Half-Year Report 2015

Transcription

1 BKW GROUP Half-Year Report First half-year

2 FACTS & FIGURES BKW Group Electricity business GWh Sales Sales Switzerland 3,456 3,421 6,784 Sales International 832 1,031 1,687 Market sales 6,096 6,048 12,099 Pump/substitution energy Transmission losses/own consumption Total 10,614 10,735 21,011 Generation and purchases Hydroelectric plants 1,758 1,835 3,843 Nuclear power plants incl. purchase contracts 3,230 3,186 6,080 Fossil-fuel power plants New renewable energy Trade (purchases) and energy buy-backs 5,096 4,880 9,762 Total 10,614 10,735 21,011 Financials CHF millions Total operating revenue 1, , ,844.9 Operating profit before depreciation, amortisation and impairment Net profit Cash flow from operating activities Purchase of property, plant and equipment Balance sheet total 7, , ,939.9 Shareholders equity 2, , ,525.0 as % of balance sheet total Employees Full-time equivalent Employees 3,172 3,676 3,504

3 Table of contents 4 Foreword 4 BKW is well on the way 5 Financial Result 5 BKW can offset negative impact of energy prices and exchange rates 11 Half-Year Financial Statements of the BKW Group 12 Consolidated Income Statement 13 Consolidated Statement of Comprehensive Income 14 Consolidated Balance Sheet 15 Changes in Consolidated Equity 16 Consolidated Cash Flow Statement 17 Notes to the Interim Financial Statements 28 Investor Information

4 4 HALF-YEAR REPORT 2015 FOREWORD BKW is well on the way In spite of sustained low electricity prices and the strong Swiss franc, the BKW Group 1 produced a strong operating profit of CHF million in the first half of the year (first half of 2014: CHF million). With this result BKW was able to offset the negative effects of changes in electricity prices and the exchange rate, recording a net profit of CHF million, CHF 31 million higher than in the first half of the previous year. CHF 300 million in revenue from our infrastructure and energy services business. Further acquisitions have allowed us to reinforce the infrastructure business in the first half-year and we have tapped into another attractive market in drinking water pipeline engineering. We have also expanded our regional presence in the field of building technologies and electrical installation, widening our customer base. Additional businesses in this field have come aboard in the first half of the year, increasing the amount of business we do in the greater Zurich area. We already employ 250 people who are working for our customers in the field of building technologies. Dear shareholders, ladies and gentlemen We are making resolute progress on the journey of transformation for our company to become a leading provider of energy and infrastructure services. In the first half of the year we once again encountered stormy seas. As the electricity price continued to fall, the swell of the unfavourable EUR/CHF exchange rate also had an impact on our results. Although we are diligent in doing our homework in the Energy business and our Networks business is stable, that is not enough to maintain the medium-term profitability of our company in today s environment. The key to our success is ensuring that we are strong and keep an even keel in an environment that may well experience turbulence for a number of years to come. This robustness and stability is achieved by continuing to reduce our dependence on the price of electricity. In addition to strengthening the Energy business and developing Networks, we can see promising opportunities in the development of a powerful business in energy and infrastructure services. A key element in the energy strategy is the increasing levels of energy efficiency. We are already comprehensively engaged in efforts in this respect, seeking to make efficient use of all forms of energy. Our endeavours in new areas of business are ultimately all related to energy efficiency. We are already earning some Major energy users can now benefit from our newly launched BKW power flex product. When there is excess supply of power in the grid, these industry customers receive an automated request to increase their consumption if they can. BKW power flex starts up the agreed machinery and ensures that the excess electricity is used. If demand for power outstrips supply, however, the same customers are requested to switch off the machinery. The flexibility of this technical equipment can be traded on the operating reserve market a win-win for us and our business customers while we also make a specific contribution to transforming the energy system. Good result expected for 2015 BKW confirms the outlook for the current financial year that it communicated when it published its 2014 annual financial statements: Thanks to focused efficiency improvements and cost management, active management of the energy position, the stabilising effect of the Networks business and continued expansion of the Services business, some of the negative factors relating to the price of electricity and exchange rates will be offset. Nevertheless, BKW anticipates that the operating result for 2015 will fall below the strong figures reported for Yours sincerely 1 The BKW Group comprises BKW AG and its Group companies. In order to make this report easier to read, the Group will be referred to as BKW. Where the text relates specifically to BKW AG or BKW Energy Ltd., this is expressly mentioned. Suzanne Thoma CEO

5 HALF-YEAR REPORT FINANCIAL RESULT BKW can offset negative impact of energy prices and exchange rates BKW achieved a good result in the first half of 2015, in a sector characterised by falling electricity prices and despite the strong Swiss franc. The operating income (EBIT) totalled CHF million (+ 41 %). This includes the positive effects of currency translation in respect of provisions for onerous energy procurement contracts denominated in euro. Before allowing for this effect, EBIT was on a par with the first half of the previous year. BKW has therefore succeeded in offsetting the negative impact of electricity prices and exchange rates. Net profit in the first half of the year grew by CHF 31 million to CHF million (+ 34 %). Robust operating profit net profit increased In the first half of 2015 BKW achieved an operating profit of CHF million. This represents an increase of 41 % compared with the first half of the previous year. Ignoring the positive currency translation effects amounting to CHF 61 million, which arose in the conversion of provisions for onerous energy procurement contracts denominated in euro, EBIT is on a par with the previous year. Therefore, despite the negative impact of falling electricity prices and exchange rates on the Energy business, it was possible to maintain the previous first half-year s performance. Active cost management, slightly improved volumes and successful management of our energy position were the principal contributing factors to this development. In addition, the Networks business increased its contribution to the operating profit. Expansion of the Services business progressed swiftly, as income from services improved by 41 % year-on-year. One-off costs of acquisition and integration and a significant seasonal effect have combined to keep the contribution of Services to EBIT within modest levels in the first half of the year. An increase in the EBIT margin is expected for the second six months. Net profit increased to CHF million, which is a 34 % rise compared with the previous year s figure of CHF 92.1 million. BKW achieved an operating cash flow of CHF 159 million in the first half of the year, reporting liquidity of CHF 1.2 billion. Changes in accounting principles and in the scope of consolidation BKW adjusted its reporting and management structure with effect from 1 January 2015 as part of the implementation of its business strategy. Decisions on allocation of resources and assessment of earning capability are taken at the level of the Energy, Networks and Services business areas. The reporting segments therefore now correspond to BKW s business areas. The new reporting structure improves transparency and supports the consistent implementation of the business strategy. A range of smaller companies have been added to the scope of consolidation in the Services area (building technologies), following acquisitions made in the first half of 2015.

6 6 HALF-YEAR REPORT 2015 Financial Result Total operating revenue down, Services business reporting high rates of growth At CHF 1,277.6 million, total operating revenue was 11 % lower compared with the previous year. This decrease can be attributed to the lower electricity prices and the effects of the CHF/EUR exchange rate, which caused the total operating revenue of the Energy business to drop by CHF million. In contrast, the Services business climbed strongly by CHF 50.9 million or 36 % to CHF million, thus providing some degree of counterbalance. The Networks business also recorded an increase as operating revenue increased by 9 % to CHF million. Operating expenses increased as a consequence of expansion in the services business, while cost savings took effect in the established business areas. Energy procurement and transport costs decreased by 33 % during the year under review, to CHF million. One reason in particular for this development was the positive effect of lower costs of procurement in the market resulting from the electricity price and exchange rate movements. The half-year-end currency translation of provisions for onerous energy procurement contracts denominated in euro also had a positive influence on the energy procurement costs, to the tune of CHF 61 million. Operating expenses excluding energy procurement increased by CHF 55.7 million, or around 14 % year on year. This hike is largely attributable to the expansion of the Services business with its higher personnel requirements, but there was also a contribution from greater regulatory expenses in the Networks business, in particular in relation to the feed-in remuneration at cost scheme (KEV). It was possible to offset some of the cost increases through lower generation costs in energy production and efficiency improvements in support units. Financial result lower owing to weaker fund performance The financial result was significantly weaker compared with the previous first half-year period, at CHF 58.7 million. The reason for this development can be attributed in particular to the negative performance of the decommissioning and disposal funds. While the funds achieved a surplus of CHF 40.1 million in the first half of the previous year, they registered a deficit of CHF 11 million in the first six months of The cessation of the Robin Hood Tax generated a positive one-off tax effect of CHF 18.9 million in taxes on income. The tax expense of CHF 17.4 million was therefore significantly lower than in the previous first half-year period (CHF 31.6 million). BKW s net profit grew by CHF 31 million to CHF million.

7 HALF-YEAR REPORT 2015 Financial Result 7 Energy business segment: Successful offsetting of negative effects on revenue The Energy segment builds, operates and maintains BKW s pool of power plants in Switzerland and abroad. It is also responsible for the sale of energy in Switzerland and in Italy and for trading in electricity, certificates and raw materials. CHF millions % change Electricity sales Switzerland % Electricity sales International % Other electricity sales % Income from other energy business % Other operating income and own work capitalised % Total operating revenue 1, % Energy procurement % Expense from other energy business % Personnel expenses % Material and third-party services and other operating expenses % Total operating expenses % Operating profit before depreciation, amortisation and impairment % Depreciation, amortisation and impairment % Income from associates % Operating profit/loss % As anticipated, lower electricity prices and a stronger Swiss franc have impacted the revenue of the Energy business, as total operating revenue decreased by 22 % to CHF million. The volumes of energy sold through Swiss distribution channels and through the wholesale market were close to the previous comparable period, while the sales volume in Italy improved by almost 200 GWh. However, lower electricity prices in the partially regulated distribution business resulted in a 5 % drop in revenue to CHF million. Other electricity sales (market sales and direct sales from power plants) fell by 32 % to CHF million. In addition to the drop in electricity market prices, the exchange rate had a particularly negative impact in this respect. The energy procurement cost fell by 36 % to CHF million. In addition to the lower market procurement prices and currency effects, the reasons for this decrease included lower market procurement volumes. Electricity production of 5,855 GWh was significantly up on the previous year s figure of 5,518 GWh. Hydro power plants achieved slightly higher production volumes (+ 77 GWh) while new renewable energy sources also increased production (+ 31 GWh), in particular wind farms. Owing to market conditions, fossil-fuel power plants increased production markedly, by 273 GWh. Lower demand for power from French nuclear power plants caused the amount of electricity generated by nuclear plants to fall slightly by 44 GWh. Energy procurement costs also benefited from the positive effect of currency translation in relation to provisions for onerous energy procurement contracts, at CHF 61 million. Improvements in efficiency and cost savings led to lower generation costs for energy produced by BKW and therefore a significant reduction of CHF 17.6 million ( 9 %) in operating expenses excluding energy procurement. In addition to the increased production volumes and improved efficiency, successful management of the energy position also helped to offset much of the impact of lower electricity prices and the exchange rate. As a result, operating profit increased by 64 % to CHF 142 million. Ignoring the positive effect of the exchange rate on provisions for onerous energy procurement contracts, the operating profit was on a par with the previous year.

8 8 HALF-YEAR REPORT 2015 Financial Result Networks business segment: Contribution to overall result increased again The Networks segment builds, operates and maintains BKW s distribution network. It is also responsible for the transport of energy for end customers outside BKW s supply region in Switzerland and Italy. CHF millions % change Distribution grid usage fees % Energy transport income % Other operating income and own work capitalised % Total operating revenue % Energy transport expense % Personnel expenses % Material and third-party services and other operating expenses % Total operating expenses % Operating profit before depreciation, amortisation and impairment % Depreciation, amortisation and impairment % Income from associates % Operating profit/loss % Total operating revenue of the Networks segment improved by 9 % to CHF million. Within this figure, income from distribution grid usage fees increased by CHF 18.4 million to CHF million. This growth is attributable to both slightly higher volumes of third-party power carried and higher fees. Energy transport income relates to the transport of energy for end customers outside of the supply region, both in Switzerland and in Italy. Operating expenses increased overall by around 10 %. While there was a slight drop in expenses for energy transport (third-party and upstream networks), other operating expenses increased in particular. The reason for this rise was primarily the regulatory expenses (in particular KEV), which have gone up once again. Operating profit grew by CHF 8.6 million to CHF 68.4 million. This means that the Networks business has increased its contribution to the overall result by 14 %.

9 HALF-YEAR REPORT 2015 Financial Result 9 Services business segment: Successful expansion of the services business The Services business segment provides energy services in the fields of building technologies, grid infrastructure and energy efficiency. It also provides services relating to the project management and design of new plants and expansion of existing power plants for third parties. CHF millions % change Income from services % Other operating income % Total operating revenue % Personnel expenses % Material and third-party services and other operating expenses % Total operating expenses % Operating profit before depreciation, amortisation and impairment % Depreciation, amortisation and impairment % Income from associates % Operating profit/loss % The Services business segment raised the total operating revenue markedly, by CHF 50.9 million to CHF million. Achieving a growth rate of 36 %, this shows that the strategic expansion of the services business is progressing rapidly. Organic growth during the period under review was 8 %, while inorganic growth reached 28 %, recording an increase of some CHF 40 million. Since June 2014, ten companies in the building technologies sector (in particular heating installation businesses) and the grid/infrastructure services sector have been acquired. Five of these were added in the first six months of Operating expenses in the Services segment, with its higher personnel requirements, have risen in parallel to the strong growth in sales. As much of the expansion has been generated by business acquisitions, initial acquisition and integration costs also add to the expense items. Accordingly, the EBIT of the Services segment for the first half of the year was just CHF 1.1 million. Operating output of the acquired companies was as planned. Since the Services segment typically experiences significant sector-specific seasonal effects (grid services, building technologies), it is expected that the operating result will increase in the second half of the year.

10 10 HALF-YEAR REPORT 2015 Financial Result Solid cash inflow from operations At the end of June, operational cash flow amounted to CHF 159 million (end of June 2014: CHF million), therefore covering all of the first six months investments, which amounted to CHF 125 million. The reduction compared with the previous year can be attributed to seasonal effects in net current assets and contributions to the result that have no effect on liquidity. Cash and cash equivalents were on a par with the previous year s level at CHF million. Including current financial assets, BKW s liquidity continues to be high at around CHF 1.2 billion on the reference date. Continued sound equity and financing situation: ensuring financial and operational flexibility The balance sheet total fell by almost 5 % compared with the end of the year, coming in at CHF 7.6 billion at the half-year mark. Despite the lower balance sheet total, the equity ratio remained stable at 31.5 % (year-end 2014: 31.8 %). The reason for the slight dip is the translation of equity capital of Group companies located in the euro zone, which suffered a negative impact as a result of the strong Swiss franc. CHF millions Non-current assets 5, ,368.0 Current assets 2, ,207.6 Non-current liabilities 4, ,469.2 Current liabilities Shareholders equity 2, ,384.4 Balance sheet total 7, ,575.6 BKW s financing situation remains solid. Net debts (financial liabilities less current financial assets and cash and cash equivalents) were significantly reduced due to exchange rates at the half-year point, by around CHF 35.5 million to CHF million. The first refinancing of outstanding bonds is due in In addition, BKW maintains an unused syndicated loan of CHF 250 million. The financial framework for maintaining financial and operational flexibility therefore remains unchanged.

11 HALF-YEAR REPORT Half-Year Financial Statements of the BKW Group

12 12 HALF-YEAR REPORT 2015 Half-Year Financial Statements of the BKW Group Consolidated Income Statement CHF millions Net sales 1, ,225.2 Own work capitalised Other operating income Total operating revenue 1, ,277.6 Energy procurement/transport Material and third-party services Personnel expenses Other operating expenses Total operating expenses 1, Operating profit before depreciation, amortisation and impairment Depreciation, amortisation and impairment Income from associates Operating profit/loss Financial income Financial expenses Profit/loss before income taxes Income taxes Net profit attributable to: BKW shareholders Non-controlling interests Result per share in CHF (undiluted) Result per share in CHF (diluted)

13 HALF-YEAR REPORT 2015 Half-Year Financial Statements of the BKW Group 13 Consolidated Statement of Comprehensive Income CHF millions Net profit Actuarial gains/losses (Group companies) Actuarial gains/losses Income taxes Actuarial gains/losses (associates) Actuarial gains/losses Income taxes Total items that will not be reclassified to income statement, net of tax Currency translations Currency translations Available-for-sale financial assets Value adjustments Income taxes Hedging transactions Value adjustments Reclassification to the income statement Income taxes Total items that may be reclassified to income statement, net of tax Other comprehensive income Comprehensive income attributable to: BKW shareholders Non-controlling interests

14 14 HALF-YEAR REPORT 2015 Half-Year Financial Statements of the BKW Group Consolidated Balance Sheet CHF millions Assets Property, plant and equipment 2, ,772.0 Investments in associates 1, ,080.0 Derivatives Non-current financial assets 1, ,237.2 Intangible assets Deferred tax assets Total non-current assets 5, ,368.0 Inventories Accounts receivable Current tax receivable Derivatives Current financial assets Prepaid expenses and accrued income Cash and cash equivalents Total current assets 2, ,207.6 Total assets 7, ,575.6 Shareholders equity and liabilities Share capital Capital reserves Retained earnings 2, ,768.0 Other reserves Treasury shares Equity attributable to BKW shareholders 2, ,288.6 Equity attributable to non-controlling interests Total shareholders equity 2, ,384.4 Non-current provisions 2, ,990.5 Non-current financial liabilities 1, ,611.6 Deferred tax liabilities Pension liability Derivatives Other non-current liabilities Total non-current liabilities 4, ,469.2 Other current liabilities Current provisions Current financial liabilities Current tax liabilities Derivatives Deferred income and accrued expenses Total current liabilities Total liabilities 5, ,191.2 Total shareholders equity and liabilities 7, ,575.6

15 HALF-YEAR REPORT 2015 Half-Year Financial Statements of the BKW Group 15 Changes in Consolidated Equity CHF millions Share capital Capital reserves Retained earnings Treasury shares Other reserves Attributable to BKW shareholders Attributable to non-controlling interests Equity at , , ,365.7 Net profit Other comprehensive income Comprehensive income Dividend Transactions in treasury shares Share-based payments Acquisition of non-controlling interests Contribution to equity from non-controlling interests Equity at , , ,389.9 Total Equity at , , ,525.0 Net profit Other comprehensive income Comprehensive income Dividend Transactions in treasury shares Share-based payments Acquisition of non-controlling interests Changes in the scope of consolidation Contribution to equity from non-controlling interests Equity at , , ,384.4

16 16 HALF-YEAR REPORT 2015 Half-Year Financial Statements of the BKW Group Consolidated Cash Flow Statement CHF millions Result before income taxes Adjustment for: Depreciation, amortisation and impairment Income from associates Financial result Gains/losses from sale of non-current assets Change in non-current provisions (excl. interest) Change in assigned rights of use Change from the valuation of energy derivatives Other non-cash positions Change in net current assets (excl. financial assets/liabilities and derivatives) Income taxes paid Other financial items paid Cash flow from operating activities Purchase of property, plant and equipment Proceeds from disposal of property, plant and equipment Acquisition of Group companies Disposals of Group companies Investments in associates Proceeds from sale of associates Investments in current and non-current financial assets Disposals of current and non-current financial assets Purchase of intangible assets Disposals of intangible assets Interest received Dividends received Cash flow from investing activities Sale/purchase of treasury shares Acquisition of non-controlling interests Contribution to capital from non-controlling interests Increase in current and non-current financial liabilities Decrease in current and non-current financial liabilities Increase in other long-term liabilities Decrease in other long-term liabilities Interest paid Dividends paid Cash flow from financing activities Translation adjustments on cash and cash equivalents Net change in cash and cash equivalents Cash and cash equivalents at start of reporting period Cash and cash equivalents at end of reporting period

17 HALF-YEAR REPORT 2015 Half-Year Financial Statements of the BKW Group 17 Notes to the Interim Financial Statements 1 Business activity BKW AG, Berne (CH), together with its Group companies, is a leading energy provider in Switzerland and delivers a comprehensive range of products and services to residential and business customers. Energy is sold in neighbouring countries via the Group s own sales channels. BKW covers the entire value chain, from production and distribution to the trading and sale of energy. In addition to pure energy supply, BKW develops, implements and operates comprehensive energy solutions for private and commercial customers, as well as for energy utility companies and local authorities. 2 Accounting principles 2.1 General principles The unaudited consolidated financial statements for the half-year ended 30 June 2015 have been prepared in accordance with the International Accounting Standard on Interim Financial Reporting (IAS 34) and should be read in conjunction with the consolidated financial statements to 31 December These interim financial statements have been drawn up in accordance with the principles described in the 2014 Financial Report (pages 17 to 31). The consolidated interim financial statements for the period ended 30 June 2015 were approved by the BKW AG Board of Directors on 27 August 2015 and released for publication. The preparation of this half-year report entailed assumptions and estimates. Actual results may differ from these estimates. 2.2 Adoption of new standards and interpretations In the 2015 financial year BKW was required to adopt the following new or revised standards: Amendments to IAS 19 Defined Benefit Plans: Employee Contributions Annual Improvements cycle Annual Improvements cycle These changes have had no effect on the presentation of the financial position, results of operations and cash flows of BKW.

18 18 HALF-YEAR REPORT 2015 Half-Year Financial Statements of the BKW Group 2.3 Future adoption of new standards and interpretations The following new and amended standards and interpretations had been published by the balance sheet date but will not be applied until subsequent financial years. BKW intends to apply the changes from the date on which they enter into force (entry into force for financial years beginning on or after the dates in brackets): IFRS 9 Financial Instruments (1 January 2018) IFRS 15 Revenue from Contracts with Customers (1 January 2018) Amendments to IAS 1 Disclosure Initiative (1 January 2016) Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (1 January 2016) Amendments to IFRS 11 Acquisition of an Interest in a Joint Operation (1 January 2016) Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation (1 January 2016) Annual Improvements cycle (1 January 2016) BKW is currently examining the possible effects of applying these new or changed standards and interpretations. 2.4 Foreign currency exchange rates The reporting currency is the Swiss franc (CHF). The currency exchange rates in relation to the Swiss franc applied to the consolidated financial statements were as follows: Closing date Closing date Average 2014 Average 2015 CHF/EUR Principles of accounting and valuation In conjunction with the implementation of the established company strategy, BKW modified its reporting and management structure with effect from 1 January 2015, resulting in changes to the accounting principles relating to segment reporting. Segments and segment results are still defined on the basis of the management approach. In line with the implementation of the company strategy, BKW s reporting lines are now structured around the business areas Energy, Networks and Services. These three business areas represent BKW s reporting business segments. The results of the segments are separately monitored by the CEO in order to make decisions on resource allocation and to assess the earning power of the units. Operating profit is used by the the CEO as the chief operating decision-maker as the basis for resource allocation and performance measurement.

19 HALF-YEAR REPORT 2015 Half-Year Financial Statements of the BKW Group 19 3 Business combinations Business combinations 2015 CHF millions Building technologies Property, plant and equipment 0.6 Intangible assets 4.7 Financial assets 0.4 Other current assets 10.1 Cash and cash equivalents 3.8 Deferred tax liabilities 1.6 Non-current financial liabilities Other non-current liabilities 0.2 Current liabilities 7.2 Fair value of acquired net assets 10.0 Goodwill 14.4 Purchase price 24.4 Deferred purchase price payments 5.0 Cash and cash equivalents acquired 3.8 Cash outflow The values for the transactions listed are provisional since the purchase price allocations have not been finalised. Building technologies During the first six months of 2015, BKW acquired 100 % of the shares in each of Karl Waechter AG, Marzolo & Partner AG, Lutz Bodenmüller AG and Weber AG. These companies operate in the market for heating installation. In addition, BKW acquired 100 % of the shares in the electrical installation specialist Elektro Aebi AG. All of the businesses acquired have been assigned to the Services business segment. At the acquisition date, there were expected deferred purchase price payments of CHF 5.0 million in conjunction with these acquisitions. Of this amount, CHF 3.0 million is dependent on the future business performance of the companies acquired. As at the half-year point in 2015, no payments had yet been made in respect of these deferred purchase price payments. The transactions included goodwill of CHF 14.4 million. The goodwill mainly reflects the expected future synergies and the acquisition of a qualified workforce (know-how). The fair value of the receivables amounted to CHF 6.5 million. These largely consist of trade receivables for which the risk of default is estimated to be extremely low. Therefore no impairments were recorded for these receivables. Had the companies already been acquired as at 1 January 2015, total operating revenue for 2015 would have been CHF 9.3 million higher and the net profit CHF 0.6 million higher. Between the point at which the individual companies were fully consolidated and 30 June 2015, the acquired companies recorded a cumulative operating revenue of CHF 14.4 million and a total net loss of CHF 0.5 million. Business combinations 2014 No transactions were undertaken in the first half of 2014.

20 20 HALF-YEAR REPORT 2015 Half-Year Financial Statements of the BKW Group 4 Seasonality and fluctuations in business over the year According to experience, performance of sales in the Services business is subject to seasonal fluctuations. Normally, business activity is higher in the second half of the year than in the first six months. 5 Segment reporting In conjunction with the implementation of the established company strategy, BKW modified its reporting and management structure with effect from 1 January Decisions on how to allocate resources and assess earnings power are taken at the level of the Energy, Networks and Services business areas. The reporting segments therefore now correspond to BKW s business areas. The new management and reporting structure helps to realise the established company strategy in a transparent and meaningful way. The figures for the first half of 2014 have been adjusted in relation to the new structure. BKW operates the following three reportable business segments: The Energy business segment builds, operates and maintains BKW s pool of power plants in Switzerland and abroad. It is also responsible for the sale of energy in Switzerland and Italy and for trading in electricity, certificates and raw materials. The Networks business segment builds, operates and maintains BKW s distribution network. It is also responsible for the transport of energy for end customers located outside BKW s supply region in Switzerland and Italy. The Services business segment provides energy services in the fields of building technologies, grid infrastructure and energy efficiency. It also provides services relating to the project management and design of new plants and expansion of existing power plants for third parties. The column Other covers activities which are centrally managed within the Group; these largely consist of the decommissioning and disposal funds, Group financing, real estate, financial assets and tax. Costs that arise in conjunction with the creation of new business areas (acquisition/integration costs, technology development costs, etc.) are borne centrally within the Group to a certain extent, and are not charged to the business segments. Segment figures are obtained in accordance with the same accounting and valuation principles as are applied for the Group-level presentation of consolidated figures. The prices for intra-group transactions (transfer prices) are based on the market price on the transaction date.

21 HALF-YEAR REPORT 2015 Half-Year Financial Statements of the BKW Group 21 Information by business segment 2015 CHF millions Energy External revenue ,277.6 Networks Net sales ,225.2 Own work capitalised Other operating income Internal revenue Net sales Other operating income Total operating revenue ,277.6 Total operating expenses Operating profit before depreciation, amortisation and impairment Depreciation, amortisation and impairment Income from associates Operating profit/loss Financial result 58.7 Profit/loss before income taxes Services Other Consolidation Total Additions: Property, plant and equipment and intangible assets of which from business combinations State funds Associates Shareholdings in associates at ,080.0 Total assets at , , , , ,575.6

22 22 HALF-YEAR REPORT 2015 Half-Year Financial Statements of the BKW Group 2014 CHF millions Energy External revenue 1, ,431.5 Networks Net sales ,385.8 Own work capitalised Other operating income Internal revenue Net sales Other operating income Total operating revenue 1, ,431.5 Total operating expenses ,207.3 Operating profit before depreciation, amortisation and impairment Depreciation, amortisation and impairment Income from associates Operating profit/loss Financial result 17.5 Profit/loss before income taxes Services Other Consolidation Total Additions: Property, plant and equipment and intangible assets of which from business combinations 0.0 State funds Associates Shareholdings in associates at , ,173.5 Total assets at , , , , ,939.9

23 HALF-YEAR REPORT 2015 Half-Year Financial Statements of the BKW Group 23 6 Energy procurement/transport CHF millions Cost of energy procurement from third parties and associates Provision for onerous energy procurement contracts Provisions used Provisions added Provisions released Total energy procurement expenses Energy transport expenses Total energy procurement and transport expenses Financial result CHF millions Interest income Dividend income Value adjustment on state funds Gains from the disposal of financial assets Value adjustment on securities held for trading Other financial income Currency translations Financial income Interest expenses Capitalised borrowing costs Interest on provisions Value adjustment on state funds Value adjustment on securities held for trading Impairment of financial assets Other financial expenses Financial expenses

24 24 HALF-YEAR REPORT 2015 Half-Year Financial Statements of the BKW Group 8 Income taxes In its decision of 9 February 2015, the Italian constitutional court declared the Robin Hood Tax to be in breach of the constitution. The Robin Hood Tax was the name for an additional income tax levied only on businesses in the energy sector at a rate of 6.5 %. Several BKW Group companies in Italy were previously subject to this tax. The constitutional court s decision was legally binding with immediate effect, and led to a corresponding reduction in the tax rate as of As at 30 June 2015 BKW has revalued the deferred tax liabilities for the affected Group companies and reduced them by CHF 18.9 million. This has resulted in a corresponding one-off reduction in the income tax expense of the same amount. In addition to this one-off effect, revocation of the tax will result in a lower annual tax charge and therefore to lower cash outflows. 9 Dividends In accordance with the decision made at the BKW AG Annual General Meeting held on 8 May 2015, a dividend of CHF 1.60 (previous year CHF 1.20) per share was paid for the 2014 financial year.

25 HALF-YEAR REPORT 2015 Half-Year Financial Statements of the BKW Group Assets and liabilities measured at fair value Assets and liabilities measured at fair value are classified according to a hierarchical structure for the purposes of valuation. The allocation is based on the principles described on page 74 of the 2014 Annual Report, which remain unchanged. As in the comparable period, there were no transfers between the different levels during the period under review. CHF millions Financial assets at fair value through profit or loss Non-current financial assets Carrying amount at Level 1 Level 2 Level 3 Available-for-sale financial assets Receivables from state funds Derivatives (current and non-current) Current financial assets Securities held for trading Inventories Certificates (proprietary trading) Financial liabilities at fair value through profit or loss Derivatives (current and non-current) CHF millions Financial assets at fair value through profit or loss Non-current financial assets Carrying amount at Level 1 Level 2 Level 3 Available-for-sale financial assets Receivables from state funds Derivatives (current and non-current) Current financial assets Securities held for trading Inventories Certificates (proprietary trading) Financial liabilities at fair value through profit or loss Derivatives (current and non-current) In addition, the liabilities at 30 June 2015 include the following at fair value: Bonds with an amount of CHF million (31 December 2014: CHF million) as part of a fair value hedge valued at Level 2. Other liabilities with an amount of CHF 5.7 million (31 December 2014: CHF 1.5 million) from deferred purchase price payments in relation to business combinations valued at Level 3. There were no material additions, disposals or impairments to assets valued at fair value at Level 3 during the reporting period or the previous period.

26 26 HALF-YEAR REPORT 2015 Half-Year Financial Statements of the BKW Group 11 Financial assets and liabilities measured at amortised cost The carrying amounts of the financial assets closely correspond to the fair values. Due to short residual terms to maturity, the carrying amounts of financial liabilities at amortised cost correspond approximately to the fair value. A difference exists between these values in respect of the bonds and the convertible bond, which are included under non-current financial liabilities. The market price of the bonds (fair value level 1) as at the reporting date amounted to CHF 1,296.6 million, while the carrying amount was CHF 1,153.0 million. At 31 December 2014 the corresponding market price was CHF 1,260.3 million and the carrying amount CHF 1,150.9 million. 12 Events after the balance sheet date 12.1 Business combinations After the balance sheet date, BKW undertook a number of acquisitions and signed acquisition contracts. Business combinations completed before the Board of Directors approval of the half-year accounts antec group AG BKW has acquired 100 % of the shares of antec group AG, based in Risch (ZG). With its two subsidiary operating companies ahochn AG in Dübendorf (ZH) and ahochn AG, Rotkreuz, in Risch (ZG), antec group AG is a leading planning group in the area of building technologies in Switzerland. It offers its customers innovative end-to-end solutions in building technologies, with a focus on buildings and energy. The purchase contract was completed on 31 July The company has been fully consolidated from this date. It is allocated to the Services business segment. Casa delle Nuove Energie (C.D.N.E. S.p.A.) In Italy, BKW acquired a 71 % majority interest in C.D.N.E. S.p.A. based in Massazza (I). The company is focused on energy efficiency and renewable energy and operates a network of 75 sales branches throughout Italy. The purchase contract was completed on 21 July The company has been fully consolidated from this date. It is allocated to the Services business segment. The purchase price allocations for these acquisitions have not yet been completed, since they have been calculated only shortly before preparation and approval of the half-year accounts. BKW has calculated the following provisional amounts: The net assets acquired in the scope of these business combinations amount to around CHF 13 million. The provisional total purchase price is in the region of CHF 30 million. Of this, some CHF 8 million relates to conditional purchase price payments that are dependent on the future business performance of the acquired businesses.

27 HALF-YEAR REPORT 2015 Half-Year Financial Statements of the BKW Group 27 Business combinations that are expected to be completed after the Board of Directors approval of the half-year accounts Solare Datensysteme GmbH (SDS) On 12 August 2015, BKW announced its acquisition of 100 % of the shares of Solare Datensysteme GmbH (SDS). Based in Geislingen-Binsdorf, in south-west Germany, SDS is a global market leader in the monitoring of photovoltaic systems. Through the portal solutions it provides its customers, it monitors more than 230,000 photovoltaic solar panel installations with a total installed capacity of 9.9 GWp. Currently, 70 % of its existing customers are based in Germany, and 90 % in Europe. It is anticipated that the purchase contract will be completed in autumn The company is allocated to the Services business segment. Fresnoy Brancourt wind farm On 3 August 2015, BKW announced that it had signed contracts to purchase 100 % of the shares in the Parc Eolien de Fresnoy Brancourt SAS wind farm. The company is the owner of a wind farm with an installed capacity of 13.8 MW. It is planned to complete the purchase contract in September The company is allocated to the Services business segment Acquisition of an additional shareholding in Swissgrid On 30 July 2015, BKW announced that it intends to exercise its pre-emptive right to purchase the Swissgrid interest held by Alpiq Grid Beteiligungs AG (AGB). With this acquisition, BKW will hold a significant minority interest in Swissgrid. As for all other Swissgrid shareholders, BKW has a pre-emptive right through its subsidiary BKW Netzbeteiligung AG to purchase shares in Swissgrid. This right is established in legislation, statute and contract and forms part of the compensation to all former transmission grid owners in respect of the compulsory transfer of the high voltage transmission grid to Swissgrid. The extent to which BKW is able to exercise its pre-emptive right depends on whether other Swissgrid shareholders also wish to exercise their own pre-emptive rights. The purchase price for the entire interest in Swissgrid held by AGB amounts to some CHF 300 million. This corresponds to the purchase prices already communicated by Alpiq in respect of the two tranches.

28 28 HALF-YEAR REPORT 2015 INVESTOR INFORMATION Important information on the BKW share, bonds and financial calendar Performance of the BKW share BKW registered Swiss Performance Index (indexed) Performance of the share markets in the first half of 2015 was significantly affected by the revocation by the Swiss National Bank (SNB) of the EUR/CHF exchange rate floor. The SNB s announcement resulted in immediate losses on the financial markets. The BKW share also consequently lost around 5 % in price. However, the initial negative reaction was gradually corrected and the share market recovered. On 23 February, BKW indicated that its 2014 result would be significantly stronger than had previously been anticipated. Both operating profit and net profit increased significantly compared with the previous year. As a result, the BKW share made major gains in price. The performance of the share in 2015 up to this time had been around + 5 %. After publication of the Financial Report on 19 March, with the detailed presentation of the strong 2014 annual result, the BKW share increased further in price and significantly outperformed the SPI. At the start of May it was trading at CHF 37.45, the highest value since in the first half of Following this owing to the dividend payment in mid-may and corresponding to the slight downward trend of the market as a whole, in terms of the SPI, the share price dropped slightly to the end of June. The price of the BKW share at 30 June closed at CHF 34.90, thus recording a gratifying 18.5 % gain since the beginning of the year, which was notably better than the performance of the SPI (+ 0.7 %). Listing The shares of BKW AG are listed on the main segment of the SIX Swiss Exchange. There is also a listing on the BX Berne Exchange. Ticker symbol on SIX and BX BKW Securities number ISIN code CH