Successful financial year and consolidated market position

Transcription

1 Fiscal 2004 Check against delivery Successful financial year and consolidated market position Speech by Kurt Rohrbach, CEO, at the Annual Press Conference on 12 April 2005 Ladies and Gentlemen I have pleasure in welcoming you to today's Annual Press Conference. BKW has had a successful year in which we followed up the record results of was a year of consolidation and affirmation. To coin a mountaineering phrase: We aim to take the safest route to the top, avoiding as many risks as possible. The successful partnership strategy we have followed for years, based on regional presence and customer proximity, once more proved its worth. I will start off with the results, a brief outline of business performance and the related success factors. I will then devote the second part of my presentation to the current climate surrounding energy policy and outline for you BKW's position in this regard. Finally, I will discuss the outlook against the backdrop of our key strategic values. Messrs Ineichen and Sahli will then provide more detailed information on the energy business and financial aspects. First, then, the results.

2 2 Positive trend in sales and profit Overall the BKW Group has recorded a successful financial year with total operating revenue slightly above CHF 2,932 million, EBITDA of CHF million and net profit at CHF million. Thus the positive trend reported for the first half-year was continued in the second half of Although these figures are slightly below the previous year, we are nevertheless very pleased with the results. Unlike the previous year, when the result was positively impacted by a number of factors, the operating result for 2004 does not include any special effects. Hydrological conditions were not particularly atypical, nor were any lengthy cold or hot spells recorded. Indeed, 2004 saw the coming into force of some two-thirds of the price reductions of CHF 50 million for home market customers which were decided on in the autumn of These concessions were offset on the one hand by higher sales prices abroad and on the other hand by an increase in sales volumes in Switzerland. Sales in Switzerland amounted to CHF million. Even though average earnings were lower, volumes were higher due to new contracts with sales partners as well as growth in sales to directly supplied customers. Revenue from trading rose to just over CHF 1,520 million, allowing the trading unit to consolidate sales volumes at higher prices in a generally stable environment. On the other hand, due to a concentration on specific segments, international sales dropped by 9.5 percent to CHF million. However, due to the higher prices involved, revenue dropped by less than volume. At CHF million, the consolidated net profit of the BKW Group is slightly more than CHF 1 million below the previous year's extraordinarily good result. Regional presence, vertical integration While BKW's key corporate values of regional presence, diverse partnerships and vertical integration are not spectacular, they are nevertheless practical and successful. Since its foundation, BKW has promoted and expanded its regional presence. Thanks to a broad-based production mix and production facilities, some of which are jointly operated with partners in various regions of Switzerland, BKW customers now benefit from high-level, high-quality security of supply. Backed by efficient, reliable facilities and by supplying end customers directly, we have carved out a solid national and international market position. BKW aims to continue pursuing this proven path of vertical integration, with business activities that cover the entire value added chain. I would now like to discuss the political framework in which we operate, since it has an important influence on BKW's business success. Rapid market liberalisation needed

3 3 Security of supply and market liberalisation are closely linked. Our security of electricity supply is largely dependent on Switzerland's integration in the European energy environment. For this reason, BKW has for many years supported the creation of a transparent, Euro-compatible legal framework in Switzerland. While Switzerland is not obliged to keep pace with the European Union, its geographical situation and the pivotal role it plays in the North-South transit of electricity makes it necessary to bring the market into line with Europe. By liberalising its own market, Switzerland will ensure its continuing integration in the European electricity grid. Switzerland's future function as a European electricity hub is dependent on the harmonisation of Swiss legislation with that of the EU. Any other solution would lead to isolation, which would in turn entail high costs and major disadvantages for the Swiss economy in general and the country's electricity sector in particular. For all these reasons, BKW is not only closely monitoring political discussions about the terms and conditions governing Swiss market deregulation, but is also prepared to contribute and help to shape this framework. Within the next few months parliament will begin debating the Electricity Supply Law and the amendment to the Electricity Law. The passage through parliament will not be an easy one, since sides have already been taken following the 2002 referendum on the Electricity Market Law. The conditions laid down for market deregulation by the Electricity Supply Law will allow all industrial and commercial customers entered in the commercial register to have a free hand in choosing their electricity suppliers. For households, the law provides for an elective model with an assured basic supply level, thereby addressing the concerns expressed ahead of the referendum on the Electricity Market Law. BKW explicitly welcomes its customers' right to choose. Not only is such a right in keeping with the times; BKW is also convinced that it will prove an important economic driver. Of particular importance for Switzerland as an electricity hub and, of course, for BKW, is the creation of new regulations governing cross-border trading in electricity. The importance and urgency of such regulations is recognised by all political actors. The new Electricity Law will create this legal framework. It provides for the setting up of an independent transmission network operator and the creation of a statutory regulatory authority. It will also lay down provisions governing access to the network and the handling of supply shortfalls. BKW is of the opinion that the electricity transits should be governed by the EU's minimum requirements. This is the only way that Switzerland can continue to participate in European electricity trading as an equal partner and avoid isolation.

4 4 At the end of 2004 BKW and other Swiss electricity grid operators founded Swissgrid, which will be responsible for operation of the Swiss transmission network. The Competition Commission COMCO welcomed the foundation of Swissgrid but laid down certain provisions regarding its tasks. While BKW acknowledges what is, in principle, a positive decision by COMCO, it and the other electricity grid companies intend to examine the Commission's provisions closely. By establishing Swissgrid, an important initiative has been launched in the direction of market liberalisation. We have created a national and international partner from which the Swiss economy as well as the Swiss electricity sector will benefit. It would therefore be incomprehensible for us, were this to be subjected to provisions that constrain the new company's functioning and stifle this voluntary initiative. Operating permit for the Mühleberg nuclear power plant Against the backdrop of ongoing production shortfalls in Europe, increasing attention has been focused on the question of future security of supply. In this regard BKW aims to keep all its options open. One of our key objectives in this context is for the existing time limit on the operating permit for the Mühleberg nuclear power plant to be lifted. A request to this effect was drawn up in 2004 and submitted to the Federal Council at the beginning of this year. BKW had already taken the necessary steps and made the requisite investments to ensure the continued safe, cost-effective production of electricity at this plant. In BKW's opinion, by voting to lift the time limit on the operating permit for Beznau II the Federal Council decided in favour of security of supply and our country's economic future. BKW is confident that the national government will also decide in favour of lifting the time limit for Mühleberg, in the interests of equality of treament. Hermann Ineichen, Head of Energy, and Christian Sahli, Head of Finance and Controlling, will now discuss business performance and the financial results in greater depth. Following on from these detailed presentations of business performance and the financial result, I would like to briefly remind you of BKW's strategic goals and outlook. Further development of proven strategy Against the backdrop of ongoing change, an uncertain framework for energy policy, and volatile energy markets, BKW's strategic and corporate policy focuses on consistency and continuity. BKW intends to continue pursuing its long-established and proven strategy of vertical integration. The company aims to further develop and intensify successful regional partnerships with regionally based production and sales companies.

5 5 Outside Switzerland we aim to concentrate on a few selected markets where we can pursue our strategy of vertical integration alongf the value chain. Thanks to our proximity to customers (the BKW Group directly supplies some 300,000 customers), proven flexibility and attractive service offerings, particularly for our sales partners, we are ina position to tackle the challenges ahead. BKW is well-equipped to further strengthen its national and international market position and guarantee its customers a secure, cost-effective supply of energy. Last but not least we will also further expand our leading position as a provider of new renewable energies, with due consideration to market conditions, and take further steps to underpin our commitment to renewable energies. Proposals to the BKW General Shareholders' Meeting Ladies and Gentlemen, my presentation is almost concluded. Based on the successful 2004 results, we will be proposing a dividend of CHF 18 per share to the General Shareholders' Meeting on 26 May, We will also be proposing several amendments to the Articles of Incorporation, including a 1:10 share split. Outlook As far as this year is concerned, we are right on track from an operational standpoint. The long cold winter provided a good basis for a favourable start to And thanks to the opening of the Bernina line in January, transport capacities to Italy have virtually been doubled. However, production capacity this year will be less than the maximum due to expansion work on our partner plant, Kraftwerke Oberhasli AG. Achieving a result on a par with the past few years is an ambitious goal. We remain committed to helping to shape the boundary conditions for our sector and taking the requisite steps in all relevant areas such as production, networks and sales to ensure that the existing high-level security of energy supply is sustained well into the future. Many thanks for your attention! Ich danke Ihnen für Ihre Aufmerksamkeit! Je vous remercie de votre attention!