BKW Energie AG

BKW Group - 2011 Half-Year Results
Difficult, challenging environment - lower sales, higher production

Bern (ots) - Against a challenging economic and regulatory backdrop, the BKW Group has delivered unsatisfactory results for the first half of 2011. The result was impacted by low energy prices, the downturn on equity markets, the low Euro exchange rate and the events in Japan. Compared to the prior-year period, consolidated operating revenue was 2.1% lower at CHF 1,346.4 million (CHF 1,374.7 million). At CHF 220.8 million, operating profit before depreciation, amortisation and impairment (EBITDA) was down CHF 36.8 million or 14.3%. Net profit ended the first half of 2011 at CHF 90.5 million: CHF 43.9 million below the 2010 first half-year figure. Measures have been introduced with the aim of cutting controllable costs by 15%. This is likely to involve a reduction in the workforce.

In the first half of 2011 the BKW Group sold 10,716 GWh of electricity, corresponding to a slight reduction of 1.5% versus the first half of 2010 (10,880 GWh). Electricity sales in Switzerland fell versus the same prior-year period by 1.8% to 4,138 GWh (4,214 GWh). The reduction is primarily attributable to higher average temperatures. The volume of electricity traded increased by 3.7% from 5,281 GWh to 5,475 GWh. As a result of the current economic situation in Italy, international sales of electricity were 11.8% lower year-on-year at 804 GWh.

Increase in production

BKW increased electricity production year-on-year by 466 GWh to 5,561 GWh. The increase is chiefly due to the higher production volume recorded by the Livorno Ferraris gas-fired combined-cycle power plant in Italy's Piedmont region. Hydroelectricity production in Switzerland was 199 GWh lower at 1,453 GWh as a result of low precipitation. Moreover, the level of reservoirs was below the long-term norm due to hydrological conditions. BKW saw a slight increase in electricity generated by nuclear power plants, from 3,165 GWh in the prior-year period to 3,221 GWh. Mühleberg nuclear power plant generated 1,621 GWh (1,617 GWh), while Livorno Ferraris gas-fired combined-cycle power plant recorded an output of 637 GWh (123 GWh).

Solid energy business - trading impacted by euro exchange rate

In the first half of 2011 BKW recorded consolidated operating revenue of CHF 1,346.4 million: 2.1% lower than the result for the prior-year period (CHF 1,374.7 million). While the energy and trading business posted lower results, the Swiss market performed positively and international sales posted stable volumes despite generating lower revenue. Energy Switzerland recorded an increase of 8.0% in operating revenue to CHF 1,159.7 million (CHF 1,074 million). Due to the suspension of the framework permit application process for replacement nuclear power plants, related costs of around CHF 14 million were charged to the income statement for the first half of 2011. Revenue generated by the Energy International and Trading segment fell by 2.0% to CHF 1,074.6 million (CHF 1,096.4 million). The lower operating result is primarily due to the weaker euro and a narrower price difference between base load and peak load energy. Trading posted a market-related drop in revenue of 8.6% to CHF 462.3 million (CHF 506.0 million), while international sales recorded a volume-related decrease of 25.3% to CHF 75.8 million. Finally, revenue generated by the Networks segment was 3.8% higher at CHF 334.7 million (CHF 322.3 million).

Lower operating and financial result

Energy procurement costs amounted to CHF 732.9 million (CHF 749.6 million), representing a reduction of 2.2% compared to costs recorded in the prior-year period. Operating profit before depreciation, amortisation and impairment (EBITDA) fell by 14.3% to CHF 220.8 million (CHF 257.6 million). This difference versus the prior-year period is mainly attributable to the reversal in the first half of 2011 of a provision of CHF 28.9 million in respect of onerous energy procurement contracts with partner plants. Excluding this special effect, operating profit for the first half of 2011 was 3.5% or CHF 7.9 million lower. The result was also negatively impacted by the suspension of the framework permit application process. On the other hand, solid earnings posted by the Swiss energy business had a positive impact on the operating result. Depreciation, amortisation and impairment ended the first half of 2011 CHF 10.5 million higher at CHF 79.2 million, while operating profit (EBIT) fell by CHF 25.0% to CHF 141.6 million. Excluding the aforementioned special effect of CHF 28.9 million for costs related to energy procurement contracts with partner plants, the reduction for the first half of 2011 amounted to 11.5%. Compared to the prior-year period, the financial result was CHF 16.6 million lower at CHF - 43.1 million. The main factors behind this reduction were the downward trend on equity markets and higher interest rate expenses. The euro depreciated less dramatically compared to the first half of 2010, as a result of which currency translation losses were lower. The lower operating and financial results impacted the BKW Group's profit for the first half of 2011, which fell by 32.7% from CHF 134.4 million for the prior-year period to CHF 90.5 million.

Outlook

BKW expects to close the current financial year with revenue in the prior-year figure range. The difficult environment, characterised by low energy prices on international markets and the strong Swiss franc coupled with regulatory requirements and the longer interruption to operations at Mühleberg nuclear power plant, will exert an additional strain on the operating results for the second half-year, as a result of which the second half of 2011 will close with significantly weaker results than the first six months. Taking all these factors into account, operating profit before depreciation, amortisation and impairment (EBITDA) for 2011 - adjusted for the special effect related to reversal of the provision for onerous energy procurement contracts with partner plants in 2010 - is expected to fall well below the prior-year figure. Assuming that the difficult situation on financial markets will persist, the financial result will be weighed down even more and, taking into account the aforementioned special effect, is expected to close the year with substantially lower net profit than in 2010.

Introduction of a holding structure

As announced at the AGM in May 2011, BKW FMB Energy Ltd. intends to introduce a holding structure for the BKW Group in order to create the right structural and organisational conditions for addressing new regulatory challenges and allow the Group to respond even more flexibly to future market needs. The holding structure will be introduced in the form of an exchange of shares in BKW FMB Energy Ltd. for shares in the new holding company, BKW Inc., in the fourth quarter of 2011. To this end BKW Inc. will submit a 1:1 public swap offer to BKW FMB Energy Ltd. shareholders, i.e. for each share in BKW FMB Energy Ltd. shareholders will receive one share in BKW Inc. Further details as well as the conditions governing the swap offer will be provided in the offer prospectus, which is scheduled for publication at the beginning of October 2011. At the same time as the offer prospectus is published, shareholders in BKW FMB Energy Ltd. will be notified by their custodian bank of the procedure to be followed under the swap offer.

Comprehensive strategy review - boosting earning power

With a view to further developing its market position, BKW FMB Energy Ltd. launched a review of its corporate strategy immediately after the events in Japan. The review will also address emerging trends in the economic and political boundary conditions. The findings will not be available before the 2012 AGM. Cost-cutting programmes are currently under way to boost earning power, with the aim of reducing controllable costs by around 15% in the medium term.This is likely to involve a reduction in the workforce, although at this stage the actual extent cannot be quantified.

The 2011 Half-Year Report is available for downloading at http://www.bkw-fmb.ch/halfyearreport11

The statements contained in this press release constitute expectations and forward-looking statements. Because these statements are subject to risks and uncertainties, actual future results may differ materially from those expressed or implied by the expectations and statements. This press release is issued in German, French, English and Italian. The German version is authoritative.

Contact:

Antonio Sommavilla
info@bkw-fmb.ch
031 330 51 07



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