ELEKTROWATT AG History
P.O. Box 8022
Telephone: (01) 385 22 11
Fax: (01) 385 25 55
Incorporated: 1895 as Elektrobank
Sales: SFr 4.534 billion (US$3.47 billion)
Stock Exchanges: Zürich Geneva Basel
Elektrowatt AG is one of the largest holding companies in Switzerland, with diversified interests in more than 100 operating companies worldwide, many of which are market leaders in their fields. The company derives its income mainly from dividends and interest on its holdings. Elektrowatt holds a controlling interest in the majority of companies in the group, which together form its operating arm. In 1991, consolidated group profits amounted to SFr 209 million (US$163 million) on revenues of SFr 4.5 billion (approximately US$3.5 billion).
Elektrowatt operations are organized into three divisions--energy, industry, and services. The main companies report independently to the executive board of directors in Zürich while enjoying considerable intragroup synergies. Areas in which the company is dominant include electric utilities, building management, information systems, and security systems. While the focus of group operations is in Europe, markets in North America and the Far East are also important.
Elektrowatt was founded in Zürich on July 25, 1895, under the name Bank für Elektrische Unternehmungen (Electrical Enterprise Bank), or Elektrobank for short. It represented the interests of a consortium of manufacturers and banks who wished to co-finance projects involving a promising new energy source--electricity. The potential of electricity to revolutionize the way businesses and homes were illuminated became obvious as early as 1881, when Thomas Edison amazed visitors at the Paris Exposition with his incandescent lighting technology. Edison offered a complete system, from generators and conductors to fuses and light bulbs. The Electrical Exposition at the Crystal Palace in London in 1882 gave further impetus to the spread of civilian applications such as power stations, street lighting, electric tramways, and electrochemical factories. Nevertheless, when Elektrobank started operations, electricity was still regarded with suspicion by the general public, and financing the new industry was a volatile undertaking that carried enormous risks.
Given the uncertainty, it made sense to spread the risk around as much as possible. Electrical engineers and manufacturers of electrical components had an obvious strategic interest in the development of power grids and installations, but they lacked the financial wherewithal to build such operations themselves. They turned to Europe's biggest banks for help with capital funding, forming electrical holding companies known as trust companies, which in structure and intent were very similar to the venture capital firms of today. Elektrobank quickly developed into one of these big trust companies. In the early days, the principal investors were Allgemeine Elektricitä×-Gesellschaft (the General Electric Company of Berlin) and Schweizerische Kreditanstalt (the Crédit Suisse) of Zürich. The German company withdrew its support after World War I, but the Crédit Suisse holding company still owned 42 percent of Elektrowatt as of 1991.
Elektrobank expanded quickly during its first years of operation, developing projects in countries as far afield as Russia and Argentina, as well as closer to home in Spain and Germany. The hydroelectric power station at Rheinfelden on the Swiss-German border, completed in 1898, was a pioneer in its field, producing electricity by waterpower. However, this period of continuous growth was rudely interrupted in 1914 with the outbreak of World War I, which had far-reaching political and economic consequences for all of European industry. Chaos reigned in inflationary postwar Germany, and the currencies of most of its neighbors were steeply devalued. The nationalization without compensation of all Russian businesses in the wake of the October Revolution of 1917 led to a significant loss in property and earnings for Elektrobank, which was forced to retrench briefly.
Nevertheless, in the early 1920s the company was able to develop a number of new facilities and take over existing facilities in Spain, France, England, Belgium, Austria, and Hungary. The Wall Street crash of October 1929 precipitated a world depression of hitherto unimaginable proportions, but Elektrobank remained relatively unscathed. The company had had the foresight to liquidate the majority of its risky German interests, using the revenue to invest primarily in electrical utilities and natural gas companies in the United States--solid ventures that would become the cornerstone in Elektrowatt's considerable U.S. investment portfolio.
The direct impact of World War II on Elektrobank operations was less damaging than that of World War I for a number of reasons. The company had by this time paid off practically all of its debt, and its presence in Germany was negligible. On the other hand, it had increased its holdings in its native Switzerland, which as a neutral country had remained relatively untouched by the war. In addition, the American portfolio had increased substantially in value as a result of massive U.S. government investment in the military machine.
The years after World War II were a period of transition during which the electrical industry in Europe underwent a fundamental transformation. Firstly, European currency markets were heavily regulated, making it difficult for Elektrobank to repatriate earnings. In addition, a wave of nationalization swept the industry, affecting plants in France, Austria, Spain, and eventually Italy. The worst losses were in Eastern Europe, where private companies in Poland, Hungary, and East Germany were expropriated without compensation by the new communist regimes. This was ironic in view of the fact that most electrical installations, unlike factories and government buildings, had survived the war intact. For many years after World War II, Germany was the only foreign country in which Elektrowatt maintained a substantial hydroelectric presence.
The losses incurred as a result of nationalization among private European companies forced Elektrowatt to reconsider its strategy. The company had changed its name in 1946 to Elektro-Watt Elektrische und Industrielle Unternehmungen AG (Elektrowatt Electrical and Industrial Enterprises Limited). It now focused its attention on the domestic market, which had seen a substantial increase in energy consumption in the growth years after World War II. Elektrowatt was to play a decisive role in the development of the hydroelectric power industry in Switzerland and in the peripheral electrical engineering industry. Older plants were enhanced and new plants were developed. One of the most important developments came with the construction of Elektrizitä×-Gesellschaft Laufenburg (the Electrical Company at Laufenburg), which, in addition to producing and procuring electrical energy, still serves as a vital junction in national and international grid operations.
Not content to dominate the hydroelectric industry in Switzerland, Elektrowatt also spent the 1950s consolidating its industrial engineering holdings both at home and abroad. In purchasing companies that produced such items as electronic components, which seemed to have great strategic growth potential, Elektrowatt laid the foundations of the industry division that today boasts some of the group's most dynamic operations.
In the 1960s the hydroelectric power industry suffered a number of unforeseen setbacks. The main problem was the extraordinary increase in the construction and capital costs of new plants, which for the first time rendered their development overly expensive. Elektrowatt responded to the setback by increasing investment in atomic power, specifically the construction of Switzerland's largest atomic power plant at Leibstadt, in the canton of Aargau, in which Elektrowatt obtained a controlling interest. For some time, the company had recognized nuclear power's potential as a cheap alternative to other forms of electricity generation. Investment in new plants was accompanied by considerable financial contributions to the research and development of nuclear technology in Switzerland's scientific community. By 1991, nuclear plants contributed 57 percent of the electricity produced by Elektrowatt's energy division.
Since the early twentieth century, Elektrowatt operated a small technical department, which until the 1940s was responsible primarily for advising the parent company on technical matters. As Elektrowatt grew, the technical division expanded, taking on planning and construction responsibility for new hydroelectric facilities. With the decline in construction in the 1960s, outside engineering projects became increasingly important, as did activity beyond the borders of Switzerland. The importance of this new sphere of operations was recognized in 1965 with the incorporation of Elektro-Watt Ingenieurunternehmung AG (Elektrowatt Engineering Services Limited), which by the 1990s had become the center of Elektrowatt's services division.
The incorporation of Elektrowatt Engineering marked the beginning of a new period of diversification and expansion abroad, a trend the company had on the whole avoided since its brush with nationalization after World War II. During the 1970s and 1980s, Elektrowatt established a position at the leading edge of several new technologies while maintaining its presence in the traditional field of electricity generation. By the late 1970s, group holdings had been divided into three divisions, the energy division, the industry division, and the services division, which in 1991 contributed 35 percent, 47 percent, and 18 percent to total sales respectively.
The backbone of the energy division remains four large electrical utilities, three in Switzerland and the company's original utility at Rheinfelden in Germany. Elektrowatt is the largest independent producer of electricity in an industry that is largely state-owned. In addition to producing their own output, member companies are partners in numerous joint ventures and enjoy permanent drawing rights in the French atomic power stations at Bugey and Cattenom. With an eye to future trends in the industry, Elektrowatt has been an active participant in the building of an experimental 500-kilowatt photovoltaic solar power plant at St. Imier near the French border. The energy division also owns and operates the Calpine Corporation in California, which holds an interest in geothermal plants in California's Geysers area.
The industry division is the fastest growing segment of the company, with total sales of SFr 2.15 billion (US$1.68 billion) in 1991, almost 80 percent of which was generated outside Switzerland. It specializes in state-of-the-art electrical and electronics companies, notably in the security and building installation fields. For example, the fire and intruder detection systems on the luxury cruise liner 'Star Princess' and in the Musee d'Orsay in Paris were provided by group company Cerberus Limited. Another group company, Staefa Control System Limited, developed the fully-integrated building management system at Du Pont headquarters in Geneva. This system regulates all aspects of the day-to-day management of the complex, from security and communications to heating and ventilation. The electronic components field encompasses the manufacture and distribution of electronic parts with wide-ranging telecommunications and data technology applications. One of the other successful companies in the industry division is Prontophot Holding Limited, which manufactures, operates, and sells self-service coin-operated identity photo machines. In 1991, over 12 million customers used Prontophot locations worldwide. The industry division's success is therefore predicated on a sensitivity to market trends and a huge investment in sophisticated technological research.
The services division embraces Göhner AG, one of Switzerland's largest general contractors and real estate managers, and Elektrowatt Engineering Services Limited, a prominent firm of engineering consultants with subsidiaries in Germany and the United Kingdom. The division also deals in soil analysis and ecological survey work, waste incineration management, and timber conversion, which is managed by Canadian subsidiary Sandwell, Inc. Recent projects within the division include development of a hydroelectric plant in Sri Lanka, construction of the new Zürich Stock Exchange, and refurbishment of the runways and tarmac areas at John F. Kennedy International Airport in New York.
Elektrowatt also controls several finance and real estate companies, most of which perform specialized functions on behalf of the parent company. Watt AG conducts financial transactions, acquires shareholdings, and supervises occasional share capital increases. Elektrowatt Finance (BVI) Limited in the Virgin Islands specializes in international finance. Serewatt AG acquires real estate for use by the parent company and its affiliates.
Several developments in the early 1990s set the stage for Elektrowatt's further expansion and financial strength. The collapse of communism opened up opportunities for business with countries that had played an important part in the company's early success but were rendered off-limits for many years. In 1991, for example, the Elektrowatt management was able to submit a claim to the German government for the restitution and compensation of assets seized after World War II. Specifically, the company was interested in the fate of the Thuringer Electrical Production Company, situated in the former German Democratic Republic, in which it had owned a 25 percent interest until 1946. The company also welcomed the decision by the Swiss Federal Council to apply for formal membership in the European Community to take effect in 1995.
Elektrowatt already enjoys favorable trading relations with a number of European countries, and many of its most profitable subsidiaries are located abroad. EC membership will enable the group to take advantage of the free trade conditions by increasing its energy supplies throughout the European grid. On the other hand, the future of the atomic energy industry in Switzerland is less clear. Environmental legislation in Switzerland is among the strictest on the European continent, and publicity surrounding the efficacy of nuclear waste disposal has been controversial, leading to a public referendum in February of 1991 on the future of the Muhleberg nuclear power facility in Berne. Voters rejected government proposals to grant a definitive operating license to the firm and increase its operating capacity by ten percent. Although Muhleberg is not an Elektrowatt subsidiary, its fate has implications for the company's important nuclear power interests.
In spite of such concerns, Elektrowatt and its diverse international holdings looked set to weather the severe recession of the early 1990s with operations intact. From the outset, the company capitalized on its engineering excellence to stay abreast of new technologies. From its power base in Switzerland, it operated efficiently at the forefront of electricity generation technology at a time when demand for electricity in Europe outstripped supply. Its security and total building management systems set standards of excellence in sites worldwide. Its service division exhibited a commitment to environmental protection that could put it ahead of competitors for the strict EC regulations of the mid-1990s. With a relatively small debt load and assets in excess of US$1 billion, Elektrowatt is in an excellent position to continue the program of diversification and expansion that has served it so well in the past.
Principal Subsidiaries: Kraftwerk Laufenburg (76.3%); Elektrizitä×-Gesellschaft Laufenburg AG (78.9%); Centralschweizerische Kraftwerke (61.7%); Kraftübertragungs-werke Rheinfelden Aktiengesellschaft (67.8%); Calpine Corporation (USA); Cerberus AG; Staefa Control System AG; Kummler + Matter AG; T. Clarke plc (United Kingdom; 53.2%); Schaffner Elektronik AG; Melcher AG; Moor Finanz AG (47.7%); Alfred Neye Enatechnik GmbH (Germany); Texim Electronics BV (Netherlands); TME Components BV (Netherlands); Unitech plc (United Kingdom; 29.7%); Prontophot Holding AG; Vibro-Meter International AG; Ego Kunststoffwerk AG; Göhner AG; Elektrowatt Ingenieurunternehmung AG; Sandwell, Inc. (Canada); Winter Partners Holding AG (80%); Siemens-Albis Aktiengesellschaft (22%); Watt AG; Serewatt AG; Elektrowatt Finance (BVI) Ltd. (British Virgin Islands).
- Developments in the Situation of Europe's Electric Power Supply Industry during the Post-War Period, Geneva, United Nations Publications, 1959.
Report of the Board of Directors, Zürich, Elektrowatt AG, October 15, 1970.
- Meyer, Herbert, A History of Electricity and Magnetism, Massachusetts Institute of Technology, 1971.
- Gugler, Adolf, 'Elektrowatt: Accepting the Challenge of the Future,' Swiss Quality Products, autumn, 1989.
- 'Spanning the Globe,' Euromoney, June, 1990.
Switzerland Country Report No. 2 1992, London, The Economist Intelligence Unit, 1992.
Source: International Directory of Company Histories, Vol. 6. St. James Press, 1992.