3W Power/AEG Power Solutions Reports Results for Q3 2012

3W Power/AEG Power Solutions:

¹ historical numbers have been represented for comparative purposes to reflect the classification of the telecom converter business (CVT/LED) as a discontinued operation in Q3 2012.

3W Power SA (Prime Standard, ISIN GG00B39QCR01, 3W9), the holding company of AEG Power Solutions (AEG PS), a global leading provider of power electronic systems and solutions for industrial power supplies and renewable energies, today announced results for Q3 2012.

Order intake in Q3 2012 was €89.2 million, down 10.2% year-on-year as a result of a significant drop in orders for polysilicon systems for POC in RES. Compared to the prior quarter, orders were up 7.4% primarily coming from Solar which is resuming solid growth after renewed ability of some key customers to obtain project financing. Order backlog in Q3 2012 was €135.3 million, down 32.4% year-on-year but up 6.7% compared to Q2 2012. The book-to-bill ratio of 1.10 in Q3 2012 provides a solid underpinning despite the persistent weaknesses in the macroeconomic environment.

Revenue in Q3 2012 was €81.0 million, down 21.6% compared to Q3 2011 (€103.2 million) and down 13.7% compared to the prior quarter (€93.8 million) with increases in Solar revenue (up 13.3%) offset by lower POC and EES revenue. Normalized EBITDA in Q3 2012 was €13.7 million, which excludes one-time charges of €2.7 million. This corresponds to normalized EBITDA in Q3 2011 of €17.4 million and €5.9 million in Q2 2012. The Group maintained solid liquidity in Q3 and had €65.3 million cash on balance sheet at the end of September 2012.

On November 5, AEG PS completed the sale of EMED, a 5.75MW solar installation in Puglia, Italy for a total consideration of €24.3 million, which includes the assumption of €17.4 million of debt. In Q3 2012, EMED contributed €0.8 million in operating income to the Group.

RES Business Segment

¹ historical numbers have been represented for comparative purposes to reflect the classification of the telecom converter business (CVT/LED) as a discontinued operation in Q3 2012.

Orders in Renewable Energy Solutions (RES) were €42.1 million in Q3 2012, down 24.5% from €55.8 million year-on-year, resulting from lower POC business partially offset by strong order intake from Solar (up 129.4% year-on-year). Compared to Q3, orders were up 13.3% from €37.2 million largely driven by Solar (up 24.5%). RES order backlog in Q3 2012 was €54.5 million, down 54.3% year-on-year but up 0.5% compared to Q2 2012.

RES revenue was down 31.8% to €42.3 million in Q3 2012 compared to €62.1 million in Q3 2011 with increases in Solar revenue not sufficient to offset the weakness in POC. Compared to Q2 2012, RES revenue was down 18.2% with increases in Solar (up 13.3%) offset by a drop in POC. Segment EBITDA for RES was €11.8 million in Q3 2012 compared to €20.0 million in Q3 2011, again a reflection of the drop in highly profitable POC revenues.

In Q3 2012, the Company recorded an accelerated amortization charge for customer-related intangible assets of €43.3 million driven by the current significant overcapacity in the POC market and corresponding investment reluctance of the Company’s customers. The spot market for polysilicon continues to indicate an oversupply situation. "While we strongly believe that the polysilicon market will recover in the medium-term, it remains a strategic priority for us to continue diversifying the Power Controller business beyond polysilicon applications into promising areas”, comments Horst J. Kayser, CEO of 3W Power/AEG Power Solutions.

EES Business Segment

¹ historical numbers have been represented for comparative purposes to reflect the classification of the telecom converter business (CVT/LED) as a discontinued operation in Q3 2012.

In Energy Efficiency Solutions (EES), order intake for Q3 2012 was €47.1 million, up 8.0% year-on-year (Q3 2011: €43.6 million) due to higher EMS order intake. Compared to the prior quarter, EES showed moderate growth, up 2.6% mainly due to lower DCT orders. The order backlog stood at €80.8 million in Q3 2012, down 0.4% compared to the prior year but up 11.3% compared to €72.6 million in Q2 2012.

Revenue was €38.7 million in Q3 2012, down 5.8% compared to the prior year (Q3 2011: €41.1 million) and down 8.0% compared to €42.1 million in Q2 2012. Segment EBITDA for EES in Q3 2012 was €2.5 million, including restructuring charges of €1.3 million, compared to €2.0 million in Q3 2011 and €0.1 million in Q2 2012.

In Q3 2012, the Company has classified its loss-generating telecom converter business in Lannion, France within EES as a discontinued operation and asset held for sale. For the three and nine-months ending September 2012, the Company’s loss from discontinued operations was €4.9 million and €8.2 million, respectively.

Outlook

For the full financial year 2012, 3W Power expects revenue of €370-€380 million and projects a normalized EBITDA margin of at least 9% which excludes the discontinued operations of the telecom converter business (CVT/LED). This EBITDA expectation has an additional upside of up to €7 million due to contractual cancellation fees that may be recognized in Q4 2012. The expectation is based on continued margin improvements in the EES business segment and an order and sales pipeline above 2011 levels in Solar within RES for the fourth quarter of 2012.

While AEG PS is well diversified and excellently positioned both technologically and also geographically to capture opportunities in its key global industrial vertical markets as well as in the renewable energy markets, the Company expects 2013 will be a challenging year given the continued global macroeconomic issues and the overcapacity in the polysilicon industry. As such, AEG PS has initiated a multi-faceted cost improvement initiative to continue to increase structural profitability. The Company has launched a global EES headcount reduction of more than 100 employees, principally in Warstein-Belecke, Germany. This initiative, together with the effects of product clinics, purchasing initiatives to reduce material costs and structural efficiency programs undertaken in 2012, is expected to achieve run-rate cost savings of approximately €7 million. In addition, AEG PS has further focused on reducing its central overhead costs and is targeting an annual run-rate of its central overhead costs of approximately €10 million. Restructuring provisions and one-off costs for all of these initiatives are expected to be approximately €9.7 million. The Company took a restructuring charge of €2.4 million in Q3 2012 and expects to take a charge for the balance of these initiatives in Q4 2012.

The diversity of the Company’s business mix and its exposure to the solar market makes accurate forecasting in the current economic environment difficult. For 2013 AEG PS expects to achieve overall sales volumes above 2012 levels and with its cost reduction initiatives and stressed emphasis on continuous improvement the Company expects to maintain similar EBITDA profitability levels to those of 2012. On a segment level for 2013, AEG PS currently anticipates the following:

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

Horst J. Kayser emphasizes that ”AEG PS is fortunate to have such a diversified business both geographically as well as across industries and markets. With a focus on both cash flow and exciting new growth areas we are well positioned for the future.” AEG PS’ industrial business continues to provide a solid and resilient base that helps to insulate the Company from the more volatile and cyclical business segments within RES. AEG PS continues to focus on improving the profitability and cash generation of EES whilst supporting the growth and development of Solar. The Company’s Solar business is well positioned and less exposed to the challenging Western European markets relative to key competitors. The recent certification of the Protect PV.500-UL to the North American standard now also positions the Company in the U.S. solar market. Furthermore, the only local producer of utility scale solar inverters in South Africa, AEG PS is uniquely positioned in growth regions of Southern Africa as well as in Eastern Europe and India. Lastly, despite near-term market volatility, the POC business remains profitable and will continue to be a center of innovation and technological strength as the Company diversifies into new promising areas such as advanced industrial applications and power control systems for energy storage and Smart Grid applications.

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About 3W Power/AEG Power Solutions:

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

AEG Power Solutions (AEG PS) Group is a global provider of power electronics systems and solutions for all industrial power requirements offering one of the most comprehensive product and service portfolios in the area of power conversion and power control. Two complementary operating business segments, Renewable Energy Solutions (RES) and Energy Efficiency Solutions (EES) serve customers worldwide. The RES product and service portfolio consists of systems and solutions for solar power plants, such as solar inverters, monitoring and control systems as well as power controllers for a wide range of industrial applications such as polysilicon, energy storage, sapphire, and glass. The EES product and service portfolio includes high-performance uninterruptable power supplies (UPSs), industrial chargers, DC systems and converters.

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

AEG PS’ footprint is global including 17 subsidiaries and competence centers around the world, employing 1,700 employees.

For more information go to: www.aegps.com

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

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