BKW AG (BKW) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, dear participants. On behalf of BKW, I'd like to welcome you to the analyst and media conference on BKW AG's 2026 Half Year Results. My name is Marisa Fetzer. I'm Head of Corporate Topics within BKW's Corporate Communications Department and will be facilitating this online event. I'd also like to welcome BKW's CEO, Robert Itschner; and BKW's CFO, Martin Zwyssig. They will be presenting BKW AG's half year results for 2026 shortly. And on the cover of our 2026 half year report, you can see Markus Späth. He is Project Manager, LTB Leitungsbau, part of BKW's network. As part of the Ultranet project, LTB Leitungsbau is upgrading existing power lines on the section between Mannheim and Phillipsburg in Germany and erecting numerous new pylons. The aim is to enable the simultaneous transmission of direct and alternating current along the same route. Ultranet thus increases the transmission capacity for transporting electricity from Northern to Southern Germany. Before I hand over to Robert Itschner, I would like to briefly outline today's agenda. First, our CEO, Robert Itschner, will give you a brief overview of the results for the first half year of '26 and discuss the key developments over the first 6 months across our 3 business segments: Energy Solutions, Power Grid and Infrastructure and Buildings. Then Martin Zwyssig, our CFO, will present the financial results for the first half year of 2026 in detail before I hand over to Robert Itschner to conclude the presentation part of this conference with an outlook for the current fiscal year. You will also have the opportunity to ask questions. We will round off today's online conference with a comprehensive Q&A as is customary. Please submit your questions in writing at any time during the presentation. We will answer them during the Q&A. Let's now start with a detailed explanation of BKW's half year results of '26, and I'm pleased to hand over to our CEO, Robert Itschner.

Thank you very much, Marisa. Ladies and gentlemen, good morning. I would like to also extend a warm welcome to you on the occasion of BKW's online Analyst and Media conference for the 2026 half year results. As always, I'd like to take this opportunity before our CFO, Martin Zwyssig, delves into our financial results to present an overview of the key figures and say a quick word about developments in our business segments. Our half year at a glance. In the first half year, we achieved a solid result, but the first 6 months were quite challenging. I'm going to say a bit more about that later on. In Energy Solutions, we are in a dynamic environment, which is characterized by the uncertain situation in the Middle East and the very dry weather with little wind. That said, we were able to capitalize on opportunities with Energy Solutions, particularly due to the significant fluctuations in the System Services business and in short-term trading. Thus, we were able to offset part of the negative results. Overall, total operating income, operating profit in Energy Solutions declined compared to the previous year. In the Power Grid business segment, we've performed steadily in the first 6 months of the year with a total revenue at the previous level and EBIT only slightly lower than in the same period of '25. I'm particularly pleased with the continued positive performance in Infrastructure and Buildings, we're able to increase the EBITDA, EBIT and profitability in these business segments. These developments are reflected in 4 figures you can see here. Total revenue, EBITDA and EBIT, they have fallen compared to the same period last year because the stable to positive trends mentioned in the Power Grid and Infrastructure Building segments were unable to offset the headwinds in the Energy Solutions business segment. However, we were able to increase our net profit by 7%. As our CFO is going to explain in a minute, we have a higher free cash flow than last year, and we're able to increase our EBIT -- equity. How -- this is why BKW is a solid company. In the first half year, we were in a very stable situation. And we are on track with our Solutions 2030 strategy and are committed to our target of an EBIT of CHF 850 million to CHF 1.2 million (sic) [ CHF 1.2 billion ] in 2030. Let me now talk about the individual business segments. Let's start with Energy Solutions. You'll see some KPIs on the right-hand side, which are related to our strategy. We want to enlarge our production portfolio to 3.6 gigawatts. We have been able to increase our portfolio with 80 megawatts. Many portfolios are in the pipeline. We'll talk about this later. Another growth area is direct marketing. We're at 7.9 gigawatts. We have over our announced target, also thanks to the acquirement of Südvolt last year. And we're at 2.6 GW when it comes to virtual power plants. We're focusing on further scaling of decentral flexibility. As regards the enlargement of our portfolio. There's many highlights. We've already informed you about Cerignola. We have commissioned the second phase of the wind farm in Southern Italy. That's very positive results, and we've received a building permit for the battery storage facility in Waltrop. It's a very large battery storage facility. We want to operate 300 megawatts ourselves. We're going to start construction soon, and we have already taken investment decisions. We're also investing in Switzerland according to plan, we have started the pump storage facility, Grimsel 4. I'm very pleased to announce that. It's a very important component of the future energy system because it provides flexibility in the energy system, and we need that in the future. A smaller highlight, but also important for the future is the assurance of the agreement in principle with Swissgrid for the planned large-scale battery in Mühleberg for 400 megawatts. We are in the midst of putting this project into action. We're also offering customer solutions. We were able to acquire the energy company, Volterres in France successfully. Volterres is providing wonderful growth opportunities. We were already present in France. As you all know, we managed customer plants. And with Volterres, we have obtained an additional interface with customers, and we believe that we are going to generate nice growth there because market regulation has changed in France. And for the first -- on the 1st of January '26, large volumes were made available on the market, which were made available in the past by EDF regulated -- under EDF regulated conditions. We also have a 10-year management contract with the French project developer, Acacia. Here, we want to increase to 700 megawatts, when it comes to the management of third-party plants. So we're well on track there. And finally, a very thrilling project that is contributed to our value creation, namely the energy solution hub was still launched in Switzerland in a first phase and which we're going to introduce in neighboring countries in the midterm. This project is about offering major customers the opportunity to benefit from integrated energy solutions. And we are going to offer management of energy assets for customers in an automated way. So this is a very interesting project, and it's wonderful to see how our customers' requirements are developing as we predicted some time ago. Now let's move on to the power grid. We said we're going to invest CHF 1 billion until 2030. We're well on track. We've invested quite a bit in the past. These investments are carried out to make sure that we can support the energy tradition. We've grew -- many renewables have grown. You see here the situation as per June. So there was a massive increase recently, and the BKW grid now has 800 megawatt installed capacity. That's an additional increase this year. The increase is massive, and therefore, we need investments. Now as regards to the rollout of the smart meters, we're well on track. We can conclude this project 1 year earlier than predicted. This is another very important precondition for the efficient management of the grid, and we have taken first steps already. On the left-hand side of the slide, you see topics that I've already mentioned. The investment program is well on track. And I'm pleased to say that we're able to place a green bond for investments in the distribution grid. These investments are sustainable. And in the future, we will finance them with green bonds as well. And what's important for safety of supply is the certification of the central control center in accordance with the European standards EN 50518. We are one of the first grid operators who have been awarded this certification that fills us with pride and ensures that we have a solid infrastructure to operate. Now I've already mentioned what is listed here on the slide. Let me move to Infrastructure and Buildings. Here, we've performed well in the first half. We've announced [indiscernible] for 2030. We are well on track. We're taking one step after the other. And my colleague, Martin Zwyssig will tell you in detail what's happening there. This improvement was made possible by very strict financial discipline, but also good projects, especially when it comes to project management, hospital planning. Hospital planning is a huge market, especially in Germany. Here, we have -- we were able -- been able to be awarded the second construction phase of Bonn University Hospital. We're also active in data centers with Building Solutions in Switzerland, but also with engineering in Germany. We are currently carrying out several projects and are planning more. There's also high profitable growth in the high-voltage transmission system. As my colleague, Marisa said before, high investment volumes are possible there. We're well positioned. And here, we've been able to achieve some milestones, in particular, the East Coast line, 185 kilometers of high-voltage lines were installed there, and we have doubled our transmission capacity there. An interesting project that shows our innovative abilities is a project that we carry out together with BOS, namely the refurbishment of the Weissenstein Tunnel near Solothurn. Here, we introduced an automated drilling robot for the first time. Together, we tested it, and we were able to reduce overall cost by around 50%. There are videos online if you're interested in this project. When it comes to the service business, we were also able to achieve more growth, especially when it comes to Building Solutions, higher margins, less risk. And therefore, we're interested in expanding in these projects, and we'll also have several projects in the pipeline, namely bolt-on acquisitions. We've made 2 acquisitions this year already, but many more are in the pipeline. We are interested in acquiring specific competencies and adding them to their network, which will support our long-term objectives. Now that's a short review of the last 6 months. And now I hand over to my colleague for the financials.

Thank you very much, Robert. Very good morning from me, too, and a warm welcome to today's half year call. As usual, I will now take you through the details of the 2026 half year financial results. Let's start with an overview of key figures. BKW AG generated a revenue of CHF 2.2 billion in the first half of 2026. This represents a 3.1% decrease compared with the previous year. I will come back to the detailed performance when discussing the individual business segments. Let's start with the EBIT. It fell by CHF 47 million or 15.1% year-on-year to CHF 262.7 million. By contrast, net profit increased by 7% compared to the previous year, namely to CHF 217.6 million. This is due to the positive performance of Mühleberg/STENFO which was able to offset the lower operating profit. The performance of the Mühleberg/STENFO was reflected in the financial results, which consequently increased by CHF 61.5 million compared with the previous year. In the previous year, we had a loss of CHF 9 million. The operating net profit has been adjusted -- and the operating net profit amounts to CHF 169.1 million, representing a decrease of 19.6% compared with the previous year. The operating cash flow amounts to CHF 122.5 million despite the lower profit. Details on this will be provided in the commentary on the cash flow statement. The growth stands at 7%, significantly exceeding BKW's WACC. And finally, the equity ratio. It was strengthened to 52.3%, thanks to retained earnings and actuarial gains. That's an increase of 1.4 percentage points compared with the previous year. Now this slide shows you which business segments are driving our performance, both in terms of total revenue and EBIT. Let's first look at total revenue on the left-hand side. In the Energy Solutions business segment, decline amounted to CHF 41.3 million. The fall in consolidated revenue is, therefore, mainly attributed to the Energy Solutions business segment. In Power Grid, total revenue was slightly higher due to the increased transmission volumes. In the power -- in the Infrastructure and Buildings segment, we recorded a year-on-year decline in revenue of CHF 24.6 million due to the focus on profitable business. And in the support functions, the decline is attributable to last year's sale of BKW's 2/3 stake in the customer service and billing provider, cc energie. On the right-hand side, you see the EBIT bridge, which shows the negative impact of the Energy Solutions business segment on the group overall. At EBIT level, profit fell by CHF 15 million. Essentially, prices hedged at a higher level were unable to offset the lower trading results and the weather-related low production volumes. At Power Grid, higher costs led to slightly lower EBIT and Infrastructure and Buildings managed to increase its profit by CHF 3.9 million compared with the previous year despite a decline in revenue. On this -- on the next slide, I will discuss the individual business segments, Energy Solutions, Power Grid and Infrastructure and Buildings in greater detail. The first segment presented on this slide is Energy Solutions. Total revenue for this business segment fell by 4.2% or CHF 41.3 million to CHF 950.7 million. The higher hedge prices are having a positive effect on total revenue. As lower generation volumes already weighed on us last year, revenue is only significantly affected by the low production volumes. The main driver behind this decline in total revenue is the low energy trading margin. As regards to EBIT, EBIT amounted to CHF 156.9 million in the first half of the year, which is 24.2% or CHF 50 million below the previous year's level. The impact of the dry weather is not significant in a year-on-year comparison due to the similarly dry first half of 2025. However, it was a key factor in the normalized volume on which our planning assumptions were based. The main driver of the reduction in EBIT is the electricity trading business, which was characterized in the reporting period by a difficult marketing environment with prices not driven by fundamentals due to the developments in the Middle East mainly. These erratic price movements made positioning in trading challenging. And the contributions to earnings from certain proprietary trading segments were particularly affected by this. By contrast, the intraday business continued to generate good returns. Additionally, revenue opportunities arose in intraday trading, particularly during the heat wave in June. The positive fund performance of the Leibstadt/STENFO increased earnings by CHF 27.7 million compared with the same period last year. Let's now take a quick look at the generation mix, as you will see on the right-hand side. In the first half year, BKW generated 4.6 terawatt hours of energy, which is around 3% more than in the previous year. The dry weather led to a further decrease in hydroelectric power generation of 0.1 terawatt hours to 1.6 terawatt hours. Production from wind farms and PV plants remained under pressure due to poor wind conditions. The increase of 0.2 terawatt hours is primarily attributable to the commissioning of the Cerignola wind farm. The nuclear power stations in which BKW holds a stake and the thermal power stations produced at the same level as in the previous year. Now next slide shows hydro production and the Leibstadt/STENFO's fund performance in a multiyear comparison. Hydro production is at 1.6 terawatt hours and is once again below the levels of the previous year, which was already a dry one and below the long-term average and is therefore below our expectations. The Leibstadt/STENFO performance contributes as a reduction to the energy procurement costs when the trend is positive. At 6.1% in the first half of 2026, the performance was significantly above standard return of 2.8% and reduced energy costs by CHF 27.7 million compared with the previous year, as I've said before. Electricity price volatility is a key driver of trading activities. You already know the left curve from earlier presentations. It shows the trend in forward volatility, which has now been extended to include the first half of 2026, whilst the trend in short-term volatility is now shown on the right-hand side. On the forward volatility enables trading margins to be generated on hedging transactions by close countering forward spreads. It has fallen substantially since its peak in '22 and explains the significant decline in trading results since then. Now this is nothing new as such. Although this volatility increased slightly in the first half of '26, the level remains comparatively low. And this is weighing on the profit contributions from longer-term market positions and limiting the opportunities to realize trading margins. By contrast, short-term day ahead volatility has risen steadily since its low point in 2023. It stood at 137% in 2025 and rose further to 152% in the first half of 2026. This high short-term volatility created additional trading opportunities in the first half of the year and bolstered earnings from the System Services businesses and intraday trading in particular. However, and this is also important, and I briefly alluded to this earlier, that if price movements are erratic and not driven by fundamentals, that is if they are not, for example, based on weather forecast where one can take a position, but are driven by social media causing corresponding price movements, and this makes it very challenging, if not impossible, to take a position. And consequently, no trading margin is realized. This was particularly the case in the first quarter of 2026. Now let's have a look at Power Grid. Total revenue rose slightly by 3.5% or by CHF 3.5 million or 1.1%. Reason for the higher total revenue is the slightly higher transmission volumes. EBIT for the grid business, however, fell by around 1.9% from CHF 69.3 million to CHF 68 million. This was due to higher cost for energy transmission, owing to a lower run-of-the-river generation. More energy had to be procured from Swissgrid transmission grid, which led to correspondingly higher transmission costs. Depreciation and amortization also rose by CHF 3.8 million as a result of the growing regulatory asset base arising from investment activities. These costs form part of the cost of production, which will be factored into future tariffs. Overall, the Power Grid business segment is a very stable business segment in terms of earnings with only minor year-on-year variations. Now finally, the Infrastructure and Building segment -- let's first look at revenue. Revenue fell by 2.6% or CHF 24.7 million due to continued focus on profitable business. Organically, the decline stood at 2.8%. This was offset by a slight inorganic growth amounting to CHF 2.6 million or 0.2%. The EBIT increased to CHF 34.7 million, representing a year-on-year increase of CHF 3.9 million. The improvement of operating performance is reflected in a decline in operating costs relative to total performance. This improvement has led to an increase in the EBIT margin from 3.2% to 3.7%. What's worth noting is the seasonality of the results in this business segment, which, as expected, is pronounced again this year. And to reiterate my comments from previous presentations, we can report another half year of continuous operational improvements in the Infrastructure business segment. Let us now move on from the income statement to the cash flow statement. The group's cash and cash equivalents amounted to CHF 699.7 million at the reporting date, representing a decrease of CHF 155 million compared with the end of 2025, both blue bars on the slide. Operating cash flows before the use of nuclear provision amounts to CHF 168.4 million, which is CHF 43.4 million lower than the previous year. Main reason being the lower operating profit. As in the previous year, additional funds are tied up in the net current assets on a seasonal basis. I will talk about investments in more detail. Investment activity -- the inflow of STENFO covers provisions utilized amounts to CHF 77.4 million as is high this year relative to the payments of CHF 45.9 million. So should be balanced out. This is due to an extraordinary payment of CHF 15.4 million resulting from the reassessment of decommissioning costs for the years 2020 and 2021. Taken together, this results in a positive free cash flow of CHF 96.6 million for the first half of '26, which at CHF 68 million is substantially higher than the previous year's figure of CHF 28.6 million. However, this free cash flow was not sufficient to finance the dividends paid out amounting to CHF 211.3 million, but this must be assessed on an annual basis. We have, therefore, in the short term, mainly drawn on our existing liquidity, which explains the lower level of cash and cash equivalents compared with the end of December, as mentioned at the outset of CHF 699.7 million. As announced, let's take a brief look at where BKW has invested. In the first half year of '26, capital expenditure on property, plant and equipment, intangible assets and the acquisitions of group companies totaled CHF 209.7 million. Of this, 49.4% was allocated to growth and CHF 106 million or 50.6% to maintenance. In the Energy Solutions business segment, CHF 56.7 million were invested in growth. Part of this went towards the expansion of the Cerignola wind farm and the development of battery projects. With Volterres, if we were able to acquire an important energy provider in France, and that's an important step in our achievement of our Energy Solutions 2030 project. In infrastructure and Buildings, small acquisitions were made thereby enabling further investment in growth and maintenance. And in Power Grid growth investments were made into grid reinforments and the strategic expansion of the electricity grid. And of the CHF 106 million spent on maintenance, the majority, CHF 56.7 million went to the Power Grid division for the upkeep of existing grid infrastructure. This overview shows on the left-hand side, the trend in net debt and on the right-hand side, the maturity profile of our outstanding bonds and debentures. Let's start with net debt. On the left-hand side, you see liquidity bars above the 0 line, as I explained before. Here, you see short-term financial assets, which have been included. Financial liabilities remained stable at around CHF 1.89 billion. And as a result of declining cash and cash equivalents and the stable financial liabilities, net debt in dark blue rose seasonally by CHF 234.4 million as at the reporting date, reaching roughly the same level as in previous years. On the right-hand side, you see our maturity profile, which is balanced out. In March, BKW successfully placed green bonds for the first time to fund investments in the distribution grid totaling CHF 200 million. The chart shows that BKW has an excellent diversification over the time horizon. This means low refinancing risks, great flexibility and corresponding room for maneuver for future growth financing. An important factor -- not included in these figures is the syndicated credit facility amounting to CHF 1.5 billion. This serves as an additional liquidity buffer and has not been drawn down. The facility matures in 2031. On this slide, you see a schematic overview of the balance sheet trends. The balance sheet remains stable with only slight shifts. Current assets have decreased by CHF 0.2 billion due to lower cash and cash equivalents, receivables and short-term financial assets. Fixed assets, on the other hand, increased by CHF 0.1 billion, mainly due to ongoing investment activities. Loans borrowings fell by a total of CHF 0.2 billion, and there was a reclassification of outstanding bonds between current and noncurrent borrowings based on their remaining maturity. Equity increased by CHF 0.1 million. The main reasons for the strengthening of our equity are, firstly and most importantly, the net profit generated of CHF 217.6 million and furthermore, actuarial gains from the valuation of employee pension provisions of CHF 39.3 million with strengthen equity. The dividends of CHF 211.3 million paid out in the half -- first half year are charged to equity. The equity ratio continues to rise by 0.8 percentage points to 53%, which underpins further growth and enables us to continue to play an active role in shaping the energy transition. And finally, a comment on the return on capital employed on the ROCE and the net debt to EBITDA. The ROCE stands at 7%, thereby significantly exceeding BKW's cost of capital with the exception of the record year '22, which remains very stable. Shown on the right-hand side is the net debt-to-EBITDA ratio, which has stabilized at a figure slightly above 1. And with that, I conclude my remarks. I hand back to Robert Itschner for the outlook. Thank you very much for your attention.

Thank you very much, Martin. I'd like to have a quick look at our strategy, in particular, on market potentials, which continue to be very positive. We understand our market segments better than 2024. We have understood that our potential is even higher if you look at midterm growth. I'm not going to bore you with lots of figures, but I'm just going to pick out a few. Investment need for electricity in Germany until 2040, around CHF 600 billion to CHF 630 billion. In Switzerland, there's another CHF 40 billion to CHF 50 billion, big figures. Now if you look at infrastructure, in particular, in the EU, we see that investment needs are immense, particularly in Germany. There's over CHF 50 billion by 2030 that need to be invested in schools and hospitals. Motorway bridges is a big topic. In Germany, they are in need of refurbishment, approximately 8,000 of them will have to be refurbished. These data show that we have a lot of potential. The market is there. BKW has many opportunities, and we're going to use them to grow profitably. When it comes to the implementation of our strategy, I'd like to show you our investment program. Around CHF 4 billion have already been allocated, more than 60%. That's the blue bar. CHF 1.8 billion have been allocated to projects, which will be executed in the coming months, CHF 1.6 billion according to our past plans will have to be allocated. Now here, I'd like to inform you that we're not going to take investment decisions just to take them. We're only investing in profitable projects and that applies to all of our business segments. Now what is not shown here are our investments in the Oberhasli power plants. Another CHF 200 million are expected by 2030. It shows that we have a good position. You see that in the comments that we're receiving. We're making huge progress. We've allocated over 50% in Energy Solutions. This is due to our very strict capital discipline. It's only 50%, not more. But our pipeline, we believe, is very strong, and we're going to further develop it, and we plan to realize upcoming projects. I've already mentioned Power Grid. The planning situation is very good here. Everything has been planned for until 2030. Of course, it's simpler in a regulated system. As regard to infrastructure and buildings, we're permanently developing our pipeline for upcoming investments. The cycle is shorter than in the energy business here. But in a nutshell, we're well on track, and we're going to execute all of the investments that are going to pay into our 2030 strategy. And that brings me to the end of my presentation and my conclusion. BKW's situation is sound financially. Our market situation looks good. Markets continue to offer significant opportunities for profitable growth. And in the first half of the year, we have achieved important milestones in the implementation of our 2030 strategy, and we are on track with our planned investment, as I explained earlier on, giving you some examples. Against this backdrop, we believe that we are going to continue generating profitable growth in attractive markets. As regards the rest of 2026, for Energy Solutions, Infrastructure & Buildings, we expect significantly stronger performance, whilst Power Grid is set to perform steady in line with our expectations. Against this backdrop, we anticipate an EBIT for the full year '26 to be at the lower end of the range of CHF 650 million to CHF 750 million announced at the beginning of the year.

Thank you very much, Robert and Martin, for your presentations on the half year results for the year 2026. That brings us to the Q&A. It's time for your questions, ladies and gentlemen. And we have already received some questions. Let's start with the first question. First question submitted by [indiscernible] from UBS. The question was asked in English. How much of the H1 Energy earnings shortfall in the Energy Solutions was related to the temporary Middle East-related market disruptions? And to what extent have those effects normalized in Q3 so far? Now I'll pass that question to our CFO.

Well, the substantial sums, in particular, which came about in the first months of the first half year and are due to the developments in the Middle East. Large parts of these items that weighed down on our results were due to events in the first quarter. This didn't normalize in the second quarter -- in the third quarter, we already realized in April that trading results normalized and came back to planned numbers or even above.

Part of the downside we had in the first quarter was due to valuations. We have a fair value rate that will be corrected in the future. And therefore, we said temporary -- we use the term temporary in our press release.

Thank you very much for this reply. Further question by [indiscernible] In the Energy Solutions, BKW has added resources in its trading division volatility in 2026, if results are lower. What will change in the second half year 2026? Why? That's the first part of your question. And the second one is, why are you not growing electricity capacity faster in Europe as electricity demand has started to accelerate and the outlook is positive. I'd like to pass that question to our CEO.

Well, there's 2 things in the second half year. We have looked to strengthen of our capacities. We've observed change there due to the drought. We believe that in the second half year, we'll have good potential there. We'll be able to generate good results. Secondly, as I said before, there's this temporary effect of assessment of our positions, which will be corrected mostly, I believe these are the two topics in the trading area, which make us -- lead us to believe that we will close that gap. As regards the expansion of our production portfolio, I've already gave you some information on that. It's the fact that energy demand is rising significantly. We believe, however, that we have to look closely at the investments we want to make. There are some very unrealistic prices and price expectations on the market. We're, therefore, carefully selecting our choices. With Cerignola, we've proven that we are able to take very good decisions. This wind park is a very promising investment, and we are going to strengthen profitable investments in energy production.

Thank you very much. We have 4 partial questions by Emanuele Oggioni from Kepler Cheuvreux. I'm going to ask the questions one after the other because they do not all -- they cannot be fit in one context. First question, could you explain in more detail the trading breakdown among the different moving parts considering that the ancillary services and the intraday trading profit from elevated short-term volatility, but this was not sufficient to offset the other parts?

Well, let me start. A breakdown of results will not be provided. But one thing about System Services in terms of their volumes. On an annual basis, we have CHF 80 million to CHF 100 million generated. We look at half year by half year, and we believe that -- we see that we were -- we doubled our results. Profits from services cannot offset trading results, however.

Second question by Emanuele Oggioni. It relates to hydro production. Hydro production was only 0.1 terawatt-hours lower year-on-year. What is your expectation for the second half year 2026 compared with 2025?

Well, first of all, we are comparing a very dry year and even drier year with a dry year last year. We had expected a different situation. We're calculating with long-term rainfall averages, and we're always looking at rainfall data at the end of the year to plan for the next year. And here, we're comparing to very dry years. As a result, weather, well, there, I can't make any predictions, but lake filling volumes are very low. If you look at BFE data, you will see that in the canton of Grisons, they're very low. In Valais, they're around average volumes. And elsewhere, we're very below averages. That is an indication of what is to be expected in the next year, and that affects our planning. The Oberhasli power plant has good results because glaciers have been melting as a result of the heat. Of course, we need more rain, much more rain. We calculate based on statistical averages. But of course, now we're taking into consideration the filling volumes for planning of upcoming years.

Next question regards Grimsel 4, remain with hydro production. Could you add more color on the expected EBITDA contribution from Grimsel 4? And when is the EBITDA contribution to be expected?

Well, Grimsel 4, as a matter of fact, will only be connected to the grid in '31. We're calculating with a 2-figure EBITDA contribution from that year. So that's a very good development. But of course, we're not going to publish detailed data, but we're factoring a 2-figure EBITDA contribution.

Thank you very much. Last partial question from Emanuele Oggioni. Could you update on 2029 hedging?

Yes, we can. You may remember that we said that we moved from a strict hedging mechanism in -- at the beginning of the year when we hedge the 3-year ahead production in a short time, we've maintained that system. Not everything is hedged for 2029. However, some positions are left open. We do that intentionally, and therefore, we cannot tell you at this point in time what the exact average price will be. Thank you very much.

Thank you very much, Martin. There's another question coming in from UBS, Alexandra Bossert in particular. I think we've already talked about. Let me present the question. Can you tell us something about the impact of the very dry summer on the first half year and the expected second half year figures? Robert already said that we cannot predict the weather, but maybe you want to add something?

Not really, maybe just to say that as a result of the dry weather, we had very little wind as well. We believe -- we're hoping for changing weather for more wind. This is going to boost our wind production. We hope that the weather situation normalizes.

So let's hope for rainy and windy autumn. Definitely, that's what we wish for. Thank you very much, Robert. There's another question coming in from [indiscernible] Question is, can you tell us about the situation of the dams after the long drought. Is this going to have a continuous negative effect on the second half year? Do you believe it's going to be bottlenecks there? Can you tell us anything about the Middle East?

Well, as I said, filling volumes vary. The big hydro capacities are located in the canton of Valais and the canton of Bern, as we know. Here, the situation doesn't look too dire. In the canton of Grisons, the filling levels are very low, and we have large facilities there, but things could change quickly if there's more rain in the next coming weeks. Second question, Middle East and the developments there. We believe that there's not going to be a normalization of the situation in the near future. And of course, that's going to affect gas prices, in particular, in the mid and long term, but that might change. Right now, we believe that things are not going to change quickly.