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Swiss utility Axpo to post 2016 loss on pumped storage writedown

| ZURICH, Sept 19

ZURICH, Sept 19 Government-owned Axpo, Switzerland's biggest utility, forecast another full-year net loss after taking 1.4 billion Swiss francs ($1.43 billion) of writedowns on its pumped storage dams and other facilities.

Axpo booked a 540 million franc impairment on its new 1,520 megawatt Linth-Limmern pumped storage plant, launched this month. Built in the Swiss Alps, the plant acts as a power storage system by pumping up water at night and releasing it by day.

Its profitability strongly depends on the difference in prices for base load electricity and prices during peak consumption times, but abundant daytime solar power has reduced that spread to below the level to operate the plant profitably.

"Even though this power plant is immensely important for the security of supply in Switzerland, it cannot be operated profitably in the coming years," Axpo said in a statement.

Axpo also wrote down the the value of its production plants and made provisions for energy supply contracts as European wholesale power prices sank to 13-year lows in the first quarter and have since recovered only to levels of a decade ago.

Consequently, Swiss utilities - whose power costs more to produce than they can sell it for on the European market - have written off billions of dollars worth of facilities, with no relief in sight.

"The year-on-year contraction of around 30 percent in European wholesale prices for electricity is a clear sign that the price slump will last longer than expected a year ago," Axpo said.

Axpo, whose loss last year hit nearly 1 billion francs, began construction on the 2.1 billion franc Linth-Limmern project five years ago.

It had hoped to sell power from it across Europe at times of high demand and high prices. Instead, a flood of new renewable energy sources in particular in Germany, coupled with laggard demand, have conspired to drive the price of electricity to levels where Linth-Limmern will be a money-loser for years to come.

Fellow Swiss utility Alpiq huge Nant de Drance pumped storage dam faces similar challenges.

To raise cash, Axpo has joined other Swiss utilities including Alpiq in seeking to unload assets and diversify their businesses away from electricity sales. ($1 = 0.9810 Swiss francs) (Reporting by John Miller; Editing by Geert De Clercq)

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