Good morning, ladies and gentlemen. On behalf of BKW, I would like to extend a warm welcome to our first nine months update business call. We are delighted that you are all joining today. My name is Sharon Alexandra Schär, and I am media spokesperson at BKW, and I will be guiding you through today's call. Joining me here is BKW CFO, Martin Zwyssig. He will provide you with an insight into our business performance over the first nine months of 2026 and update you on the progress made in implementing our Solutions 2030 strategy. We will also give an outlook for the full year. Following his presentation, you will have the opportunity to ask questions. Please feel free to submit your questions in writing at any time during the presentation. We will address them during the concluding question-and-answer session. I now hand over to Martin Zwyssig.
Thank you so much, and good morning, ladies and gentlemen. I would like to warmly welcome you to BKW's nine months business update call. This is the first time we are holding this call, and we are thereby firmly establishing an additional communication event in our annual schedule. The reason for this is that in the past, there was no established news flow regarding business performance between the presentation of the half-year result in August and the annual results press conference early March. This is not a presentation of quarterly results. We will continue to publish half-yearly and annual results in the future. However, today, we are providing you with a qualitative update on business performance for the first nine months 2026.
The focus is the development of the three business segments, Energy Solutions, Power Grid, and Infrastructure & Buildings, as well as progress on selected projects in the implementation of the Solutions 2030 strategy. Let's start with Energy Solutions. As in the first half of the year, production conditions remained challenging in the third quarter and showed little change. The long, dry, and hot summer had a direct impact on water levels. At the same time, wind levels remained low. Production at our hydro and wind power stations therefore continued to fall short of the long-term average on which our planning is based. Specifically, we are short of around 500 GWh of hydro generation and 300 GWh of wind generation compared with our plans up to the end of the third quarter.
In the electricity trading business, we had a challenging first half year. I explained this to you during the presentation of the half-year results in August. Generally speaking, the trading environment continues to be driven by geopolitical factors and therefore remains very challenging. This means that trading contributions are subject to significant fluctuations. Compared with our plan, which forms the basis of 2026 guidance, the electricity trading business was able to gradually overcome the difficult start to 2026. I am referring specifically to the first quarter, and thus gradually reduce the shortfall against our plans. However, it has not yet been able to fully offset the production shortfalls. In performing well, it has the potential to exceed its full-year targets in the fourth quarter, thereby offsetting the production shortfalls in hydro and wind from the third quarter that have impacted earnings. Weather and hydrology, we can't impact them.
At the same time, we are consistently driving forward the work that lies within our sphere of influence. We continued to expand our renewable energy production portfolio in the third quarter as well. Shortly after the end of the quarter, we were able to reach important milestones in two projects on which we had been working intensely over recent months. Following the commissioning of the 125 MW wind park Cerignola in Italy in early 2026, the Öhringen-Karlsfurt wind farm marked a further step forward in our European wind portfolio at the start of October. The wind farm comprises seven wind turbines with a total capacity of 33.6 MW and an expected annual output of 80 GWh . With the Öhringen-Karlsfurt wind farm, BKW is increasing its installed onshore wind capacity in Germany from 183 MW to around 217 MW.
At the end of October, we also successfully commissioned the Turbach hydroelectric power station in the Bernese Oberland together with our partner Aventron. This plant will produce around 7.3 GWh of renewable energy annually. With these two projects, we are taking further concrete steps towards the targeted expansion of our renewable energy portfolio as part of Solutions 2030. This was Energy Solutions and a brief update on Power Grid. This developed in line with our expectations over the first nine months. The grid business is and remains a stabilizing component of our business model. Finally, regarding the Infrastructure & Buildings business segment, this also developed positively in line with expectations. The business segment continues its focus on profitable growth and high-margin activities.
At Building Solutions, the largest division within Infrastructure & Buildings in terms of turnover, we are improving operational performance and harmonizing processes across around 50 companies. The project margin improved significantly compared with the previous year. Order intake and the order book provide a solid basis for further development. The Infra Services business area is also continuing to perform well in terms of results and has secured important new contracts. These include substations for power stations in Germany, as well as work on the operational and safety systems at the Gotthard Road Tunnel. These projects exemplify our positioning in selected infrastructure markets where technical expertise, local presence, and reliable execution are crucial. The Engineering business area also continued to improve its result in the first nine months.
In August, we also announced the acquisition of Priedemann Fassadenberatung in Germany, thereby further strengthening our engineering network with the addition of a leading international specialist in the design of complex building envelopes. The company, with around 130 employees, possesses extensive expertise in façade design, building physics, and the development of innovative and sustainable façade technologies. The Infrastructure & Buildings business area as a whole is thus increasingly developing into a second stabilizing pillar of the BKW Group. So much for the business segments. Furthermore, in the third quarter, BKW successfully placed a bond worth CHF 200 million on favorable terms to specifically strengthen its liquidity reserve and launched a new brand identity in September. With the new brand architecture, we are reducing duplication and increasing efficiency in marketing. This leads me to the outlook.
In the Energy Solutions business segment, business performance after nine months remains. The potential for a significantly higher hydropower generation remains limited. In the electricity trading business, however, we anticipate a further improvement in the fourth quarter, which has the potential to offset the production shortfalls affecting earnings from the third quarter. For the Power Grid and Infrastructure & Buildings business segments, we expect to close the financial year in line with our expectations. Against this backdrop, we confirm the EBIT guidance for 2026 financial year at the lower end of the target range of CHF 650 million-CHF 750 million. BKW's strategic position is very strong. We have a valuable portfolio of generation and grid infrastructure, are strengthening our flexibility and improving profitability in the Infrastructure & Building business. We also provide you with the provisional figures at the 2026 financial year on February 10, 2027.
This is a further new communication date that we are adding to the reporting calendar year. This will be followed on March 10, 2027 by the annual results press conference featuring detailed explanations on 2026 financial year. That brings me to the end of our update. Thank you very much for your attention. I am now happy to take your questions.
Thank you so much, Martin, for your explanations. As promised, we are now happy to answer your questions. We have already received a few questions via the live stream, so let's start with the first question from Laura Bucher from Octavian, and she writes that in particular, we should underline opportunities resulting from risen energy prices. Martin, could you highlight what the trading opportunities are from which these result? Is it proprietary trading, optimization bonuses, or intraday trading? Furthermore, Mrs. Bucher would like to know how much of this potential could be realized in the third quarter and what is expected for the fourth quarter?
Yes, with pleasure. First of all, it's actually the asset-backed trading that is key, and our evaluation was carried out alongside our positioning in the different trade areas in comparison to our expectations. The outlook refers to the fourth quarter, meaning we do know where we're ending by end of third quarter, but my outlook is based on the fourth quarter and our expectations on the backdrop of our positioning.
That's great. Thank you, Martin. This leads me to the second question by Jung-Su Song from AWP. She would like to know how the current development on energy markets and the low production in Switzerland is considered in view of the coming winter. What are the major impact aspects, and what are the major risks, and what do you expect in terms of electricity prices for the future?
I'm just taking notes. This is why it takes a little second. The development will be as follows. When talking about trade, I already mentioned it, the entire environment is very volatile. We know about the geopolitical impacts, and it is very much subject to these, and the weak production is a fact. For the fourth quarter, we lowered our expectation for energy production, and for the future, we will have to see. It's hard to anticipate for our planning. We expect average values. This is, let's say, the best planning basis that we have. We do not know how the first quarter is going to be. Will there be a lot of precipitation or not?
But over the year, we collected experience that is adapted quarterly, and we know how, let's say, rainfall usually develops, but there can also be strong deviations. Concerning the risks, of course, we do not know how the geopolitical situation will develop, and wars have a major impact on energy prices and make them volatile. We have a perspective concerning energy prices, but of course, this is part of our business secret because this is our positioning in the market. This decides upon our margins.
Thank you, Martin, for this answer. We continue with four questions from Emanuele Oggioni from Kepler Cheuvreux, and I will indicate them individually. Can you be a bit slower? The first question is a hedging update for 2029. Could you come up with something? The next one, STENFO performance in Q3. The fourth question, when will we update our business plan? Fourth question again, will our trading result 2027 be improved should the energy market turbulences be settled?
Okay. First of all, the hedging update for 2029, there is not much to say about that in comparison to what we already said on the half year. We still have a certain open position that we haven't hedged so far, and this might be new. In the future, we will morely work with open positions, so short-term price volatility can be to our favor. Usually, prices are higher in the current environment, and if we secure everything, we're giving a potential, and this is why for 2029, we have a certain policy for open hedges. The STENFO performance Q3 in comparison to plan, this might be useful for the outlook.
Concerning half-year results, I said that we had some tailwind in comparison to our plan based on the guidance 2019, and usually, we plan with a target performance of 2.8%, and at six months, we had CHF 19 million of tailwind. In the third quarter, this remains unchanged. STENFO has continued to develop positive, and alongside our plans, there is no further tailwind in comparison to the first six months in the third quarter. Could you help me out? What was the other question?
Yes, the third question was, when will you update your business plan?
I do assume that you're referring to the Solutions 2030 strategy, and we're still working on a CHF 1 billion sales, and once appropriate, we will confirm or correct this figure, but we do not have a fixed communication date on any comments.
Then the trading result. You already answered it. That's perfect. Thank you. Thank you, Martin. This leads us to Michael Heim's question from Handelszeitung. He would like to know how water scarcity of the current year impacts your business development, and what are the price and quantity effects there are, and what your expectations are for the coming winter at BKW.
Basically, quantities that we're currently selling are secured. We have high energy prices at the moment, and if we have too low production, but we promise delivery, we have to buy this additionally on the market. Short-term prices that we're using for a lack of production are high. We do not have a negative impact or a negative effect from the lack of own production. How this is going to develop into the future is currently hard to anticipate. Should we continue to produce less than secured, we will have to acquire on a short-term basis on the market, and this can be rather a benefit and not a negative effect.
Merci, Martin. Similar questions on the prices for which 2029 production will be secured.
This is a consolidated question. The securitization prices, A, it is not the entire quantity that is secured. These are prices that have changed in comparison to 2028's securitization, but only to a minimum. It is like CHF 60 for base load calculated on three years.
Thank you. Then two questions from Tommaso Operto from UBS. First of all, he would like to know how many of the lower prices in the 2027 financial year will be compensated in that financial year. Second question, in how far will low waterfalls also have an impact on production?
Okay, going to the last question first, that is quite easy to answer. Basically, there is no positive impact if water stands are low. The storage power stations have, let us say, a high water stand, so the impact on a pumping power station on BKW will not be significant, I think. However, hydropower stations with run-of-the-river hydroelectricity are, of course, subject to that. This means that we have to buy electricity from the Swissgrid net, and the grid costs have a negative impact on our result. This is already happening right now, and this is what I can say on that. in 2027, in general, we expect certain outcomes that we will communicate on the balance sheet conference in March 2027, and this year has already started.
Thank you, Martin. Another question by Alexandra Bossert from UBS. Can you say something on cash flow development and indebtedness?
Yes, I can. Basically, cash flow development, of course. If we fall below plan and we had to adapt our guidance for half-year expectations, we had to limit our guidance in terms of bandwidth, so we are lacking a little bit of OpEx in comparison to the planning, which has an effect on operative cash flow, which is, of course, falling below plan in that respect. Now we are compensating for that by being very careful with investment. This means that, last not least, our free cash flow development is stable, and this is in line with the indebtedness, which is also according to plan. Not much movement here.
Further questions on your Solutions 2030 that was communicated in 2024. Are you sticking to that strategy?
Yes, this is an ambition that we set forth. First of all, we have CHF 1 billion of sales, a bandwidth of CHF 150 million-CHF 1.5 billion. This is our ambition, yes.
One question by Monika Bieri from fedafin. How did the energy trade from CHF 10.3 million from end of June to end of September develop?
CHF 10.3 million from end of June to end of September.
Okay. Let us come to Michael Heim from Handelszeitung. A question on the Swiss business in photovoltaics. BKW introduced a dynamic acquisition by small customers, and do you expect revenues or changed power flow?
Power flow can modify, that is true. Honestly, I do not expect a major effect here. It is relatively hard to estimate, but for the BKW Group, there will not be a significant impact.
Thank you, Martin. Then Richard Alderman from BGAG. Concerning additional operative costs generated from your expansion in Infrastructure & Buildings, can you tell us something about it, and will your expectations concerning the 2027 forecast be impacted by that?
I&B, I assume we are talking about inorganic growth and the impact of M&A. What I can say on mergers and acquisitions in the capital markets, we only go for acquisitions that are based on our former strategy. Our former strategy was different. Our third pillar has been built for infrastructure projects, and this is why these revenue contributions from these acquisitions are relatively low. Here we are talking about one-digit million amounts for a financial year in total. Currently, it is not a significant impact we see here.
Merci, Martin. This leads us to the last questions. One question by Peter Gürke from Tax Consultants Gürke. Since beginning August 2026, electricity prices rose. When will these rises reflect in BKW's figures?
Increasing prices already have a significant impact on our figures. The question is whether we are talking about energy production or trading. In production, our prices are secured. As I mentioned, we started to soften this starting this year. We are not systematically securing three years in springtime for the next three years to benefit from short-term opportunities. Concerning the production result, trading and production are not separately disclosed, but they are part of Energy Solutions. For production, it does not play a major role. There is a fixed price, and in trading results, you can see exactly that. I told you already that we had a difficult start in 2026 due to the geopolitical situation. Successively, we are trying to catch up with this, and we now have a positive outlook to 2026 in trading.
The current electricity prices and short-term developments support trading for BKW and also trading revenue and economic revenue, which is already depicted in our figures.
Thank you, Martin. Our last question from Andreas von Arx from ZKB. He would like to know whether there will be an investor call with the provisional figures.
This is what I said. That is the 10th of February, where for the first time, we will inform our investors about our results. This is a fixed date, February 2027, starting.
Thank you very much, Martin, for your explanations. A big thank you to you, participants, for your questions and interest. Before coming to closing down our call, I would like also to draw your attention to the next upcoming events. On Tuesday, 10th of February, we will publish our press release on the provisional financial figures, and the same day, also be an investor call. On Wednesday, 10 March 2027, we will present our annual results as usual at Hotel Widder in Zurich and online. This brings you to the end of our update call. On behalf of BKW, I would like to thank you very much for your participation and interest. We were looking forward to welcoming you again in our next events. Until then, I wish you all the best and a wonderful advent season. Goodbye for now. Have a nice-