BKW AG (BKW) Earnings Call Transcript & Summary

Ladies and gentlemen here in the hotel with us, dear viewers in the live stream. On behalf of BKW, I'd like to welcome you to the Analyst and Media Conference on BKW's 2023 Half Year Results. My name is Marisa Fetzer. I'm the Deputy Head of Group Communications. On stage here, I'd like to welcome Robert Itschner, the CEO of BKW; and Martin Zwyssig who has been with us as CFO since the 1st of July of this year. I'd like to briefly outline the program for today's analysts and media conference. To start with, BKW CEO, Robert Itschner, will give a brief overview of the half year results and the highlights in the individual business areas. Then our CFO, Martin Zwyssig, is going to present the half year results in more detail. And finally Robert Itschner will provide an outlook for the second half of the year. Presentations by Robert Itschner and Martin Zwyssig will be followed by a Q&A, and we'll pass around a microphone here in the room. And you, ladies and gentlemen, in the live stream have an opportunity to ask your questions online as of now, and we will answer them in the Q&A session. Now let's start with the presentations on BKW's 2023 half year results. I'd like to hand over to our CEO, Robert Itschner.

Ladies and gentlemen, a hearty welcome from me too to this analyst and media conference on the half year results of BKW. I'm very pleased to present to you an excellent half year result, you can see the key ratio we grew our revenue to about CHF 2.4 million, plus 6% EBIT, plus 29%, CHF 425 million and operating net profit was grown by 60% to CHF 304 million. So that was a very strong first half year. And we will hear more about the individual contributions. I will comment on the business areas before handing over to our CFO. Briefly on the energy markets. We have attractive electricity market prices compared to 2022 and before gas prices have recovered steadily, but there is a lot of nervous atmosphere in the market. Let me give you an example, strike was announced by an LNG. And this -- Europe is not really dependent on Australian LNG, but still prices went up. And when the strike was canceled, they went down again. Energy transition is a big topic. We can see this in the political proposals and initiatives in Switzerland. We have the solar express, wind express, a lot of acceleration happening in the political scene. And in Germany and the rest of Europe too other initiatives are being discussed. One example is the hydrogen initiative in Germany. We're speaking of about 1,800 kilometers of lines that will be built. So a lot is happening in this and that makes us very confident when looking ahead into the future. A few highlights of what we did in the first half year. We acquired 3 wind farms in Southern Sweden with the total capacity of 125 megawatts. Sweden is a very interesting market. They need a lot of electricity, have a lot of heavy industry too, and this gives us very good opportunities. 19 turbines in 3 sites, Belpmoos was announced. You saw that at the airport in Bern. We want to build a solar plant with a 35-megawatt peak. So that is an excellent provider of electricity, and we are confident that by 2025, we will get the building permits. So we still have some work ahead of us. And there are the round tables in the Canton of Bern on the Alpine PV plant. That's an important contribution for wind energy in Switzerland. We have 2 roles there. We will provide the connections to the grid, and we have some projects that we are driving. And we do hope that in the course of this year, we will be able to move ahead with these projects. Then Trift, the new hydroelectric power project in the [ Berne's, Switzerland, ] the Grand Council, the Canton of Parliament of Bern spoke in favor of the adaptation and supplementation of the concessions. This is very important for winter electricity, and we do hope that in the coming years, we will be able to move ahead with the project, so that we will be able to build an other large-scale power plant, but there still a lot to do. Then we have some small hydropower plants. Arvigo is one of them in the Calanca Valley that was commissioned. And in September, close to [indiscernible], we're going to commission another one. And another one in the Canton of Bern, we will commission them in 2025. So we are continuously investing into small hydropower plants wherever it is possible, and we do hope that we can realize the large-scale projects, too. Then PPAs, power purchase agreements, that's an important topic for us will become even more important in the future. In Europe, we will use more and more PPAs, this collaboration between the market players. And we were able to sign new PPAs for over 200 megawatt. So mostly in Germany and also in other EU countries. To be able to grow in this area. Then users, that's a stable business. The grid business that is -- but there are some major challenges too. So 3,000 new PV systems were connected to our grid. So that's exponential growth, we have a total of 21,000 PV systems in operation in our distribution grid 440 megawatts that is 1.5 as much as Mühleberg used to produce. When the sun is signing, we have a lot of solar electricity. And the second point is -- and it illustrates the quality of our grid with this availability, we are peak worldwide. 22,000 kilometers of electricity is what we make available. And this is a lot. We are best-in-class there, and we want to maintain this high standard and it costs obviously. And then the last point, the smart meter rollout will start at the end of the year. We will replace about 400,000 meters in our grid, and we selected the partners, the suppliers of these systems. And we are ready to get started with project. So that's a sizable investment that we are making here. And last but not least, our services. We have the next picture here, the results are not quite where we would want to have them have not quite met our expectations, but the market is still very interesting. We have -- we're able to get the award for major projects in Germany. It's all about lines and the line infrastructure. In Switzerland, we have some major projects, too, but there have been delays in the project, and we saw this when it comes to capacity utilization. Generally speaking, a lot of potential when it comes to planning of energy-efficient solutions, heating and cooling solutions, and there was a major initiative in Germany to decarbonize heating. Along with the infrastructure projects in Germany, we were able to win projects in planning of heating applications. There's one here in Zurich, the EWZ for the district heating network in Altstetten, for example, we are very active, we are expanding these activities too. And last point, we are striving for excellence in all our projects. And speaking of our project in Zurich, HVAC, we're pooling synergies and expertise there. And this last slide before handing over to our CFO, a word on ESG, environmental, social and governance. We launched an extensive program. Let me give you a 2 examples. We had our 125th Anniversary this summer, and we communicated our ambition to achieve net zero by 2040. Reducing our greenhouse gas emissions to net zero by that year 2040, that's the priority. It doesn't mean that we're not working in other areas too, electrification of mobility, et cetera, we will communicate more specific milestones later. And then the second point is very important. Health and safety, occupational safety. That's a very important point for BKW. And we set a visible signal, something that is important for our employees. Suva's Safety Charter was signed, the Swiss Accident Insurance Association's Safety Charter is something we signed and there's still a lot to do in this respect. And then diversity and inclusion, that's important for BKW too. As we communicated that this year, there are specific measures that we're taking. We want to be an attractive employer for a diverse group of employees, we will work on this in the future too. And the last point that is very important to me personally too. We have a whistleblower system; we call it Integrity Line. We have had it for some time, but we included external stakeholders who can access to this Integrity Line, you will find the link on our website to this Integrity Line all observations on our conduct can be reported via this line. And we will monitor these reports and take them seriously. So this was - were some of the highlights, Martin Zwyssig does not need any introduction. I think our new CFO. Many of you will know him. He joined us on the 1st of July. It seems much longer to me because he is totally in the topic already. I'm very happy that he joined us with his wealth of experience. He will help us face the challenges of the future. I'll hand it over to you, thank you.

Thank you very much for this kind introduction. Ladies and gentlemen, welcome to this media conference. I'm extraordinary pleased to be here standing in front of you talking about the first half year 2023 with such good results. Now let's get started with the key figures. Here, you have an overview of the main key figures as of June 2023. BKW has a revenue of almost CHF 2.4 billion. This is a percentage increase of plus of 6%. The EBIT increases to CHF 425 million, we -- again a very successful portfolio management and trading results. EBIT was increased, although there was a record in the previous year of CHF 330 million and a plus of 30% leads us to CHF 425 million. The operating net profit, that's the operating performance of the group that is before the STENFO income. That's at CHF 304 million. The STENFO, which is the decommissioning fund of Mühleberg Nuclear Power Station has now had a positive performance, STENFO made a plus of CHF 36 million. So that is included in our net profit. Last year, there was a minus of 119 of the STENFO, then operating cash flow CHF 491 million, strong liquidity in the first half year. I will come back to the details later on when we talk about cash flow. Then the ROCE at 15.4%, this is definitely above the capital cost of BKW, and last but not least, equity ratio of 44.1%. This is basically due to 2 effects. We have a lower balance sheet total, and the equity was increased by about CHF 0.5 billion. I will come back to that later on as well. Now let's look at this slide. Here, you can see the business areas and where the positive developments come from in terms of revenue and also in terms of EBIT. Now energy, let's talk about revenue first. Energy, the business area of energy accounts for CHF 70 million, which is the main driver, of course, of increase in revenues. Again, we have had an extraordinary positive portfolio management and trading results. Then the passing on of tariff increases of Swiss grid, a plus of CHF 16 million. And then we have lower transmission, which is CHF 8 million, which reduces the revenue. So net we come to CHF 8 million. And when it comes to services, we have a plus of CHF 49 million. This is mainly due to inorganic growth of the acquisitions that have not yet been done in 2022. They were now reported in the first half year 2023, so that is difference. Then a few words about the EBIT on the right-hand side, again, business area of energy contributed with CHF 110 million. Then lower transmission volumes in grids minus CHF 6 million led to a slight decrease. I'll come back to that later on. And in terms of services, we have high material costs and project inefficiencies sometimes delays, sometimes the supply chain problems leads to a minus CHF 11 million in services. Then on this slide and on the next 2 slides, I will go into the individual business area. First of all, let's talk about energy. Here, we have the absolute values on the left-hand side of the slide. The business area of energy benefited from the easing of the market, this normalization was anticipated appropriately, and the positions could be reported accordingly. The dark blue pillar, here you can see a line a plus of 6% of CHF 1.245 billion in the first half year 2023. Volatility as well as spread positions and well-paid system ancillary system contributed to this good result. On the expenses side, the costs for energy procurement have decreased by 7%, 2 main drivers. Can we see here, first of all, the higher management and trading result, which reduces the procurement cost. And second, the performance of the STENFO fund, that's the decommissioning fund of power plant Leibstadt led to a reduction of the procurement cost. This led in total to an increase of the EBIT to CHF 344 million. That is a plus of 47%. Then maybe one glance on the production mix that's on the right-hand side of that slide, due to wet weathers compared to a very dry previous year led to a higher production of the hydro power plant from 1.5 to 1.7 terawatt hours. And due to prices, thermal, mainly coal power plants were a bit less used. And due to the acquisition of the [ Podufal ] wind farm in France and wind farm production increased slightly by 0.1 terawatt hours. And last but not least, the limited availability of French nuclear power plants led to a slight reduction of 0.1 terawatt hours and comes to 1 terawatt hour this year. Then about Greece. I've already mentioned it, passing on tariff increases of Swiss grid, as you may know, we invoice to Swiss grid, and this is then passed on. We had a very mild winter and energy-saving measures led to a minus of CHF 8 million or a plus of 3%. Then on EBIT level, we can say the following. Tariff increases of Swiss grid are neutral because they are passed on, so this does not have an influence on it. However, what does have an influence is the lower transmission volumes, which led to a slight reduction of EBIT of -- minus of 8% to CHF 76 million in the first half year 2023, a very stable and reliable level. Then on to services. In terms of services, revenue has a plus of 6% to CHF 884 million inorganic growth due to acquisitions that we carried out last year. Then we have building solutions when it comes to the revenue split, you can see it on the right-hand side. Building Solutions accounts for 58% of growth inorganically and organically, and the revenue was increased by 20% IT and Electronics are growing, increasingly. Engineering has a revenue share in 23%. That's a slight minus of 9%. That's mainly due to the fact we sold 2 companies in this area. Then organic growth is also lacking in terms of engineering. That is due mainly due to the fact of lack of skilled work. Then in Infra Services, with a revenue share of 19%. Here, we can see a slight decrease of 8%, which is due to the fact of a very challenging market environment, and this has led to this slight decrease. However, there is a very positive note, we have a very positive order intake and backlog in Germany. We have increased material costs and third-party services that leads to increased costs, of course, and also delayed passing on price increases and is also something that contributes to this lower EBIT level. Therefore, the EBIT is decreasing from 33% to 22%, that's a minus of 33%. However, we have introduced a 2-year program in order to increase our performance. This has been introduced as of Q1 2023, but certainly, they will only have an impact in subsequent periods. Then let's come from the income statement to the cash flow statement. The operating cash flow on your left-hand side of the chart of the slide. We have a record high of CHF 491 million. The cash conversion rate is incredible 92%, which is really a record. The main driver -- the main reason for this high cash flow is the strong result of the first 6 months and also a supporting factor is the reduction of net working capital of CHF 98 million. Net investments on your right-hand side of the slide, of course, also includes divestment, intangible assets and also marketing and other investments in 2 subsidiaries. Here, we have dividends, for example, and also the reimbursements of the STENFO are exclude. So that's real net investments. Compared to last year, this has been substantial decrease by -- from CHF 460 million to CHF 215 million that mainly due to the acquisition of companies that was much higher last year than in the first 6 months of 2023. It is important to note that the operating cash flow covers investments at BKW. Again, this has to be like this in the long-term. Of course, you can invest, but you have to cover -- it has to be covered by operating cash flow. Let us have a look into the net investments. Where did we invest into? 59% of the investments go into growth and 41% into the maintenance. Now the central circle, you can take a closer look at growth. The lion's share, of course, invested is in energy with -- of 96%. These are the wind parks, for example, that we invested into in Sweden and also minor scale hydropower network plants. Then maintenance on the very far right-hand side, CHF 91 million. Again, most of the investments in maintenance of our grids is 56%, about CHF 100 million are invested on an annual basis into the modernization of our grid. Robert Itschner has already mentioned it, this is a true prerequisite for a high availability of our grid. Therefore, we need to invest this large amount. Then we have an overview of the cash development, liquidity of the group on reporting day, that was 30th of June CHF 890 million, which is a plus of CHF 92 million compared to the 1st of January. We have already talked about the operating cash flow, a plus of CHF 491 million and cash flow from investments minus CHF 215 million, then we have dividends and interest of plus CHF 50 million, so that is dividends and interest, but also the refunds that we got from the decommissioning front of nuclear installations and STENFO CHF 17 million. So if you summarize the first 3 gray bars and we come to the free cash flow, that's CHF 326 million. This was used in order to pay the finance -- in order to pay for the dividend of CHF 227 million, and the financing was reduced by CHF 181 million. With the direct participation of Swiss pension funds in the context of our capital light strategy in the portfolio of our wind farms, we have an income of CHF 195 million. This leads to the net cash inflow of CHF 92 million, which means a cash and cash equivalents level of CHF 890 million. Very important to note, and it's not mentioned on this slide. We did not utilize a committed credit line in the amount of CHF 2 billion. So that has to be added on top. These are committed credit lines that we entered into. Then a summary of the net debt and our maturity profile of bonds. First of all, a few words about net debt on the left-hand side of the slide. Liquidity, and here, we have short-term financial assets. This is the bars above the zero line. I've already mentioned those and explained those. But on top of this, we had the financial liabilities that we were able to reduce by CHF 144 million to CHF 1.9 billion. This is mainly due to the fact that the short-term financial assets or liabilities were reduced with banks. So these liabilities are going back. And we now have a net financial debt or below of CHF 1 billion, which, of course, increases and strengthens our A rating and also eases the overall position of BKW. On right-hand side, you can see the maturity profile of our bonds. We have an extremely good diversification. If you look at the time axis and gives us a lot of leverage of room for moving ahead into the future. But this is really something that we have solved long time ago and is very gratifying. Let's take a close look at the balance sheet. The easing of the energy market has a positive impact on BKW, the reduction of the balance sheet total by CHF 0.7 billion goes back to the lower margin of energy derivative and other factors. Equity increases -- was increased to CHF 4.9 billion. The main drivers were, of course, net profit of CHF 340 million, but also other factors such as hedging successes in the first half year, that's a direct equity entering into the books. And then also the divestment of the 49% renewables in the context of our capital-light strategy. As I've already mentioned, that's CHF 195 million, which then it contributes to these figures here. Then the dividend of CHF 227 million, of course, reduces the result. We have an increase of equity and the reduction of the balance sheet total, which then comes to an increase of 44% to CHF 49 million on the reporting day. Then a few words about the return on capital employed. 15.4%, which absolutely exceed internal target of BKW of 5.5%. This was valued at the 30th of June. However, they not had that net operating profit after tax, that EBIT without financing is calculated on a rolling basis over the course of 12 months. The second semester of 2022, which is outstanding, has to be added to that. So this leads to a bit of an exaggerated NOPAT. So the ROCE at the end of will decrease again back to a rather normal level, but will certainly remain very gratifying. On the right-hand side, you can see the market capitalization. It has grown to over CHF 8 billion market capitalization. And with such a gratifying market capitalization, of course, BKW has become very interesting for other investors mainly from the international realm. And I would like to hand back to Robert Itschner, thank you very much for your kind attention.

Thank you. Thank you, Martin, for this presentation. I think the figures show how well we are positioned in attractive markets, and we want to continue growing. For your information, we communicated that we will have an organizational adjustment, the organizational structure will be adjusted as of November 1, 2023. Grids, the grid division, the Corinne Montandon will take over from our colleague, Küpfer. And we managed to take on board somebody with a lot of expertise in the energy market, Stefan Sewckow will take over on the 1st of November. He's joining us from MVV in Germany. And he will Head the new Energy Markets division trading and distribution from one source as it were, so that we can drive the energy market even further. Now this is my last slide. Outlook, I think you saw that already. We were able to profit from an excellent trading and portfolio management results. However, we do not expect to maintain this high level in the second half of the year. But still, we will raise the guidance with regard to EBIT to a bandwidth of between CHF 600 million and CHF 650 million for this financial year. And this takes me to the end of my presentation. And We have time for your questions now.

Thank you, Robert Itschner and Martin Zwyssig for your presentations. We're going to have a Q&A line. Some questions have come in, in the live stream already, and we will answer them. [Operator Instructions] And then I'd say, let's get started with the questions here in the room. And as I said, please wait for the microphone. Are there any questions here in the room? Yes, here in the front.

Yannik Ryf for ZKB. The secured electricity prices at the last conference, you were dealing with the year 2026. 2026 is this hedged now? Or is there still a buffer open and the secured electricity prices, will they be at the level of 20%, 25% or maybe a little bit above them? That's my first question.

The electricity prices are hedged in March. And for '26, the prices are hedged, and they will be at a slightly higher level than '25.

And the second question on the services segment. I think that's the only surprise today. You have a margin of 2.5%. Now Board had published, you are at 5% and there are companies that have a higher margin. And you communicated that you want to achieve an EBIT margin of 8% in the midterm. Is this still your target? And what are you going to do to achieve this margin?

I'll take this question. 8%, that is our target, and we'll stay with that. And we are confident that we are heading towards that direction. We acquired very quickly in the past, and we are now consolidating to be able to grow in this business, and we really want to drive that.

So that was my question.

Are there any more questions in the room.

Alexandra Bossert, UBS. I have a follow-up question on the sales of the investment in the wind farms to institutional investors is capital-light cash inflow of CHF 195 million. In your business report I read, you gave a loan to the company a hybrid loan. Could you comment on that?

Quite honestly, I cannot answer this question. At this point in time, but I will give you an answer at the later stage. Thank you.

Let's check in the live stream. We have questions from Bosco Ojeda in English. I'm going to read it in English. Good morning, I have 3 questions. Could we have the breakdown in the Energy division EBIT between the trading profit and normalized energy sales? It's a question to you, Martin.

Could you repeat the question please?

We have the breakdown in the Energy division EBIT between trading profit and normalized energy savings. That's the first question.

We don't disclose these numbers on the detailed level, I'm sorry.

And here comes the second question from Bosco Ojeda, UBS. Can we have some color on the hedging prices achieved for the next 3 years. As recently mentioned, 80 to 90-megawatt hour in 2 to 3 years. Is that a good reference?

Yes, this is a good reference.

And the third question Bosco Ojeda, UBS. What is the outlook for margins and services in the next 1 to 2 years?

I can answer this. Our goal is that we come back to the level that we had and then grow our profitability from there.

A question here in the room, Andreas von Arx.

I have a question on the Services segment. Could you give us an indication whether there are restructuring costs that you would know for the next few years. Or do you -- are you aware of an order of magnitude of how much you can reduce the costs? To just get an impression.

We do not have any restructuring programs at the level of these services units. We have adaptations in the individual companies that were made already, we do not think that we will have significant restructuring costs with regard to the number of employees. We are in a growing market. As you heard, we have more orders coming in that's growing. So we need people. We have structural costs that will grow, but we do not have any major restructuring programs, no one-off costs to grow the profitability.

So you would head for the midterm goal. On the sale of your investment deal in wind parkings a wind farm in Switzerland. At the same time, you are buying in Sweden, maybe you can comment on that. What is the strategic thinking behind that?

The strategic thinking of this capital-light model is that for wind parks within the BKW renewables, that's where we pulled them. We keep the majority. So we were looking for a stable investors environment and we found them with the pension funds, the Swiss pension funds. That gives them a very stable return on investment and with the cash that is generated in this way, we can make further investments without giving up control or majority on these investments.

And buying, acquiring in other countries, that's not the model that you use?

No, not right now. Yes, we have foreign wind parks in our portfolio. We're not limiting ourselves to 1 geography.

If we look at the midrange picture, can you say a few words on dividends? What can be expected? And with regard to the previous management, there was a 2026 EBIT profit goal. Is this still valid?

On the dividend, we spoke about that briefly. That is a decision taken by the AGM. And of course, we will submit the recommendation. We have not discussed that for next year based on this year, paid out next year, but we think that the policy of BKW will remain the same as in the past with regard to dividend. And then Ambition 2026, we're not changing that. That is our ambition, and this is what we're working for.

Thank you here on the left.

[indiscernible], CKB. You're producing 20% of your energy with thermal power plants, and in 2014, you have the net zero target that you set yourselves. Now what does that mean for gas power stations or coal power stations, power plants in Germany?

Well, that's actually a good question. We're clarifying that. What we can do there. There are various aspects that need to be heated. We are not the majority stakeholder, especially not the one of the coal power plant in Germany. But of course, we are discussing together with the other partners, what can be done with these power plants, whether there are any possibilities to fire them in a different way with renewables more sustainable with pellets, for example. So that is one discussion that's ongoing. However, we haven't come that for in order to take any decisions. We are still reviewing all the possibilities, all the options, and we will really need to look whether this still makes sense. And what about the gas power stations, that may be second priority. With the coal power station, I think that is the main emitter of CO2. That's why we focus on this first. But actually, this coal power station is very much needed at the moment, so we cannot react on the short-term. But of course, we will have to look at a long-term plan there.

Let me check the live stream. We have 2 questions by Carlo Sen of Bern Title and Bond. First of all, this is probably a question for Robert. Why do you increase electricity tariffs, although the profit has increased. You have mentioned some of the reasons, for example, the increase to Swiss grid, the energy transition, smart meters. However, for many readers, this increase in tariffs is not understandable.

I understand that this is not understandable. However, we have to make a difference between the regulated business that's the grid. We are very strongly regulated there. We can pass on these costs, that's what we are doing. And we are not in a position to increase our profit via tariffs or -- and at the same time, be a reliable partner for energy supply, so these are the 2 factors that need to be taken into account. Some of the factors have already been mentioned. First of all, the cost for the hydropower reserves, for the emergency power plant in build, for example, is also done by a Swiss grid and tariff increases on the grid side due to ancillary systems. The costs that are increasing and the smart meter project, I've already mentioned it, this is also a cost factor of course that has to be factored in. And last but not least, on the energy tariff side, we have had to make a small increase because we have a more expensive power plant mix, and last year due to water scarcity and also higher overall costs. So these costs were reviewed by the Elcom and have been approved. So the net profits that we talked about today. This is really mainly due to the portfolio management and trading result. This has nothing to do with the basic energy supply that we are carrying out.

Thank you. Let me take the second question of Carlo Sen of Berne Title and Bond. What does BKW expect in the coming years when it comes to the prices for energy, are the costs tend -- do they tend to increase, and can we expect a reducing of energy prices?

Well, that is really reading a crystal ball. Of course, demand will increase massively. That's what we can observe continuously, and it will even accelerate this trend. I guess this is just the prerequisite for energy prices in order to keep them at a tolerable level on the grid tariff side. However, I have to point out that are major challenges that need to be overcome. And I expect that in the midterm, these costs will increase slightly. But I -- really, I'm very cautious about global energy prices increases or decreases for the future.

All right. Any further questions in the room? Yes, please.

Christoph Henry Eslin, NZZ. First question. You are still under a rescue program 2026 is coming up soon. Are you talking to the federal government because there are other companies that are also under this umbrella. Now you have mentioned your key figures, but don't you think that you should withdraw from this? Then second question about Germany, at 10,800 kilometers of hydrogen transport and the efforts of the European Union. Now do you think that Switzerland should live up to these expectations in terms of hydrogen as well.

Well, first of all, the rescue program. We are not having any discussions with this, but maybe you are right that this might be a good idea. We are very solid are in this respect, and we contribute to it for companies that are hit and affected by it, but we are not discussing. It is really on the cost side, but it doesn't contribute to any good figures. Then hydrogen, there are a lot of activities in Switzerland too, for example, at the Federal Institute of Technology, [ Inteha ] in Zurich, they have launched a program and initiative, various projects in order to implement such projects in Switzerland. Now for Switzerland, there is the big question that how and when we can be set up so that we can be integrated in the European context and structure. So this would be a very important basis in order to do more research and invest more in hydrogen. But this is truly a political question, and we cannot really impact this or influence this. But of course, a lot of things will happen. They are already going on in Germany. There are a lot of projects with major players, 300-plus megawatt plants are being built, and this infrastructure will be upgraded as well. So this is -- these are the very, very tangible steps that are being undertaken already at the moment.

Thank you. Any further questions?

Johannes Brinkman, [indiscernible]. You have mentioned that in services business, you put 3 units to 2, when you will undertake further steps. What does that mean?

Well, I cannot give you or communicate any concrete plans in this respect. However, we do have a clear plan. I can assure you of that. This is not about doing any consolidating measures that do not have any effect, but we really have to clarify very clearly and review in which direction we want to go and then take the further steps, but I cannot communicate any tangible measures.

Georgia Miller, market. With the services business, the consolidation that you are undertaking and profitability increase, does that also mean the following. Do you -- will you have fewer acquisitions? Is this acquisition hunger a bit satisfied? Or will you go on with acquisition?

Well, you have noted that we have acquired at a reduced pace. In the midterm, we do not know yet and still have to decide of the further steps in terms of acquisitions, but this is, of course, always part of our decisions for the future. But currently, we are not really under pressure and do have -- and can take away a bit of pressure on the acquisition pace. I think we have now reached a size, which is really gratifying in order to grow organically in favor of our customers. We have acquired lots of skills and competencies that we can leverage and capitalize on within BKW, and I think that over the near future, we want to become more well known in the market so that we can push forward organic growth.

Thank you. Further questions? Yes, please.

[ Erhart Lever ], AMG. I was considering the following you invested a lot also in grid, you call it maintenance, but I'm sure it's not only maintenance, but the return on these investments is quite small and not very attractive for shareholders. Wouldn't it be better to invest this money into other areas where the return is better?

Well, now we have a public mission or a task that we have to fulfill. We have to do that. We have to provide a reliable grid and maintain it. And this is part of our task of our mission. It is really a stable anchor of our strategy. This has always been like that in the past. It has a strategic value, but this is public services that we are doing here, and we want to uphold this as good as we can.

What about the return ambitions that you have?

Well, I don't think that we want to disclose this. However, we are very demanding here and very selective when it comes to the investments that we are doing also acquisitions that we are carrying out, and we have over -- above average return.

What does that mean above average return?

Well, for each business and for each market, we have differing prerequisites that we want to achieve requirements that we need to fulfill. For example, a wind farm in Germany is assessed in a different way as it is in Switzerland, for example.

So am I correct. The strategy with regard to services will not be changed basically.

No. No. It is a very attractive market. And it will become even more attractive in the future. So I believe we are -- it's a very good position to be present here.

A completely different question as well. You said that the profit from the hedging goes directly into equity and has become bigger and bigger. Can you explain in greater detail and what does this mean for the future?

Well, what does it mean for the future? I can't tell you because I don't know the price development. These are assessment effects. For example, you may know that from pension funds may be interest rate changes, whether interest rates are increasing or decreasing, of course, it has an impact. And then flows directly into equity. So these are the same effects that we have with the hedge accounting. It comes from the assessment of the derivatives. But basically, it's actually the same mechanism. It's not an income statement, in the past, it went overall -- to the overall statement or balance sheet, but it's actually the same assessment mechanism, as I just explained.

Thank you very much. Are there any more questions?

[indiscernible]. The Trift project, what is the situation like with regards to the timeline? Just to get an idea, will it be finished by 2030 or later. What is the time horizon, and then costs too? And another follow-up question, how big is the capacity? What can we expect?

We're confident that we will be able to submit a building application. KWO will do that. And that will take some time. It's difficult to make any forecast there. '26, '27 would be an optimistic date for beginning of the construction. And we work in the Alps, it will take some time. We can only build in the warm season. So there might be some interference. I think it's early '30s, which would be the earliest time to commission this. There might be objections too to the building application. 215 gigawatt hours additional winter electricity that we can generate with this project.

Yannik Ryf, ZKB. I have a question on the acquisitions. The wind farms in Sweden and the wind farm project in Italy, the prices there will you sell them in the free market? Or do you have any fixed agreements?

We have both. Some is fixed and some is market.

50-50 or what's the ratio?

Less markets than 50.

I think the gentleman behind you has a question and has been waiting for some time.

Daniel Koenig, Mirabaud Securities. I have 2 questions. The guidance implies that in the second half year, an EBIT of CHF 200 million midpoint plus/minus will be reached. And I try to look that up. When did you reach that in '18, '19, you reached that last in trading the assumption. Is this a normalized trading profit? Or what is the assumption? And the lifestyle production, is that a normal one? So what is the assumption to arrive at this figure? And then another question in Services. In Switzerland, inflation is low in Germany, it's high. So I ask myself, is this one of the main reasons, the fact that inflation is quite high in Germany and the economy is somewhat weak. And is that the reason why the service margin is a little bit lower?

Let me comment on trading. It's important to understand this why this is not a topic in the past. In the past, we moved in stable markets. For the first time we have had a half year when this mechanism showed its repercussions. On the reporting date, you have to value all the trading positions, not only the ones for '23, but all the positions that you have thousands of them, thousands of trading positions, they have to be valued on this reporting date. If nothing changes in the way of prices, then nothing will be added in the second half of the year. What will come in is that we have to deliver production. But with regards to the valuation of these trading positions, if we assume that prices will not change. Nothing will change. So you cannot simply multiply by 2. So how will this move? We have some ideas; we know how electricity prices moved in the past 8 months. So we're coming closer to a normalization. There is a little bit less volatility. So the opportunities in trade, the possibilities to generate something above that is very limited. And that's why we arrived at the guidance that we presented to you.

Was this understandable no microphone is used, unfortunately.

No microphone is used. But the answer is -- it's important to understand, it can go in both directions. And then last December week, if you have a negative valuation effect. It will have a total impact and you have this on the reporting date in your books, it can go both ways. That's something you have to be aware of. On the topic of Germany and inflation, we feel this in the market. Residential construction is at a record low. We are very strong when it comes to residential construction of infrastructure, the grid, for example, enormously investments are being made, and we have a major contribution there and we were able to win over many large-scale projects. And our focus is on infrastructure planning. Railway stations, hospitals and other structures. So the German business still overall, is a very good business for us. We have a good market there, and we will keep working in this market.

Thank you. I can take 1 question from the live stream. This is the only question that we have now. It was partially answered by Martin Zwyssig when he spoke about the outback. It's an English question by Frederic Nozal. If we take the fiscal year '23 guidance that implies energy EBIT of around CHF 130 million in H2 in line with prior years. 2015 to '21, it's that the correct thinking that the big boost from power prices have now normalized?

Have now normalized and have been taken into account by the 30th of June. Correct.

Thank you. I think this question has been answered by commenting on the previous question. Are there any more questions in the live stream or here in the room. Any more questions? Yes, there is another question here.

A simple question because an estimate is always wrong. With regard to the grid, what's the assumption for next year?

In the midterm, it should be stable. But in the short-term, the estimate is always wrong. So what would be a good assumption for next year? Taking that consumption is normal. I do not want to tweak your model, but if you have no major changes, CHF 140 million, CHF 150 million EBIT. If nothing happens with fee through, then it's a relatively stable situation.

And there's yet another question here in the room.

Would you assume that delay in services that we saw in the results, will you be able to catch up there?

So capacity utilization, that topic, that is something we will not totally overcome, but we have other projects, the [ Astral ] project that it will help us in the next year. Thank you.

Thank you very much. We ask here in the room. There are no more questions here in the room, none in the live stream. And I'd like to thank you. Robert Itschner and Martin Zwyssig for your presentations, for answering the questions. Thank you for your questions here in the room. And in the stream, thank you for participating in our media conference. We would like to invite you for drinks here in this room. Enjoy the autumn season, and I hope to see you all again on the 12th of March 2024 when we communicate our 2023 results. Thank you very much, and hope to see you again.