CHF 1'200 36.0 36.0 Agrogaz Lignerolle SA, Lignerolle E CHF 800 40.0 40.0 VO RE-Nouvelable SA, Orbe E CHF 200 50.0 50.0 Gazobois SA, Cossonay-Ville E CHF 120 50.0 50.0 Spontis SA, Granges-Paccot N CHF 100 30.0 30.0 St-Gingolph Energia SA, St-Gingolph E CHF 100 25.0 25.0 Energie Renouvelable Vouvry SA, Vouvry 5) E CHF 100 35.0 -

* The percentage of voting rights is systematically identical to equity interest with the exception of Romande Energie Commerce SA, Forces Motrices de l'Avançon SA and Société Electrique des Forces de l'Aubonne SA, for which the share of voting rights is 63.5%, 37.23% and 24.67%, respectively.

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ROMANDE ENERGIE HOLDING SA Balance sheet as at 31 December 2014

FINANCIAL STATEMENTS In CHF thousands Note 31.12.2014 31.12.2013

ASSETS Current assets Cash and cash equivalents 184'580 314'934 Income statement Securities, term deposits and derivative financial instruments 329'008 196'250 Running accounts and other current assets from affiliates and related parties 250'929 162'282

as at 31 December 2014 FINANCIAL REVIEW Other current assets 522 1'450 In CHF thousands 2014 2013 Total current assets 765'039 674'916

Income Non-current assets Rents and miscellaneous income 2'688 2'615 Property, plant and equipment 11'356 12'102 Financial income 111'901 122'153 Long-term financial assets 203'763 196'104 Total income 114'589 124'768 Loans to affiliates 88'232 85'471 Total non-current assets 303'351 293'677 Operating expenses Total assets 1'068'390 968'593 Other operating expenses (419) (458) General administration costs (2'151) (2'021) LIABILITIES AND SHAREHOLDERS' EQUITY Depreciation, amortisation and provisions (746) (746) Current liabilities Financial expenses (1'904) (2'347) Running accounts and other current liabiliites with affiliates 38'527 17'394 Profit before taxes 109'369 119'196 Other short-term liabilities 2'902 2'684 Income taxes (1'035) (1'836) Current taxes payable 3'254 2'344 Total current liabilities 44'683 22'422 Net profit for the year 108'334 117'360 VIEW Non-current liabilities RE Long-term borrowings 2 100'000 100'000 Long-term provisions 14'800 14'800

Total non-current liabilities 114'800 114'800 FINANCIAL Total liabilities 159'483 137'222

Share capital and reserves Share capital 28'500 28'500 General reserve 5'859 5'859 Reserve for own shares 3 99'124 99'076 Total share capital and reserves 133'483 133'435

Retained earnings Income brought forward 667'090 580'576 Net income for the year 108'334 117'360 Retained earnings 775'424 697'936 Total shareholders' equity 908'907 831'371 Total liabilities and shareholders' equity 1'068'390 968'593

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NOTE 3 Notes to the parent company financial statements Own shares 2014 2013 In CHF thousands Number of CHF 000 Number of CHF 000 NOTE 1 shares shares Major shareholdings Held by Romande Energie Holding SA Main Currency Share capital Shareholding (%) Balance at beginning of year 113'437 99'076 12'765 6'153 business Acquisition - 48 119'994 130'761 '000 2014 2013 Sale - - (48'917) (51'534) Romande Energie SA, Morges 1) CHF 36'150 100.0 100.0 Transfer - - 29'595 13'696 FINANCIAL REVIEW Bas-Valais Energie SA, Vouvry 1) CHF 19'898 72.0 72.0 Balance as at 31 December 113'437 99'124 113'437 99'076 Romande Energie Commerce SA, Morges 1) CHF 15'294 63.5 63.5 Romande Energie Renouvelable SA, Morges 1) CHF 2'500 100.0 100.0 Held by Romande Energie SA Romande Energie France SAS, Paris 2) EUR 7'700 100.0 100.0 Balance at beginning of year - - 29'595 13'696 Sitel SA, Morges 2) CHF 20'850 33.3 33.3 Transfer - - (29'595) (13'696) Forces Motrices de l'Avançon SA, Bex 1) CHF 7'095 10.5 - Forces Motrices de Sembrancher (FMS) SA, Sembrancher 1) CHF 6'000 20.6 20.6 Balance as at 31 December - - - - Société Electrique des Forces de l'Aubonne SA, Aubonne 1) CHF 5'000 36.6 36.6 Total own shares 113'437 99'124 113'437 99'076 neo technologies SA, Lausanne 2) CHF 2'000 48.9 48.9

Energie Solaire SA, Sierre 1) CHF 1'600 34.0 34.0

Cisel Informatique SA, Matran 2) CHF 1'200 36.0 36.0

NOTE 4 Main business 1) Production, distribution and marketing of energy Authorised capital

2) Other The Board of Directors has an authorised capital of CHF 10.125m, consisting of 405,000 registered shares with a nominal value of CHF 25

VIEW each, approval of which was renewed by a resolution made at the Annual General Meeting on 27 May 2014. This resolution expires on 27 May

RE 2016.

NOTE 2

Borrowings FINANCIAL FINANCIAL In CHF thousands Rate Period Maturity 2014 2013 NOTE 5 Significant shareholders AVS 2.120% 2010-2020 07.07.2020 50'000 50'000 AVS 2.120% 2010-2020 07.07.2020 50'000 50'000 % 2014 2013 Total borrowings 100'000 100'000 Vaud Canton 38.60 38.60 Vaud municipalities 14.09 14.05 Groupe E SA, Fribourg 5.80 5.80 BKW Energy SA, Bern 5.00 5.00 Banque Cantonale Vaudoise, Lausanne 3.31 3.41 Holdigaz SA, Vevey 2.52 2.52

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NOTE 6 Fire insurance value Recommended appropriation of retained earnings As at 31 December 2014 In CHF thousands 2014 2013

Fire insurance value of buildings 33'160 33'160 In CHF thousands 31.12.2014

Balance carried forward from previous year 742'963 Dividend retained on own shares (Art. 659a CO) (3'403)

Net profit for the year 108'334 NOTE 7 Miscellaneous liabilities At the disposal of the AGM 847'894

Dividend of CHF 30 per share 34'200 FINANCIAL REVIEW The company is part of a VAT group and is therefore jointly and severally liable to the Swiss Federal Tax Administration for VAT debts Balance carried forward 813'694 incurred by the other members. The company has issued a guarantee of EUR19.7m in order tocover payments agreed between its subsidiary Romande Energie Renouvelable Total 847'894 SA and a supplier of power-generation equipment. In addition, the company has issued other guarantees for a total of CHF 0.1m.

On behalf of the Board of Directors

Guy Mustaki, Chairman NOTE 8 Compensation paid to members of the Board of Pierre Oberson, Corporate Secretary Directors

The remuneration and the social insurance costs of the Board of Directors and the Executive Board are shown in the remuneration report, pursuant to the provisions of the Ordinance against Excessive Remuneration by Listed Companies (ERCO). No option or conversion rights were held by the Board of Directors or the Executive Board as at 31 December 2014 or 31 December 2013.

Share ownership is as follows: Held by members of the Board of Directors 20 shares < 1 % VIEW Held by members of the Executive Board 0 shares 0 % RE

NOTE 9 FINANCIAL Compensation paid to members of the Executive Board

The Group has appointed committees tomanage specific risks such as those associated with the procurement of electricity. The work of these committees as well as risk management processes are coordinated by a risk manager. The internal control system (ICS) is thoroughly documented and adapted to business risks and the Group’s sphere of activities. The ICS is fully compliant with the lawand fulfils the requirements of the Executive Board and the Board of Directors. It enables management tomonitor the most important processes within the company, which have a significant impact on financial reporting.

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CALENDAR CONTACTS

26 May 2015 Media relations 113th Annual General Meeting, Karin Devalte, Head of Communications Ecublens, Swiss Tech Convention Center T +41 21 802 95 67 [email protected] 28 May 2015 Last trading day with entitlement to receive the dividend Investor relations René Lauckner, Treasurer 29 May 2015 T +41 21 802 95 24 Ex dividend date [email protected]

1 June 2015 Corporate governance Dividend payment Pierre Oberson, Corporate Secretary T +41 21 802 95 61 1 September 2015 [email protected] Publication of Interim Report

April 2016 Publication of 2015 Annual Report

May 2016 114th Annual General Meeting

PUBLISHED BY

Romande Energie Holding SA Rue de Lausanne 53 P.O. Box CH-1110 Morges 1 T +41 21 802 91 11 F +41 21 802 95 95 www.romande-energie.ch ROMANDE ENERGIE GROUP Romande Energie SA Rue de Lausanne 53 P.O. Box CH-1110 Morges 1 T +41 21 802 91 11 F +41 21 802 95 95 www.romande-energie.ch