BKW AG (BKW) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome here on site and dear participants in the live stream on behalf of BKW, I wish a hearty welcome to the presentation of the half year report 2024. I am Marisa Fetzer. I'm Deputy Head of the BKW Media office. I'd like to introduce Robert Itschner our CEO, and Martin Zwyssig, our CFO. And on the slide here, you can see Alba Sánchez. She is a solar engineer at Solstis, the BKW Group company. We accompanied her from the warehouse in Lausanne to the rooftop of an industrial building. The new solar system on the rooftop is expected to produce around 311,960 kilowatt hours per year. And this is our contribution to the generation of green energy. I would like to briefly outline the program for today's conference. First, our CEO, Robert Itschner, will give you a brief overview of the half year results 2024 and the most important developments of the individual businesses. And with regard to sustainability, then our CFO, Martin Zwyssig will present the 2024 half year financial year results in detail. And finally, Robert Itschner will give you an outlook for the current 2024 financial year. The presentations by Robert Itschner and Martin Zwyssig will be followed by a Q&A. We will be handing around a microphone for participants who wish to take the floor and ask questions. And if you are in the live stream, you're welcome to enter your questions online as of now. We will answer them in the Q&A. Now let's begin with the presentation on the half year results 2024 of BKW. I'd like to hand over to Robert Itschner.

Welcome, ladies and gentlemen, to our media conference for the first half year 2024. We are very happy to present a very good half year result. Here are the figures, CHF 2.3 billion revenue a little bit lower than last year. Our CFO will give you more details. EBIT, CHF 438 million, that's an increase year-on-year. We're very proud of this result. And then the net operating profit, CHF 303 million, which is about the same as in the previous period of last year. We're proud of this result, and we think we can continue on our success trajectory and walk the talk. I'll show you some highlights in the following slides before our CEO of -- so we are staying with our 3 pillars that give us stability and we are well positioned for the future. And we will profit from events in the market. First, the vote on the Electricity Act of the 9 June, that's a highlight. We hope that we will have a bit more tailwind for our projects in Switzerland. We're pushing them. They are the Grimsel dam project, then the solar plants, wind projects, et cetera. This is our hope based on this clear positive result and we will have to prove that we are serious about expanding renewables. For the Grimsel dam, we applied for the concession expansion in the next 12 months, the Canton of Bern Will come up with a decision. So much on the vote on the Electricity Act. That was an important signal for us and for society at large. Highlights in energy. I mentioned the Grimsel dam project and the concession application in May of this year. We are confident that we can go ahead. We had a large majority last year already. There will always be objections. We will see that. We have an agreement with many stakeholders already and some NGOs but there can be other organizations that come up with an objection. Turbach hydropower, that's a smaller project that we started building this summer, 7.36 kilowatt hours as the production and the Canton of Bern, we started this [indiscernible] and Mont-Soleil, it's at the Mont-Soleil where we have the installed base already, the solar project. We got a yes from the municipality of Saint-Imier, for the Alpine project, which is a very good project with all the infrastructure roads, et cetera, and we'll be very happy to implement that. It will produce something like 24.5 gigawatt hours of electricity. And last but not least, an important milestone for us. That's the agreement with the Sami in Norway. We had discussions and controversies for many years, also with respect to human rights. And the Fosen Vind farm. With the help of the Norwegian government and our local partners in Norway we went into a long and intensive mediation process, and we have come to an agreement with the Sami, and we will continue to operate the Vind farm. And this is very important with regard to our ambitions in ESG that we could find this positive solution. Then grids, very stable. We have growth and a number of applications in photo will take. Here, you can see the number of connections, 2,600 new PV systems were connected to the grid, a clear growth is expected there with all the requirements that come up with that time is of the essence. We have 550-megawatt installed photovoltaic, this will grow dramatically and quickly. Smart meters, that's another important topic that will be with us. We want to have most of the smart meters installed by 2028, 400,000 such smart meters will be installed over the next few years, then the grid reinforcement that is and will remain a challenge with regard to the expansion of PV. We are well positioned. We have the necessary resources also with regard to customer interfaces. And our services, we made some great progress. So as this was mentioned, the solar engineer who you saw at the beginning, she works for Solstis. This is a brand that we're expanding all over the country. We will want to double our installed capacity to over 75 megawatts in the next 2 years, the market is very positive. Growth is somewhat lower, but there is still a great need. Then Wunsiedel battery storage facility. This is a project that we're realizing for others. BKW Infra Services collaborates with Fluence Energy and MW storage from Switzerland. This is the 100-megawatt capacity project in Wunsiedel, the transformers arrived in May and were assembled. So by spring 2025, we will be ready to go into operation. This is an interesting project for us and it will give us the necessary experience for our own battery storage facilities that we planned. Albula Tunnel II, that was a very nice project, the electrification of the new tunnel between Preda and Spinas, a total length of 5,860 meters, various of our group companies were involved. And this project was concluded successfully, and the tunnel was inaugurated [ effectively ]. Then 2 projects from engineering, EDGE ElbSide and Roots, EDGE ElbSide is a large construction site in Hamburg Harbor, City, an enormous surface, and they are timber skyscraper with interesting technology, [ Asman ] Consulting and Planning supported us. They were a good partner. And then routes also in Hamburg, as I said, the tallest timber skyscraper, 65 meters high. A 19 floors, there are a total of 160 apartments in this timber wooden skyscraper. You can see it on the picture, it's really made of wood. Technologically, a lot has been realized that this type of building is possible and BKW has the necessary competencies and we'll use them also in the future. It's a super interesting project. You can see the difference between concrete and wood. It's not -- everything is prefabricated with regard to concrete, not wood. And now ESG, environment, social and governance, we made some headway here. We are about to electrify our vehicle fleet, 180 out of 3,000 vehicles were electrified have been electrified so far. And by 2030, we want to have the whole fleet electrified. There are some practical questions. Will the vehicles be charged at home, et cetera, we'll have to find solutions but they will be found. These are the discussions we have internally now. With regard to social, we launched the onboarding of our suppliers. We will have to report in great detail across the whole supply chain. And we will request EcoVadis certificates from our suppliers in the future. Then governance. You saw it on the slide. In our remuneration system, we have an ESG component, and you can see this in our remuneration report. It's in the SDI and we will fine-tune this system and gain experience on what our priorities are in this respect. So this is an important goal. An important element that is somewhat technical is the double materiality analysis that we have to produce. We did this with about 60 parties that we interviewed, made our conclusions, identified 17 goals from a long catalog and we'll go ahead step by step. It's an important milestone and with this, I'd like to hand over to Martin Zwyssig.

Thank you, Robert. Good morning, ladies and gentlemen. [Foreign Language]. I would like to welcome you as well to today's analyst and media conference and I'm very pleased to be able to guide you through the details of our very good first half 2024. Now to start with an overview of the key figures. BKW generated a revenue of CHF 2.33 billion in the first half of the year. This corresponds to a percentage change of minus 2.8%. Then EBIT increased to CHF 438.3 million, a plus of 3.2%. BKW does once again exceeds the record half year result of the previous year. The main driver is once again the energy business which was again able to generate an extraordinary result. In addition to the good result of the Grid business, the services business is also responsible for this result, which was able to follow up on the previous year as well. Then net profit, this is CHF 362.5 million. This includes income from STENFO, that's the decommissioning and disposal fund of the Muhleberg nuclear power plant, the STENFO performed even better than in the first half than in the previous year. In the reporting year, it was a plus of CHF 75 million versus the previous year of a plus of CHF 45 million. And that means that net profit stands at CHF 362.5 million. Then as a key figure, the net operating profit. That's adjusted for STENFO, meaning that it reflects the operating performance of the group. This operating net profit is at the previous year's level of CHF 302.6 million and is, as I said at previous year's level. Then operating cash flow comes to CHF 170.9 million, which means that BKW has had a temporarily lower cash conversion in the first half of the year. This is due to the investments in the net working capital in the energy and in the services business. And I will provide more details in my comments on the cash flow statement. Then ROCE, return on capital employed is 7.8%, significantly above BKW's cost of capital in the previous year 2023. ROCE was above average because the profit from the exceptionally good second half of 2022 was included in the calculation of this key figure As you know, the return is always calculated for 12 months. Then equity ratio is at 47.9%. This increased and this is thanks to profit retention. Now this slide shows you the 3 business areas that are responsible for our development, both in terms of revenue and EBIT. First of all, revenue, energy business revenue declined by CHF 186 million, the decline in group revenues, therefore, attributable to the energy business. The reason for this decline is the lower electricity price level on the energy markets that this led to the lower revenue. Then the Grid business, revenue increased by CHF 65 million, the passing through of the tariff increases of Swiss grid and BKW as well as the increase in the regulated WACC increased this operating revenue. Then in services, Here, the business was able to increase its revenue by CHF 64 million, CHF 44 million is organic growth, CHF 20 million acquisition-related growth. Then on to EBIT energy business. Now the decline in revenue due to the lower energy prices has had hardly any impact on the result. The once again very successful energy management and trading result which nevertheless as expected, did not quite match the previous year, is offset by increased production volumes from hydropower plants and electricity prices that were hedged at a higher level. Then Grid, the tariff increase is the main factor contributing to the EBIT increase of CHF 14 million. Services, The result was stabilized and the half year result was slightly above the previous year. Then on this slide and on the next 2 slides, I shall go into more detail of the individual businesses. First of all, this is the energy slide. First, on revenue. The total revenue of the energy business fell by 15% or CHF 186 million -- I already mentioned that to CHF 1.05 billion. The decline was driven by the lower electricity prices on the energy markets. The EBIT of the energy business in the first half of '24 amounts to CHF 340 million, and is at the same level as in the exceptionally successful previous year. The normalization of the market has led to a decline in the trading result but is still at the high level. And we also had higher production volumes from hydropower plants. And as I said, prices were hedged at higher levels, and this has had an positive impact of CHF 16 million on EBIT. Just 1 brief glance at the production mix. On the right-hand side, in the first half of the year, BKW produced 4.7 terawatts of energy, 8% more than in the previous year. The wetter weather led to an increase in production from hydropower plants of around 0.5 terawatt hours and then the 3 wind farms in Sweden were commissioned and better wind conditions. And this means that the wind production was increased by 0.1 terawatt hours, the higher availability at the nuclear power plant of Cattenom increased nuclear power production by 0.1 terawatt hours and thermal power plants were used less due to price factors. Then the Grid business. The Grid business recorded an increase in revenue of CHF 65 million or 24% to CHF 340 million. The passing through of the Swiss Grid tariff increase that is a plus of CHF 37 million and the pricing in of higher costs and depreciation totaling CHF 17 million had a positive impact. In contrast, tariff increases of CHF 12 million to a cost covering level have an impact on EBIT and are only slightly reduced by lower energy transmissions due to the relatively warm winter. Then EBIT -- the EBIT of the Grid business increased by 18% from CHF 76 million to CHF 90 million. This is due to the aforementioned tariff increases to a cost curing level and an increase of the WACC of 3.83% for the tariff year '23 to 4.13% for '24. Furthermore, the equity result of our participation in Swiss Grid, we hold 37% in stake, increased by CHF 2 million. Then finally, on to the services business. Revenue increased by 7% to CHF 948 million. Organic growth amounted to 5% and with an additional CHF 20 million from acquisitions. The Infra Services division made the largest contribution to organic growth revenue. It holds 25% of the services revenue. Organic growth was driven by the numerous significant orders in the German high-voltage market that we received. Then on to EBIT, as announced, EBIT is back at the previous year's level and has thus stabilized. The previous year still included a positive special effect from the reversal of purchase price liabilities in the Building Solutions division, while the services business will face less depreciations in 2024 due to the value adjustments in the 2023 financial statements. And this means the 2 effects cancel each other out. Important for you to note is the following, the services business had to bear an additional CHF 7 million in internal costs in the first half of 2024 due to the adjustment of the billing concept. These additional costs were offset through operational performance improvement. This means that operational performance improved by CHF 7 million in the first half of the year. And in addition, there is a further CHF 2 million in nonorganic growth or revenue, which brings us to the reported CHF 24 million. To put this a bit into perspective, it is obvious that with these margins and an EBIT of CHF 24 million, we are still a long way from where we want to be. However, the measures to improve the structures and processes are having an effect and will continue to be implemented unabated. Now let's move on to the cash flow statement. The group's cash and cash equivalents amounted to CHF 587 million, a decrease of CHF 185 million. That's the blue bars that we compare here. The operating cash flow before the use of nuclear provisions of CHF 220 million is substantially lower than in the same period of the previous year. This is mainly due to the increase in net working capital. In the first half of 2024, BKW invested CHF 179 million in net current assets. Therefrom, CHF 50 million are due to higher gas inventories and unbilled work, this means work that is still in progress, particularly at Infra services due to numerous major orders in the German high-voltage market led to a further increase of CHF 130 million. Payments for the decommissioning and disposal fund of Millerberg, are at the previous year's level of CHF 49 million and are deducted from the nuclear provisions. I will go into more detail on the next slide when it comes to actual investments. At CHF 184 million, the investing cash flow before refunds from STENFO is at the same level as the previous year. This results in a positive free cash flow of CHF 22 million for the first half 2024. This free cash flow, however, was not yet sufficient to finance the dividends paid out to the tune of CHF 188 million, but this has to be sufficient or level out at year-end only. So therefore, we had to resort in the short term to our existing liquidity, which is the reason for the lower level of cash and cash equivalents of CHF 587 million, as I mentioned in the beginning of this slide. Now let's have a look at the investments. In the first half of the year, investments in fixed assets and intangible assets amounted to CHF 197 million, of this, 58% were invested in growth and CHF 84 million or 42% in maintenance. If we look at the energy business, CHF 68 million were invested in growth here, which means CHF 49 million were for the wind farms in Southern Sweden and Cerignola in Italy. In addition, investments were made in the expansion of heating networks and small hydropower plants. In the Grid business, gross investments to the tune of CHF 29 million were made in strategic expansion of the power grid. And in the services business, 2 smaller acquisitions were made in the engineering sector. On the maintenance side, we can see that CHF 84 million, the majority of this CHF 84 million, CHF 44 million were -- went into the grid business with investments in wind farms in Southern Sweden and Italy, in Swiss hydropower and in the strategic expansion of the power grid, BKW invested primarily along the value chain of the energy transition. Now here, we have an overview that shows the development of the net debt on the left and on the maturity profile on the right side of this slide. The development of the liquidity on the left of the slide, the bar above the 0 have already been explained. In addition, short-term financial investments were also taken into account here. Financial liabilities remained stable at around CHF 1.9 billion as a result of the decrease in cash and cash equivalents and the stable financial liabilities net debt temporarily increased by CHF 177 million to CHF 1.129 billion. Then the maturity profile on the right side of the slide, you can see that it's well balanced. BKW has an excellent diversification over time, meaning low refinancing risk, a high degree of flexibility and corresponding scope for future growth financing. And important to note here is the following. In May of this year, we replaced the 2 credit lines totaling CHF 2 billion with a new credit line of CHF 1 billion. The credit line has an increased option, which is called accordion option for a further CHF 0.5 billion with the existing syndicate. And this credit line has not been drawn and serves as a liquidity reserve. BKW's A rating allows us to adapt our financial course set to our needs at any time. And let's take a look at our balance sheet. The balance sheet has been basically stable since the easing of the energy markets with slight shifts between current assets and noncurrent assets, liability have decreased by CHF 0.2 billion, mainly due to a lower level of accounts payable and a lower valuation of derivatives, then nuclear provisions in the amount of CHF 48.7 million were again utilized. Equity increased by CHF 0.3 billion, the main reasons for the strengthening of equity are first and foremost, of course, the net profit of CHF 363 million. And there are also actuarial gains and positive currency effects which also strengthened equity by a total of CHF 104 million. The dividends of CHF 188 million paid out in the first half of the year are charged to equity. The equity ratio continues to rise as a result to a solid 48%, which supports further growth and enables us to actively shape the energy transition. Last but not least, a comment on the return on capital employed, ROCE, the return is at 7.8%, which is in higher than BKW's cost of capital and has been stable with the exception of the record year, as you can see in 2023. This concludes my remarks, and I would like to hand over to Robert Itschner for the outlook.

Thank you, Martin. Let me give you a summary. We are confident that this year, too, by the end of the year, we will have a successful year, very successfully year, this positive outlook in energy production, but also in trading. Trading is very important for us. So the results show that we can be confident. The solid contributions from the grids are obvious. And with regard to services there, we will continue the good performance of last year and will become more profitable. We want to live up to that expectation. We will adjust the guidance to now CHF 700 million to CHF 800 million EBIT for the year as a whole. So this is the new expectation of new guidance. Let me give you a brief outlook, and we announced that at the last media conference on the 8 November, we will have a Capital Markets Day. You are cordially invited. We will report on our strategy, present our strategy over the next years. We revised our strategy in the course of this summer. It's not a revolution. It's an evolution. We will continue our success trajectory, the thrust will be somewhat different. And I hope you will join us at the Capital Markets Day [ will ] invite all the details. The venue is The Circle at Zurich Airport, where we have many customers and suppliers. I'd like to hand back to Marisa.

Thank you, Robert and Martin, for your presentations. Let's move on to our Q&A. We have a question in the live stream. Thank you very much and you dear participants in the room here onsite please wait for microphone, raise your hand and please state your name and your affiliation. So that we can answer your question. Are the first questions here. Wait for the microphone, please.

Yannik Ryf, Zürcher Kantonalbank. I have a question -- 2 questions actually. One on the energy business. EBIT was very good. You had an impairment of CHF 24 million. Two, Could you mention what -- this means it probably has something to do with the new construction in hydro and then the operating cash flow. You said the decline had something to do with the increase in the net current assets and the work in Infra Services. Is this a shift in allocating costs? Or is there a reason to worry reason for concern.

Let me answer that. On the operating cash flow, Increase of the net working capital, No, there is no reason for concern whatsoever. With Infra Services, the construction of systems, they generated more revenue in the first half year. We have many contracts, very good order backlog. It just had something to do with the accounting and allocating of costs. So no reason to worry and the cycle with regard to gas storage system, it's normal. It was just higher this year. And the winter we outsource and vice versa. So that's normal. We used opportunities in the market and build up our inventory, and this led to the situation in the net working capital. And the impairment, CHF 24 million, that's correct. We made an impairment on a small hydro power plant that we are about to build. We saw the costs are not sufficient. We exceeded costs. due to the geological situation. We made all the necessary tests beforehand. But once you start drilling. There are sometimes surprises, and this is the adjustment. These are the effects behind the situation. Does that answer your question?

Yes.

Are there any more questions here in the room? Brunner, Mr. Brunner, oh Mrs. Brunner rather.

[ Yvon D. Brunner ] is my name, Finance and [indiscernible] Vertere. Did you feel the slump in the German construction industry and your former CEO said recently that in Switzerland, new nuclear power plants will be built. Is that a topic for BKW?

Yes, we felt the slump in the construction industry in Germany, yes, is the answer. But still, we managed to achieve good results. We are well positioned we're well positioned 4 large-scale projects, demanding projects and this is a [ trump ] in the market. We made a rebranding in engineering, it's BKW engineering now and not all the sub-brands. So we have more visibility. We are the biggest planner in the area of Germany, Austria and Switzerland. Despite the slump -- despite the price struggle, we were able to operate very well in this market. And I'm confident that this will continue. And then nuclear power, I saw this too. There are different opinions in Switzerland, BKW always communicated that we are technologically open. We do not think it's a good idea to ban technology. And we have to be open and able to react in the future right now at the present moment, we do not have any plans of pushing nuclear power, but we are looking closely at the situation also with regard to nuclear power to then understand where we want to go.

We have a question in the live stream, [indiscernible] the question is when will BKW offer for its customers who have a PV system and have a vehicle that has V2G technology, the possibility when will [ BKB ] offer the possibility to feed in their electricity into the public system. We will take this question on board and give you an answer at a later stage. Yes. Thank you, Mr. [indiscernible] and then another question here in the room.

Andreas von Arx, Baader-Helvea. I have 4 questions. On the trading business, I assume that the trading business will make up more than 10% of the overall EBIT. Wouldn't it be friendly to shareholders to show the figure separately because the shareholders will want to understand what the drivers are in the business. And furthermore, the trading profits are structurally higher than we saw a few years ago, maybe you could mention the most important points why the trading profits are higher structured really now. And whether this is sustainable, over the next years once the electricity prices will have reached a normalized level. A third question on the trading business again, I would be interested in hearing from you how high the invested capital is in the trading business. And what the risks involved are in the accounting. And then the service business, I would be interested in hearing. Whether you have done all the cleaning up work that was necessary or whether you saw elements in the past 6 months will lead to amortization and write-offs or the other way around profits.

Will you answer the first 1 and the third one. So whether it is friendly for shareholders, so we report on segments in energy. I know that trading makes up a lot of this energy business. The other major part is production. What will land with trading or production, that's our internal mechanism that decides that -- not all the utilities do it in the same way -- so it's not really totally comparable. We do know that this is a need. But for now, we're staying with this segment reporting because it's 1 area for us. So production will hand over to trade, who then works on the project maybe for 3 years -- we also have prop trading and this is included also. We will stay with this segment reporting that we currently have. And how high is the capital. There are major fluctuations, and it's reduced now less than CHF 100 million. In trading why this is structurally higher than in '21, '22. The absolute price levels are, of course, 1 of the major factors and volatility in the market is, of course, a major and this is much higher than it was the case before the crisis. It was significantly higher, and it will probably remain on a certain level also with a view to the expansion of renewables. That makes quite a turmoil in the system. So in trading, in the foreseeable future, we will certainly generate good results as well. There are various activities in the market various positions. We try to optimize the hedged electricity prices on the go in 3 years in advance, that means and we optimized this portfolio during these 3 years, then we have some prop trading. As Mr. Zwyssig has just elaborated on. And sometimes, we can even benefit from volatility in the short term. And what's important to note is that volatility also means that flexibility of energy production is extremely significant and valuable. So that's why we try to do this during these volatile times. And -- in the foreseeable future, we will certainly be able to generate more income here. I hope that this answers your question. Then on the Capital Markets Day, you will also have the opportunity to ask our Head of Trading, Stefan Sewckow, and it will be certainly very helpful to ask him questions because he will be able to be -- to go more into detail of the mechanics of these questions. Then -- we have gone through the worst when it comes to your last question -- it's not -- I cannot promise that nothing will happen. There will be some hiccups, but certainly not to the extent as we've seen them in the past. So we will be able to cover this with normalities, and we will not have any visible adjustments. That's our goal anyway. And I'm quite optimistic that this is a new phase of stability that we have reached now. Of course, it also requires a lot of work and efforts, but certainly on a different level than in the past. This is also the reason why we want to connect to 2022, which was very good for services. But this year is mainly under the keyword of stability. And from here, we want to see a permanent continuing improvement.

I have a follow-up question. The 8% EBIT margin that was mentioned, when will we achieve them?

Well, I cannot precisely answer this question, but the goal is certainly still there, we will, with the progress that we're making right now in our planning, we want to move in this direction in the coming years. Of course, we want to achieve this. But whether it's '26, '27, '28 precisely, I cannot really tell you right now because the market really plays an important role here. The direction is, of course, we are on track in terms of direction.

[ Rolf Keller ], Cana Capital. Maybe a follow-up question. In 2022, you had a margin of 3% in the services business. And from 3% up to 8%, I would say, it's a rather big step. Could you roughly elaborate how you want to improve this margin because it's more than double of the margin and maybe you can say something about the net working capital in the services business because that's quite substantial as well. Maybe you could quantify here a little bit how you plan and how you -- what do you expect? Is this sustainably a higher level? Or what do we have to expect in the coming years?

Net working capital, I'll take over here. As I've said before, I do not expect that the whole CHF 130 million will come back, but a large part of it will come back. The net working capital, if we do not have any major disruptions where we have to put in any collaterals, if we look -- if we have a stable situation, then net working capital is definitely too high. In normal times, I would expect 5% of our revenue as net working capital in our industry. So that will come back. Services, not entirely -- that is definitely inflated. Then on the path from the 3% to 8%, there are various measures that are necessary to reach this, there are projects that we need to improve. We sometimes have very long projects that are ongoing. We have to work them off, whether they're profitable or not. So that will, over time, be concluded 1 by 1 -- then cost structures in our portfolio that will have to improve as well. We will work on this as well. The organizational structures need to be improved as well so that we will reach the optimal structure. I can give you an example in engineering, for example. A lot of white collar work is being done there and there it doesn't really matter whether it's an engineer sitting in Munich working on a project in Hamburg. So the distance is not the important issue, but it's the interfaces that need to show a high quality. But in other businesses with, for example, electrical engineering, if you work essentially, it's a completely different thing. If you're 130 kilometers away from a construction. So these structures need to be improved. These need to be optimized so that the structures, the existing structures will really allow us to be very precise.

I have 2 more questions. You said the smart meters will be introduced. What do you do with them? What is the benefit for BKW in order to strengthen profitability, for example.

To improve profitability. Well, we will see what the impact will be on profitability. However, what we expect is that the availability of data will be improved. We have a better customer service. We can automate various processes that are now done manually to read all these meters takes a lot of time because you go to the places, you write the data down and then you have to put it into a system. And that is very time-consuming, energy consuming, of course. So this will now be automated with the smart meters and will also help to cost -- to reduce costs -- but also the loads in the grids can be optimized. And therefore, the entire grid expansion will become much more intelligent. And that is something where I really hope for great potential in the future. I cannot tell you precisely and in detail what it means in terms of profitability. BKW already has smart meters in operations, several thousands of them are already introduced. So we do know that the technology is there, and it is very beneficial -- but however, we can still do a lot in this respect. But you will also have to have more flexible pricing models. I assume yes. But you have to know that the law stipulates that we are able to read in an interval of 15 minutes and not more due to data protection issues. So we have price models that we can offer. However, very quick differences or changes in the grid cannot be read.

And the last question. How does the BKW expect the volatility or the changes of electricity prices? Do you have any scenarios here.

Well, this is, of course, a secret, what we expect. However, our expectations are always a little bit interfered with -- in the current times and actual changes. What we expect is stable price situation much more stable than in '22, '23 however, at a higher level than in the years before. But I do not want to go into more detail and give you any precise figures here in terms of electricity prices.

I have 1 more question from the live stream. [ Karl Osen ] from [ Tamedia ] has following question. What's the impact or if the biodiversity initiative were adopted, the impact on building projects of BKW.

Well, I cannot tell you conclusively, we will only see that if the biodiversity initiative is adopted and then will influence many building projects, of course, we are now of the opinion or we assume that we can build in certain areas. But that, of course, also will have an impact on the entire industry. We do not think that this is the right path to achieve the promotion of biodiversity. We also have to say that we invest a great deal in biodiversity already now. We have many projects that show this, for example, at the [indiscernible], say, we have a project where the entire River Bank has been newly designed, and we have really a lot of investments, therefore, to promote biodiversity. And we also have balancing measures that we want to introduce be that for Dry Meadows or any other investments -- of course, this also makes -- or leads to higher costs. However, we certainly have to say that we do a lot in terms of biodiversity and I think we are well on track here.

Another question maybe from the room. Anything else, any burning questions.

Klaus Bonanomi from Radio [ Schweizer ] SRF. The tariffs that you have mentioned for the feed in of solar power that has been discussed lately at BKW. It's -- the volatility of these feed-in tariffs that I'm asking, is this a difficult thing to calculate, why do you uphold this model or this program and how this -- it has an impact.

Well, the model, as I said before, works quite well. It's been working for many years. The average spot price is paid out retroactively, BKW does not make any profits because we sell this power at spot prices as well. So we compensate the consumers feeding it in at the same price as we sell. I think also in the long term, it is a good model, and it's a good incentive to feed in power that you do not use yourself for self-consumption. We will especially see that during summer months, where a lot of power is not used for self consumption. Now if we look at the sell-back tariffs of the last years of BKW if we look at ago, if you had a PV installation, 15 Rappen was paid back. And I think that was in the above average, even in Switzerland. However, if you install the PV panels only last year, then, of course, the margins or the prices have come down massively. So this is, of course, an issue and therefore, retroactively on the first June, we increased it by 3 Rappen for the guarantees of origin -- for our -- and this is also financed from our EBIT. So whether the model can be explained, I mean, the questions that you've asked, we can only explain it to some extent, it's something that we are working on with the new Electricity Act. We can see the following: the producers and the grid operators, if they do not agree. There are minimum remunerations that come into play. So the model in terms of political terms is also discussed in political rails. What we've also seen is that many maybe sometimes also optimistic assumptions were taken because PV installations are amortized within 25 to 30 years. If you installed that 15 years ago, it was certainly better than doing it last year. So depending on the installation it depends a little bit of what you can expect. But it is true that we need a proactive approach with regard to these questions.

So for house owners, you would also recommend to install battery storage facilities, for example.

Yes, I mean, battery storage is, of course, a good solution to transfer electricity or consumption of electricity to whenever you use it or need it, but these batteries are still rather expensive. So for those households using a lot of their own energy, this might be a very good idea because the sell-back tariff, if that is compared to the tariff that what we sell you electricity, I mean, this difference is something or these costs can be saved, of course. And this can add up.

Thank you very much. Are there any further questions here in this room or in the live stream. This is not the case. So on this note, let us conclude this conference. On behalf of BKW I would like to thank you for your interest and participation in this media conference on the half year results of the first half year 2024. We would like to invite you to snacks and drinks here in this room, and we would like to wish you a very nice end of summer and, of course, hope to see you again at the Capital Markets Day on the 8th of November of this year at The Circle in Zurich. Thank you very much, and goodbye. [Statements in English on this transcript were Spoken by an interpreter present on the live call.]