Half Year 2026 BKW AG Earnings Call
Speaker #1: I'd like to welcome you to the Analyst and Media Conference on BKW's 2026 half-year results. My name is Marisa Fetzer, I'm Head of Corporate Topics within BKW's Corporate Communications Department, and we'll be facilitating this online event.
Speaker #1: I'd also like to welcome BKW's CEO, Robert Itschner, and BKW's CFO, Martin Zwyssig. There will be presenting BKW's half-year results for 2026 shortly, and on the cover of our 2026 half-year report you can see Marcus Schmidt.
Speaker #1: He's Project Manager LTV Leitungsberge GmbH, part of BKW's network. As part of the UltraNet project, LTV Leitungsberge is upgrading existing power lines on the section between Mannheim and Philipsburg in Germany, and erecting numerous new pylons.
Speaker #1: The aim is to enable the simultaneous transmission of direct and alternating current along the same route. UltraNet thus increases the transmission capacity for transporting electricity from northern to southern Germany.
Speaker #1: Before I hand over to Robert Itschner, I would like to briefly outline today's agenda. First, our CEO, Robert Itschner, will give you a brief overview of the results for the first half-year of 2026 and discuss the key developments over the first 6 months across our 3 business segments, energy solutions, power grid, and infrastructure and buildings.
Speaker #1: Then Martin Zwyssig, our CFO, will present the financial results for the first half-year of 2026 in detail, before I hand over to Robert Itschner to conclude the presentation part of this conference with an outlook for the current fiscal year.
Speaker #1: You will also have the opportunity to ask questions. We will round off today's online conference with a comprehensive Q&A as is customary. Please submit your questions in writing at any time during the presentation, we will answer them during the Q&A.
Speaker #1: Let's now start with the detailed explanation of BKW's half-year results for 2026, and I'm pleased to hand over to our CEO, Robert Itschner. Thank you very much, Marisa.
Speaker #1: Ladies and gentlemen, good morning. I would like to also extend a warm welcome to on the occasion of BKW's online Analyst and Media Conference for the 2026 half-year results.
Speaker #1: As always, I'd like to take this opportunity before our CFO, Martin Zwyssig, delves into our financial results to present an overview of the key figures and say a quick word about developments.
Speaker #1: In our business segments, our half-year at a glance: in the first half-year, we achieved a solid result, but the first 6 months were quite challenging, and I'm going to say a bit more about that later on.
Speaker #1: In energy solutions, we are in a dynamic environment, which is characterized by the uncertain situation in the Middle East and the very dry weather with little wind.
Speaker #1: That said, we will be able to capitalize on opportunities with energy solutions, particularly due to the significant fluctuations in the system services business and the short-term trading.
Speaker #1: Thus, we were able to upset offset part of the negative results. Overall, total operating income and operating profit in energy solutions declined compared to the previous year.
Speaker #1: In the power grid business segment, we've performed steadily in the first 6 months. The year with a total revenue at the previous levels level and EBIT only slightly lower than in the same period of 2025.
Speaker #1: I'm particularly pleased with the continued positive performance in infrastructure and buildings, we're able to increase the EBITDA, EBIT, and profitability in this business segment.
Speaker #1: These developments are reflected in 4 figures you can see here. Total revenue EBITDA and EBIT, they are falling compared to the same period last year because the stable to positive trends mentioned in the power grid and infrastructure building segments were unable to offset the headwinds in the energy solutions business segment.
Speaker #1: However, we were able to increase on our profit by 7%. As our CFO is going to explain in a minute, we have a higher free cash flow than last year, and we're able to increase our EBIT equity how this is why BKW is a solid company in the first half-year.
Speaker #1: We were in a very stable situation, and we are on track with our solutions 2030 strategy, and are committed to our target of an EBIT of 850 to 1.2 million in 2030.
Speaker #1: Let me now talk about the individual business segments. Let's start with energy solutions. You'll see some KPIs on the right-hand side, which are related to our strategy.
Speaker #1: We want to enlarge our product and portfolio to 4.7 3.6 gigawatt. We have been able to increase our portfolio with 80 megawatts, many portfolios are in the pipeline.
Speaker #1: We'll talk about this later. Another growth area is direct marketing, where it's 7.9 gigawatts we have over our announced target. Also thanks to the acquirement of SuitWatt last year.
Speaker #1: And we're at 2.6 when it comes to virtual power plants. We're focusing on a further scaling of decentral flexibility as regards the enlargement of our portfolio.
Speaker #1: There's many highlights. We've already informed you about Sarinola, we have commissioned the second phase of the wind farm in southern Italy, that's very positive results, and we're very we've received a building permit for the battery storage facility in Waltrop.
Speaker #1: It's a very large battery storage facility. We want to operate 300 megawatts ourselves, we're going to start construction soon, and we have already taken investment decisions.
Speaker #1: We're also investing in Switzerland, according to plan. We have started the pump storage facility Grimsel 4. I'm very pleased to announce that it's a very important component of the future energy system, because it provides flexibility in the energy system and we need that.
Speaker #1: In the future, a smaller highlight, but also important for the future, is the assurance of the agreement in principle with Swiss grid for the plant large-scale battery in Mühlenberg for 400 megawatts.
Speaker #1: We are in the midst of putting this project into action. We're also offering customer solutions. We were able to acquire the energy company Volta in France, successfully.
Speaker #1: Volta is providing wonderful growth opportunities. We were already present in France, as you all know, we managed customer plants and with Volta's we have obtained an additional interface with customers and we believe that we are going to generate nice growth there because market regulation has changed in France and for the first on the first of January 26, large volumes were made available on the market, which were made available in the past by EDF regulator under EDF regulated conditions.
Speaker #1: We also have a 10-year management contract with the French project developer Acacia, here we want to increase to 700 megawatts when it comes to the management of third-party plants, so we're well on track there.
Speaker #1: And finally, a very thrilling project that is contributing to our value creation, namely the energy solution hub, which will be launched in Switzerland in a first phase.
Speaker #1: And which we're going to introduce in neighboring countries in the mid-term. This project is about offering major customers the opportunity to benefit from integrated energy solutions, and we are going to offer management of energy assets for customers in an optimated way.
Speaker #1: So this is a very interesting project and it's wonderful to see how our customers' requirements are developing as we predicted some time ago. Now let's move on to the power grid.
Speaker #1: We said we're going to invest 1 billion until 2030, we're well on track. We've invested quite a bit in the past. These investments are carried out to make sure that we can support the energy tradition.
Speaker #1: We've grew many renewables, have grown. You see here the situation as per June. So there was a massive increase recently, and the BKW grid now has 800 megawatts installed capacity that's an additional increase this year.
Speaker #1: The increase is massive, and therefore we need investments now. As regards the role, of the smart meters, we're well on track. We can conclude this project one year earlier than predicted, this is another very important precondition for the efficient management of the grid, and we have taken first steps already.
Speaker #1: On the left-hand side of the slide, you see topics that I've already mentioned, the investment program is well on track, and I'm pleased to say that we were able to place a green bond for investments in the distribution grid.
Speaker #1: These investments are sustainable, and in the future we will finance them with green bonds as well. And what's important for safety of supply is a certification of the central control center in accordance with the European standard, EN 50518.
Speaker #1: We are one of the first grid operators who have been awarded this certification that fills us with pride and ensures that we have a solid infrastructure to operate now.
Speaker #1: I've already mentioned what is listed here on the slide, so let me move to infrastructure and buildings. Here, we've performed well in the first half, we've announced a percent for 2030, we are well on track, we're taking one step after the other, and my colleague Martin Zwyssig will tell you in detail what's happening there.
Speaker #1: This improvement was made possible by very strict financial discipline, but also good projects, especially when it comes to project management, hospital planning, hospital planning is a huge market, especially in Germany.
Speaker #1: Here, we have were able to been able to be awarded the second construction phase of Bonn University Hospital. We're also active in data centers, with building solutions in Switzerland, but also with engineering in Germany.
Speaker #1: We are currently carrying out several projects and are planning more. There's also high profitable growth and a high voltage transmission system, as my colleague Marisa said before, high investment volumes are possible there.
Speaker #1: We're well positioned and here we've been able to achieve some milestones. In particular, these coastline Berlin, 185 kilometers of high voltage lines, were installed there.
Speaker #1: And we have doubled our transmission capacity there. And interesting project that shows our innovative abilities is a project that we carry out together with BLS, namely the refurbishment of the Weissenstein tunnel near Solothurn.
Speaker #1: Here, we introduced an automated drilling robot for the first time together with tested it, and we were able to reduce overall cost by around 50%.
Speaker #1: There were videos online if you're interested in this project. When it comes to the service business, we were also able to achieve more growth.
Speaker #1: Especially when it comes to building solutions, higher margins, less risk, and therefore we're interested in expanding in these projects, and we'll also have several projects in the pipeline namely Bottom acquisitions.
Speaker #1: We've made two acquisitions this year already, but many more are in the pipeline. We're interested in acquiring specific competencies and adding them to their network, which will support our long-term objectives.
Speaker #1: Now, that's a short review of the last six months, and now I hand over to my colleague for the financials. Thank you very much, Robert.
Speaker #1: Very good morning. For me too, and welcome to today's half-year call. As usual, I will now take you through the details of the 2026 half-year financial results.
Speaker #1: Let's start with an overview of key figures. BKW generated a revenue of 2.2 billion in the first half of 2026. This represents a 3.1% decrease compared with the previous year.
Speaker #1: I will come back to the detailed performance when discussing the individual business segments. Let's start with the EBITDA. It fell by 47 million or 15.1% year on year, to 263.7 million.
Speaker #1: By contrast, net profit increased by 7% compared to the previous year, namely to 217.6 million. This is due to the positive performance of Mühleberg Stanford.
Speaker #1: Which was able to offset the lower operating profit. The performance of the Mühleberg Stanford is reflected in the financial results, which consequently increased by 61.5 million Swiss francs compared with the previous year.
Speaker #1: In the previous year, we had a loss of 9 million. The operating net profit has been adjusted and the operating net profit amounts is 169.1 million, representing a decrease of 19.6% compared with the previous year.
Speaker #1: The operating cash flow amounts to 122.5 million, despite the lower profit. Details on this will be provided in the commentary on the cash flow statement.
Speaker #1: The growth stands at 7%, significantly exceeding BKW's work. And finally, the equity ratio. It was strengthened to 52.3% thanks to retained earnings and actual gains.
Speaker #1: That's an increase of 1.4 percentage points compared with the previous year. Now, this slide shows you which business segments are driving our performance, both in terms of total revenue and EBIT.
Speaker #1: Let's first look at total revenue on the left-hand side. In the energy solutions business segment, the client amounted to 41.3 million Swiss francs. The full consolidated revenue is therefore mainly attributed to the energy solutions business segment.
Speaker #1: In power grid, total revenue was slightly higher, due to the increased transmission volumes. In the power in the infrastructure, buildings segment, we recorded a year-on-year decline in revenue of 24.6 million due to the focus on profitable business, and in the support functions, the decline is attributable to last year's sale of BKW's two-thirds stake in the customer service and billing provider CC Energy.
Speaker #1: On the right-hand side, you see the EBIT bridge which shows the negative impact of the energy solutions business segment on the group overall. At EBIT level, profit fell by 50 million.
Speaker #1: Essentially, prices hedged at a higher level were unable to offset the lower trading results and the weather-related low production volumes. At power grid, higher costs led to a slightly lower EBIT and infrastructure and buildings managed to increase its profit by 3.9 million compared with the previous year, despite a decline in revenue.
Speaker #1: On this and the next slide, I will discuss the individual business segments energy solutions power grid and infrastructure and buildings in greater detail. The first segment presented on this slide is energy solutions.
Speaker #1: Total revenue for this business segment fell by 4.2% or 41.3 million Swiss francs to 950.7 million. The higher hedge prices are having a positive effect on total revenue.
Speaker #1: As lower generation volumes already weighed on us last year, revenue is only in significantly affected by the low production volumes. The main driver behind this decline in total revenue is the low energy trading margin.
Speaker #1: As regards EBIT, EBIT amounted to 156.9 million in the first half of the year, which is 24.2% or 15 million below the previous year's level.
Speaker #1: The impact of the dry weather is not significant in a year-on-year comparison due to the similarly dry first half of 2025. However, it was a key factor in the normalized volume on which our planning assumptions were based.
Speaker #1: The main driver of the reduction in EBIT is the electricity traded business, which was characterized in the reporting period by difficult marketing environment with prices not driven by fundamentals due to the developments in the Middle East mainly.
Speaker #1: These erratic price movements made positioning and trading challenging. And the contributions to earnings from certain proprietary trading segments were particularly affected by this. By contrast, the intraday business continued to generate good returns.
Speaker #1: Additionally, revenue opportunities arose in intraday trading, particularly during the heatwave in June. The positive fund performance of the Leipstadt Stanford increased earnings by 27.7 million compared with the same period last year.
Speaker #1: Let's now take a quick look at the generation mix, as you will see on the right-hand side. In the first half year, BKW generated 4.6 terawatt-hours of energy, which is around 3% more than in the previous year.
Speaker #1: The dry weather led to further decrease in hydroelectric power generation of 0.1 terawatt-hours to 1.6 terawatt-hours. Production from wind farms and PV plants remained under pressure due to poor wind conditions.
Speaker #1: The increase of 0.2 terawatt-hours is primarily attributed to the commissioning of the Cherry Nola wind farm. The nuclear power stations in which BKW holds a stake and the thermal power stations produced at the same level as in the previous year.
Speaker #1: Now, this slide shows hydro production and the Leipstadt Stanford's fund performance in a multi-year comparison. Hydro production is at 1.6 terawatt-hours, and is once again below the levels of the previous year, which was already a dry one, and below the long-term average.
Speaker #1: And is therefore below our expectations. The Leipstadt Stanford performance contributes as a reduction to the energy producing costs when the trend is positive. At 6.1 in the first half of 2026, the performance was significantly above standard return of 2.8 and reduced energy costs by 27.7 million compared with the previous year, as I've said before.
Speaker #1: Electricity price volatility is a key driver of trading activities. You already know the left curve from earlier presentations. It shows the trend in forward volatility which has now been extended to include the first half of 2026, whilst the trend in short-term volatility is now shown on the right-hand side.
Speaker #1: On the forward volatility enables trading margins to be generated on hedging transactions by prolonged encounter in forward spreads. It is formed substantially since its peak in '22 and explains the significant decline in trading results since then.
Speaker #1: Now, this is nothing new. As such, although this volatility increased slightly in the first half of '26, the level remains comparatively low. And this is weighing on the profit contributions from longer-term market positions, and limiting the opportunities to realize trading margins.
Speaker #1: By contrast, short-term day-ahead volatility has risen steadily since its low point in '23. It stood at 137% in 2025 and rose further to 152% in the first half of 2026.
Speaker #1: This high short-term volatility created additional trading opportunities in the first half of the year and bolstered earnings from the system services businesses and intraday trading in particular.
Speaker #1: However, and this is also important, and I briefly alluded to this earlier, that if price movements are erratic and not driven by fundamentals, that is, if they are not, for example, based on weather forecasts where one can take a position, but are driven by social media causing corresponding price movements, then this makes it very challenging, if not impossible, to take a position.
Speaker #1: And consequently, no trading margin is realized. This was particularly the case in the first quarter of 2026. Now, let's have a look at power grid.
Speaker #1: Total revenue rose slightly by 3.5% or 1.1 by 3.5 million Swiss francs or 1.51%. Reasons for this higher total revenue is the slightly higher transmission volumes.
Speaker #1: EBIT for the grid business, however, fell by around 1.9% from 69.3 to 68 million Swiss francs. This was due to higher costs for energy transmission, owing to a lower run of the grid generation, more energy had to be procured from Swiss grid transmission grid, which led to correspondingly higher transmission costs.
Speaker #1: Depreciation and amortization also rose by 3.8 million. As a result of the growing regulatory asset base arising from investment activities. These costs form part of the cost of production, which will be factored into future tariffs.
Speaker #1: Overall, the power grid business segment is a very stable business segment in terms of earnings, with only minor year-on-year variations. Now, finally, the infrastructure and building segment.
Speaker #1: Let's first look at revenue. Revenue fell by 2.6% or 24.7 million Swiss francs due to Kenyon focus on profitable business. Organically, the decline stood at 2.8%.
Speaker #1: This was offset by a slight inergonic growth amounting to 2.6 million or 0.2%. The EBIT increased 234.7 million representing a year-on-year increase of 3.9 million.
Speaker #1: The improvement of operating performance is reflected in a decline in operating costs. Relative to total performance, this improvement has led to an increase in the EBIT margin from 3.2% to 3.7%.
Speaker #1: Now, it's worth noting is this seasonality of the results in this business segments, which, as expected, is pronounced again this year. And to reiterate my comments from previous presentations, we can report another half-year of continuous operational improvements in the infrastructure business segment.
Speaker #1: Let us now move on from the income statement to the cash flow statements. The group's cash and cash equivalence amounted to 699.7 million Swiss francs at the reporting date, representing a decrease of 155 million Swiss francs compared with the end of 2025, both blue bars on the slide.
Speaker #1: Operating cash flows before the use of nuclear provision amounts to 168.4 million, which is 43.4 million lower than previous year. Main reason being the lower operating profit.
Speaker #1: As in the previous year, additional funds are tied up in the net current assets on a seasonal basis. I will talk about investments in more detail.
Speaker #1: Investment activity the intro of Stenford to cover the provisions utilized amounts to 77.4 million Swiss francs, as is high this year, relative to the payments of 45.9 million Swiss francs.
Speaker #1: So it should be balanced out. This is due to an extraordinary payment of 15.4 million Swiss francs resulting from the reassessment of decommissioning costs for the years 2020 and 2021.
Speaker #1: Taken together, this results in a positive free cash flow of 96.6 million. Swiss francs for the first half of '26, which at 68 million Swiss francs is substantially higher than the previous year's figure of 28.6 million Swiss francs.
Speaker #1: However, this free cash flow was not sufficient to finance the dividends paid out amounting to 211.3 million Swiss francs. But this must be assessed on an annual basis.
Speaker #1: We have, therefore, in the short term, mainly drawn on our existing liquidity, which explains the lower level of cash and cash equivalence compared with the end of December, as mentioned at the outset of 699.7 million.
Speaker #1: As announced, let's take a brief look at where BKW has invested. In the first half-year of '26, capital expenditure on property, plant, and equipment, intangible assets, and the acquisitions of group companies, totaled 209.7 million Swiss francs.
Speaker #1: Of this, 49.4% was allocated to growth and 106 million Swiss francs or 50.6% to maintenance. In the energy solutions business segment, 56.7 million were invested in growth.
Speaker #1: Part of this went towards the expansion of the Cherignola wind farm, and the development of battery projects with Volta SR, we were able to acquire important energy provider in France, and that's an important step in our achievement of our energy solutions 2030 project.
Speaker #1: In infrastructure and buildings, small acquisitions were made, thereby enabling further investment in growth and maintenance, and in power grid growth investments, were made into grid reinforcements.
Speaker #1: And the strategic expansion of the electricity grid and of the 106 million spent on maintenance, the majority 56.7 million went to the power grid division for the upkeep of existing grid infrastructures.
Speaker #1: This overview shows on the left-hand side the trend in net debt, and on the right-hand side the maturity profile of our outstanding bonds and debt ventures.
Speaker #1: Let's start with net debt. On the left-hand side, you see liquidity bars above the zero line, as I explained before. Here, you see short-term financial assets.
Speaker #1: Which have been included. Financial liabilities remain stable at around 1.89 billion, and as a result of declining cash and cash equivalence and the stable financial liabilities, net debt in dark blue rose seasonally by 234.4 million, as at the reporting date, reaching roughly the same level as in previous years.
Speaker #1: On the right-hand side, you see our maturity profile, which is balanced out. In March, BKW successfully placed green bonds for the first time to fund investments in the distribution.
Speaker #1: Grid totaling 200 million Swiss francs. The chart shows that BKW has an excellent diversification over the time horizon. This means low refinancing risks, great flexibility, and corresponding room for maneuver for future growth financing.
Speaker #1: An important factor not included in these figures is the syndicated credit facility, amounting to 1.5 billion. This serves as an additional liquidity buffer and has not been drawn down.
Speaker #1: The facility matures in 2031. On this slide, you see a schematic overview of the balance sheet trends. The balance sheet remains stable, with only slight shifts.
Speaker #1: Current assets have decreased by 0.2 billion due to lower cash and cash equivalence, receivables and short-term financial assets. Fixed assets, on the other hand, increased by 0.1 billion.
Speaker #1: Mainly due to ongoing investment activities. Loans and borrowings fell by a total of 0.2 billion, and there was a reclassification of outstanding bonds between current and non-current borrowings based on their remaining maturity.
Speaker #1: Equity increased by 0.1 million. The main reason for the strengthening of our equity are firstly and most importantly, the net profit generated of 217.6 million, and furthermore, actuarial gains from the valuation of employee pension provisions of 39.3 million Swiss francs.
Speaker #1: Which strength equity. The dividends of 211.3 million Swiss francs paid out in the half first half-year are charged to equity. The equity ratio continues to rise by 0.8 percentage points to 52.3%, which underpins further growth and enables us to continue to play an active role in shaping the energy transition.
Speaker #1: And finally, a comment on the return on capital, employed on the row C, and the net debt to EBITDA. The row C stands at 7%, thereby significantly exceeding BKW's cost of capital.
Speaker #1: With the exception of the record year '22, it remains very stable. Shown on the right-hand side is the net debt to EBITDA ratio. Which has stabilized at a figure slightly above 1.
Speaker #1: And with that, I conclude my remarks. I hand back to Robert Itschner for the outlook. Thank you very much for your attention. Thank you very much, Martin.
Speaker #1: I'd like to have a quick look at our strategy, in particular on market potentials. Which continue to be very positive. We understand our market segments better than 2024.
Speaker #1: We have understood that our potential is even higher if we look at mid-term growth. I'm not going to bore you with lots of figures, but I'm just going to pick out a few.
Speaker #1: Investment need for electricity in Germany until 2040, around 600 to 630 billion. In Switzerland, there's another 40 to 50 billion. Big figures. Now, if you look at infrastructure, in particular in the EU, we see that investment needs are immense, particularly in Germany.
Speaker #1: There's the over 50 billion by 2030 that need to be invested. In schools and hospitals, motorway bridges is a big topic. In Germany, they are in need of refurbishment, approximately 8,000 of them will have to refurbish.
Speaker #1: These data show that we have a lot of potential. The market is there. BKW has many opportunities and we're going to use them to grow profitably.
Speaker #1: When it comes to the implementation of our strategy, I'd like to show you our investment program. Around 4 billion Swiss francs have already been allocated.
Speaker #1: More than 60%. That's the blue bar. 1.8 billion have been allocated to projects, which will be executed in the coming months. 1.6 billion Swiss francs, according to our past plans, will have to be allocated.
Speaker #1: Now, here, I'd like to inform you that we're not going to take investment decisions just to take them. We're only investing in profitable projects, and that applies to all of our business segments.
Speaker #1: Now, what is not shown here are our investments in the Oberhasli power plants and other 200 million francs are expected by 2030. It shows that we have a good position.
Speaker #1: You see that in the comments that we're receiving, we're making huge progress. We've allocated over 50% in energy solutions. This is due to our very strict capital discipline.
Speaker #1: It's only 50%, not more. But our pipeline we believe is very strong and we're going to further develop it and we plan to realize our upcoming projects.
Speaker #1: I've already mentioned power grid. The planning situation is very good here. Everything has been planned for until 2030. Of course, it's in a regulated system as regards to infrastructure and buildings.
Speaker #1: We're permanently developing our pipeline for upcoming investments. The cycle is shorter. Then in the energy business here, but in a nutshell, we're well on track and we're going to execute all of the investments that are going to pay into our 2030 strategy.
Speaker #1: And that brings me to the end of my presentation and my conclusion. BKW's situation is sound financially. Our market situation looks good. Our markets continue to offer significant opportunities for profitable growth.
Speaker #1: And in the first half of the year, we have achieved important milestones in the implementation of our 2030 strategy. And we are on track with our planned investment, as I explained earlier on, giving you some examples.
Speaker #1: Against this backdrop, we believe that we are going to continue generating profitable growth in attractive markets. As regards the rest of 2026, for energy solutions and energy solutions infrastructure buildings, we expect significantly stronger performance whilst power grid is set to perform steady in line with our expectations.
Speaker #1: Against this backdrop, we anticipate an EBIT for the full year 2026 to be at the lower end of the range of 650 to 750 million Swiss francs announced at the beginning of the year.
Speaker #1: Thank you very much, Robert and Martin, for your presentations. On the half-year results, for the year 2026. That brings us to the Q&A. It's time for your questions, ladies and gentlemen.
Speaker #1: And we have already received some questions. Let's start with the first question. First question submitted by Leandra Satorro from UBS. The question was asked in English.
Speaker #1: How much of the H1 energy earnings shortfall in the energy solutions was related to the temporary Middle East-related market disruptions? And to what extent have those effects normalized, in Q3 so far?
Speaker #1: Now, I'll pass that question to our CFO. Well, we'll substantial sums in particular, which came about in the first months of the first half-year, and are due to the developments in the Middle East.
Speaker #1: Large parts of the these items that weigh down on our results were due to events in the first quarter. This didn't normalized in the second quarter in the third quarter.
Speaker #1: We already realized in April that trading results normalized and came back to planned numbers or even above. Part of the downside we had in the first quarter was due to valuations.
Speaker #1: We have a fair value rate at will be corrected in the future. And therefore, we set temporary we use the term temporary in our press release.
Speaker #1: Thank you very much for this reply. Further question by Michelle Snyder from Redwill Econfin. In the energy solutions, BKW has added resources and trading division volatility in 2026.
Speaker #1: Yet results are lower. What will change in the second half year 2026? Why? That's a first partial question. And the second one is, why are you not growing electricity capacity faster in Europe as electricity demand has started to accelerate and the outlook is positive?
Speaker #1: I'd like to pass that question to our CFO. Well, there's two things in the second half year. We have block to strengthen our capacities.
Speaker #1: We've observed change there due to withdrawals. We believe that in the second half year, we'll have good potential there. We'll be able to generate good results.
Speaker #1: Secondly, as I said before, there's this temporary effect of assessment of our positions which will be corrected mostly, I believe. These are the two topics in the trading area which make us make leaders believe that we will close that gap.
Speaker #1: As regards the expansion of our production portfolio, I've already gave you some information on that. It's a fact that energy demand is rising significantly.
Speaker #1: We believe however, that we have to look closely at the investments we want to make. There are some very unrealistic prices and price expectations on the market where they fall carefully selecting our choices.
Speaker #1: We're training all we've proven that we are able to take very good decisions. This wind park is is a very promising investment. And we are going to strengthen profitable investments in energy.
Speaker #1: Production. Thank you very much. We have four partial questions by Emanuele Oggioni from Kepler Chevron. I'm going to ask the questions. One after the other because they do not all they cannot be seen in one context.
Speaker #1: First question. Could you explain in more detail the trading breakdown among the different moving parts considering that the Ansily services and the intraday trading profit from elevated short-term volatility?
Speaker #1: But this was not sufficient to offset the other parts. Well, let me start. A breakdown of results will not be provided but one thing about system services in terms of their volumes.
Speaker #1: On an annual basis, we have 80 to 100 million generated. We look at half-year by half-year and we believe that we and we see that we were we doubled results.
Speaker #1: Profits from services cannot offset trading results however. Second question. Hi, Emanuele Oggioni. It relates to hydro production. Hydro production was only one 0.1 terawatt hours lower year on year.
Speaker #1: What is your expectation for the second half-year 2026 compared with 2025? Well, first of all, we are comparing a very dry year and even drier year with a dry year last year.
Speaker #1: We had expected a different situation. We're calculating with long-term rainfall averages and we always looking at rainfall data at the end of the year to plan for the next year.
Speaker #1: And here we're comparing to very dry years. As results, weather well, there I can't make any predictions but Lake filling volumes are very low.
Speaker #1: If you look at BFE data, you will see that in the Canton of Greece on the very low in Valais there around average volumes and elsewhere were very low averages that is an indication of what is to be expected in the next year.
Speaker #1: And that affects our planning. The Oberhasley power plant has good results because glaciers have been melting as a result of the heat. But of course, we need more rain much more rain we calculate based on statistic averages.
Speaker #1: But of course, now we're taking into consideration the filling filling volumes for planning of upcoming years. Now, next question regards Grimzo 4. Remain with hydro production.
Speaker #1: Could you add more color on the expected EBITDA contribution from Grimzo 4 and when? When is the EBITDA contribution to be expected? Well, Grimzo 4 as a matter of fact will only be connected to the grid in '31.
Speaker #1: We calculate our calculating with a two-figure EBITDA contribution as from that year so that's a very good development. But of course, we're not going to publish detailed data but we're factoring a two-figure EBITDA contribution.
Speaker #1: Thank you very much, Robert. Last partial question. From Emanuele Oggioni. Could you update on to 2029 hedging? Yes, we can. You may remember that we said that we moved from a strict hedging mechanism in at the beginning of the year when we had the three-year head production in a short time.
Speaker #1: We've maintained that system. Not everything's hedged for 2029. However, some positions are left open. We do that intentionally and therefore we cannot tell you at this point in time what the exact average price will be.
Speaker #1: Thank you very much. Thank you very much, Martin. There's another question coming in from you best. Alexandra Bossert. In particular. I think we've already talked about let me present the question.
Speaker #1: Can you tell us something about the impact of the very dry summer on the first half-year and the expected second half-year figures Robert already said that we cannot predict the weather but maybe you want to add something.
Speaker #1: Not really. Maybe just to say that as a result of the dry weather he had very little wind as well. We believe we're hoping for a changing weather for more wind.
Speaker #1: This is going to boost our wind production. We hope that the weather situation normalizes. So let's hope for a rainy or windy autumn. Definitely.
Speaker #1: That's what all you wish for. Thank you very much, Robert. There's another question coming in from AVP Finance and I think Christoph Graham. Question is can you tell us about the situation of the dams after the long drought?
Speaker #1: Is this going to have an continuous negative effect on the second half-year? Do you believe it's going to be bottlenecks? Can you tell us anything about the Middle East?
Speaker #1: Well, as I said, filling volumes vary. The big hydro capacities are located in the Canton of Valais and the Canton of Bron as we know.
Speaker #1: Here the situation doesn't look too dire. In the Canton of Greece the filling levels are very low and we have large facilities there but things could change quickly if there's more rain in the next coming weeks.
Speaker #1: Second question. Middle East and the developments there. We believe that there's not going to be a normalization of the situation in the near future.
Speaker #1: And of course, that's going to affect gas prices in particular in the mid and long term. But that might change right now we believe that things are not going to change quickly.
Speaker #1: Thank you very much. Let's continue to the next question. We have Christian Dreesen from Montel. He has one question regarding energy solutions in the second half-year.
Speaker #1: Do you believe figures are going to be more positive in the second half-year? Why do you believe that is going to be so? The geopolitical situation continues to be very dynamic.
Speaker #1: And can you tell us anything about the hydro development in the second half-year? I think that's what many people are interested in. So this question goes to the two of you.
Speaker #1: I believe I've already talked about the training results. Maybe you want to answer? Well, we have negative assessment effects on the one hand. In the second half-year, as we know, we've have some improvement to be expected there.
Speaker #1: The assessments will be corrected we believe. And we'll be back on track in the second half-year. As I said before, there are positions that are clearly plannable and when we look ahead the mixers believe that development the development is going to be positive in the second half-year.
Speaker #1: This is why we based ourselves on those planned data and positive figures in the second half-year. Let's now move on to infrastructure and buildings.
Speaker #1: Armin Rechberger by ZK from ZK has one question. Which areas are not doing well? That's his question. We are continuously improving in all areas.
Speaker #1: I can really tell you about one specific area that's not doing well. Of course, there's many challenges that's normal. Well, one thing that can be said is that infrastructure is not developed in Switzerland as fast as it should be given the need needs for a energy transition.
Speaker #1: But we are well positioned on the market and we are continuously improving our operative performance overall I'd say that we're not doing as well everywhere as we would like but we are continuously improving.
Speaker #1: Thank you very much. And there's additional questions. I an additional question by Andreas Fox that we already partly covered. Let's stay with infrastructure and buildings.
Speaker #1: We have two questions that concern the objective of eight of a profitability of 8% by 2030. Now, question is many objectives were confirmed. Is there also concern the 8% by 2030?
Speaker #1: Yes, that's our ambition. We believe that if the measures that we've introduced over the past two to three years become effective we can further push growth and we can also if we can improve profitability and portfolio in our portfolio we can achieve those 8%.
Speaker #1: Thank you very much. Question by Andreas Vonaks ZKB. He has a question about not allocated investments. You, Robert, said what we had already allocated.
Speaker #1: Question is how many concrete projects concrete projects are there for the not allocated 3 billion investments? Given the multi-annual construction times, can these really contribute to the 2030 EBIT target?
Speaker #1: Should investments be significantly lower by 2030? Could you still achieve your 850 million EBIT target by 2030? Robert? Well, we've said that we've already invested 700 million at over 8 million already allocated to projects therefore I don't know what the 3 billion are about.
Speaker #1: One point 6 billion needs to be allocated. Of course, that's a challenge in itself but we are convinced that we can do it. We are convinced that we will find good potential investments.
Speaker #1: Now, depending on technology, of course, projects take a long time to implement. We know that. But we have some very good projects. The workshop battery storage facility for example and we'll soon contribute to EBIT.
Speaker #1: And we are convinced that we will balance our portfolio in such a way that new projects will contribute will be contributing to profitability. We have a question by Laura Bucher from Octavian again.
Speaker #1: It's about the EBIT expected for energy solutions in the second half-year. She has an additional question. On the pickup in energy EBIT in H2, just to confirm, do you factor any tailwind from the central fund or do you assume a normalized 2.8 performance?
Speaker #1: We do that very systematically because we don't know how they how stocks develop. We look at performance achieved in the first half-year and then we calculate with standard profit with standard returns so normalized planned return for the second half-year.
Speaker #1: Based on first half-year figures. We continue with the next question by Renee Rickard from Vaderbank again. Which additional revenue is to be expected from the Valtrop battery project and which effect on the EBIT you expect once project is fully implemented?
Speaker #1: Well, battery projects are about flexibility and the EBIT effect they have are very is very important. Revenue is not that relevant. Because we want to feed in electricity into the grid when prices are good.
Speaker #1: It's so it's not about energy volumes but about feeding in to the grid when it makes sense. We're not going to publish exact figures but they're going to be in the 2 million two digit million range.
Speaker #1: Thank you very much, Robert. I'd say we take another three to four questions and then we will conclude our Q&A. Let me start with the next question by Patrick Yeager, IFS again.
Speaker #1: It's about intraday volatility and earnings in the balancing energy market as of 29, 2030. How are they how are they going to develop before all planned battery storage plans are implemented?
Speaker #1: That's a very good question. Of course, the market situation is going to further change and develop. We believe that the mentioned battery facilities give us a very good position.
Speaker #1: However, there are many plans for expansion of renewables therefore there's a need for flexibility in the future. We don't believe that we're going to invest in assets that will not provide the returns we expect.
Speaker #1: We have very good facilities, very good plants and projects. I'm not talking about competitors projects but are about our projects in particular. Question by Peter Gürkli.
Speaker #1: Tax adviser. You've already sold most of the electricity for the year 2026. Can you supply it from your own power plants or have to do you have to buy from third-party providers?
Speaker #1: Well, if we have customer agreements and our own capacity is not sufficient then we have to buy electricity. Of course, that's not good for our business.
Speaker #1: We avoid that when we can but that's reality sometimes. We always meet our the promises we make to our customers. One last question for this Q&A.
Speaker #1: There's many coming in. Thank you very much for your interest. We will reply to your answers. We will contact you. Last questions will take on here.
Speaker #1: It's from Andrea Schneller from Puerto Tortini. What about expansion of hydropowers with drift? I'm thinking of thrift and dam wall increases. What about nuclear energy and the dismantling of Mühleberg?
Speaker #1: We are convinced that we'll start thrift and crimson wall expansion next year. Final decisions are still to be made and approvals need to be given.
Speaker #1: But I believe that we have a great deal of support for those projects given the current energy situation in Switzerland that we're going to implement those projects.
Speaker #1: But I don't think the effect will be visible before 2030. As regards the Mühleberg power plant, we're well on track here. As was known, the fuel roads were stored some time ago and now the dismantling phase has to be concluded by 2032.
Speaker #1: At the latest, we will develop a utilization plan by next year. We have an idea for battery storage I believe we're well on track.
Speaker #1: If you're interested, please read the article published at NCZ last week. This article describes the current situation in great detail. Thank you very much, Robert.
Speaker #1: Thank you for the detailed information provided. Thank you to you, our participants, and for asking questions. All the questions that have not been answered right now will be answered directly.
Speaker #1: We will contact you. Now, before we bring today's analyst media conference to a close, I would like to draw your attention to the upcoming events.
Speaker #1: On Tuesday, 10th of November 2026, we will carry out a nine-month business update call. It is carried out for the first time this year to enhance transparency for the capital markets between the half-year and annual results.
Speaker #1: And the presentation also the next half-year results will take place in Zurich in March. And that brings us to the end of this event.
Speaker #1: Thank you very much again for participating. We look forward to welcoming you again on Tuesday, 10th of November 26th for the nine-month business update call.
