Annual Report 2015 01.01 01.10 01.07 01.04

BKW GROUP Annual Report 2015

01.01

01.04 01.07

01.10 “The focused implementation of our strategy and our strict cost management are now bearing fruit. We are shaping the future of energy – straightforward, reliable and integrated.”

Suzanne Thoma, CEO

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2 Letter to Shareholders

4 Review of the 2015 results

13 BKW Group Consolidated Financial Statements

14 Consolidated Income Statement 15 Consolidated Statement of Comprehensive Income 16 Consolidated Balance Sheet 17 Changes in Consolidated Equity 18 Consolidated Cash Flow Statement 19 Notes to the Financial Statements 88 Group companies and Associates 92 Report of the statutory auditor on the consolidated financial statements

95 Financial Statements of BKW AG

96 Income Statement 97 Balance Sheet 98 Notes to the Financial Statements 101 Proposal to the General Meeting 102 Report of the statutory auditor on the financial statements

105 Investor Information

106 Important information on the share, bonds and financial calendar 110 Production Facts and Figures

113 Corporate Governance

137 Remuneration Report

150 Addresses and Legal Notice 2 ANNUAL REPORT 2015 | MANAGEMENT REPORT Letter to Shareholders

Dear Shareholders measures. In parallel, considerable cost savings were achieved in the energy sector, as well as in We can look back with gratitude and pride on an- production and in overheads. To reinforce the stra- other good financial year in what has been a very tegic Energy business over the past year, we made challenging environment. Despite the persistent significant investments in renewable energies. collapse in electricity prices and the revaluation of Here, our focus was on the small hydroelectric the Swiss franc against the euro, the BKW Group power plant sector in Switzerland and on the Wind is once again able to report very attractive figures business in other European countries. for 2015. Thanks to our increased operating profit In 2015, Networks saw the start of the develop- and record-high operating cash flow, we have ment and application of modern technologies to substantially reduced our net debt and continue create a supply infrastructure that is more effi- to improve our solid financial basis. We have done cient, more economic and more customer-friendly. our homework and are now shaping the future of The increasingly distributed small production energy – simple, safe and integrated. plants which are primarily operated by our cus- 1 The BKW Group tomers for their own consumption are placing new comprises BKW AG and Expanding renewable energies while demands on network operators. its Group companies. In reducing cost order to make this report easier to read, the Switzerland is also suffering from disarray in the Services business on a growth trajectory Group will be referred traditional electricity generation markets. Thanks In 2015, our Services business grew, both organi- to as BKW. Where the to the intelligent management of the investment cally and inorganically. Electricity supply, telecom- text relates specifically to BKW Energy Ltd., portfolio through our trading, we were once again munications, transport and water supply require this is expressly men- successful in the past year in taking counter- an extensive, widespread infrastructure which is tioned. ANNUAL REPORT 2015 | MANAGEMENT REPORT 3

planned, built and maintained by us. In addition to all our employees. With commitment, a willing- to the provision of services for a modern network ness to change and great enthusiasm you have all infrastructure, the building engineering market is made your daily contributions to the success of a prime focus for us. Worldwide building stocks our company. Together we will shape the future of are becoming an integral part of an energy supply energy – straightforward, reliable and integrated. system. Energy efficiency, distributed production and customer preferences for partial self-suffi- Kind regards ciency are combined with the new technological potential of digitisation. As an integrated energy and infrastructure business, our mission is to create customer benefits in this area and to play our part in shaping the energy future. In order to supplement and consolidate our expertise in this regard, we acquired, in 2015, several services companies which will be assigned directly or indirectly Urs Gasche Suzanne Thoma to building engineering. One of these is Solare Dat- Chairman of the Board CEO ensysteme GmbH (SDS). With its technologies and range of digital services, SDS supports its customers in achieving their desire for economic and safe self-sufficiency in electricity. Also joining us in 2015 was the planning company, ahochn AG, which specialises in the planning of demanding building solutions in the combined area of energy and technology. With these additional areas of expertise, the launch of our Home Energy product and the acquisition of a series of companies operating in the heating, ventilation and air conditioning sectors, we succeeded, in 2015, in laying sustainable foundations for our growth as an integrated provider of complete solutions.

We are maximising the opportunities of change Changed customer requirements, new market structures and rapid technological developments require us to embark with purpose on a fundamental change process. Energy and infrastructure services are rooted at the core of our strategy, and change our culture and values. Today, we are a highly developed company that has set itself the target of maximising the changes in its environment and achieving growth as a result.

A big thank-you What we achieved during the last financial year has only been possible thanks to the trust of our shareholders and our customers. We thank you for this most sincerely. We would also like to thank our suppliers and partners who, through their expertise and spirit of partnership in their partnerships with us, have also contributed to this success. We would also like to extend our thanks

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REVIEW OF THE 2015 RESULTS BKW records strong result again

The BKW Group 1 is pleased to present a very good result for the 2015 financial year, in an industry environment characterised by heavily falling electricity prices and negative currency effects. Operating profit (EBIT) amounts to CHF 382 million (+ 10 %). This figure reflects both the successful operating activities, and two one-off items that had a positive effect. The net profit of CHF 284 million is on a par with the strong level achieved in the previous financial year. BKW’s liquidity has also improved: Operating cash in-flow of CHF 576 million exceeds last year’s record value, reducing net debt by 38 % and thus helping to strengthen the already sound financing situation.

Solid operating result – net profit on a par with previous year In the 2015 financial year, the BKW Group has pushed ahead on its way to implementing its strategy. This is reflected in the very good annual result. Despite the negative performance of electricity prices and exchange rates, BKW has successfully increased its operating profit (EBIT) by 10 % to CHF 382.0 million. This increase includes the positive effects of two one-off items. The first arises from the currency conversion of provisions for onerous energy procurement contracts denominated in euro, while the second relates to the successful claim for compensation payments in respect of the delayed commissioning of the coal-fired power plant in Wilhelmshaven. Even ignoring these positive effects, EBIT stands at a strong CHF 309 million. BKW has thus succeeded in significantly offsetting the negative impact of the electricity price and exchange rate trends, as previously announced. Optimum management of the energy position, active cost management and an increased contribution from the Services business are the main reasons for this performance.

Owing to performance of the financial markets, the financial result is CHF 94.1 million lower than in the previous year. Performance of the Decommissioning and Disposal Funds was slightly negative in 2015, compared with a rather high return of over 11 % in the previous year. The income tax expenditure figure benefited from a one-off positive effect of CHF 27.1 million owing to changes in the tax regime in Italy. At CHF 284.0 million, the reported net profit is just around 3 % lower than the strong figure achieved in the previous year.

1 The BKW Group comprises BKW AG and its Group companies. In order to make this report easier to read, the Group will be referred to as BKW. Where the text relates specifically to BKW AG or BKW Energy Ltd., this is expressly mentioned. ANNUAL REPORT 2015 | MANAGEMENT REPORT 5

CHF millions 2014 2015 % change Total operating revenue 2,844.9 2,645.0 – 7.0 % Energy procurement/transport 1 – 1,544.7 – 1,265.7 – 18.1 % Operating costs – 772.0 – 849.1 10.0 % ––Material and third-party services – 196.7 – 239.8 21.9 % ––Personnel expenses – 399.8 – 448.6 12.2 % ––other operating expenses – 175.5 – 160.7 – 8.4 % Operating profit before depreciation, amortisation and impairment 528.2 530.2 0.4 % Depreciation, amortisation and impairment – 217.7 – 213.7 – 1.8 % Income from associates 36.2 65.5 80.9 % Operating profit/loss 346.7 382.0 10.2 % Financial result – 12.6 – 106.7 746.8 % Profit/loss before income taxes 334.1 275.3 – 17.6 % Income taxes – 42.2 8.7 – 120.6 % Net profit 291.9 284.0 – 2.7 %

1 Expenses for charges relating to the compensatory feed-in remuneration (KEV), municipal taxes and water charges amounting in total to CHF 87.3 million are now carried in energy transport costs and no longer reported in other operating expenses. An adjustment of CHF 66.6 million has been made to the previous year’s figures.

Improvements gained from change in segment reporting On 1 January 2015, BKW altered its reporting and management structure in conjunction with the implementation of its corporate strategy. Decisions on how to allocate resources and assessments of earning power are now made at the level of the Energy, Networks and Services business areas. The reporting segments will thus be aligned with these BKW business areas. The new structure improves the usefulness of the reported information and supports the consistent and successful implementation of the company strategy.

–– The Energy segment builds, operates and maintains BKW’s pool of power plants in Switzerland and abroad. It is also responsible for the sale of energy in Switzerland and in Italy and for trading in electricity, certificates and raw materials. –– The Networks segment builds, operates and maintains BKW’s distribution grid. It is responsible for the transport of energy for end customers outside BKW’s supply region in Switzerland and Italy. –– The Services segment provides energy services in the fields of building technologies, network infrastructure and energy efficiency. It also offers engineering services for power plants and infrastructure.

Adaptations to the income statement lead to more appropriate reporting Expenses for charges relating to the compensatory feed-in remuneration (KEV), municipal taxes and water charges are now reported in energy transport costs and no longer reported in other operating expenses. These restructured items represent costs over which BKW has no influence. The change has been made to make the figure reported under other operating expenses more meaningful. The previous year’s figures have been restated to ensure comparability. 6 ANNUAL REPORT 2015 | MANAGEMENT REPORT

Total operating revenue decreases as anticipated due to electricity prices, services business reporting high rates of growth Total operating revenue decreased by 7 % (some CHF 200 million) compared with the previous year, to CHF 2.6 billion. Significantly lower electricity prices and the negative effects of the CHF/EUR exchange rate have considerably affected sales in the Energy business (– 20 % or around CHF – 400 million). In contrast, in the Services business BKW realised strong sales growth of + 34 % or CHF + 110 million, thanks primarily to acquisitions, but also owing to organic growth. As a result it was able to offset a significant portion of the lost sales in the Energy business. Networks also recorded improved sales, which increased by around CHF 80 million (+ 12 %).

Lower energy procurement expense and decreasing operating costs in traditional business areas Energy procurement and transport costs fell by 18 % to CHF 1,265.7 million. This was primarily caused by the positive effects of the lower electricity prices and exchange rate on costs of procurement in the market. Energy procurement expenses also benefited positively from a CHF 45 million effect from the currency conversion on the balance sheet date of provisions for onerous energy procurement contracts.

Operating costs in the traditional Energy and Networks businesses were reduced by 5 % or CHF 22 million thanks to consistent cost management. Nevertheless, acquisitions during the reporting year meant that operating costs rose overall by CHF 77.1 million to CHF 849.1 million. Personnel expenses increased in particular, as a result of the inorganic growth of the Services business. At the end of 2015 BKW employed a total of 3,993 FTE, including trainees, which represents an increase of some 490 people.

Lower financial result due to weakened fund performance The financial result of CHF – 106.7 million was considerably weaker than in the previous year (2014: CHF – 12.6 million). This is attributable largely to the negative performance of the Decommissioning and Disposal funds. In the reporting year, the funds recorded a loss of CHF 4.6 million, compared with the extraordinarily high profit of CHF 91.6 million in the previous year. In addition, in 2014 BKW realised a one-off gain of some CHF 25 million from the sale of its shareholding in Jung fraubahn Holding AG. Income taxes include the effect of a significant one-off item. In Italy a combination of the reversal of the “Robin Hood Tax” and the reduction in tax rate adopted in December resulted in a positive effect on tax of CHF 27.1 million. Mainly because of this one-off effect, and in conjunction with effective adjustments to taxable carrying values, there was a net tax revenue of CHF 8.7 million in the year under review (2014: tax expense of CHF 42.2 million). At CHF 284.0 million, BKW’s net profit was just 3 % below the strong result of the previous year. ANNUAL REPORT 2015 | MANAGEMENT REPORT 7

Energy: Management of energy position and operating costs reduce negative effects of electricity prices

CHF millions 2014 2015 % change Electricity sales Switzerland 552.8 516.4 – 7 % Electricity sales International 130.5 132.3 1 % Other electricity sales 1,109.5 824.3 – 26 % Income from other energy business 120.7 55.7 – 54 % Other operating income and own work capitalised 43.3 35.8 – 17 % Total operating revenue 1,956.8 1,564.5 – 20 % Energy procurement – 1,195.4 – 907.4 – 24 % Expense from other energy business – 68.4 – 4.4 – 94 % Operating costs – 357.9 – 319.2 – 11 % ––Personnel expenses – 124.3 – 117.8 – 5 % ––Material and third-party services and other operating expenses – 233.6 – 201.4 – 14 % Total operating expenses – 1,621.7 – 1,231.0 – 24 % Operating profit before depreciation, amortisation and impairment 335.1 333.5 – 0 % Depreciation, amortisation and impairment – 129.6 – 121.2 – 6 % Income from associates 17.2 49.3 187 % Operating profit/loss 222.7 261.6 17 %

Lower electricity prices and the stronger Swiss franc had a hugely negative impact on sales by the Energy business, as anticipated. Total operating revenue decreased by CHF 392.3 million (– 20 %) to CHF 1,564.5 million. In the partially regulated Swiss distribution business, weather conditions caused consumption to fall by 100 GWh, which together with lower electricity prices entailed a small 7 % drop in revenue to CHF 516.4 million. In the international distribution business, sales remained stable despite the exchange rate and lower prices, thanks to increased volumes. Other electricity sales (market sales and direct sales from power plants) endured a considerable 26 % decrease to CHF 824.3 million because of prices, even though volumes were higher (+ 275 GWh). In addition to the low electricity market prices, the primary negative contributory factor was the exchange rate.

The revenue from other energy business comprises mainly sales of certificates and gas supplies. During the reporting period these revenues fell owing to market conditions and a reduction in opportunities. At the same time, the procurement expenses for these positions also dropped accordingly.

Energy procurement costs fell by 24 % to CHF 907.4 million. Alongside the lower market procurement prices and effects of the exchange rate, lower market procurement volumes were also behind this development. Electricity production of 11,830 GWh was significantly higher than the previous year’s figure of 11,249 GWh. A marked 639 GWh increase in production was recorded by fossil-fuel power plants. This was due first to higher volumes produced by Italian gas power plants in response to the market. Second, the coal-fired power station went online at the end of October 2015, mark- ing the end of a seven-year construction phase. It produced around 200 GWh of power by the end of the year. The hydro power plants produced 140 GWh more power during the reporting year, primarily owing to the lowering of the lake level at Räterichsboden (KWO). The total volume produced by new renewable energy was only slightly (+ 7 GWh) greater than the previous year, at 865 GWh. However, record production by Juvent and the newly acquired wind farm in France helped wind power to produce about 22 GWh more power. 8 ANNUAL REPORT 2015 | MANAGEMENT REPORT

Nuclear power recorded lower volumes during the year under review. The 205 GWh decrease was caused mainly by the higher temperature of the River Aare at the Mühleberg nuclear power plant, while at Leibstadt there was a lengthy inspection. Energy procurement costs also benefited positively from a CHF 45 million positive effect of the currency conversion of provisions for onerous energy procurement contracts.

Thanks to improvements in efficiency and cost savings in production, trading and sales, it was also possible to lower operating costs significantly. A reduction of CHF 38.7 million (– 11 %) has been achieved.

The result from associates was CHF 32.1 million higher than in the previous year. This includes a one-off effect that arose in respect of the coal-fired power plant in Wilhelmshaven. A claim for compensation against the supplier was successful, following the delayed commissioning of the plant, leading to a CHF 28 million one-off effect.

The reported operating profit grew by CHF 38.9 million to CHF 261.6 million. Without the positive one-off effect of the currency conversion of provisions for onerous energy procurement contracts and the one-off effect of the receipt of compensation for the Wilhelmshaven power plant, operating profit is CHF 188.6 million. This therefore means that the operating result is CHF 34.1 million lower than the previous year. Owing to the known negative performance of electricity prices and exchange rates (reduced sales of CHF 200 million), an even heavier decrease had threatened. How- ever, as previously announced the Energy business was able to offset some of this heavily negative impact thanks to optimum energy position management and consistent management of costs. ANNUAL REPORT 2015 | MANAGEMENT REPORT 9

Networks: A reliable contribution

CHF millions 2014 2015 % change Distribution grid usage fees 411.8 444.9 8 % Energy transport income 174.8 216.5 24 % Other operating income and own work capitalised 96.0 100.1 4 % Total operating revenue 682.6 761.5 12 % Energy transport expense – 281.3 – 354.7 26 % Operating costs – 210.4 – 217.3 3 % ––Personnel expenses – 82.5 – 89.8 9 % ––Material and third-party services and other operating expenses – 127.9 – 127.5 – 0 % Total operating expenses – 491.7 – 572.0 16 % Operating profit before depreciation, amortisation and impairment 190.9 189.5 – 1 % Depreciation, amortisation and impairment – 74.7 – 73.3 – 2 % Income from associates 18.9 16.1 – 15 % Operating profit/loss 135.1 132.3 – 2 %

The Networks segment improved its total operating revenue by 12 % to CHF 761.5 million. Distribu- tion grid usage fee revenue increased by 8 % to CHF 444.9 million for the reporting year. The main contributory factor here was a price increase, in particular in relation to the passing on of increased regulatory charges (compensatory feed-in remuneration (KEV), system services (SDL) and other charges). Slightly higher volumes of distributed power also had a positive effect. The energy transport income is related to revenue from end customers outside the supply region, in both Switzerland and Italy. Growth in this revenue of CHF 41.7 million is primarily attributable to increased transport volumes in Italy. Sales growth of CHF 78.9 million in the Networks business is therefore almost exclusively caused by third-party costs that are passed on, and is therefore not relevant for EBIT.

Accordingly, the energy transport expenses rose in line with the sales. Increased regulatory charges and the costs of third-party grid providers caused a rise of 26 %. By passing on the external costs, it was possible to record a stable operating profit in the Networks business. At CHF 132.3 million this was just 2 % lower than in the previous year, largely caused by a slightly smaller contribution to results from associates.

During the reporting year, about CHF 110 million was invested in the BKW grid. BKW hired more employees in order to deal with the required grid investment, and so personnel expenses rose by 9 %. As a result of the increased personnel deployment in respect of the investment activity, own work capitalised was about CHF 4 million higher. 10 ANNUAL REPORT 2015 | MANAGEMENT REPORT

Services: Successful and rapid expansion

CHF millions 2014 2015 % change Income from services 313.1 420.1 34 % Other operating income 7.3 9.6 32 % Total operating revenue 320.4 429.7 34 % Operating costs – 303.3 – 402.4 33 % ––Personnel expenses – 130.1 – 174.7 34 % ––Material and third-party services and other operating expenses – 173.2 – 227.7 31 % Total operating expenses – 303.3 – 402.4 33 % Operating profit before depreciation, amortisation and impairment 17.1 27.3 60 % Depreciation, amortisation and impairment – 5.9 – 10.1 71 % Income from associates 0.1 0.1 0 % Operating profit/loss 11.3 17.3 53 %

The Services business increased its total operating revenue significantly, by almost CHF 110 million to CHF 429.7 million. This growth rate of 34 %, which is largely based on inorganic growth, has helped to rapidly drive the strategic expansion of the Services business. Since June 2014, a total of twenty companies have been acquired in the areas of building technologies (particularly heating installations), grid and infrastructure services, engineering services, and wind and solar services. Fifteen of these were purchased in the 2015 financial year, including the largest acquisitions com- prising the antec group and Solare Datensysteme (SDS). These acquisitions provide BKW with a good position in the building technologies market in the supply region and in Zurich and Eastern Switzerland. With a range of international acquisitions, BKW is now also represented in the neighbouring countries of Germany, Austria and Italy.

While sales increased by 34 %, EBIT rose disproportionately by 53 % to CHF 17.3 million. While the resulting EBIT margin is still lower than the target level, as a result of the acquisition and integration costs, it has already surpassed the 4 % mark. In pure operating terms, the acquired companies are already performing in line with expectations. The Services business is therefore making a positive cash contribution of about CHF 24 million.

BKW consistently pursued the implementation of its announced strategy during the reporting year, with the successful acquisition of specialised companies in a range of service areas. ANNUAL REPORT 2015 | MANAGEMENT REPORT 11

Large cash inflow from operations Operating cash flow during the reporting year was CHF 575.8 million, which is CHF 37.7 million higher than the already very good figure from the previous year. The successful management of net working capital made a significant contribution to this record value. BKW was thus able to finance the total investments of almost CHF 400 million from the cash that it had produced itself during the reporting year.

Cash and cash equivalents grew by CHF 282.0 million to CHF 834.2 million. After taking account of current financial assets, BKW’s liquidity on the balance sheet date totalled about CHF 1.4 billion, an increase of CHF 0.2 billion on the previous year.

A convincing equity and financing situation: Safeguarding financial and operational flexibility The balance sheet total rose by 1 % to year-end, to about CHF 8 billion. The equity ratio fell only slightly, despite the very good annual result, by 0.4 percentage points to 32.2 %. Currency translation of equity in group companies located in the euro zone had a negative effect owing to the strong Swiss franc. After excluding these negative currency effects, equity ratio would have increased by an additional 1.4 percentage points.

BKW successfully improved its already solid financial position. Net debts (financial liabilities less current financial assets and cash and cash equivalents) were significantly reduced by around 38 % from CHF 470.2 million to CHF 291.7 million. The first refinancing of outstanding bonds is due in 2018. In addition, BKW continues to have access to an unused syndicated loan totalling around CHF 250 million. This has therefore further expanded the financial framework for safeguarding financial and operational flexibility.

Stable dividend As in the previous year, an unchanged dividend of CHF 1.60 per share will be proposed to the General Meeting on 13 May 2016. This equates to a dividend yield of 4.2 %, based on the year-end share price. The payout ratio adjusted for material one-off items in net profit is around 46 %, reflecting the consistency of BKW’s dividend policy.

Outlook BKW anticipates that the 2016 financial year will present an unchanged challenging market environment, in which falling energy prices will continue to dominate. In maintaining the same speed of expansion of the Services business, consistent management of the energy position and consistent cost management, BKW is seeking to reduce the negative influences. In addition, the Networks business will also be able to offset some of the negative performance in the energy sector thanks to its higher fees. BKW expects the operating profit excluding exceptional items in 2016 to be in line with that achieved in 2015. 12 ANNUAL REPORT 2015 | MANAGEMENT REPORT ANNUAL REPORT 2015 BKW Group Consolidated Financial Statements 14 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

BKW GROUP CONSOLIDATED FINANCIAL STATEMENTS Consolidated Income Statement

CHF millions Note 2014 2015 Net sales 1 7 2,732.6 2,533.5 Own work capitalised 49.4 58.3 Other operating income 1 62.9 53.2 Total operating revenue 2,844.9 2,645.0 Energy procurement/transport 2 8 – 1,544.7 – 1,265.7 Material and third-party services – 196.7 – 239.8 Personnel expenses 9 – 399.8 – 448.6 Other operating expenses 2 10 – 175.5 – 160.7 Total operating expenses – 2,316.7 – 2,114.8 Operating profit before depreciation, amortisation and impairment 528.2 530.2 Depreciation, amortisation and impairment 11 – 217.7 – 213.7 Income from associates 19 36.2 65.5 Operating profit/loss 346.7 382.0 Financial income 12 142.2 18.2 Financial expenses 12 – 154.8 – 124.9 Profit/loss before income taxes 334.1 275.3 Income taxes 13 – 42.2 8.7 Net profit 291.9 284.0 attributable to: ––BKW shareholders 288.2 276.7 ––Non-controlling interests 3.7 7.3

Earnings per share in CHF (undiluted) 14 5.96 5.71 Earnings per share in CHF (diluted) 14 5.85 5.29

1 Income from the BKW group company cc energie sa of CHF 9.0 million is now reported in net sales. Previously this income was included in other operating revenue. The previous year’s figure has been adjusted and an amount of CHF 10.4 million has been reclassified in net sales. 2 Expenses for charges relating to the compensatory feed-in remuneration (KEV), municipal taxes and water charges amounting in total to CHF 87.3 million are now carried in energy transport costs and no longer reported in other operating expenses. An adjustment of CHF 66.6 million has been made to the previous year’s figures. ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 15

BKW GROUP CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statement of Comprehensive Income

CHF millions 2014 2015 Net profit 291.9 284.0 Actuarial gains/losses (Group companies) ––Actuarial gains/losses – 135.8 – 49.0 ––Income taxes 29.9 10.8 Actuarial gains/losses (associates) ––Actuarial gains/losses – 19.8 – 9.5 ––Income taxes 1.5 0.3 Total items that will not be reclassified to income statement, net of tax – 124.2 – 47.4 Currency translations ––Currency translations – 22.6 – 112.4 ––Reclassification to the income statement – 0.3 0.0 ––Income taxes 0.0 – 0.1 Available-for-sale financial assets ––Value adjustments 0.9 – 0.3 ––Reclassification to the income statement – 25.0 0.0 ––Income taxes 5.3 0.1 Hedging transactions ––Value adjustments – 0.1 1.0 ––Reclassification to the income statement – 0.1 – 0.2 ––Income taxes 0.3 – 0.3 Total items that may be reclassified to income statement, net of tax – 41.6 – 112.2 Other comprehensive income – 165.8 – 159.6 Comprehensive income 126.1 124.4 attributable to: ––BKW shareholders 122.1 116.0 ––Non-controlling interests 4.0 8.4 16 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

BKW GROUP CONSOLIDATED FINANCIAL STATEMENTS Consolidated Balance Sheet

CHF millions Note 31.12.2014 31.12.2015

Assets Cash and cash equivalents 32 552.2 834.2 Trade accounts receivable and other receivables 15 757.7 677.3 Current tax receivables 20.5 19.4 Financial assets 18 711.8 560.2 Derivatives 28 104.3 82.1 Inventories 16 123.0 86.7 Prepaid expenses and accrued income 17 115.9 86.1 Total current assets 2,385.4 2,346.0 Financial assets 18 1,230.0 1,242.7 Derivatives 28 45.2 59.1 Investments in associates 19 1,173.5 1,156.5 Property, plant and equipment 20 2,882.8 2,846.3 Intangible assets 21 179.4 319.6 Deferred tax receivables 13 43.6 37.1 Total non-current assets 5,554.5 5,661.3 Total assets 7,939.9 8,007.3

Shareholders’ equity and liabilities Trade accounts payable and other liabilities 22 439.1 468.4 Current tax liabilities 21.7 26.3 Financial liabilities 23 65.9 53.9 Derivatives 28 65.2 67.0 Provisions 24 52.7 69.0 Deferred income and accrued expenses 17 191.4 213.7 Total current liabilities 836.0 898.3 Financial liabilities 23 1,668.3 1,632.2 Derivatives 28 23.2 38.8 Pension liability 25 197.5 257.8 Other liabilities 26 228.2 276.2 Provisions 24 2,035.9 1,970.7 Deferred tax liabilities 13 425.8 357.3 Total non-current liabilities 4,578.9 4,533.0 Total liabilities 5,414.9 5,431.3 Share capital 27 132.0 132.0 Capital reserves 27 41.3 41.3 Retained earnings 27 2,728.3 2,924.2 Other reserves 27 – 157.4 – 318.1 Treasury shares 27 – 311.1 – 302.9 Equity attributable to BKW shareholders 2,433.1 2,476.5 Equity attributable to non-controlling interests 91.9 99.5 Total shareholders’ equity 2,525.0 2,576.0 Total shareholders’ equity and liabilities 7,939.9 8,007.3 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 17

BKW GROUP CONSOLIDATED FINANCIAL STATEMENTS Changes in Consolidated Equity

CHF millions capital Share reserves Capital earnings Retained shares Treasury Other reserves to Attributable BKW shareholders to Attributable non-controlling interests Total Equity at 31.12.2013 132.0 35.0 2,467.0 – 319.2 8.2 2,323.0 42.7 2,365.7 Net profit 288.2 288.2 3.7 291.9 Other comprehensive income – 166.1 – 166.1 0.3 – 165.8 Comprehensive income 288.2 – 166.1 122.1 4.0 126.1 Dividend – 58.0 – 58.0 – 2.9 – 60.9 Transactions in treasury shares 29.0 8.1 37.1 37.1 Share-based payments 1.7 1.7 1.7 Acquisition of non-controlling interests – 0.8 – 0.8 – 0.8 Sale of non-controlling interests 1.2 0.5 1.7 45.6 47.3 Changes in the scope of consolidation 0.0 0.4 0.4 Contribution to equity from non-controlling interests 0.0 2.1 2.1 Convertible bond 6.3 6.3 6.3 Equity at 31.12.2014 132.0 41.3 2,728.3 – 311.1 – 157.4 2,433.1 91.9 2,525.0 Net profit 276.7 276.7 7.3 284.0 Other comprehensive income – 160.7 – 160.7 1.1 – 159.6 Comprehensive income 276.7 – 160.7 116.0 8.4 124.4 Dividend – 77.5 – 77.5 – 1.0 – 78.5 Transactions in treasury shares – 6.1 8.2 2.1 2.1 Share-based payments 2.8 2.8 2.8 Acquisition of non-controlling interests 0.0 – 0.7 – 0.7 Changes in the scope of consolidation 0.0 – 1.0 – 1.0 Contribution to equity from non-controlling interests 0.0 1.9 1.9 Equity at 31.12.2015 132.0 41.3 2,924.2 – 302.9 – 318.1 2,476.5 99.5 2,576.0 18 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

BKW GROUP CONSOLIDATED FINANCIAL STATEMENTS Consolidated Cash Flow Statement

CHF millions Note 2014 2015 Result before income taxes 334.1 275.3 Adjustment for: ––Depreciation, amortisation and impairment 11 217.7 213.7 ––Income from associates 19 – 36.2 – 65.5 ––Financial result 12 12.6 106.7 ––Gains/losses from sale of non-current assets – 2.7 – 8.4 ––Change in non-current provisions (excl. interest) – 17.3 – 138.6 ––Change in assigned rights of use – 9.6 – 10.3 ––Change from the valuation of energy derivatives – 15.0 26.4 ––Other non-cash positions 2.8 11.1 Change in net working capital (excl. financial assets/liabilities and derivatives) 66.9 205.1 Income taxes paid – 14.5 – 38.0 Other financial items paid – 0.7 – 1.7 Cash flow from operating activities 538.1 575.8 Investments in property, plant and equipment 20 – 222.6 – 223.6 Disposal of property, plant and equipment 16.3 19.7 Acquisition of Group companies 6/32 – 13.2 – 96.5 Disposals of Group companies 0.3 1.1 Investments in associates 19 – 33.9 – 9.7 Disposals of associates 2.4 6.3 Investments in current and non-current financial assets – 458.2 – 83.8 Disposals of current and non-current financial assets 64.0 215.0 Investments in intangible assets 21 – 12.8 – 23.7 Disposals of intangible assets 1.0 0.1 Interest received 9.2 9.4 Dividends received 55.3 18.5 Cash flow from investing activities – 592.2 – 167.2 Sale/purchase of treasury shares 27 1.6 1.4 Acquisition of non-controlling interests – 0.8 – 0.7 Sale of non-controlling interests 47.3 0.0 Contribution to capital from non-controlling interests 2.1 1.9 Increase in current and non-current financial liabilities 179.9 12.3 Decrease in current and non-current financial liabilities – 26.8 – 32.2 Increase in other long-term liabilities 19.7 20.1 Decrease in other long-term liabilities – 7.2 – 0.7 Interest paid – 45.3 – 44.2 Dividends paid – 60.9 – 78.5 Cash flow from financing activities 109.6 – 120.6 Translation adjustments on cash and cash equivalents – 0.1 – 6.0 Net change in cash and cash equivalents 55.4 282.0 Cash and cash equivalents at start of reporting period 496.8 552.2 Cash and cash equivalents at end of reporting period 32 552.2 834.2 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 19

BKW GROUP CONSOLIDATED FINANCIAL STATEMENTS Notes to the Financial Statements

1 Business activities

BKW AG, Bern, Switzerland, together with the other companies in the BKW Group (BKW), is a leading supplier of energy and related services in Switzerland. BKW provides a comprehensive range of products and services to residential and business customers. In neighbouring countries, the Group sells energy through its own sales channels. BKW’s activities extend throughout the value chain, from the production and distribution to the trading and sale of energy. In addition to simply sup- plying energy, BKW develops, implements and operates comprehensive energy solutions for private and business customers, and for energy utility companies and local authorities.

2 Basis of preparation

2.1 General principles

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). They provide a true and fair view of the financial position, the results of operations and the cash flows of BKW. The consolidated financial statements also comply with Swiss company law. The closing date for the consolidated financial statements is 31 December. The consolidated financial statements are presented in Swiss francs (CHF).

The consolidated financial statements have been prepared on the historical cost basis. Exceptions are described in the “Accounting policies and valuation”.

2.2 Adoption of new standards and interpretations in 2015

The following new and amended standards are applicable for BKW for the first time in the 2015 financial year:

–– Amendments to IAS 19 “Employee Benefits: Defined Benefit Plans – Employee Contributions” –– Annual Improvements to IFRSs 2010 – 2012 Cycle –– Annual Improvements to IFRSs 2011 – 2013 Cycle

These changes have had no effect on the presentation of BKW’s financial position, results of operations and cash flows. 20 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

2.3 Future adoption of new standards and interpretations

The following new and amended standards and interpretations had been published by the balance sheet date but will not be applied until subsequent financial years. BKW intends to apply the changes from the date on which they enter into force (entry into force for financial years beginning on or after the dates in brackets):

–– IFRS 9 “Financial Instruments” (1 January 2018) –– IFRS 15 “Revenue from Contracts with Customers” (1 January 2018) –– Amendments to IAS 1 “Disclosure Initiative” (1 January 2016) –– Amendments to IFRS 10 and IAS 28 ‘Sale or Contribution of Assets between an Investor and its Associate or Joint Venture’ (to be determined) –– Amendments to IFRS 11 “Accounting for Acquisitions of Interest in Joint Operations” (1 January 2016) –– Amendments to IAS 16 and IAS 38 “Clarification of Acceptable Methods of Depreciation and Amortisation” (1 January 2016) –– Annual Improvements to IFRSs 2012 – 2014 Cycle (1 January 2016)

BKW is currently examining the possible effects of applying these new or changed standards and interpretations.

On 13 January 2016 the International Accounting Standards Board (IASB) published a new standard on accounting for leases, IFRS 16 Leases. The standard provides a single accounting model for the lessee, which means that in future all assets and liabilities from leasing agreements must be recorded in the balance sheet. In the case of BKW, the new requirement will lead to an increase in non-current assets and, at the same time, an increase in financial liabilities. BKW is currently examining the effects in detail. The standard will be applicable for the first time in the 2019 financial year.

2.4 Changes to the accounting policies

On 1 January 2015, BKW altered its reporting and management structure in conjunction with the implementation of its corporate strategy. This has resulted in changes to the accounting principles relating to segment reporting (see Note 4.19). ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 21

3 Consolidation

3.1 Consolidation principles

The consolidation is based on the financial statements of the individual Group companies, which have been drawn up according to uniform principles of valuation and presentation. Intra-group balances, transactions, profits and expenses are eliminated in full.

The closing date for all Group companies is 31 December. The closing date for some associates and one joint arrangement differs from that of BKW since these companies close their accounts on 30 September in line with the hydrological year. The closing date for consolidation of these companies is set at 30 September. Adjustments are made for material transactions that occur between the closing date of the companies and the closing date of BKW.

3.2 Scope of consolidation

Group companies Group companies are included in the consolidated financial statements in their entirety. Assets and liabilities as well as expenses and income are included in their entirety. Non-controlling interests in shareholders’ equity and in net income of the relevant Group companies are disclosed separately in consolidated equity and in the consolidated income statement. Inter-company income and expenditure as well as inter-company assets and liabilities are eliminated on consolidation. Interim profits on inter-company goods and services that have not yet been realised from sales to third parties are eliminated. There are no material restrictions on the transfer of funds from subsidiaries to the parent company.

Joint arrangements Companies over which there is joint control are treated as joint ventures or joint operations. Joint control exists when decisions are made with the unanimous consent of the parties to the contractual arrangement. Where such unanimous consent does not exist, joint control could arise indirectly from the overall existence of contractual provisions and their application in certain individual cases. Joint operations are accounted for in the Group financial statements by recognising the Group’s share of the assets and liabilities and of the revenues and expenses. The Group’s joint ventures are accounted for using the equity method.

Associates Investments in companies in which BKW is able to exercise significant influence but not overall control are classified as associates and accounted for using the equity method. A significant influence is generally held to be a share of voting rights of between 20 % and 50 %. Rights agreed in contract may in some circumstances mean that a significant influence can be exerted even though the share of voting rights is smaller than 20 %. This applies in particular in the case of partner plants.

Partner plants comprise companies that build and operate power stations or that manage energy procurement rights and plan nuclear storage facilities. The energy produced by these companies is purchased at production cost in line with contractual agreements. Partner plants are assigned to the Energy segment. 22 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

3.3 Acquisition and sale of Group companies

Companies acquired by BKW during the year are consolidated as from the effective date of acquisition. Net assets acquired are measured at fair value and integrated using the acquisition method. The excess of the cost of acquisition over the fair value of net assets acquired is classified as goodwill. Any negative difference is immediately recognised in income.

Group companies that BKW ceases to control are excluded from consolidation as of the date on which control ceases. The difference between the proceeds from the sale and the net assets dis- posed of is recognised in the income statement on the effective date. Attributable goodwill and accumulated foreign currency translation differences and value fluctuations for financial instruments charged to the statement of other comprehensive income are derecognised in income as a component of the gain or loss on sale.

3.4 Foreign currency translation

The reporting currency is the Swiss franc (CHF). BKW records transactions in foreign currencies at the prevailing exchange rates on the transaction date. Exchange rate gains and losses arising from such transactions as well as the translation of foreign currency balances on the balance sheet date are charged to the financial result.

Foreign-currency financial statements of Group companies outside Switzerland are converted to Swiss francs according to the following principles:

–– Balance sheet, at the prevailing exchange rate on 31 December; –– Income statement, at average exchange rates for the reporting year; –– Cash flow, at average exchange rates for the reporting year.

Closing date Closing date Average Average 31.12.2014 31.12.2015 2014 2015 CHF/EUR 1.2024 1.0835 1.2139 1.0679

Goodwill and adjustments to fair value made in the apportionment of purchase prices to the carrying amounts of identified net assets of companies in foreign currency are carried in the foreign currency.

Differences arising from the translation of the financial statements of Group companies, associates and joint arrangements in foreign currencies are accounted for in other comprehensive income. ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 23

4 Accounting policies and valuation

4.1 Revenue recognition

Sales of energy to end customers and sales partners are considered as having been realised and are recorded as revenue when delivery is complete. Revenue arising from customer-specific manufacturing orders in Services is posted according to the Percentage of Completion (POC) method, whereby the proportionate revenue is recognised according to the degree of completion of the order.

Energy-trading revenue is presented according to the purpose of the underlying transaction. Energy transactions are conducted either for the purpose of actively managing the power plant base or to ensure physical coverage of energy supply or purchase contracts. Such management transactions can be broken down into “own-use” and “hedging” transactions. The gross revenue from own-use transactions is recorded as sales (“Electricity Trading” or “Gas Business”) at the time of delivery. Hedging transactions result from extended activities to manage the production portfolio, compris- ing additional transactions undertaken to hedge BKW’s own production. These additional hedging transactions qualify as financial instruments. Other energy transactions are conducted with the sole intention of achieving a trading margin. Such transactions also qualify as financial instruments.

Energy transactions defined as financial instruments are measured at fair value at the closing date; realised and unrealised gains and losses from these transactions are recorded as net figures in “Income from Energy Hedging” and “Income from Proprietary Energy Trading” (see Note 35.2). The income from such transactions consists of two components: effective realised gains or losses from transactions in progress, and unrealised measurement gains and losses from measurement at fair value of the open contracts.

4.2 Financial instruments

Financial instruments comprise all contractual agreements that give rise to financial assets for BKW and financial liabilities for a counterparty, and vice versa. Financial assets and liabilities are categorised as follows:

–– Financial assets or financial liabilities at fair value through profit or loss (financial instruments held for trading and derivatives); –– Held-to-maturity investments (non-derivative financial assets with fixed or determinable payments and fixed maturity that the company intends and is able to hold to maturity); –– Loans and receivables; –– Available-for-sale financial assets (non-derivative financial assets that cannot be classified in any other category); –– Financial liabilities at amortised cost.

Financial assets are recorded and derecognised on the trade date. Financial assets and liabilities are subjected to a standard valuation procedure according to category. They are initially recognised at fair value. Transaction costs for financial instruments not categorised as “at fair value through profit or loss” are assigned to the acquisition or issuance of the financial instrument. For subsequent valuation, financial instruments categorised as “at fair value through profit or loss” are recorded in the balance sheet at fair value, and the related gains or losses are recorded in the income statement. Financial assets available for sale are also recorded at fair value in the balance sheet. While available-for-sale financial assets are measured at fair value, the gains or losses are 24 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

recorded in other comprehensive income, unless they qualify as an impairment or the financial instrument is sold. In the event of impairment, disposal or other derecognition, the amount recorded in other comprehensive income is transferred to the income statement. Loans granted by and receivables due to BKW as well as liabilities incurred are carried at amortised cost using the effective interest method less impairments.

Impairment is recognised if there are objective indications that the value of an asset is at risk. Assets carried at amortised costs are considered to be impaired if the carrying amount is higher than the present value of estimated future cash flows. Available-for-sale assets are considered to be impaired if the fair value is lower than the acquisition value. Equity instruments are considered to be impaired only if the decline in value is significant or prolonged.

The fair value of a stock-exchange listed share for which the market is assumed to be active is determined based on the published market price. The fair value of other financial instruments is determined using the discounted cash flow method or other recognised measurement methods. Financial assets are derecognised when the rights are realised or have expired, or when BKW hands over control. Financial liabilities are derecognised only when they are discharged.

4.3 Derivatives

4.3.1 Energy derivatives BKW trades in contracts in the form of forwards with fixed and flexible profiles, and futures on electricity, gas, oil, coal and certificates. Contracts concluded with the sole intention of achieving a trading margin, as well as hedging transactions resulting from extended production portfolio management, are treated as financial instruments and designated as energy derivatives. Trans actions that are open on the balance sheet date are measured at fair value. BKW receivables in respect of counterparties are recorded under assets as positive replacement values (under Deriva- tives), while payables are recorded under liabilities as negative replacement values (under Deriva- tives). Ongoing transactions with positive or negative replacement values are netted if the respective contract terms provide for this, and settlement is legally enforceable and intended. Realised and unrealised gains and losses from energy derivatives are recorded as income from proprietary energy trading or as income from energy hedges as applicable within net revenue.

4.3.2 Hedge accounting Financial instruments can be used to hedge fluctuations in the fair value of an asset or liability (fair value hedge), to hedge exposure to variability in cash flows (cash flow hedge) and to hedge exposure of net investments in business operations abroad (net investment hedge). This is done in accordance with the existing guidelines governing BKW’s hedging and credit risk policy. They are measured at fair value. To qualify as a hedging transaction, strict criteria must be met in terms of documentation, the effectiveness of a hedging instrument and the probability of occurrence. When a hedging transaction is concluded, the relationship between the hedging instrument and the hedged position as well as the purpose and strategy of risk hedging must be documented. The effectiveness of the hedging relationship is assessed and documented at the inception of the hedge and throughout its duration. Changes in the value of financial instruments which are used to hedge the fair value of a balance sheet item and are highly effective (thus qualifying as a fair value ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 25

hedge) are recognised in profit or loss together with the respective change in fair value of the underlying asset or liability. The effective portion of the gain or loss on financial instruments that qualify as cash flow hedges or as hedges for net investments in business operations abroad is recognised in other comprehensive income. The ineffective portion of the gain or loss is recognised in profit or loss. If the qualifying criteria for accounting as a hedging instrument are no longer met, the hedging transaction expires, is sold, ends or is exercised without rolling over into another hedging transaction, the amounts previously recognised in other comprehensive income remain in equity until the hedged transaction has occurred.

Realised and unrealised changes in the value of financial instruments that serve economically and according to Group guidelines to hedge against exchange rate and interest rate risks related to ongoing business activities, but which do not qualify as hedging transactions, are charged to income as financial income/expenses.

4.4 Property, plant and equipment

Property, plant and equipment are recorded at acquisition or manufacturing cost less accumulated depreciation and recognised impairment losses. Depreciation is calculated systematically using the straight-line method and based on the useful lives of the assets. The useful lives and indications of impairment are reviewed annually. Impairments in respect of property, plant and equipment are determined according to the principles set out in Note 4.11. Property, plant and equipment dependent on concessions that are revertible without compensation are written down at most over the expected term of the concession.

The present values of estimated dismantling, decommissioning and disposal costs are charged to the balance sheet together with acquisition or manufacturing costs (see also Note 4.14). Fuel elements produced specifically for the nuclear power plant are disclosed in the balance sheet under property, plant and equipment. They are written down on the basis of wear and tear (burn-up).

For long-term investment projects the borrowing interest is charged to the balance sheet during the set-up phase. Land is valued at acquisition cost. Depreciation is recorded only in the event of impairment.

The costs of repairs and maintenance that does not add value are charged to the income statement as they are incurred. They are carried as assets only if the costs extend the original useful life or give rise to other significant economic benefits (cost reduction, increase in earnings). Costs incurred due to legal requirements that generate no direct future benefit are capitalised only if and when this enables other assets to generate benefits. 26 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

The estimated useful lives of property, plant and equipment lie within the ranges listed below and are unchanged compared with the previous year:

Buildings 50 years Power plants 12 to 80 years Distribution equipment 20 to 60 years IT systems 10 to 30 years Operating facilities and vehicles 3 to 20 years Fuel rods After burn-up

4.5 Intangible assets

Intangible assets include rights of use, contractual or legal rights acquired as a result of acquisitions, brands, as well as software and goodwill.

Rights of use comprise contractually agreed one-off amounts to a contractual partner for the use of its operating installations as well as licences for the construction and operation of BKW’s own installations. Intangible assets are amortised over the period of use, or at most the contract period, using the straight-line method.

Goodwill is not written down but assigned to the relevant cash generating unit and subjected to annual impairment tests or ad hoc tests whenever impairment is indicated.

4.6 Financial assets

Financial assets cover holdings, securities, loans and term deposits. Receivables from state funds that do not fall under the scope of IAS 32, IAS 39 and IFRS 7 are also included as financial assets.

Stock-exchange-listed securities that constitute part of a portfolio of financial instruments, that are jointly managed and that are regularly purchased and sold, are categorised as “assets at fair value through profit or loss” and recorded under current assets. Other holdings and securities are categorised as “available-for-sale” and assigned to non-current assets.

Term deposits and loans are valued at amortised cost.

Nuclear power plant operators are required by law to make annual payments to state funds (federal decommissioning and disposal funds). The operators will be paid the future costs for disposal and decommissioning by these state funds according to the statutory requirements. Such payments are regarded as reimbursements and are charged to income as receivables from state funds. Changes in fund valuations are recorded in the financial result for the period in question. ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 27

4.7 Trade accounts receivable/payable, and prepaid/accrued expenses and prepaid expenses and accrued income

Receivables are stated at nominal value less any adjustment in value. Adjustments are made on the basis of assessments of individual receivables, non-performance of contractual receivables and debtor payment behaviour. Receivables are derecognised only if there is sufficient indication that payment can no longer be expected. Payables are not subject to interest and are recorded at nominal value. Prepaid/accrued expenses and deferred/accrued income cover the periodic adjustment of expenses and income and are also recorded at nominal value and broken down into financial and other accruals. Financial accruals consist of goods and services provided or purchased on a contractual basis but not billed by the balance sheet date.

4.8 Inventories

4.8.1 Stock materials Materials held in stock for network construction and the electrical installation business are recorded at the lower of acquisition/manufacturing cost or net realisable value. The acquisition/ manufacturing cost of raw and auxiliary materials is measured at the weighted moving average. Semi-finished and finished products include the directly assignable cost and share of overall construction costs. Stock materials with an unsatisfactory turnover are written off in full or in part.

4.8.2 Emission rights and green certificates For emission rights held under national or international emissions allowance schemes for the purpose of compliance with carbon emission allowances, the net liability method is used. These emission rights are recorded at the lower of acquisition cost or net realisable value. A provision is recognised as soon as the carbon output exceeds the emission allowances originally allocated and still held. The value of the emission rights and certificates is realised when they are sold or returned to the authorities as compensation for emissions.

Green certificates certify the generation of electricity from renewable energies and can be sold separately from the delivery of electricity. Income from green certificates from BKW’s own production is accrued at the time of the energy being produced based on the expected proceeds from the sale. Purchased green certificates are carried in the balance sheet at acquisition cost.

For transactions in emission rights and certificates conducted with the sole intention of achieving a trading margin, BKW applies the brokerage exemption, under which these may be recognised at fair value, less costs to sell. Changes in value on the balance sheet date as well as realised purchases and sales are recorded in the income statement. Transactions in derivatives on emission rights which are conducted with the intention of achieving a trading margin are treated in the same way as energy-trading derivatives (see Note 4.3.1). 28 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

4.9 Work in progress

Production contracts are valued according to the Percentage of Completion (POC) method. The stage of completion is determined on the basis of individual progress reports or cost estimates (contract costs incurred for work performed to date as a proportion of the estimated total contract costs). The associated income is recorded in the income statement as revenue. The income includes the original contract sum as well as variations in contract work, claims and incentive premiums, insofar as it is probable that they will result in revenue and can be reliably measured. Orders and order groups for which pro rata income cannot be reliably estimated are capitalised at cost. Antici- pated losses are immediately recorded in their entirety. After taking account of part payments from customers, work in progress is stated under accounts receivable as a net amount from production contracts or as advance payment from customers in other current liabilities.

4.10 Non-current assets or disposal groups held for sale

Non-current assets and disposal groups that are held for sale are presented separately in current assets and in current liabilities. Non-current assets or disposal groups are measured at the lower of their carrying amount and fair value, less costs to sell. Impairments applied in respect of the initial classification are recognised in the income statement. Assets and disposal groups held for sale are not depreciated further.

4.11 Impairment of non-financial non-current assets

On each balance sheet date, assets are tested for impairment or improvement in value. If indications of impairment or improvement are identified, the recoverable amount of the asset is measured. Assets with an indefinite useful life are assessed for impairment irrespective of whether there are any indications. The value of assets with a carrying value that exceeds the recoverable amount is adjusted in the income statement. The recoverable amount is the higher of the net selling price and value in use (present value of estimated future cash flows), and is measured separately for each asset or, if this is not possible, for the cash-generating unit to which the asset belongs. If the amount estimated for an impairment loss is greater than the carrying value of the asset, a liability is recognised only if the requirements for a provision or other obligation are met. An impairment loss recognised in previous years for an asset other than goodwill is reversed if no impairment or only a reduced impairment exists. Impairment losses for assets subject to depreciation are reversed to the value which would have been determined had the acquisition value been depreciated on a systematic basis. The reverse posting is also charged to income.

Energy produced by partner plants is billed to shareholders on the basis of existing agreements – irrespective of the current market prices – at the cost of production. Overvaluation of partner companies’ production plants is accounted for under onerous energy procurement contracts, due to the contractual obligation to pay energy production costs. Based on the obligation of the shareholders to pay production costs, it is assumed that the holdings in partner plants measured at the proportionate equity value are recoverable. ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 29

4.12 Assigned rights of use

Assigned rights of use are recognised under other non-current liabilities. They consist of third- party payments for transit rights to transmission systems, plant usage rights and contributions to grid costs (connection contributions). Such assigned rights are recognised in the balance sheet at the nominal value of the cash inflow less any reversed amounts charged to income. The liability is reversed on a straight-line basis over the useful life of the facility but for no longer than the life of the relevant assigned right.

4.13 Financial liabilities

Financial liabilities comprise interest-bearing financial obligations, namely bonds, loans and finance leasing liabilities. Bonds and loans are carried at amortised cost using the effective interest method. Finance leasing liabilities are carried in accordance with IAS 17.

Convertible bonds are investigated for the existence of a debt and an equity component. The fair value of the debt component is calculated at the time of issue on the basis of the market interest rate for comparable instruments with no conversion rights, and is subsequently valued at amortised cost. Any equity component is allocated to the residual value that remains after deducting the amount separately calculated for the debt component from the fair value of the instrument as a whole. The equity component is not revalued following its initial recognition. Transaction costs are allocated to the debt and equity components on a pro rata basis.

4.14 Provisions

Provisions cover all obligations on the balance sheet date arising from past transactions and events where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the amount of which is not known but can be reliably measured. If an outflow of resources is no longer probable or determinable, a provision is charged to contingent liabilities. If the effect of the time value of the cash outflow is material, the amount of the provision is measured at the present value of the expected cash outflow.

As the operator of Mühleberg nuclear power plant, BKW is required by law to decommission the plant after the operating phase and to dispose of the nuclear waste. The resultant costs are subject to regular review, and the present value of estimated decommissioning and disposal costs is provisioned and adjusted annually subject to interest. The same amount is carried together with the acquisition/manufacturing costs of the plant and written down over the useful life using the straight line method. The costs incurred related to commissioning were capitalised and the corresponding provision was recognised on the date on which the plant went into operation. Further- more, the additional decommissioning and disposal costs incurred by power plant operation are capitalised annually and written down over the average useful life of the fuel elements using the straight-line method, and the corresponding provision is recognised. 30 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

The provision is calculated based on the following assumptions, which are unchanged compared with the previous year:

–– Assumed operating period of 47 years (until 2019) –– Average inflation rate of 1.5 % –– Interest rate of 3.5 %

The inflation and interest rate parameters are used in relation to the revised Decommissioning and Disposal Funds Ordinance (SEFV). The parameters used in the SEFV to calculate the contributions for the Decommissioning and Waste Disposal Funds have been applied in the calculation of the provisions (see Note 24).

BKW holds non-controlling interests in power plant companies, under the terms of which it is committed to purchasing the energy generated by these plants at production cost. Provisions are recognised for obligations to purchase energy at production costs that exceed the expected future realisable sales prices. The calculations are made using the discounted cash flow method.

4.15 Income taxes

Income taxes include current taxes based on profit and deferred taxes based on valuation differences. Current income taxes are determined based on local tax regulations. Deferred taxes account for the income tax effects between internal and local tax valuation guidelines for assets and liabilities according to the liability method, and are based on the actual tax rates or the tax rates expected to apply when this difference is adjusted.

Deferred tax liabilities are always recognised in the balance sheet. Deferred tax assets are recognised only if it appears probable on the basis of future anticipated gains that they can be realised.

Changes in deferred taxes are recorded in the income statement except when the origin of temporary differences is recognised as not affecting income. In this case, deferred taxes are recorded in other comprehensive income.

4.16 Leasing

Leasing arrangements are divided into operating leases and finance leases. A finance lease is a leasing arrangement in which the lessor essentially transfers to the lessee all risks and opportunities associated with the ownership of an asset. Assets held by BKW as the lessee in a finance leasing arrangement are initially accounted for as property, plant and equipment at the lower of the fair value and the present value of the minimum lease payments. They are depreciated over the shorter of the lease term or the life of the asset. The lease instalments are divided into interest costs and repayment amounts using the annuity method. Finance leasing liabilities are presented in the balance sheet under current and non-current financial liabilities.

Other leasing arrangements are classified as operating leases and are not recorded in the balance sheet. The leasing payments are recorded as operating expenses on a straight-line basis over the contract term. ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 31

4.17 Pension plans

BKW operates various pension plans in accordance with legal requirements. The majority of employees are covered by the Pensionskasse BKW, a legally autonomous defined benefit scheme compliant with the terms of IAS 19.

The costs and obligations arising from defined benefit schemes are determined annually by independent actuaries using the projected unit credit method, which reflects service rendered by employees to the date of valuation and incorporates actuarial assumptions. Until this obligation or surplus is recalculated, current service costs are charged on the basis of selected parameters. A pension surplus is capitalised if over funding of a pension plan generates an economic benefit. In this case the economic benefit from future reductions in contributions is measured after taking account of the asset ceiling. Annual service costs related to employment during the reporting period and the interest on the defined benefit obligation or plan assets are charged to income in personnel expenses. The actuarial gains and losses from periodic recalculations are charged to other comprehensive income in the statement of comprehensive income.

4.18 Share-based payment

BKW employees have the opportunity to purchase BKW AG share capital on preferential terms. Full- time employees of BKW are offered a defined number of BKW shares every year at a fixed preferential price, set for that year, subject to a blocking period. In addition, a performance-related bonus has been allocated to members of the Group Executive Board and senior management in the form of BKW shares as part of their fixed annual base salary. The allocation of shares is decided on an annual basis for the current financial year. The shares are subject to a blocking period.

Allocation of shares to employees is not subject to any other conditions in either of the aforemen- tioned cases, hence there is no vesting period and the compensation is recorded on the grant date, with fair value measured on the basis of the share price. The corresponding expense is recognised in personnel expenses at the time of the grant being made. In relation to the share purchase programme, the personnel expense corresponds to the difference between the fair value and the preferential price paid by employees.

4.19 Segment reporting

Segments and segment results are defined on the basis of the management approach. In line with the implementation of the strategy, from 2015 BKW’s reporting has been restructured into the business areas Energy, Networks and Services. These three areas of business represent BKW’s three reporting segments.

The results of the business divisions are separately monitored by the CEO in order to make decisions on resource allocation and to assess the earning power of the units. Operating profit is used by the senior decision-maker, the CEO, as the basis for resource allocation and performance measurement. 32 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

5 Measurement uncertainties

Preparation of the financial statements in accordance with the applicable accounting standards necessitates the use of estimates and assumptions that affect the reported amounts of assets, provisions, liabilities and contingent liabilities on the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions are based on past findings and best possible assessment of future developments. Actual results may differ from these estimates. Estimates and assumptions are regularly reviewed, and changes are recognised in the period in which they were identified.

5.1 Impairment testing of non-current assets

The recoverable amount calculated for the purposes of impairment testing of non-current assets is the higher of the fair value minus sale costs and value in use (present value of estimated future cash flows). The calculation of the recoverable amount is reliant to a significant extent on estimates of the expected future cash flows from use, long-term growth rates, useful life of assets, discounting rates and on estimates of the potential net sale price of the asset. The actual results may differ significantly from these estimates.

5.2 Mühleberg nuclear power plant

Measurement of the provision for nuclear waste disposal and the inherent value of property, plant and equipment recorded in the balance sheet (power plant and equipment, fuel rods, including present disposal value) is material for the purposes of assessing BKW’s balance sheet and income statement. Detailed costs for decommissioning nuclear power plants and nuclear waste disposal are jointly calculated by the industry and updated every five years in accordance with the Ordinance on the Decommissioning and Disposal Funds for Nuclear Power Plants. These cost calculations are reviewed by the Swiss federal government. The most recent estimate of the decommissioning and waste disposal costs was produced in 2011 and confirmed by the Swiss Federal Nuclear Safety Inspectorate (ENSI) on 5 November 2012. The estimates for plant-specific obligations are made by BKW.

Changes to cost calculations and the statutory requirements for nuclear waste disposal may have a material effect on the Group’s results of operations and cash flows. As at 31 December 2015, property, plant and equipment at the Mühleberg nuclear power plant was carried at some CHF 140 million along with provisions for nuclear waste disposal of CHF 1,586 million. ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 33

5.3 Provision for onerous energy procurement contracts

Provisions for onerous energy procurement costs are calculated using the discounted cash flow method. Measurement of the provision depends primarily on estimated future energy prices, estimated production costs of the power plant, and the assumed discount rates. The calculations are also usually made over an extremely long period, generally over the licence term or useful life of the power plants. These estimations and assumptions constitute uncertainties and can deviate significantly from actual results.

5.4 Pension plans

The pension liabilities arising from defined benefit pension plans are calculated based on actuarial assumptions which may not reflect reality and hence may have an impact on BKW’s results of operations and cash flows. The actuarial assumptions used in the calculation and a corresponding sensitivity analysis have been disclosed in Note 25.

5.5 ElCom legal proceedings

The tariffs which BKW is permitted to charge to its customers for grid usage and energy are partly reviewed by the Federal Electricity Commission (ElCom). At present there are several proceedings awaiting decisions by various bodies. The main object of the proceedings is to rule on the chargea- ble capital and operating costs. Decisions issued by the court of last instance may have implica- tions for BKW’s future cash flows. In connection with the transfer of the transmission grid to Swissgrid Ltd. as per 1 January 2013, the expected final compensation for the installations is currently provisional owing to ongoing court proceedings. 34 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

6 Business combinations

Business combinations in 2015

Solare Daten- CHF millions systeme GmbH antec group AG Miscellaneous Total Cash and cash equivalents 2.5 3.0 8.3 13.8 Other current assets 7.7 5.3 22.5 35.5 Financial assets 0.0 0.0 1.4 1.4 Property, plant and equipment 0.4 0.2 33.6 34.2 Intangible assets 14.2 7.7 8.0 29.9 Deferred tax assets 1.4 0.0 0.0 1.4 Current liabilities – 2.3 – 2.6 – 18.0 – 22.9 Non-current financial liabilities 0.0 0.0 – 18.2 – 18.2 Provisions – 0.3 – 0.2 – 1.6 – 2.1 Deferred tax liabilities – 4.5 – 2.0 – 6.1 – 12.6 Fair value of acquired net assets 19.1 11.4 29.9 60.4 Non-controlling interests 0.0 0.0 – 0.5 – 0.5 Goodwill 57.1 16.8 24.8 98.7 Purchase price 76.2 28.2 54.2 158.6 Deferred and contingent purchase price payments – 35.1 – 7.5 – 7.6 – 50.2 Cash and cash equivalents acquired – 2.5 – 3.0 – 8.3 – 13.8 Cash outflow 38.6 17.7 38.3 94.6

The values for the transactions listed are provisional since the purchase price allocations have not been finalised.

Solare Datensysteme GmbH (SDS) On 1 September 2015 BKW acquired 100 % of the shares in Solare Datensysteme GmbH (SDS). Based in the Swabian town of Geislingen-Binsdorf, SDS is a global market leader in the monitoring of pho- tovoltaic installations. The company has been assigned to the Services segment.

At the acquisition date, there were deferred and contingent purchase price payments of CHF 35.1 mil lion, which are dependent on the future economic development of SDS. Due to this assessment of the company’s economic development, the present value was recognised at the maximum amount. The goodwill recognised is mainly attributable to the expected synergies and the assembled, qualified workforce. The fair value of the receivables amounted to CHF 1.5 million. These largely consist of trade receivables for which the risk of default is estimated to be extremely low. As a result, no value adjustments have been recognized. There were no transaction costs.

Had the company already been acquired as at 1 January 2015, total operating revenue for 2015 would have been CHF 8.9 million higher and the net profit CHF 0.4 million higher. Between the point at which the company was fully consolidated and 31 December 2015, the acquired company recorded an operating revenue of CHF 3.8 million and a net loss of CHF 1.4 million. ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 35

antec group AG On 31 July 2015, BKW acquired 100 % of the shares of antec group AG, based in Risch (ZG). With its two subsidiary operating companies ahochn AG in Dübendorf (ZH) and ahochnAG, Rotkreuz, in Risch (ZG), antec group AG is a leading planning group in the area of building technologies in Switzerland. As a one-stop shop, the company provides their customers with innovative solutions in building technologies for heat and energy. The company has been assigned to the Services segment.

At the acquisition date, there were contingent purchase price payments of CHF 7.5 million. This purchase price payment depends on future economic development in the years to come. Due to this assessment of the company’s economic development, the maximum amount was recognised. The goodwill recognised is mainly attributable to the expected synergies and the assembled, qualified workforce. The fair value of the receivables amounted to CHF 2.9 million. Since these largely consist of trade receivables for which the risk of default is estimated to be extremely low, there have been no value adjustments recognized. There were no transaction costs.

Had the company already been acquired as at 01 January 2015, total operating revenue for 2015 would have been CHF 7.0 million higher and the net profit CHF 1.5 million higher. Between 1 August 2015 and the end of the year, the company recorded an operating revenue of CHF 4.4 million and a net profit of CHF 0.1 million.

Miscellaneous In the reporting year, BKW acquired seven companies in the area of building technologies. BKW acquired 100 % of the shares in Karl Waechter AG, Marzolo & Partner AG, Lutz Bodenmüller AG, Weber AG, Kasteler Guggisberg AG, Dietrich Kälte AG and Schönenberger & Partner AG. The companies are established in the market for heating installations. In addition, BKW acquired 100 % of the shares in the electrical installation company, Elektro Aebi AG.

In other service fields, BKW acquired a majority share of 75 % of the company Casa delle Nuove Energie S.p.A. , which is based in Massazza (I). The company works in the fields of energy efficiency and renewable energies. Furthermore, BKW acquired 100 % of the shares in the German company Kraftwerks- und Anlagenengineering GmbH (KAE) and the Austrian company Ingenieurgemeinschaft Bilek & Krischner GmbH (IGBK). KAE specialises in retrofit projects and verification in the field of safety for nuclear facilities, while IGBK works in hydraulic engineering, environmental engineering, and infrastructure and building consulting. BKW also acquired 100 % of the shares of the companies Technische Informationen und Dienstleistungen (TID) and IWAG Ingenieure AG, which specialise in water, waste-water and environmental engineering. The companies acquired have been assigned to the Services segment. 36 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

In addition, on 16 September 2015 BKW acquired 100 % of the shares of the company Parc Eolien de Fresnoy Brancourt SAS in Fresnoy-le-Grand (F). The company is the owner of a wind farm with installed capacity of 13.8 MW. The company has been assigned to the Energy segment.

Due to the individual size of each company, summarised figures are reported.

At the acquisition date, there were deferred and contingent purchase price payments of CHF 7.6 million. Of these, CHF 4.1 million depend on the future economic development of the companies acquired. By the end of 2015, payments of CHF 0.5 million had been made in respect of these.

The acquisitions led to total goodwill of CHF 24.8 million. The goodwill recognised is mainly attributable to the expected future synergies and the assembled, qualified workforce. The fair value of the receivables amounted to CHF 14.1 million. These largely consist of trade receivables for which the risk of default is estimated to be extremely low. Therefore no material value adjustments were recorded for these receivables. There were no significant transaction costs.

Had the companies already been acquired as at 1 January 2015, total operating revenue for 2015 would have been CHF 45.1 million higher and the net profit CHF 2.9 million higher. Between the point at which the individual companies were fully consolidated and 31 December 2015, the acquired companies recorded a cumulative operating revenue of CHF 53.6 million and a total net profit of CHF 1.1 million. ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 37

Business combinations in 2014

CHF millions Total Cash and cash equivalents 6.0 Other current assets 18.0 Deferred tax receivables 0.5 Property, plant and equipment 3.4 Intangible assets 0.2 Current liabilities – 14.3 Non-current financial liabilities – 0.9 Pension liability – 4.4 Other non-current liabilities – 0.3 Fair value of acquired net assets 8.2 Non-controlling interests – 0.5 Fair value of interests already held – 0.1 Goodwill 12.0 Purchase price 19.6 Deferred and conditional purchase price payments – 1.5 Cash and cash equivalents acquired – 6.0 Cash outflow 12.1

In 2014, BKW conducted a number of smaller corporate acquisitions, for which summarised figures are reported due to the individual size of each operation. The values for the transactions conducted in the previous year are provisional since the purchase price allocations had not been finalised. The final purchase price allocation has since been completed and has not resulted in any changes.

With its entry into the heating installation market, in the second half of 2014 BKW acquired 100 % of the shares in Armin Neukom Installationen AG, Hertig Haustechnik AG and Cantoni Haustechnik AG. The acquired companies were assigned to the Renewables & Efficiency business segment, and, as a result of the change in segment reporting, are now included in the Services business segment. At the acquisition date, there were deferred purchase price payments of CHF 0.3 million in conjunction with these acquisitions. By the end of 2015, payments of CHF 0.3 million had been made. There are no further deferred purchase price obligations

In the area of infrastructure services, in the second half of 2014, BKW acquired 100 % of the shares in Baumeler Leitungsbau AG and Cabcon Ltd. The acquired companies were assigned to the Net- works business segment, and as a result of the change in segment reporting are now included in the Services business segment. At the time of acquisition, there were deferred purchase price payments of CHF 1.2 million in relation to the acquisition of these companies. In the current financial year, payments of CHF 1.2 million have been made so that there are no further deferred purchase price obligations.

Had the companies already been acquired as at 1 January 2014, total operating revenue for 2014 would have been CHF 38.2 million higher and the net profit CHF 0.6 million lower. Between the point at which the individual companies were fully consolidated and 31 December 2014, the acquired companies recorded a cumulative operating revenue of CHF 17.8 million and a total net loss of CHF 0.4 million. 38 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

7 Segment reporting

On 1 January 2015, BKW altered its reporting and management structure in conjunction with the implementation of its corporate strategy. Decisions on how to allocate resources and assessments of earning power are now made at the level of the Energy, Networks and Services segments. The reporting segments therefore now correspond to BKW’s business areas. The new management and reporting structure assists in the transparent and meaningful implementation of the finalised corporate strategy. The previous year’s figures have been adjusted to match the new structure.

BKW operates the following three reportable business segments:

–– The Energy segment builds, operates and maintains BKW’s pool of power plants in Switzerland and abroad. It is also responsible for the sale of energy in Switzerland and in Italy and for trading in electricity, certificates and raw materials. –– The Networks segment builds, operates and maintains BKW’s distribution grid. It is responsible for the transport of energy for end customers outside BKW’s supply region in Switzerland and Italy. –– The Services segment provides energy services in the fields of building technologies, network infrastructure and energy efficiency. It also provides services relating to the project management and design of new plants and expansion of existing power plants for third parties.

The column “Other” covers activities which are centrally managed within the Group; these largely consist of the decommissioning and disposal funds, Group financing, real estate, financial assets and tax. In addition, costs that arise in conjunction with the expansion of the business areas (acquisition/integration costs, technology development costs, etc.) are partially borne centrally within the Group and are not charged to the business segments. Segment figures are determined in accordance with the same accounting and valuation principles as are applied for the Group-level presentation of consolidated figures. The prices for inter-company transactions (transfer prices) are based on the market price on the transaction date. ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 39

Information by business segment

2015

CHF millions Energy Networks Services Other Consoli- dation Total External revenue 1,538.3 713.1 355.0 18.7 19.9 2,645.0 ––Net sales 1,513.5 671.0 349.0 0.0 0.0 2,533.5 ––Own work capitalised 5.8 31.0 0.3 1.3 19.9 58.3 ––Other operating income 19.0 11.1 5.7 17.4 0.0 53.2 Internal revenue 26.2 48.4 74.7 128.2 – 277.5 0.0 ––Net sales 15.2 0.7 71.9 0.0 – 87.8 0.0 ––Other operating income 11.0 47.7 2.8 128.2 – 189.7 0.0 Total operating revenue 1,564.5 761.5 429.7 146.9 – 257.6 2,645.0 Total operating expenses – 1,231.0 – 572.0 – 402.4 – 162.9 253.5 – 2,114.8 Operating profit before depreciation, amortisation and impairment 333.5 189.5 27.3 – 16.0 – 4.1 530.2 Depreciation, amortisation and impairment – 121.2 – 73.3 – 10.1 – 10.8 1.7 – 213.7 Income from associates 49.3 16.1 0.1 0.0 0.0 65.5 Operating profit/loss 261.6 132.3 17.3 – 26.8 – 2.4 382.0 Financial result – 106.7 Profit/loss before income taxes 275.3

Additions: ––Property, plant and equipment and intangible assets 101.9 132.3 6.3 17.0 – 4.2 253.3 ––from business combinations 32.3 31.8 64.1 ––State funds 30.3 30.3 ––Associates 9.7 9.7 Investments in associates at 31.12.2015 990.6 165.1 0.8 1,156.5 Total assets at 31.12.2015 5,663.8 1,873.3 397.3 6,411.3 – 6,338.4 8,007.3 40 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

2014

CHF millions Energy Networks Services Other Consoli- dation Total External revenue 1,932.1 637.3 245.3 11.6 18.6 2,844.9 ––Net sales 1,897.4 597.9 237.3 0.0 0.0 2,732.6 ––Own work capitalised 6.1 27.4 0.0 0.1 15.8 49.4 ––Other operating income 28.6 12.0 8.0 11.5 2.8 62.9 Internal revenue 24.7 45.3 75.1 135.9 – 281.0 0.0 ––Net sales 16.2 1.2 74.8 0.2 – 92.4 0.0 ––Other operating income 8.5 44.1 0.3 135.7 – 188.6 0.0 Total operating revenue 1,956.8 682.6 320.4 147.5 – 262.4 2,844.9 Total operating expenses – 1,621.7 – 491.7 – 303.3 – 158.5 258.5 – 2,316.7 Operating profit before depreciation, amortisation and impairment 335.1 190.9 17.1 – 11.0 – 3.9 528.2 Depreciation, amortisation and impairment – 129.6 – 74.7 – 5.9 – 9.1 1.6 – 217.7 Income from associates 17.2 18.9 0.1 0.0 0.0 36.2 Operating profit/loss 222.7 135.1 11.3 – 20.1 – 2.3 346.7 Financial result – 12.6 Profit/loss before income taxes 334.1

Additions: ––Property, plant and equipment and intangible assets 109.0 124.9 3.9 10.7 – 4.1 244.4 ––from business combinations 0.3 3.3 3.6 ––State funds 30.4 30.4 ––Associates 31.6 2.3 33.9 Investments in associates at 31.12.2014 1,019.0 153.7 0.8 1,173.5 Total assets at 31.12.2014 5,791.0 1,761.3 221.7 6,373.2 – 6,207.3 7,939.9

Information by country

Net sales to external customers by country are broken down by the place of delivery for the respective product. Non-current assets cover property, plant and equipment, intangible assets and investments in associates in the respective countries.

Switzerland Germany Italy France Other countries Total CHF millions 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 Net sales 1,477.6 1,393.2 756.1 417.0 390.6 523.6 90.2 171.0 18.1 28.7 2,732.6 2,533.5 Non-current assets 2,790.9 2,910.0 666.7 704.1 778.1 673.2 0.0 31.5 0.0 3.6 4,235.7 4,322.4

Information on significant customers

There are no transactions with individual external customers which generate revenue accounting for 10 % or more of net sales. ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 41

8 Energy procurement/transport 1

CHF millions 2014 2015 Cost of energy procurement from third parties and associates 1,271.5 996.5 Provision for onerous energy procurement contracts ––Provisions used – 6.6 – 14.0 ––Provisions added 9.2 2.8 ––Provisions released – 10.7 – 74.3 Total energy procurement expenses 1,263.4 911.0 Energy transport expenses 281.3 354.7 Total 1,544.7 1,265.7

9 Personnel expenses

CHF millions 2014 2015 Salaries and wages 321.8 361.6 Social security contributions and other personnel expenses 78.0 87.0 Total 399.8 448.6

10 Other operating expenses 1

CHF millions 2014 2015 Charges, levies and other taxes 25.8 21.0 Miscellaneous operating expenses 149.7 139.7 Total 175.5 160.7

1 Expenses for charges relating to the compensatory feed-in remuneration (KEV), municipal taxes and water rates amounting in total to CHF 87.3 million are now carried in energy transport costs and no longer reported in other operating expenses. An adjustment of CHF 66.6 million has been made to the previous year’s figures. 42 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

11 depreciation, amortisation and impairment

CHF millions 2014 2015 Depreciation ––Property, plant and equipment 202.5 183.4 ––Intangible assets 9.0 13.1 Impairment ––Property, plant and equipment 26.2 18.1 ––Intangible assets 0.1 0.0 Reversal of impairments ––Property, plant and equipment – 20.1 – 0.9 Total 217.7 213.7

The impairments on property, plant and equipment recognised in the reporting year concerned power plants from the Energy segment. The reversed impairments related to the Grid segment.

Impairments of CHF 15.2 million were recorded on property, plant and equipment in the Production segment in 2014, and CHF 11.0 million in the Renewables & Efficiency segment. Of the impairments on property, plant and equipment reversed in 2014, CHF 12.2 million related to the Production segment, CHF 3.7 million to the Networks segment and CHF 4.2 million to the Renewables & Efficiency segment.

Plants previously belonging to the Production and Renewables & Efficiency business segmentshave been reallocated to the Energy business segment as a result of the change to segment reporting.

12 Financial result

CHF millions 2014 2015 Interest income 10.5 10.6 Dividend income 5.2 4.1 Value adjustment on state funds 91.6 0.0 Gains from the disposal of financial assets 25.5 0.2 Value adjustment on securities held for trading 5.7 0.5 Other financial income 2.4 1.8 Currency translations 1.3 1.0 Financial income 142.2 18.2 Interest expenses – 51.9 – 49.2 Capitalised borrowing costs 1.6 2.3 Interest on provisions – 94.6 – 67.5 Value adjustment on state funds 0.0 – 4.6 Losses from the disposal of financial assets – 0.1 0.0 Value adjustment on securities held for trading – 0.4 – 0.4 Impairment of financial assets – 3.4 – 2.7 Other financial expenses – 6.0 – 2.8 Financial expenses – 154.8 – 124.9 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 43

13 income taxes

CHF millions 2014 2015 Current income taxes 8.6 43.0 Deferred taxes 33.6 – 51.7 Total 42.2 – 8.7

Reconciliation with reported income taxes

CHF millions 2014 2015 Profit/loss before income taxes 334.1 275.3 Tax expenses at anticipated rate of 24.2 % (2014: 23.6 %) 78.8 66.6 Effects of changes in tax rate 0.0 – 27.1 Participation reduction and non-taxable income – 33.7 – 12.5 Use/capitalisation of uncapitalised tax losses – 0.8 – 3.3 Non-tax-deductible expenses 2.5 5.1 Uncapitalised or partially capitalised tax losses 1.9 0.7 Taxes in respect of previous years – 2.5 – 0.4 Participation write-down – 1.4 – 33.0 Other items – 2.6 – 4.8 Total income taxes 42.2 – 8.7 Effective tax rate 12.6 % – 3.2 %

The anticipated tax rate is determined annually as a weighted average (based on the pre-tax earnings of individual Group companies and the applicable local tax rate). The increase in comparison with the previous year can be attributed to the fact that companies subject to higher tax rates have increased their profits.

In its decision of February 2015, the Italian constitutional court declared the “Robin Hood Tax” to be in breach of the constitution. The “Robin Hood Tax” is the name for an additional income tax levied only on companies in the energy sector at a rate of 6.5 %. Several BKW Group companies in Italy had previously fallen in the scope of this tax. The constitutional court’s decision is legally binding with immediate effect, and led as a consequence of the revocation to a corresponding reduction in the tax rate as of 2015.

Furthermore, on 28 December 2015 the Italian parliament decided to lower the corporation tax (IRES) from 27.5 % at present to 24 % as of 1 January 2017. This reduction will affect all the Italian companies in the BKW Group.

Due to these changes, BKW recalculated the deferred tax assets/liabilities of the Group companies affected and reduced them by CHF 27.1 million. This led to a one-off reduction in income tax expense in the same amount. In addition to this one-off effect, this will result in future in a lower tax charge and corresponding lower cash outflows. 44 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

Changes in deferred tax assets/liabilities

CHF millions 2014 2015 Net deferred tax liabilities at 01.01. – 427.9 – 382.2 Changes in the scope of consolidation 0.5 – 11.2 Addition/release in the income statement – 33.6 51.7 Value adjustment to financial instruments in other comprehensive income – 0.2 0.1 Realisation of financial instruments from equity 5.5 0.0 Change in value of cash flow and net investment hedges in other comprehensive income 0.3 – 0.3 Taxes on actuarial gains/losses 29.9 10.8 Tax effect of issue of convertible bond – 0.5 0.0 Transactions in treasury shares 1 41.8 0.8 Currency translations 2.0 10.1 Net deferred tax liabilities at 31.12. – 382.2 – 320.2

1 In 2014, BKW AG issued a convertible bond for its own shares. For this purpose, shares previously carried as treasury shares in the BKW Energy Ltd. balance sheet were allocated to BKW AG in the form of a dividend. As a consequence of differences in tax rate, this transfer of treasury shares within the Group required an adjustment to be made in respect of deferred taxes, which was recognised directly in equity.

Deferred tax assets/liabilities by origin of temporary difference

31.12.2014 31.12.2015 CHF millions Credit Liabilities Credit Liabilities Current assets 8.2 – 20.0 3.4 – 12.5 Financial assets and holdings 9.0 – 52.3 8.1 – 61.0 Property, plant and equipment 16.3 – 285.9 15.2 – 232.4 Intangible assets 1.3 – 5.6 2.0 – 12.2 Current liabilities 5.7 – 10.6 3.6 – 7.2 Provisions 1.6 – 117.0 1.7 – 105.8 Other non-current liabilities 66.9 – 1.0 76.0 – 1.6 Capitalised loss carry-forwards 1.2 0.0 2.5 0.0 Credit/liability for gross deferred taxes 110.2 – 492.4 112.5 – 432.7 Netting of assets and liabilities – 66.6 66.6 – 75.4 75.4 Credit/liability for deferred taxes according to balance sheet 43.6 – 425.8 37.1 – 357.3

The change in temporary differences resulted in a deferred tax expense of CHF 50.4 million (2014: CHF 19.6 million) recorded in the income statement.

As in the previous year, on 31 December 2015 no deferred tax liabilities were accounted in respect of temporary differences with associates. No deferred taxes are recognised for Group companies, joint arrangements or partner plants at which a dividend payment is contractually agreed, since BKW is able to monitor the reversal of the temporary difference and such a difference is not probable in the foreseeable future. The temporary differences for which no deferred tax liabilities have been recognised in this respect amount to CHF 505.0 million (2014: CHF 520.8 million) in total. ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 45

Tax loss carry-forwards As at 31 December 2015 there were tax loss carry-forwards of CHF 28.8 million (2014: CHF 59.9 million) for which deferred taxes were not capitalised. These were not capitalised since their charging against future taxable earnings is not regarded as probable within the permissible tax period. The average applicable tax rate on tax loss carry-forwards will be 23.7 % (2014: 21.6 %).

These loss carry forwards fall due in the following periods: in CHF millions 31.12.2014 31.12.2015 Expiry within 1 year 0.3 0.0 Expiry within 2 to 5 years 1.6 1.0 Expiry after 5 years 9.8 7.4 Valid indefinitely 48.2 20.4 Total 59.9 28.8 46 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

14 Earnings per share

The undiluted earnings per share is calculated based on the weighted average number of shares in circulation. The diluted earnings per share consists of the dilution effect arising from the issue of a convertible bond (see Note 23). When calculating the diluted earnings per share, it is assumed in the financial year 2015 that the outstanding conversion rights had already been exercised at the beginning of the year. When calculating the value for the previous year, it is assumed that the convertible bonds had already been converted into shares at the time of issue. The net profit attributable to the shareholders is adjusted according to the corresponding interest expense for the convertible bond after accounting for tax.

Undiluted earnings per share

2014 2015 Net profit attributable to BKW shareholders, in CHF millions 288.2 276.7 Number of shares issued (weighted average) 52,800,000 52,800,000 Less treasury shares (weighted average) – 4,463,973 – 4,359,680 Number of shares in circulation (weighted average) 48,336,027 48,440,320 Undiluted earnings per share in CHF 5.96 5.71

Diluted earnings per share

2014 2015 Net profit attributable to BKW shareholders, in CHF millions 288.2 276.7 Tax-adjusted interest expense on convertible bonds 0.4 1.7 BKW shareholders’ portion of net profit, adjusted for dilution effect 288.6 278.4 Number of shares in circulation (weighted average) 48,336,027 48,440,320 Adjustment for theoretical conversion of convertible bonds 969,222 4,199,964 Number of shares in circulation, adjusted for dilution effect 49,305,249 52,640,284 Diluted earnings per share in CHF 5.85 5.29

Dividend per share The dividend of CHF 1.60 per share for the financial year 2015 corresponds to the proposal by the Board of Directors to the General Meeting and must be approved by shareholders at this meeting. Based on the shares in circulation on the balance sheet date, the proposed dividend amounts to CHF 77.6 million. ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 47

15 Trade accounts receivable and other receivables

CHF millions 31.12.2014 31.12.2015 Trade accounts receivable 589.6 498.7 Other financial receivables 33.3 36.1 Other receivables 98.3 85.0 Prepayments 2.6 16.8 Work in progress 33.9 40.7 Total 757.7 677.3

Work in progress on the balance sheet date includes advance payments of CHF 83.1 million (2014: CHF 45.8 million) as well as pro rata profits of CHF 2.5 million (2014: CHF 2.1 million).

The following table shows the age of trade accounts receivable which are overdue but not impaired:

CHF millions 31.12.2014 31.12.2015 Trade accounts receivable 589.6 498.7 of which: ––not past due 544.2 466.7 ––1 – 30 days past due 38.5 12.8 ––31 – 90 days past due 2.0 6.9 ––91 – 180 days past due 0.7 4.5 ––181 – 360 days past due 0.0 1.1 ––Over 360 days past due 4.2 6.7

There were no indications as on the balance sheet date that trade accounts receivable and other financial assets included items that are neither overdue nor impaired and are owed by parties that are unable to meet their payment obligations.

The value adjustments for trade accounts receivable and other financial receivables are as follows:

Other Trade financial CHF millions receivables receivables Loans Provisions for impairment at 31.12.2013 5.0 1.9 7.1 Net formation/reversal 4.0 0.5 3.4 Derecognition of uncollectable receivables – 0.8 Provisions for impairment at 31.12.2014 8.2 2.4 10.5 Net formation/reversal 1.7 – 0.4 0.8 Derecognition of uncollectable receivables – 3.7 0.0 Provisions for impairment at 31.12.2015 6.2 2.0 11.3

There are no material value adjustments for other financial assets. The other balance sheet items contain no material overdue but unimpaired financial assets. 48 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

16 Inventories

CHF millions 31.12.2014 31.12.2015 Goods and materials 11.2 16.1 Valuation adjustment on goods and materials – 1.1 – 0.5 Certificates (proprietary trading) 70.9 45.9 Certificates (own use) 43.7 25.2 Valuation adjustment on certificates (own use) – 1.7 0.0 Total 123.0 86.7

17 Accrued/deferred income and prepaid/accrued expenses

CHF millions 31.12.2014 31.12.2015 Financial accruals 80.2 55.4 Other prepaid expenses and accrued income 35.7 30.7 Total prepaid expenses and accrued income 115.9 86.1 Financial accruals 143.7 168.5 Other deferred income and accrued expenses 47.7 45.2 Total deferred income and accrued expenses 191.4 213.7 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 49

18 Financial assets

CHF millions Available-for-sale financial assets S ecurities held trading for Loans deposits Term from Receivables funds state Total At 31.12.2013 200.4 130.5 161.8 177.8 783.0 1,453.5 Additions 0.3 22.5 6.0 610.1 30.4 669.3 Disposals – 41.1 – 16.7 – 6.6 – 210.0 – 274.4 Currency translations – 0.3 – 0.7 – 1.0 Value adjustment in the income statement 5.3 91.6 96.9 Value adjustment in other comprehensive income 0.9 0.9 Impairment – 3.4 – 3.4 At 31.12.2014 160.2 141.6 157.1 577.9 905.0 1,941.8 Changes in the scope of consolidation 0.1 2.2 2.3 Additions 3.0 37.2 14.8 315.0 30.3 400.3 Disposals – 35.9 – 3.0 – 490.1 – 529.0 Currency translations – 1.6 – 3.4 – 5.0 Value adjustment in the income statement 0.1 – 4.6 – 4.5 Value adjustment in other comprehensive income – 0.3 – 0.3 Impairment – 1.9 – 0.8 – 2.7 At 31.12.2015 159.5 143.0 166.9 402.8 930.7 1,802.9 of which: ––Current financial assets 143.0 22.2 395.0 560.2 ––Non-current financial assets 159.5 144.7 7.8 930.7 1,242.7 of which: ––Financial assets according to IAS 32/39 159.5 143.0 166.9 402.8 872.2 ––Other assets 930.7 930.7

Financial assets available-for-sale, securities held for trading, and receivables from state funds are recorded at fair value. Since the state funds are managed by the federal government, BKW has no access to the managed assets. 50 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

19 investments in associates

CHF millions Total At 31.12.2013 1,187.3 Additions 33.9 Disposals – 2.7 Dividends – 50.1 Pro rata income 36.8 Impairment – 0.6 Currency translations – 12.8 Actuarial gains/losses – 18.3 At 31.12.2014 1,173.5 Additions 9.7 Changes in the consolidation method 1.6 Disposals – 7.0 Dividends – 14.4 Pro rata income 68.0 Impairment – 2.5 Currency translations – 63.2 Actuarial gains/losses – 9.2 At 31.12.2015 1,156.5

Investments in associates include in particular capital investments in the 33 % stake in GDF SUEZ Kraftwerk Wilhelmshaven GmbH & Co. KG, Germany, to finance the power plant which began operations in the reporting year.

Disposals of CHF 0.7 million did not affect cash (2014: non-cash disposals of CHF 0.3 million). ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 51

Pro rata key figures for associates at 31.12.2015 The table below gives the pro rata key figures for associates by segment. In addition, the Energy segment is broken down by type of power plant.

BKW share

CHF millions Hydro Nuclear Fossil-fuel renewable New energy Other Energy Total Networks S ervices Total Current assets 62.0 65.8 54.9 12.1 8.2 203.0 101.8 0.9 305.7 Non-current assets 1,112.9 508.9 617.4 56.7 6.8 2,302.7 371.0 0.3 2,674.0 Current liabilities – 90.1 – 82.2 – 41.8 – 8.2 – 3.0 – 225.3 – 78.6 – 0.4 – 304.3 Non-current liabilities – 824.9 – 399.6 – 12.2 – 49.5 – 3.6 – 1,289.8 – 229.1 0.0 – 1,518.9 Shareholders’ equity 259.9 92.9 618.3 11.1 8.4 990.6 165.1 0.8 1,156.5 Income 175.4 144.5 98.9 17.1 5.4 441.3 158.2 2.4 601.9 Expenses – 169.3 – 131.6 – 69.7 – 16.0 – 5.3 – 391.9 – 142.2 – 2.3 – 536.4 Net profit/loss 6.1 12.9 29.2 1.1 0.1 49.4 16.0 0.1 65.5 Other comprehensive income – 3.9 – 4.2 0.0 0.0 0.0 – 8.1 – 1.1 0.0 – 9.2 Comprehensive income 2.2 8.7 29.2 1.1 0.1 41.3 14.9 0.1 56.3

All associates are valued using the equity method.

CHF 1,007.2 million (2014: CHF 1,070.4 million) of the total pro rata assets and liabilities of partner plants relate to net financial debt (financial liabilities less cash and cash equivalents and current financial assets).

Associates in the Energy segment are, in particular, partner plants. For these, BKW is obliged to pay the annual costs due on its share (including interest and repayment of borrowed funds). The pro rata annual costs for BKW for the purchase of energy in 2015 amounted to CHF 331.1 million (2014: CHF 337.2 million). These are included in the energy procurement expense. CHF 827.3 million (2014: CHF 827.7 million) of the total pro rata assets and liabilities of partner plants relate to net financial debt. 52 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

Pro rata key figures for associates at 31.12.2014 The table below gives the pro rata key figures for associates by segment. In addition, the Energy segment is broken down by type of power plant. The previous year’s figures have been adjusted accordingly in line with the new segment structure. In addition, the Energy segment is broken down by type of power plant.

BKW share

CHF millions Hydro Nuclear Fossil-fuel renewable New energy Other Energy Total Networks S ervices Total Current assets 82.7 56.0 35.6 12.6 12.7 199.6 63.1 1.3 264.0 Non-current assets 1,101.6 516.2 653.3 71.1 4.2 2,346.4 378.7 0.3 2,725.4 Current liabilities – 100.2 – 45.3 – 41.5 – 16.3 – 3.1 – 206.4 – 74.9 – 0.8 – 282.1 Non-current liabilities – 821.4 – 438.3 – 2.8 – 56.2 – 1.9 – 1,320.6 – 213.2 0.0 – 1,533.8 Shareholders’ equity 262.7 88.6 644.6 11.2 11.9 1,019.0 153.7 0.8 1,173.5 Income 183.5 156.7 45.3 15.1 9.7 410.3 179.2 2.7 592.2 Expenses – 173.5 – 143.9 – 48.7 – 17.4 – 9.7 – 393.2 – 160.3 – 2.5 – 556.0 Net profit/loss 10.0 12.8 – 3.4 – 2.3 0.0 17.1 18.9 0.2 36.2 Other comprehensive income – 7.6 – 5.3 0.0 0.0 0.0 – 12.9 – 5.4 0.0 – 18.3 Comprehensive income 2.4 7.5 – 3.4 – 2.3 0.0 4.2 13.5 0.2 17.9 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 53

Key figures for major associates The table below gives the key figures for the major associates. The three holdings listed are all part of the Energy segment.

GDF Suez Kraftwerk Wilhelms- E.ON Produzione Centrale 100 % key figures haven GmbH & Co. KG Livorno Ferraris S.p.A. Kraftwerke Oberhasli AG CHF millions 31.12.2014 31.12.2015 31.12.2014 31.12.2015 31.12.2014 31.12.2015 Non-current assets 1,716.2 1,646.0 338.4 296.8 805.6 863.8 Current assets 27.2 86.0 106.4 106.1 105.0 53.4 Non-current liabilities – 2.0 – 29.1 – 8.4 – 10.6 – 732.5 – 734.4 Current liabilities – 80.0 – 89.5 – 60.5 – 49.1 – 24.9 – 24.6 Shareholders’ equity 1,661.4 1,613.4 375.9 343.2 153.2 158.2 % Holding 33.0 % 33.0 % 25.0 % 25.0 % 50.0 % 50.0 % Goodwill 0.0 0.0 0.0 0.0 0.0 0.0 Reported carrying amount of the investment 550.6 532.4 94.0 85.8 76.6 79.1 Dividend received 0.0 0.0 9.5 1.3 0.0 0.0

Income 0.5 154.2 180.6 191.9 177.0 158.8 Expenses – 22.0 – 65.6 – 165.6 – 182.1 – 170.7 – 153.3 Net profit/loss – 21.5 88.6 15.0 9.8 6.3 5.5 Other comprehensive income 0.0 0.0 0.0 0.0 – 9.0 – 0.4 Comprehensive income – 21.5 81.0 15.0 9.8 – 2.7 5.1 % Holding 33.0 % 33.0 % 25.0 % 25.0 % 50.0 % 50.0 % Goodwill impairment 0.0 – 2.5 0.0 0.0 0.0 0.0 Recognised proportionate result from associates – 7.2 26.7 3.8 2.5 3.2 2.8

The company GDF SUEZ Kraftwerk Wilhelmshaven GmbH & Co. KG is a limited partnership under German law. In companies with this legal form, the effective share of profit and capital of the partners may differ from their share of investment. The coal-fired power plant in Wilhelmshaven began operations in the reporting year. 54 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

20 Property, plant and equipment

CHF millions plants Power and Transmission distribution grid Buildings and land fuel Nuclear plant Other property, and equipment Construction in progress Total Gross values at 31.12.2014 2,683.7 2,491.7 282.9 752.5 361.4 247.9 6,820.1 Changes in the scope of consolidation 31.8 – 18.6 0.1 1.8 15.1 Additions 4.5 0.6 0.1 9.7 4.6 210.1 229.6 Disposals – 18.1 – 12.8 – 10.9 – 25.3 – 0.3 – 67.4 Reclassifications 91.3 77.4 1.7 23.0 – 193.4 0.0 Currency translations – 98.0 – 0.3 – 0.4 – 98.7 Gross values at 31.12.2015 2,695.2 2,538.0 273.9 762.2 365.1 264.3 6,898.7

Accumulated depreciation and impairments at 31.12.2014 1,561.1 1,325.3 130.7 627.4 238.3 54.5 3,937.3 Changes in the scope of consolidation – 9.1 – 9.1 Depreciation 70.7 53.7 6.9 25.8 25.9 0.4 183.4 Impairment 18.1 18.1 Disposals – 13.6 – 11.1 – 6.0 – 25.1 – 0.3 – 56.1 Reversal of impairment – 0.9 – 0.9 Reclassifications 54.1 – 54.1 0.0 Currency translations – 19.9 – 0.1 – 0.3 – 20.3 Accumulated depreciation and impairments at 31.12.2015 1,670.5 1,357.8 131.6 653.2 238.8 0.5 4,052.4

Net values at 31.12.2015 1,024.7 1,180.2 142.3 109.0 126.3 263.8 2,846.3 ––thereof in financial leasing 151.9 151.9 ––thereof pledged for liabilities 69.6 69.6

In the reporting year, there were no non-cash additions or disposals for the power plants (2014: non-cash disposals of CHF 47.6 million) and nuclear fuels (2014: non-cash disposals of CHF 48.6 million). Similarly, there was no non-cash increase in provisions for dismantling at power plants (2014: CHF 4.0 million). The additions to nuclear fuels also include a non-cash increase in provisions of CHF 6.0 million owing to the annual additional disposal costs of operating the power plant (2014: CHF 5.0 million).

Borrowing costs amounting to CHF 2.3 million were capitalised in the reporting year (2014: CHF 1.6 million). In the year under review, compensation of CHF 1.2 million for property, plant and equipment which was impaired, lost or decommissioned was charged to the income statement (2014: CHF 1.4 million).

Changes in the scope of consolidation relate to mergers to the amount of CHF 34.2 million (2014: CHF 3.4 million) and deconsolidation of companies to the amount of CHF – 10.0 million (2014: CHF – 3.1 million). ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 55

CHF millions plants Power and Transmission distribution grid Buildings and land fuel Nuclear plant Other property, and equipment Construction in progress Total Gross values at 31.12.2013 2,716.2 2,428.1 283.2 791.8 340.8 190.7 6,750.8 Changes in the scope of consolidation – 3.6 3.0 – 0.9 – 1.5 Additions 10.5 1.9 0.2 9.3 3.2 206.5 231.6 Disposals – 57.2 – 20.8 – 3.7 – 48.6 – 9.4 – 1.2 – 140.9 Reclassifications 37.4 82.6 3.3 23.9 – 147.2 0.0 Currency translations – 19.6 – 0.1 – 0.1 – 0.1 – 19.9 Gross values at 31.12.2014 2,683.7 2,491.7 282.9 752.5 361.4 247.9 6,820.1

Accumulated depreciation and impairments at 31.12.2013 1,488.3 1,292.6 124.5 592.1 223.5 44.6 3,765.6 Changes in the scope of consolidation – 0.7 – 1.1 – 1.8 Depreciation 81.8 55.1 6.0 35.3 24.3 202.5 Impairment 14.0 0.5 11.7 26.2 Disposals – 2.2 – 18.6 – 0.3 – 9.4 – 0.7 – 31.2 Reversal of impairment – 16.4 – 3.7 – 20.1 Reclassifications 0.1 – 0.1 0.0 Currency translations – 3.8 – 0.1 – 3.9 Accumulated depreciation and impairments at 31.12.2014 1,561.1 1,325.3 130.7 627.4 238.3 54.5 3,937.3

Net values at 31.12.2014 1,122.6 1,166.4 152.2 125.1 123.1 193.4 2,882.8 ––thereof in financial leasing 195.3 195.3 ––thereof pledged for liabilities 84.7 84.7 56 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

21 intangible assets

CHF millions Rights of use Goodwill Other Total Gross values at 31.12.2014 180.4 197.1 65.7 443.2 Changes in the scope of consolidation 2.0 98.7 29.9 130.6 Additions from acquisitions 0.7 18.9 19.6 Additions from internally generated intangible assets 4.1 4.1 Disposals – 0.5 – 4.1 – 4.6 Currency translations – 10.5 – 0.7 – 0.1 – 11.3 Gross values at 31.12.2015 172.1 295.1 114.4 581.6

Accumulated depreciation and impairments at 31.12.2014 145.3 92.4 26.1 263.8 Changes in the scope of consolidation 0.2 0.2 Depreciation 2.1 0.8 10.2 13.1 Disposals – 0.4 – 4.0 – 4.4 Currency translations – 10.6 – 0.1 – 10.7 Accumulated depreciation and impairments at 31.12.2015 136.6 93.2 32.2 262.0

Net values at 31.12.2015 35.5 201.9 82.2 319.6 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 57

CHF millions Rights of use Goodwill Other Total Gross values at 31.12.2013 183.0 185.2 55.8 424.0 Changes in the scope of consolidation 12.0 0.2 12.2 Additions from acquisitions 0.2 10.2 10.4 Additions from internally generated intangible assets 2.4 2.4 Disposals – 0.6 – 2.9 – 3.5 Currency translations – 2.2 – 0.1 – 2.3 Gross values at 31.12.2014 180.4 197.1 65.7 443.2

Accumulated depreciation and impairments at 31.12.2013 145.6 92.4 21.3 259.3 Depreciation 1.9 7.1 9.0 Impairment 0.1 0.1 Disposals – 0.2 – 2.3 – 2.5 Currency translations – 2.1 – 2.1 Accumulated depreciation and impairments at 31.12.2014 145.3 92.4 26.1 263.8

Net values at 31.12.2014 35.1 104.7 39.6 179.4 58 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

On the balance sheet date, goodwill was distributed among the following cash-generating units:

CHF millions 31.12.2015 Energy 84.4 Services 117.5 Total 201.9

Owing to the change in reporting segments, the relevant cash-generating units for the goodwill impairment test have also changed. The goodwill carried in the balance sheet has been tested at the level of the reporting segments, which are now Energy, Networks and Services. The increase in the goodwill of the cash-generating unit Services is attributable to the goodwill arising from business combinations (see Note 6). The slight decrease in the goodwill of the cash-generating unit Energy is attributable to fluctuations in the exchange rate for the euro. In the previous year, goodwill amounted to CHF 84.7 million for the cash-generating unit Production (now included in Energy), CHF 12.0 million for Renewables & Efficiency and CHF 8.0 million for Networks (now included in Services).

The goodwill carried in the balance sheet was tested for impairment by comparing the carrying value with the realisable value of the cash-generating units. The realisable value corresponds to the value in use. The calculations were made on the basis of estimated cash flows from business projections approved by management over a period of four years. Cash flows beyond this period were extrapolated using an estimated growth rate. The impairment test on goodwill disclosed in the balance sheet did not identify any need for impairment.

The value in use is measured on the basis of the following material assumptions:

WACC WACC Long-term (before tax) (after tax) growth rate % 31.12.2015 31.12.2015 31.12.2015 Energy 7.4 6.0 1.0 Services 8.1 6.6 1.0

WACC WACC Long-term (before tax) (after tax) growth rate % 31.12.2014 31.12.2014 31.12.2014 Production 7.1 5.8 1.0 Renewables & Efficiency 7.9 5.5 1.0 Networks 5.8 4.7 1.0

Based on the findings of a sensitivity analysis, realistic changes in the material assumptions do not suggest that the recoverable amount could fall below the carrying amount. ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 59

22 Trade accounts payable and other liabilities

CHF millions 31.12.2014 31.12.2015 Trade accounts payable 308.8 249.9 Other financial liabilities 54.4 120.8 Other liabilities 54.7 69.4 Pension plans 3.1 9.7 Customer prepayments 18.1 18.6 Total 439.1 468.4

Customer prepayments relate to work in progress and comprise order costs of CHF 58.9 million as at the balance sheet date (2014: CHF 52.8 million). This includes pro rata profits of CHF 2.6 million (2014: CHF 1.4 million).

23 Financial liabilities

CHF millions 31.12.2014 31.12.2015 Bonds 996.4 997.3 Convertible bond 154.5 156.0 Registered bonds 311.0 277.0 Finance leasing liabilities 83.3 63.7 Bank liabilities 139.2 125.5 Other financial liabilities 49.8 66.6 Total 1,734.2 1,686.1 of which: ––Current financial liabilities 65.9 53.9 ––Non-current financial liabilities 1,668.3 1,632.2

In the previous year, BKW issued a convertible bond in the amount of CHF 163.4 million to run from 30 September 2014 to 30 September 2020 with an interest rate of 0.125 %. At the balance sheet date the conversion price was CHF 38.47. So far no conversion rights have been exercised.

On the balance sheet date the weighted average interest rate for financial liabilities, based on the nominal value, amounted to 2.8 % (2014: 2.8 %).

The effective interest rate on bonds and registered bonds of 3.2 % (2014: 3.2 %) led to interest expenses of CHF 41.4 million in the year under review (2014: CHF 41.9 million). 60 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

24 Provisions

CHF millions disposal waste Nuclear contracts, Onerous procurement energy Other provisions Total At 31.12.2013 1,587.1 474.4 46.7 2,108.2 Changes in the scope of consolidation 0.3 0.3 Provisions added 5.0 9.2 11.0 25.2 Interest 78.1 15.9 0.6 94.6 Provisions used – 13.8 – 6.6 – 3.1 – 23.5 Provisions released – 10.7 – 7.4 – 18.1 Change in estimate for nuclear disposal – 97.5 – 97.5 Currency translations – 0.6 – 0.6 At 31.12.2014 1,558.9 482.2 47.5 2,088.6 Changes in the scope of consolidation 2.1 2.1 Provisions added 6.0 2.8 2.7 11.5 Interest 53.3 13.6 0.6 67.5 Provisions used – 32.2 – 14.0 – 4.4 – 50.6 Provisions released – 74.3 – 2.4 – 76.7 Currency translations – 2.7 – 2.7 At 31.12.2015 1,586.0 410.3 43.4 2,039.7 of which: ––Current provisions 18.2 42.6 8.2 69.0 ––Non-current provisions 1,567.8 367.7 35.2 1,970.7

Nuclear waste disposal At 31 December 2015 the provision of CHF 1,586.0 million for nuclear waste disposal comprised the following:

–– CHF 771.7 million is set aside for decommissioning of the nuclear power plant. This covers the costs of the post-operational phase after shutdown, as well as the costs of dismantling and disposing of the plant and rehabilitation of the surrounding area. Payments are anticipated from the end of commercial operation in 2019 until completion of the decommissioning work after approximately 15 years. The costs for disposal of decommissioning waste will fall due on an ongoing basis until the waste is put into the final storage depot for weak to medium-active nuclear waste (scheduled for 2061). –– An additional CHF 725.5 million is set aside for disposal, outside the plant compound, of spent fuel elements and radioactive waste. These payments will fall due on an ongoing basis until the final storage depot for highly active nuclear waste is sealed off. This is currently scheduled for the year 2116. –– CHF 88.8 million is set aside for plant-specific costs. These cover the costs within the power plant and will be payable on an ongoing basis until a few years after commercial operations cease. ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 61

The adjustment in estimates for nuclear disposal in the previous year is attributable to the application of new parameters in the calculation of provisions. In the revised Decommissioning and Dis- posal Funds Ordinance (SEFV), which came into force on 1 January 2015, the Federal Council has made adjustments including alterations to the parameters used to calculate contributions for the Decommissioning and Disposal Funds. Specifically, a general inflation rate of 1.5 % (previously 3.0 %) is to be applied along with a new return on investment of 3.5 % (previously 5.0 %). These adjusted parameters in the SEFV have been applied in calculating the provisions for nuclear disposal from 2014 on. As a result of this adjustment in the previous year, provisions have been reduced by CHF 97.5 million. Owing to the associated present-value adjustment of the acquisition costs of the Mühleberg nuclear power plant (power plant and fuel rods) of CHF 96.2 million, the reversal of this provision had largely no effect on income. Moreover, during the reporting year an allocation of CHF 6.0 million (2014: CHF 5.0 million) was made as a result of the annual additional disposal costs associated with the operation of the nuclear power plant. This also resulted in an increase in the acquisition cost for nuclear fuels without affecting income. BKW is required to make regular payments to the state funds for decommissioning and nuclear waste disposal. These funds pay the costs of decommissioning and disposal on behalf of operators following shutdown of the plants. The state fund receivables are disclosed under non-current financial assets (see Note 18).

Onerous contracts, energy procurement The provisions for onerous energy procurement contracts cover the future purchase of energy from partner plants at production costs which exceed the expected realisable selling prices. These provisions are primarily associated with the energy procurement contracts agreed with the fossil-fuel power stations at Livorno-Ferraris in Italy and Wilhelmshaven in Germany.

The cash outflow from provisions results from BKW being obliged to take the electricity produced at production cost and extends over a period of around 12 years.

Restructuring and other provisions The provision for restructuring, which covers future expenses for defined restructuring measures, stands at 31 December 2015 at CHF 1.1 million (2014: CHF 1.6 million).

Other provisions include obligations related to personnel as well as estimations of probable payments in respect of legal disputes and various minor operating obligations. Cash outflows in respect of these provisions are largely anticipated over the next three years. There are also provisions for the dismantling and break-up of power plants and for rehabilitation of the environment. These costs will be incurred at the end of the useful life of the installation of the respective power plants; the cash outflow is anticipated within the next 25 years. Interest on provisions calculated at present value is charged through financial expenses. 62 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

25 Pension plans

The majority of employees are covered by the Pensionskasse der Bernischen Kraftwerke (Pension- skasse BKW) pension fund. Pensionskasse BKW manages a defined benefit pension plan that meets the criteria of a defined benefit plan under IAS 19.

Pensionskasse BKW takes the form of a pension fund organised as a foundation established under private law. It operates the mandatory and supplementary occupational pension provision in accordance with the Federal Law on Occupational Retirement, Survivors’ and Invalidity Pension (BVG). The supreme governing body of the Pensionskasse BKW foundation is the Board, which is composed of an equal number of representatives of the employer and the employees. The benefits and financing of Pensionskasse BKW, as well as its organisation and administration, relationship with member companies and actively insured persons and beneficiaries are governed by the Pen- sion and Organisational Regulations, which are issued by the Board. The Board delegates the management of the business to the executive management. The foundation is subject to supervision by the relevant authority of the Canton of Bern.

Employees and their survivors are insured through the pension plan against the economic consequences of old age, invalidity and death. The insured benefits are supplementary to the statutory requirements and are fundamentally paid out in the form of a pension. All actuarial risks are borne by Pensionskasse BKW. The pension plan is financed through contributions and revenue from the assets. Contributions are collected through the group mechanism. The member companies and insured persons pay the premium contributions to the pension scheme, as a percentage of the insured salary of the insured person. Contributions are set at a level that ensures that they and the expected returns from investment of the assets together guarantee the obligations (benefits). Additional payments are required in the event of an increase in the insured salaries.

Responsibility for investing the pension assets is held by the Board of the foundation. The investment activities and the associated competencies are organised according to the instructions of the Pensionskasse BKW Investment Regulations issued by the Board. The Investment Regulations are supplemental to the applicable statutory framework. They define the asset structure and contain qualitative and quantitative requirements for the individual investment categories. Assets are invested to guarantee security and an appropriate return on the investment, with a balanced distribution of risks and coverage of the forecast requirement of cash and cash equivalents. The Board of the foundation has delegated responsibility for carrying out the investment activity to an Investment Committee. The investment activity of Pensionskasse BKW is primarily exercised by external providers (investment foundations, asset managers, funds) with oversight by the Invest- ment Committee and the executive management. The pension plan assets are invested in a widely diversified portfolio in Switzerland and abroad in line with the statutory requirements and the guidelines issued by the Board. Recognised Swiss banking institutions take the role of custodian.

The occupational pensions expert prepares the annual actuarial valuation and verifies the financial and actuarial situation of Pensionskasse BKW. The unaudited actuarial coverage rate of Pension- skasse BKW in accordance with BVG at 31 December 2015 with an actuarial interest rate of 2.5 % (2014: 3 %) at 109.7 % (2014: 116.2 %). In the event of a coverage shortfall according to BVG, the Board must, in agreement with the occupational pensions expert, agree suitable recovery measures (such as increasing the ordinary contributions or collecting recovery contributions). The contribution made by the employer must be at least equivalent to the total contributions paid by the employee. ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 63

The annual assessment prepared for Pensionskasse BKW by the occupational pensions expert is not based on the projected-unit-credit method as required by IFRS. Therefore, BKW obtains an additional assessment according to the requirements of IFRS from an independent pensions expert each year.

25.1 Pension liability in the balance sheet

CHF millions 31.12.2014 31.12.2015 Present value of defined benefit obligations at 31.12. – 1,755.3 – 1,821.7 Fair value of plan assets at 31.12. 1,557.8 1,563.9 Pension liability recorded in the balance sheet at 31.12. – 197.5 – 257.8

25.2 Pension expense according to IAS 19

CHF millions 2014 2015 Current service cost (employer) 30.0 39.6 Interest expenses on defined benefit obligation 32.6 19.2 Interest income from plan assets – 31.5 – 17.0 Administration costs excluding costs for management of plan assets 0.7 1.0 Pension plan expenses 31.8 42.8

25.3 Remeasurement of pension plans

CHF millions 2014 2015 Actuarial gains/losses ––Change in financial assumptions 252.1 36.9 ––Change in demographic assumptions – 30.3 – 12.9 ––Adjustments based on experience 7.1 17.1 Return on plan assets (excluding interest based on discount rate) – 93.1 7.9 Total revaluation reported in other comprehensive income 135.8 49.0

25.4 Change in present value of defined benefit obligation

CHF millions 2014 2015 Present value of defined benefit obligation at 01.01. 1,490.5 1,755.3 Interest expenses on defined benefit obligation 32.6 19.2 Current service cost (employer) 30.0 39.6 Contributions paid/benefits paid out – 60.1 – 53.9 Employee contributions 17.0 19.5 Business combination 15.7 – 0.1 Administration costs (excluding asset management costs) 0.7 1.0 Actuarial gains/losses 228.9 41.1 Present value of defined benefit obligations at 31.12. 1,755.3 1,821.7

At the balance sheet date, the active members’ share of the defined benefit obligation was CHF 941.8 million (2014: CHF 885.1 million). The share of those drawing a pension in the defined benefit obligation was CHF 879.9 million (2014: CHF 870.2 million). 64 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

25.5 Change in fair value of plan assets

CHF millions 2014 2015 Fair value of plan assets at 01.01. 1,437.6 1,557.8 Interest income from plan assets 31.5 17.0 Employer contributions 27.4 31.4 Employee contributions 17.0 19.5 Contributions paid/benefits paid out – 60.1 – 53.9 Business combination 11.3 0.0 Return on plan assets (excluding interest based on discount rate) 93.1 – 7.9 Fair value of plan assets at 31.12. 1,557.8 1,563.9

25.6 Asset structure of plan assets

CHF millions 31.12.2014 % 31.12.2015 % Cash and cash equivalents 51.5 3.3 41.7 2.7 Equity instruments 562.5 36.1 557.8 35.7 Debt instruments 576.7 37.0 585.9 37.4 Other instruments 76.4 4.9 81.4 5.2 Properties 290.7 18.7 297.1 19.0 Total plan assets 1,557.8 100.0 1,563.9 100.0 ––thereof own transferrable financial instruments 1.3 1.7 ––thereof properties used by BKW 9.4 15.7

Equity capital instruments include investments in shares and are generally listed at their market price in an active market. The proportion of Swiss shares as a percentage of the total assets at the end of the reporting period was 15.0 % (2014: 13.1 %), with foreign shares taking 20.7 % (2014: 23.0 %). Investments in Swiss and foreign shares are made directly (through external asset managers) and through investment foundations and funds.

The composition of debt instruments as a percentage of total assets on 31 December 2015, was 16.6 % (2014: 16.6 %) for Swiss bonds, 10.0 % (2014: 9.8 %) for foreign bonds with currency hedging and 10.8 % (2014: 10.6 %) for mortgage loans and mortgage bonds. The bonds and mortgage bonds are listed in an active market at their market price, whereas there is no market price listing in an active market for the mortgage loans.

Most of the other instruments are listed in an active market at their market price.

On 31 December 2015, the proportion of property as a percentage of the total assets was split between 12.5 % (2014: 12.3 %) for properties (direct investments in Switzerland) and 6.5 % (2014: 6.4 %) for property funds listed in an active market (of which almost half involved foreign properties).

The effective return from the plan assets was 0.6 % in the reporting year (2014: 8.5 %). ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 65

25.7 Actuarial assumptions

2014 2015 Discount rate 1.10 % 0.80 % Expected rate of future salary increases 1.25 % 0.50 % Expected rate of future pension increases 0.20 % 0.10 % Mortality table BVG 2010 GT BVG 2010 GT

The weighted average term of the employee pension plan obligation amounted to 14.2 years (2014: 14.3 years).

Sensitivities of the major actuarial assumptions The discount rate, changes in salaries and pensions, and life expectancy constitute significant actuarial assumptions and were therefore subjected to a sensitivity analysis. In the event of an increase/decrease in the assumptions shown below, the employee pension plan obligation will vary as follows:

31.12.2015 Defined benefit obligation CHF millions Increase Decrease Discount rate (0.25 % change) – 62.3 66.6 Salary increase (0.25 % change) 10.6 – 10.3 Changes in pensions (+ 0.20 %/– 0.10 % change) 43.6 – 15.5 Life expectancy (1 year change) 62.8 – 64.1

31.12.2014 Defined benefit obligation CHF millions Increase Decrease Discount rate (0.25 % change) – 61.1 65.4 Salary increase (0.25 % change) 10.6 – 10.2 Changes in pensions (0.20 % change) 42.5 – 40.7 Life expectancy (1 year change) 60.1 – 61.4

The sensitivity analysis was conducted on the basis of a method that extrapolates the impact on the employee pension plan obligation through changes in the above assumptions at the end of the reporting period.

25.8 Estimated contributions for the next period

CHF millions 2014 2015 Expected employer contributions 28.9 31.1 Expected employee contributions 18.5 20.1 66 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

26 Other non-current liabilities

CHF millions 31.12.2014 31.12.2015 Assigned rights of use 220.6 229.3 Other non-current financial liabilities 7.0 40.6 Other non-current liabilities 0.6 6.3 Total 228.2 276.2

27 share capital and reserves

27.1 Share capital

The issued and fully paid-in share capital of BKW AG amounting to CHF 132.0 million consists of 52,800,000 registered shares at a par value of CHF 2.50 each.

Major shareholders and their direct ownership

31.12.2014 31.12.2015 Canton of Bern 52.54 % 52.54 % Groupe E Ltd. 10.00 % 10.00 % E.ON SE 6.65 % 6.65 % Treasury shares 8.35 % 8.13 %

Transactions in treasury shares Carrying Cash-relevant amount proportion Number CHF millions CHF millions 31.12.2013 4,518,050 319.2 Purchases 170 0.0 0.0 Sales – 109,123 – 8.1 – 1.6 31.12.2014 4,409,097 311.1 Purchases 10,000 0.3 0.3 Sales – 128,146 – 8.5 – 1.7 31.12.2015 4,290,951 302.9

27.2 Reserves

Capital reserves Capital reserves include reserves paid in by shareholders.

Retained earnings Retained earnings consist of legal and statutory reserves (excluding capital reserves), retained earnings from previous years, and gains/losses on the sale of treasury shares.

Treasury shares BKW shares held by BKW or its Group companies are deducted from equity at acquisition cost. At 31 December 2015, 4,290,951 BKW shares (2014: 4,409,097) were held by BKW AG and its group companies and 3,000 shares (2014: 3,000) were held by associates. ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 67

Other reserves

CHF millions Currency translations reserve Revaluation available-for-sale financial assets Hedging gains/losses Actuarial Total At 31.12.2013 – 205.1 54.8 0.2 158.3 8.2 Currency translations ––Currency translations – 22.8 – 22.8 ––Reclassification to the income statement – 0.3 – 0.3 Available-for-sale financial assets ––Value adjustments 0.9 0.9 ––Reclassification to the income statement – 25.0 – 25.0 Hedging transactions ––Value adjustments – 0.1 – 0.1 ––Reclassification to the income statement – 0.1 – 0.1 Actuarial gains/losses ––of Group companies – 135.8 – 135.8 ––of associates – 19.4 – 19.4 Income taxes 5.3 0.3 31.4 37.0 At 31.12.2014 – 228.2 36.0 0.3 34.5 – 157.4 Currency translations ––Currency translations – 114.0 – 114.0 Available-for-sale financial assets ––Value adjustments – 0.3 – 0.3 Hedging transactions ––Value adjustments 1.0 1.0 ––Reclassification to the income statement – 0.1 – 0.1 Actuarial gains/losses ––of Group companies – 49.0 – 49.0 ––of associates – 9.1 – 9.1 Income taxes – 0.1 0.1 – 0.3 11.1 10.8 At 31.12.2015 – 342.3 35.8 0.9 – 12.5 – 318.1 68 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

Currency translations Reserves for currency translations contains currency differences arising from the translation of the financial statements drawn up in foreign currencies of foreign Group companies and associates.

Revaluation reserve available-for-sale financial assets The revaluation reserve includes fair value adjustments for available-for-sale assets until their realisation or their classification as an impairment.

Hedging The hedging reserve comprises unrealised changes in the value of financial instruments as a hedge of payment streams (cash flow hedge) and as a hedge of net investment in a foreign business operation (net investment hedge) in the amount of the effective portion of the hedge, as well as the realised gains and losses from completed hedging transactions which have not yet been recognised in profit or loss since the underlying transaction has not yet been recognised in income.

Actuarial gains/losses The reserve for actuarial gains and losses recognises the effect of periodic actuarial recalculations.

27.3 Capital management

BKW pursues a strategy aimed at the sustainable increase and retention of corporate value. The aim of BKW capital management is to ensure the Group’s long-term capital market standing and financing capability by maintaining a balance sheet structure that is compatible with the defined target rating, and to keep the potential impact of fluctuations in the value of the entire financial and risk portfolio within narrow boundaries. BKW is committed to a consistent dividend payout based on a ratio of 40 to 50 % of adjusted net profit. BKW’s financial resources primarily serve the core business and provide the requisite scope for action in accordance with the requirements of the Group strategy. There were no changes in capital management in 2015. ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 69

28 Derivatives

The following table provides information on replacement values and contract volumes for derivative financial instruments open on the balance sheet date in respect of energy trading, and of interest and exchange rate hedging. Derivatives that qualify as hedging instruments under IAS 39 and are treated according to hedge accounting provisions are disclosed separately.

Derivatives are recorded at fair value in the balance sheet, as positive replacement values (receivables) or negative replacement values (liabilities). Positive replacement values correspond to the costs which BKW would incur to replace all transactions that represent benefits for BKW if all counterparties were simultaneously unable to pay and the transactions could be immediately replaced. Negative replacement values correspond to the costs that counterparties would incur to replace all transactions that represent benefits for them if BKW were no longer able to meet its obligations. The contract volume corresponds to the basic value or contract volume of the underlying derivative financial instrument.

The replacement value for futures is zero, since price fluctuations are offset daily compared with the agreed closing prices. Forward energy trading contracts include forwards with fixed and flexible profiles.

Positive replacement value Negative replacement value Contract volume CHF millions 31.12.2014 31.12.2015 31.12.2014 31.12.2015 31.12.2014 31.12.2015 Futures (energy trading) 0.0 0.0 0.0 0.0 203.1 96.9 Forward contracts (energy trading) 137.4 129.4 82.6 100.9 1,883.7 1,382.6 Swaps 0.0 0.0 3.9 4.6 25.0 25.0 Exchange rate hedging 0.7 0.3 0.9 0.1 10.5 40.9

Hedge accounting ––Swaps 11.4 11.1 1.0 0.2 124.6 114.0 ––Exchange rate hedging 0.0 0.4 0.0 0.0 0.0 72.6 Total 149.5 141.2 88.4 105.8 2,246.9 1,732.0 of which: ––Current derivatives 104.3 82.1 65.2 67.0 ––Non-current derivatives 45.2 59.1 23.2 38.8 70 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

29 Hedge accounting

The following hedging transactions were open on 31 December 2015:

Fair value hedge On the balance sheet date, an interest rate swap existed for the purpose of hedging fluctuations in the fair value of a portion of the bonds issued. This hedging relationship is assessed as highly effective and qualifies as a fair value hedge. The change in the fair value of the underlying portion of the bonds amounted to CHF 0.8 million (2014: CHF 3.0 million). In 2015, there was no ineffective portion of hedging relationships to be reported in the financial result (2014: no ineffective portion).

Cash flow hedge In relation to borrowings for power plants, interest rate swaps existed on the balance sheet date for the next two years, in order to hedge fluctuations in interest payments. The hedging instrument qualifies as a cash flow hedge and is assessed as highly effective. The gain or loss measured for these cash flow hedges is recognised in other comprehensive income (CHF 0.2 million in the reporting year; 2014: CHF 0.1 million). In 2015, there was no ineffective portion of hedging relationships.

Various forward contracts existed on the balance sheet date for the purpose of hedging euro exchange rate fluctuations. These hedging instruments are assessed as highly effective and qualify as cash flow hedges. They comprise hedges of euro-denominated revenue for the following financial year and hedges relating to outstanding investment obligations. The gain or loss measured for these cash flow hedges is recorded in other comprehensive income (CHF 0.8 million in the reporting year; 2014: none). In 2015, there was no ineffective portion of hedging relationships reported in the financial result.

In the reporting year, the hedging of euro exchange rate fluctuations resulted in a loss of CHF 4.1 mil lion (2014: gain of CHF 1.2 million) being reported in net revenue relating to amounts that had been hedged in the reporting year.

Net investment hedge In previous years, BKW placed three registered bonds with nominal amounts of EUR 275.0 million in total. The registered bonds were placed in Germany and allow BKW to obtain an element of matched-currency financing for its investment projects from local investors in that country. The registered bonds have been designated as a net investment hedge. Foreign exchange gains or losses on the registered bonds are recognised in other comprehensive income and correspondingly offset the gains or losses from currency conversion of net investments in a foreign business operation. In the reporting year there was no ineffective portion of hedging relationships reported under financial income. ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 71

30 Related parties

The following financial relationships between BKW and related parties existed in the periods reported. Unless stated otherwise, all transactions were conducted under the same terms and conditions as with independent third parties:

Companies exerting significant influence over the Parent Group Associates Pension funds CHF millions 2014 2015 2014 2015 2014 2015 2014 2015 Income ––Energy sales 4.5 4.0 44.2 35.1 71.0 61.3 ––Other sales and services 7.0 7.0 9.9 9.2 42.4 35.8 1.1 1.1 ––Interest and dividends 2.6 2.3 2.2 2.2 57.3 21.1 Expenses ––Energy purchases 17.7 21.4 33.2 13.0 302.2 284.0 ––Other purchases and services 0.6 0.7 0.1 0.1 104.2 111.0 26.3 30.8 ––Taxes and charges 4.2 2.9 ––Interest and dividends 33.7 44.7 6.3 8.4 ––Income taxes 3.9 14.5 Assets ––Non-current financial assets 5.1 3.1 ––Loans 138.4 133.3 ––Rights of use 12.7 13.4 ––Current financial assets 0.2 15.8 ––Receivables and accruals 4.9 2.0 4.9 4.5 37.8 36.7 ––Cash and cash equivalents 74.8 35.5 Liabilities ––Loans 0.0 1.1 0.1 0.0 ––Rights of use 0.2 0.3 ––Liabilities and accruals 5.3 8.3 0.3 0.2 51.5 62.9 3.8 10.2 72 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

Transactions with the parent

The Canton of Bern is the majority shareholder of BKW. As such, it has a controlling influence on all decisions at the Annual General Meeting, including the election of members of the Board of Direc- tors and the appropriation of retained earnings. The relationship with the Canton of Bern, its authorities, public-law institutions and the private-law companies it controls takes place on many levels: BKW delivers energy and other services, purchases material and services, and pays taxes, water rates and other levies and charges. In addition, financial transactions are conducted with Berner Kantonalbank, in which the Canton of Bern holds a majority interest.

Transactions with companies exerting significant influence over BKW

Groupe E Ltd. is represented on the BKW Board of Directors and is therefore able to influence decisions on BKW’s financial and business policies. BKW supplies and procures energy, procures materials and services, and supplies services. All these transactions are performed under market conditions. In turn, BKW holds a 10.0 % share in Groupe E Ltd.

Transactions with associates

Reported transactions consist of energy deliveries, energy transports, dividends, engineering services (income), operational management and maintenance/servicing (income), energy purchases, material/third-party services and other services (expense). Energy produced by partner plants is billed to shareholders at production cost on the basis of existing agreements. In 2015, associates borrowed CHF 13.2 million in loans from BKW (2014: CHF 3.5 million). Furthermore, loans were increased by CHF 1.0 million in the reporting year owing to changes in the scope of consolidation. Owing to repayments, loans in the reporting year were reduced by CHF 1.5 million (2014: reduction of CHF 0.4 million due to repayments, reduction of CHF 0.1 million and CHF 3.1 million due to changes in the scope of consolidation and value adjustments respectively). In the reporting year, BKW acquired property, plant and equipment from associates at a purchase price of CHF 0.7 million (2014: purchased CHF 0.1 million). ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 73

Transactions with pension funds

Transactions with pension funds are conducted as part of the occupational pension plan and consist of employer contributions, administrative charges (personnel, operational and administrative costs), real estate services (management of properties) and financial transactions (liquidity management including interest).

Transactions with the Board of Directors and Group Executive Board

Remuneration

CHF millions 2014 2015 Short-term benefits 4.7 4.7 Contributions to pension plans 1.0 1.5 Share-based payments 0.5 0.6 Total 6.2 6.8

The performance-related payments contained in short-term benefits reflect the variable profit shares for the corresponding financial year.

Detailed information on the remuneration paid to the Board of Directors and the Group Executive Board can be found in the Remuneration Report, which is published in accordance with the Ordi- nance against Excessive Compensation in Listed Stock Companies. 74 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

31 Leasing

31.1 Operating leases

Future minimum lease payments under non-cancellable operating leases on the balance sheet date:

Lessor Lessor Lessee Lessee CHF millions 31.12.2014 31.12.2015 31.12.2014 31.12.2015 Up to 1 year 8.9 7.9 7.3 7.7 Later than 1 year and not later than 5 years 26.1 16.4 17.6 15.4 More than 5 years 2.5 2.1 48.7 42.8 Total 37.5 26.4 73.6 65.9

The leases relate to rental agreements for operational properties, tenancies and vehicle leasing. The posted leasing expense from operational leasing agreements amounted to CHF 7.3 million in the reporting year (2014: CHF 7.7 million).

31.2 Finance leases

Minimum Minimum lease lease payments payments Present value Present value CHF millions 31.12.2014 31.12.2015 31.12.2014 31.12.2015 Up to 1 year 17.7 11.8 13.0 8.0 Later than 1 year and not later than 5 years 48.5 40.8 34.9 30.0 More than 5 years 40.8 28.8 35.4 25.7 Total 107.0 81.4 83.3 63.7 Financing costs – 23.7 – 17.7 Present value of minimum lease payments 83.3 63.7

Finance leases are related to wind farms which are funded via long-term leasing contracts. Leasing liabilities of CHF 63.7 million (2014: CHF 83.3 million) were accounted for in the balance sheet, of which CHF 8.0 million (2014: CHF 13.0 million) was designated as current liabilities and CHF 55.7 mil lion (2014: CHF 70.3 million) as non-current liabilities. ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 75

32 Additional disclosures on the cash flow statement

Cash and cash equivalents covers cash on hand, bank account balances and cash invested with financial institutes for a maximum period of three months.

CHF millions 31.12.2014 31.12.2015 Bank and cash balances 502.2 649.2 Term deposits 50.0 185.0 Total cash and cash equivalents 552.2 834.2

Details on acquisitions of Group companies in the reporting year are provided in Note 6. The cash flow arising from the acquisition of Group companies amounting to CHF 96.6 million corresponds to the purchase price of CHF 158.6 million less the acquired cash and cash equivalents of CHF 13.8 mil lion and the deferred purchase price payments of CHF 50.2 million at the time of acquisition, plus the payment of CHF 2.0 million that had been made in respect of deferred purchase price payments in 2015.

In respect of property, plant and equipment, there were non-cash additions and non-cash disposals of CHF 6.0 million (see Note 20). Non-cash disposals of CHF 0.7 million were recorded in respect of shareholdings in associates (see Note 19).

33 Share-based payment

In the reporting year, BKW employees and members of the BKW Board of Directors had an opportu nity to acquire up to 287,652 shares in BKW (2014: 264,468 shares) at a preferential price. In 2015, 82,141 shares (2014: 67,962 shares) were purchased at a price of CHF 20.00 each (2014: CHF 20.00 each). The underlying present value per share was CHF 33.00 (2014: CHF 30.50). The personnel expense for this share-based payment was CHF 1.1 million (2014: CHF 0.7 million). No purchase rights remained open on the balance sheet date.

As a further share-based remuneration, members of the Group Executive Board and senior manage ment were granted a profit-sharing element in the form of BKW shares. In respect of this, 45,394 shares (2014: 33,542 shares) were allocated in the 2015 financial year, with an underlying present value of CHF 37.55 per share (2014: CHF 29.10). The personnel expense recorded amounted to CHF 1.8 million (2014: CHF 1.0 million). No purchase rights remained open on the balance sheet date. 76 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

34 Assets and liabilities measured at fair value

Assets and liabilities measured at fair value are classified according to the following hierarchy:

–– Level 1: valuations based exclusively on listed prices in active markets for identical assets or liabilities. BKW currently classifies listed securities and energy trading futures under this level. –– Level 2: valuations, the inputs to which are based on directly or indirectly observable market data. The inputs have a material impact on the recognised fair value. At this hierarchy level, BKW includes over-the-counter derivatives (all forward energy trading contracts, interest rate swaps and forward currency contracts) as well as the proportional share of net assets of the state funds (federal decommissioning and disposal funds). The assets of the state funds are managed by the government; BKW has no access to the managed assets. These assets are invested in accordance with the defined investment strategy, generally in products that have listed prices on active markets. To a limited extent, investments may also be made in assets for which there are no listed prices on active markets. Such investments are valued by the global custodian. BKW has no influence on the valuation method used. The annual statement of the funds is audited by external auditors each year and published by the federal offices responsible. –– Level 3: valuations which apply inputs with a material impact on fair value that are not based on observable market data. BKW mainly classifies unlisted securities designated as available-for- sale financial assets and deferred and contingent purchase price payments under this level. Valuation of such assets requires management estimates of non-observable input factors and deferred purchase price payments. The fair values of Level 3 financial assets were determined using the discounted cash flow method and discounted based on a WACC of 5.4 %. A realistic, constant margin was applied to the valuation models (the annual growth in the margin corresponds to inflation). The deferred purchase price payments result from mergers. The fair values of deferred purchase price payments are determined, taking into account expected cash flows, sales forecasts and other performance criteria.The effect of a change of 10 % in the most important non-observable input factors would have no significant impact on comprehensive income and the equity of BKW.

There were no transfers between the different levels during the year under review or during the previous year. ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 77

Carrying amount at CHF millions 31.12.2015 Level 1 Level 2 Level 3 Financial assets at fair value Current financial assets ––Securities held for trading 143.0 143.0 Inventories ––Certificates (proprietary trading) 45.9 45.9 Derivatives (current and non-current) 141.2 141.2 Non-current financial assets ––Available-for-sale financial assets 159.5 54.6 104.9 ––Receivables from state funds 930.7 930.7 Financial liabilities at fair value Derivatives (current and non-current) – 105.8 – 105.8

Carrying amount at CHF millions 31.12.2014 Level 1 Level 2 Level 3 Financial assets at fair value Current financial assets ––Securities held for trading 141.6 141.6 Inventories ––Certificates (proprietary trading) 70.9 70.9 Derivatives (current and non-current) 149.5 149.5 Non-current financial assets ––Available-for-sale financial assets 160.2 57.1 103.1 ––Receivables from state funds 905.0 905.0 Financial liabilities at fair value Derivatives (current and non-current) 88.4 88.4

In addition, the liabilities on 31 December 2015 include the following at fair value:

–– Bonds with an amount of CHF 120.0 million (2014: CHF 120.6 million) as part of a fair value hedge valued at Level 2. –– Other liabilities with an amount of CHF 46.3 million (2014: CHF 1.5 million) from deferred and contingent purchase price payments in relation to business combinations valued at Level 3.

The Level 3 debts and assets measured at fair value developed as follows during the period under review:

Deferred and contingent Available-for-sale purchase price payments financial assets CHF millions 2014 2015 2014 2015 At 01.01. 8.9 1.5 100.5 103.1 Additions 1.5 50.2 0.1 2.9 Disposals – 0.6 – 2.0 – 0.8 0.0 Value adjustment ––Transfer to income statement – 8.3 – 3.4 ––Changes in value included in other comprehensive income 3.3 – 1.1 At 31.12. 1.5 46.3 103.1 104.9 78 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

35 Disclosure of financial assets and liabilities

35.1 Carrying amount by balance sheet item and allocation to individual categories in accordance with IAS 39

Financial assets

Loans and Fair value through Note receivables profit or loss Available-for-sale Total CHF millions 2014 2015 2014 2015 2014 2015 2014 2015 Cash and cash equivalents 32 552.2 834.2 552.2 834.2 Trade accounts receivable 15 589.6 498.7 589.6 498.7 Other current financial receivables 15 33.3 36.1 33.3 36.1 Current financial assets 18 570.2 417.2 141.6 143.0 711.8 560.2 Derivatives (current and non-current) 28 149.5 141.2 149.5 141.2 Financial accruals 17 80.2 55.4 80.2 55.4 Non-current financial assets 18 164.8 152.5 160.2 159.5 325.0 312.0 Total 1,990.3 1,994.1 291.1 284.2 160.2 159.5 2,441.6 2,437.8

Financial liabilities

Recognised Liabilities at Fair value through according Note amortised cost profit or loss to IAS 17 Total CHF millions 2014 2015 2014 2015 2014 2015 2014 2015 Trade accounts payable 22 308.8 249.9 308.8 249.9 Other current financial liabilities 22 52.9 120.8 1.5 54.4 120.8 Current financial liabilities 23 52.9 53.9 13.0 65.9 53.9 Derivatives (current and non-current) 28 88.4 105.8 88.4 105.8 Financial accruals 17 143.7 168.5 143.7 168.5 Non-current financial liabilities 23 1,477.4 1,632.2 120.6 70.3 1,668.3 1,632.2 Other non-current financial liabilities 26 7.0 40.6 7.0 40.6 Total 2,042.7 2,265.9 210.5 105.8 83.3 0.0 2,336.5 2,371.7

Due to short residual terms to maturity, the carrying amount of loans and receivables and financial liabilities at amortised cost correspond approximately to the fair value. On 31 December 2015, a difference existed between these values in respect of the bonds and the convertible bond, which are included under non-current financial liabilities. At the end of 2014, the listed value of the bonds (fair value level 1) was CHF 1,272.1 million and the carrying amount was CHF 1,153.4 million (2014: listed value CHF 1,260.3 million, carrying amount CHF 1,150.9 million). ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 79

35.2 Net results of financial assets and liabilities measured in accordance with IAS 39

Net result

Loans and Fair value through Liabilities at receivables profit or loss Available-for-sale amortised cost Total CHF millions 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 Included in net sales: ––Income from proprietary energy trading 19.9 8.4 19.9 8.4 ––Income from energy hedging 14.2 18.6 14.2 18.6 ––Change in contingent purchase price payments 8.3 3.4 8.3 3.4 ––Change in provision for impairment of receivables – 3.7 2.4 – 3.7 2.4 Included in financial result: ––Interest income 7.7 8.2 2.8 2.4 10.5 10.6 ––Interest expense – 51.9 – 49.2 – 51.9 – 49.2 ––Dividends 5.2 4.1 5.2 4.1 ––Gains from subsequent measurement at fair value 5.3 0.1 5.3 0.1 ––Gains from sales 25.4 0.2 25.4 0.2 ––Impairment of financial assets – 3.4 – 0.8 0.0 – 1.9 – 3.4 – 2.7 ––Other financial income – 4.9 – 1.3 0.5 0.5 – 4.4 – 0.8 ––Currency translations 1.3 1.0 1.3 1.0 Included in other comprehensive income: ––Gains from subsequent measurement at fair value 0.9 – 0.3 0.9 – 0.3 Total – 3.0 9.5 76.4 33.6 6.1 1.9 – 51.9 – 49.2 27.6 – 4.2

In the years shown, no financial instruments were designated as being measured “at fair value”.

35.3 Netting arrangements

BKW concludes reciprocal transactions with a range of contractual partners in the scope of its busi ness activities. Where contractually agreed netting procedures have been agreed and the prerequi sites for netting balance sheet items have been met, the resulting receivables and liabilities due and owed are reported as net items in the balance sheet.

The following amounts are netted off in the balance sheet on the balance sheet date:

2014 2015 CHF millions Gross values Netting off Net values Gross values Netting off Net values Trade accounts receivable 1,067.6 – 478.0 589.6 802.1 – 303.4 498.7 Trade accounts payable – 786.8 478.0 – 308.8 – 553.3 303.4 – 249.9

Positive replacement values 461.8 – 324.4 137.4 590.2 – 460.8 129.4 Negative replacement values – 407.0 324.4 – 82.6 – 561.7 460.8 – 100.9 80 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

36 Financial risk management

36.1 Principles of risk management

Risk management is viewed as a supporting function for senior management. Its purpose is to pro vide decisionmakers with a transparent representation of the risks associated with individual busi ness activities. The core element is the risk management process, which systematically identifies, assesses and manages risks and monitors the implementation of risk mitigation measures. It is integrated into the financial management process.

The defined risk management principles govern the management of operational risks as well as market price, share price, currency, interest rate and credit risks. Principles have also been laid down governing the management of cash and cash equivalents as well as short and long-term cash deposits. The Group monitors and controls these risks. Corporate Risk Management reports directly to the Head of Finance and Controlling, defines Group-wide requirements for measuring risk, and aggregates risks at Group level.

The risk spectrum monitored by the Group Executive Board covers risks related to operating activi ties as well as to strategy and its implementation in projects. A Risk Committee at Group Executive Board level prepares guidelines and risk reports as a decision-making basis for the Group Executive Board. The Risk Committee is an advisory body which submits independent recommendations on risk issues to the Group Executive Board in predefined processes. The Board of Directors last assessed the risks related to operating activities at its meeting on 11 December 2015.

36.2 Credit risks

A credit risk is the possibility of a loss which may be incurred if a customer or counterparty is una ble to discharge its contractual obligations. Standardised credit risk management with defined lim its per counterparty is practised with respect to accounts receivable from energy-trading activities, sales activities and the investment of funds.

The majority of credit risks are managed centrally by Corporate Risk Management. The process is separated into two parts: credit appraisal with defined limits, and limit monitoring and reporting. Credit appraisal involves the use of an internal rating system which assigns credit ratings of A, B or C to counterparties. A and B correspond to the standard “Investment Grade” used by rating agencies. The rating is calculated based on the Basel II Internal Rating approach. The credit appraisal also takes into account external ratings by recognised rating agencies. A limit is defined for each counterparty based on the defined credit rating and the counterparty’s equity situation.

The following table indicates the credit risk related to trade accounts receivable, to derivatives with a positive replacement value, and to current accounts and term deposits with credit institu tions on the balance sheet date, broken down by credit rating. The standardised rating process cov ers trading and bank counterparties as well as sales counterparties in Switzerland. Credit risk man agement for other counterparties is carried out decentrally on the basis of individual approaches. ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 81

CHF millions 31.12.2014 31.12.2015 Credit rating A 484.8 581.0 Credit rating B 1,073.5 1,020.7 Credit rating C 32.2 17.0 Other counterparties 270.8 250.4 Total 1,861.3 1,869.1 Included under: ––Trade accounts receivable 589.6 498.7 ––Derivatives (current and non-current) 149.5 141.2 ––Current financial assets (term deposits only) 570.0 395.0 ––Cash and cash equivalents 552.2 834.2

The maximum credit risk (excluding guarantees granted) corresponds to the amount of outstanding monetary financial assets on the balance sheet date. On 31 December 2015, the maximum credit risk for BKW was CHF 2,136.0 million compared with CHF 2,139.8 million in 2014 (carrying amount of all financial assets in accordance with Note 35.1, with the exception of the equity instruments contained there).The maximum loss presented is based on the assumption that all counterparties simultaneously become unable to discharge their payment obligations and that existing collateral and netting arrangements cannot be utilised.

On the balance sheet date, there were issued guarantees of CHF 73.0 million (2014: CHF 44.1 mil lion), which increase the maximum default risk accordingly.

Collateral is required primarily for counterparties in the energy-trading business, whereby the cred it-worthiness of the collateral issuer is assessed and rated. Customers with A and B ratings may be granted a higher limit than defined for the assigned credit category if collateral is provided. A busi ness relation with C-rated counterparties is normally permissible only if collateral is provided to cover both billed and unbilled items. Collateral amounting to CHF 136.6 million (2014: 144.9 million) was held for trade receivables and derivatives recorded on the balance sheet at 31 December 2015.

A cluster risk would arise if excessive credit were granted to an individual customer. The potential loss and the resultant write-down would be disproportionately high if the counterparty were to default. For this reason, care is taken to ensure an adequate spread of risks and limits, with a max imum limit defined per credit category.

In geographical terms, the credit risks are primarily concentrated on Switzerland. On the balance sheet date, counterparties in Switzerland accounted for 85 % of the credit risk (2014: 81 %). 82 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

36.3 Liquidity risks

Liquidity is defined as the ability to cover cash outflow requirements at any time without restric tions.

At Group level, liquidity management is based on the Group’s mid-term planning, budget and fore cast. Rolling liquidity plans with a twelve-month horizon are drawn up for the entire Group on the basis of these documents as well as current findings. These plans are used to examine the ration ale behind long-term measures in light of the latest information, as well as to identify potential liquidity shortfalls and formulate tactics to optimise the financial result.

Residual terms to maturity of financial liabilities The following tables provide information on the residual terms to maturity and cash flows of finan cial liabilities on a non-discounted basis.

CHF millions Note Carrying amount at 31.12.2015 Due within 1 year 1 and Due between 2 years 2 and Due between 3 years 3 and Due between 5 years 5 years Due after Non-derivative financial liabilities

Trade accounts payable 22 249.9 249.9 Other current financial liabilities 22 120.8 120.8 Financial accruals 17 168.5 168.5 Financial liabilities 23 1,686.1 65.7 64.5 227.3 619.3 1,178.6 Other non-current financial liabilities 26 40.6 0.2 0.4 2.4 36.4 1.2 Total non-derivative liabilities 2,265.9 605.1 64.9 229.7 655.7 1,179.8 Derivative financial assets and liabilities Energy derivatives/options ––Positive replacement values 28 129.4 99.7 38.0 10.1 ––Negative replacement values 28 – 100.9 – 85.2 – 26.0 – 8.1 Net replacement values 28.5 14.5 12.0 2.0 0.0 0.0 Currency forwards and swaps ––Positive replacement values 28 11.8 1.0 11.1 ––Negative replacement values 28 – 4.9 – 0.3 – 0.3 – 4.6 Net replacement values 6.9 0.7 – 0.3 0.0 11.1 – 4.6 Gross cash flows related to derivatives ––Gross outflow – 3,748.1 – 1,153.9 – 273.8 – 2.5 ––Gross inflow 3,695.5 1,174.7 292.2 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 83

CHF millions Note Carrying amount at 31.12.2014 Due within 1 year 1 and Due between 2 years 2 and Due between 3 years 3 and Due between 5 years 5 years Due after Non-derivative financial liabilities Trade accounts payable 22 308.8 308.8 Other current financial liabilities 22 54.4 54.4 Financial accruals 17 143.7 143.7 Financial liabilities 23 1,734.2 114.0 70.2 72.4 622.5 1,409.7 Other non-current financial liabilities 26 7.0 0.5 4.8 0.2 0.3 1.4 Total non-derivative liabilities 2,248.1 621.4 75.0 72.6 622.8 1,411.1 Derivative financial assets and liabilities Energy derivatives/options ––Positive replacement values 28 137.4 103.6 36.8 5.7 0.1 ––Negative replacement values 28 – 82.6 – 64.4 – 22.4 – 4.6 Net replacement values 54.8 39.2 14.4 1.1 0.1 0.0 Currency forwards and swaps ––Positive replacement values 28 12.1 0.7 11.4 ––Negative replacement values 28 – 5.8 – 1.6 – 0.7 – 0.7 – 0.9 – 1.9 Net replacement values 6.3 – 0.9 – 0.7 – 0.7 10.5 – 1.9 Gross cash flows related to derivatives ––Gross outflow – 3,436.8 – 1,158.6 – 701.6 – 2.8 – 1.4 ––Gross inflow 3,507.6 1,247.5 701.8 0.0 0.0

Amounts in foreign currencies are converted at the exchange rate on the balance sheet date. The table shows the cash flows for interest-bearing liabilities including the corresponding interest rate payments. The cash flows for derivative financial instruments do not take netting arrangements into account. A cash flow amounting to the nominal value of the convertible bond (CHF 163.4 mil lion) is assumed at the time of contractual maturity (in 2020). 84 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

36.4 Market risks

Market risks arise from price and exchange rate fluctuations on unsecured positions of the energy and financial business. BKW’s risk policy enables the existence of monitored, open positions.

Energy price, interest rate, share price, exchange rate and CO2 certificate price risks are managed centrally. BKW’s market risks are aggregated in a Group-level risk portfolio that takes account of the mutual dependencies of various risk classes (correlations and the associated diversification effects) and enables a systematic analysis as well as efficient controls and effective limitation of the overall risk. The value at risk (VaR) limits required for the purpose of controls must be approved by the Group Executive Board and Board of Directors.

36.4.1 Share price risk BKW is exposed to a share price risk for financial assets held for trading and available-for-sale financial assets, as well as for receivables from state funds (see Note 18).Receivables from state funds do not come under the definition of a financial instrument under the terms of IAS 32 and consequently are not covered by the following statements on risk measurement.

36.4.2 Interest rate risks The production of power and operation of transmission and distribution grids are capital-intensive. These are financed over the long term with phased due dates to minimise the impact of interest rate changes on the earnings situation. In addition, interest rate hedging instruments are used where necessary. Cash is invested over the short to medium term, primarily in variable-interest positions.

36.4.3 Currency risks Energy trading is largely conducted in euros. Exchange rate fluctuations have an impact on the assets and earnings positions stated in Swiss francs. To the extent considered necessary, foreign currency positions are secured by means of forward exchange transactions or currency swaps.

36.4.4 Energy price risks/CO2 certificate price risks For the purpose of asset management and proprietary trading, unsecured positions in energy and

CO2 certificates trading are entered into, with smaller positions permitted for proprietary trading than for asset management. Smaller positions are permitted for proprietary trading than for asset management and unsecured energy positions can only be entered into in the current year and in up

to three subsequent years. The permissible trading window for CO2 positions extends to 2020.

36.4.5 Risk measurement Interest rate, share price and exchange rate risks are regularly measured and reported on the basis of value at risk. BKW uses a confidence level of 99 % with a one-year holding period for interest rate products and shares, and a one-day holding period for foreign exchange. ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 85

Value at Risk

CHF millions 31.12.2014 31.12.2015 Interest 4.9 11.7 Share price, financial instruments available-for-sale 58.0 57.2 Currencies 1.6 8.4

The value at risk shows value fluctuation risk based on individual risks which, given no change, could occur in a twelve-month/one-day period respectively, taking into account the defined confi dence level. The values shown would impact the results as well as equity.

In the absence of any impairments, fluctuations in the value of available-for-sale financial instru ments have no influence on the annual results but are recorded directly in other comprehensive income.

The risk of unfavourable price movements for unsecured positions in electricity, gas, CO2, coal (financial) and oil (financial) is determined using the Cross-Commodity-Value-at-Risk (CC-VaR) method which factors in the mutual impact of these commodities. The calculation follows a model-based Monte Carlo method for a one-day holding period and a confidence level of 99 %. The model parameters are estimated based on a rolling 260-day observation period. Besides CC-VaR limits, risk control covers position and trading volume limits. Proprietary trading is addi tionally subject to loss limits. At 31 December 2015 the CC-VaR amounted to CHF 1.1 million (2014: CHF 1.1 million). 86 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

37 Contingent liabilities and investment obligations

CHF millions 31.12.2014 31.12.2015 Contingent Liabilities ––in favour of associates 23.9 17.7 ––in favour of third parties 20.2 55.3 Investment obligations 78.1 300.0 Total 122.2 373.0

Contingent liabilities CHF 8.4 million of the guarantees granted have a term to maturity of up to 12 months (2014: CHF 11.1 million), while guarantees amounting to CHF 12.1 million were granted for an unlimited term (2014: CHF 14.6 million).

Nuclear power plant operators are under a limited obligation to make supplementary contributions to the decommissioning and disposal funds in the event that an individual contributor is unable to pay.

In the event of a claim, power plant operators who are members of the European EMANI insurance pool must pay a contractually defined supplementary contribution of six annual premiums, which for BKW corresponds to a maximum obligation of around CHF 1.5 million (2014: CHF 1.2 million).

Due to existing partner contracts, shareholders in partner plants are obliged to pay the annual costs due on their shares (including interest and repayment of borrowed funds).

Investment obligations On 30 July 2015, BKW announced that it intends to exercise its pre-emptive right to purchase the Swissgrid interest held by Alpiq Grid Beteiligungs AG (AGB). As for all other Swissgrid shareholders, BKW has a pre-emptive right through its subsidiary BKW Netzbeteiligung AG to purchase shares in Swissgrid. This right is established in legislation, statute and contract and forms part of the com pensation to all former transmission grid owners in respect of the compulsory transfer of the high voltage transmission grid to Swissgrid. The purchase price for the whole AGB Swissgrid sharehold ing of approximately 30 % is approximately CHF 300 million. At the time of preparation of these financial statements, the shares have not yet been transferred, as the original purchaser has taken legal measures against the pre-emptive right of BKW; the proceedings have not yet been concluded. ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 87

38 Events after the balance sheet date

In the first quarter, BKW signed a purchase contract for a majority shareholding of 70 % in Frosio S.r.l. (Frosio). Closing was at the end of February. The engineering company from Brescia (I) special ises in hydraulic engineering and hydroelectric power plants and is a market leader in these fields in Italy. In the last few years, Frosio has generated revenue of EUR 2.4 million with a team of around 20 people.

In the first quarter, BKW also acquired 100 % of the shares in sewage pipe technology company Arpe Holding AG (Arpe). By acquiring Arpe, which specialises in sewer rehabilitation and mainte nance, BKW is expanding its existing fields of business. In addition to energy, telecoms and trans port, it now also operates in the field of water infrastructure. The sewage pipe technology company employs a workforce of around 100 employees and generated sales of approximately CHF 20 million in the last year.

Furthermore BKW acquired in the first quarter 100 % of the shares in Schmid Amrhein AG, Lucerne. By acquiring this company, BKW is now also present in Central Switzerland. The Lucerne heating, ventilation and plumbing company has a 90-strong workforce and has generated annual sales of more than CHF 15 million in the last few years.

The companies acquired have been assigned to the Services segment. The purchase price alloca tions for these acquisitions have not yet been completed as these were made only shortly before the completion and approval of the annual financial statements. By acquiring these companies, BKW expects acquired net assets of approximately CHF 8 million and goodwill in a high single-digit millions range.

On 23 February 2016, BKW announced that, through Nordic Wind Power DA, a European investors’ consortium, BKW and four institutional investors have acquired a 40 % holding in the largest onshore wind-farm project in Europe (Fosen Vind). A total of six wind farms will be connected to the grid between 2018 and 2020. With installed capacity of more than 1,000 MW, these installa tions will produce around 3,400 GWh of electricity each year. Total investment costs amount to a good EUR 1.1 billion. BKW’s stake in the investors’ consortium is just under 30 %.

Approval of the consolidated financial statements The Board of Directors of BKW authorised the approval of these consolidated financial statements on 11 March 2016. The consolidated financial statements are subject to the approval of the BKW General Meeting on 13 May 2016. 88 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements Group companies and Associates

Energy Networks S ervices Other Domicile capital Share/basic in millions Currency in % ownership Direct closing law Company date

Group companies Switzerland A. Dietrich Kälte Klima Lüftung AG • Beringen 0.2 CHF 100.0 31.12. ahochn AG • Dübendorf 0.3 CHF 100.0 31.12. ahochn AG, Rotkreuz • Risch 0.1 CHF 100.0 31.12. antec group AG • Risch 0.4 CHF 100.0 31.12. Arnold AG • Wangen an der Aare 0.5 CHF 100.0 31.12. Baumeler Leitungsbau AG • Buchrain 0.1 CHF 100.0 31.12. BEBAG Bioenergie Bätterkinden AG • Bätterkinden 0.1 CHF 56.0 31.12. Biomassekraftwerk Otelfingen AG • Otelfingen 0.5 CHF 50.0 31.12. BKW Energy Ltd. • • • • Bern 132.0 CHF 100.0 31.12. BKW ISP AG • Ostermundigen 0.9 CHF 100.0 31.12. BKW ISP Gebäudetechnik AG • Wädenswil 0.2 CHF 100.0 31.12. BKW Grid Switzerland Ltd. • Bern 0.1 CHF 100.0 31.12. BKW Netzbeteiligung Ltd. • Bern 25.1 CHF 50.1 31.12. BKW Wallis AG • Visp 0.1 CHF 100.0 31.12. Cantoni Haustechnik AG • Wohlen 0.2 CHF 100.0 31.12. cc energie sa • Morat 1.0 CHF 66.7 31.12. Curea Elektro AG • Landquart 0.2 CHF 100.0 31.12. EES Jäggi-Bigler Inc. • Etziken 2.1 CHF 100.0 31.12. Elektrizitätswerk Grindelwald AG • • Grindelwald 0.6 CHF 92.1 31.12. Elektrizitätswerke Wynau AG • Langenthal 0.1 CHF 100.0 31.12. Elektro Aebi AG • Aeschi 0.3 CHF 100.0 31.12. Elektro Feuz AG • Grindelwald 0.1 CHF 100.0 31.12. EWR Energie AG • • Schattenhalb 2.0 CHF 100.0 31.12. Gesellschaft Mont-Soleil • Bern – CHF 60.0 31.12. Hertig Haustechnik AG • Wohlen 0.1 CHF 100.0 31.12. Holzwärme Grindelwald AG • Grindelwald 2.5 CHF 90.7 31.12. inelectro sa • Porrentruy 0.5 CHF 100.0 31.12. IWAG Ingenieure AG • Zurich 0.1 CHF 100.0 31.12. Juvent SA • Saint-Imier 6.0 CHF 65.0 31.12. Karl Waechter AG • Zurich 0.1 CHF 100.0 31.12. Kasteler - Guggisberg AG • Bern 0.2 CHF 100.0 31.12. Kraftwerk Gohlhaus AG • Lützelflüh 1.3 CHF 59.9 31.12. Kraftwerk Lauenen AG • Lauenen 2.0 CHF 85.0 31.12. Reichenbach Kraftwerk Spiggebach AG • im Kandertal 3.8 CHF 51.0 31.12. Kraftwerk Utzenstorf AG • Utzenstorf 0.1 CHF 100.0 31.12. Kraftwerke Fermelbach AG • St. Stephan 4.5 CHF 80.0 31.12. Kraftwerke Kander Alp AG • Kandersteg 2.5 CHF 60.0 31.12. Kraftwerke Milibach AG • Wiler (Lötschen) 1.0 CHF 80.0 31.12. Kraftwerke Ragn d’Err AG • Surses 6.0 CHF 80.0 31.12. Lutz Bodenmüller AG • Beringen 0.1 CHF 100.0 31.12. Marzolo & Partner AG • Uster 0.1 CHF 100.0 31.12. Neukom Installationen AG • Rafz 0.2 CHF 100.0 31.12. Onyx Energie Dienste AG • • Langenthal 2.0 CHF 100.0 31.12. Onyx Energie Mittelland AG • Langenthal 10.5 CHF 100.0 31.12. ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 89

Energy Networks S ervices Other Domicile capital Share/basic in millions Currency in % ownership Direct closing law Company date

Group companies (continued) Onyx Energie Netze AG • • Langenthal 10.5 CHF 100.0 31.12. Onyx Energie Produktion AG • Langenthal 3.0 CHF 100.0 31.12. Regionaler Wärmeverbund AG Heimberg-Steffisburg (REWAG) • Heimberg 2.5 CHF 51.0 31.12. Schönenberger & Partner AG Sanitäre Anlagen • Rickenbach 0.1 CHF 100.0 31.12. Simmentaler Kraftwerke AG • Erlenbach i. S. 7.3 CHF 83.9 31.12. Société des forces électriques de la Goule SA • • Saint-Imier 3.5 CHF 84.3 31.12. sol-E Suisse AG • Bern 0.1 CHF 100.0 31.12. TID Technische Informationen & Dienstleistungen P. Tschannen GmbH • Schüpfen 0.1 CHF 100.0 31.12. TW Energie AG • Bern 1.2 CHF 75.0 31.12. Weber AG, Stäfa • Stäfa 0.1 CHF 100.0 31.12. Germany BKW Bippen Wind GmbH • Berlin 0.03 EUR 100.0 31.12. BKW Borkum West II Beteiligungs-GmbH • Berlin 0.03 EUR 100.0 31.12. BKW Deutschland GmbH • Berlin 0.1 EUR 100.0 31.12. BKW Dubener Platte Wind GmbH • Berlin 0.03 EUR 100.0 31.12. BKW Energie Dörpen Beteiligungs-GmbH • Berlin 0.03 EUR 100.0 31.12. BKW Energie Wilhelmshaven Beteiligungs-GmbH • Berlin 0.03 EUR 100.0 31.12. BKW Erneuerbare Energien GmbH • Berlin 0.03 EUR 100.0 31.12. BKW Holleben Wind GmbH • Berlin 0.03 EUR 100.0 31.12. BKW Landkern Wind GmbH • Berlin 0.05 EUR 100.0 31.12. BKW Wind Service GmbH • • Berlin 0.03 EUR 100.0 31.12. KAE Kraftwerks- & Anlagen-Engineering GmbH • Hausen 0.05 EUR 100.0 31.12. Solare Datensysteme GmbH • Geislingen 0.03 EUR 100.0 31.12. STKW Energie Dörpen GmbH & Co. KG • Dörpen – EUR 100.0 31.12. STKW Energie Dörpen Verwaltungs-GmbH • Dörpen 0.03 EUR 100.0 31.12. France BKW France SAS • Paris 0.1 EUR 100.0 31.12. BKW Hydro Allevard SAS • Paris 0.1 EUR 100.0 31.12. Parc Eolien de Fresnoy Brancourt SAS • Vincennes 0.04 EUR 100.0 31.12. Italy BKW Hydro Valle d’Aosta S.r.l. • La Salle 0.05 EUR 100.0 31.12. BKW Italia S.p.A. • • Milan 13.4 EUR 100.0 31.12. BKW Wind Italia S.r.l. • Milan 0.01 EUR 100.0 31.12. C.D.N.E. S.p.A. • Massazza 0.5 EUR 74.9 31.12. CHI.NA.CO S.r.l. • Roè Volciano 2.0 EUR 100.0 31.12. Electra Italia S.p.A. • • Milan 1.0 EUR 100.0 31.12. Green Castellaneta S.p.A. • Milan 0.1 EUR 100.0 31.12. Idroelettrica Lombarda S.r.l. • Milan 25.4 EUR 100.0 31.12. Tamarete Energia S.r.l. • Ortona 3.6 EUR 60.0 31.12. Volturino Wind S.r.l. • Milan 0.03 EUR 100.0 31.12. Wind Farm Buglia S.r.l. • Milan 0.03 EUR 100.0 31.12. Wind Farm S.r.l. • Milan 0.02 EUR 100.0 31.12. Wind International Italy S.r.l. • Milan 52.2 EUR 100.0 31.12. Austria Ingenieurgemeinschaft DI Anton Bilek und DI Gunter Krischner GmbH • Graz 0.04 EUR 100.0 31.12. 90 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements

Energy Networks S ervices Other Domicile capital Share/basic in millions Currency in % ownership Direct closing law Company date

Group companies (continued) USA Solar Data Systems Inc. • Bethel (CT) 0.10 USD 100.0 31.12.

Joint operations Bielersee Kraftwerke AG BIK • Bienne 20.0 CHF 50.0 31.12. Kraftwerk Sanetsch AG (KWS) • Gsteig 3.2 CHF 50.0 30.09.

Associates Switzerland Aarewerke AG • Klingnau 1.7 CHF 10.1 30.06. Abonax AG • St. Gallen 1.0 CHF 34.0 31.12. AEK Energie AG • Solothurn 6.0 CHF 39.5 31.12. Ampard Ltd. • Zurich 0.2 CHF 26.7 31.12. Biogaz du Vallon Sàrl • Cortébert 0.02 CHF 24.5 31.12. DEVIWA AG • Leuk 0.1 CHF 20.0 31.12. EDJ, Energie du Jura SA • Delémont 7.4 CHF 41.0 30.09. Electra-Massa AG • Naters 20.0 CHF 16.1 31.12. Electricité de la Lienne SA • Sion 24.0 CHF 33.3 30.09. em electrocontrol ag • Urtenen-Schönbühl 0.3 CHF 6.6 31.12. Energie Biberist AG EBAG • Biberist 5.0 CHF 25.0 31.12. Engadiner Kraftwerke AG • Zernez 140.0 CHF 30.0 30.09. Erdgas Thunersee AG • Interlaken 6.9 CHF 33.3 31.12. ETRANS Ltd. • Laufenburg 7.5 CHF 11.5 31.12. EVTL Energieversorgung Talschaft Lötschen AG • Wiler (Lötschen) 1.3 CHF 49.0 31.12. Externes Lager der Kernkraftwerke Schweiz • Baden – CHF 25.0 31.12. Forces Motrices de Mauvoisin SA • Sion 100.0 CHF 19.5 30.09. GEBNET AG • Buchegg 7.0 CHF 40.9 31.12. Gommerkraftwerke AG • Ernen 30.0 CHF 25.0 31.12. Grande Dixence SA • Sion 300.0 CHF 13.3 31.12. Hertli & Bertschy AG, elektrische Anlagen • Tafers 0.05 CHF 40.0 31.12. InnoCampus Ltd. • Nidau 1.3 CHF 22.9 31.12. Kernkraftwerk Leibstadt AG • Leibstadt 450.0 CHF 9.5 31.12. Kernkraftwerk-Beteiligungsgesellschaft AG (KBG) • Bern 150.0 CHF 33.3 31.12. Kraftwerk Berschnerbach AG • Walenstadt 0.1 CHF 49.0 31.12. Kraftwerk Wannenfluh AG • Rüderswil 0.3 CHF 31.9 31.12. Kraftwerke Färdabach AG • Ferden 0.1 CHF 34.0 31.12. Kraftwerke Hinterrhein AG • Thusis 100.0 CHF 7.7 30.09. Kraftwerke Mattmark AG • Saas-Grund 90.0 CHF 11.1 30.09. Kraftwerke Oberhasli AG • Innertkirchen 120.0 CHF 50.0 31.12. La Prairie Biogaz SA • Porrentruy 1.4 CHF 30.0 31.12. Metanord SA • Bellinzona 18.6 CHF 30.9 31.12. MOHA ZOFI • Brienz – CHF 38.5 31.12. Nagra • Wettingen – CHF 14.3 31.12. NIS AG • Sursee 1.0 CHF 25.0 31.12. Oberland Energie AG • Thun 9.1 CHF 49.0 31.12. ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 91

Energy Networks S ervices Other Domicile capital Share/basic in millions Currency in % ownership Direct closing law Company date

Associates (continued) Officine Idroelettriche della Maggia SA • Locarno 100.0 CHF 10.0 30.09. Officine idroelettriche di Blenio SA • Blenio 60.0 CHF 12.0 30.09. Replacement nuclear power plant Beznau Ltd. • Döttingen 1.0 CHF 11.5 31.12. Replacement nuclear power plant Mühleberg Ltd. • Mühleberg 1.0 CHF 51.0 31.12. RESUN AG • Aarau 1.0 CHF 33.3 30.09. Société des Forces Motrices du Châtelot SA • La Chaux-de-Fonds 6.0 CHF 11.7 31.12. sol-E Suisse Biogas Zernez • Zernez – CHF 22.9 31.12. Solutions Renouvelables Boudry SA • Boudry 0.9 CHF 49.0 31.12. Spontis SA • Avenches 0.1 CHF 30.0 31.12. Swissgrid Ltd. • Laufenburg 313.4 CHF 10.9 31.12. Zwilag Zwischenlager Würenlingen AG • Würenlingen 5.0 CHF 10.7 31.12. Germany GDF SUEZ Kraftwerk Wilhelmshaven GmbH & Co. KG • Wilhelmshaven – EUR 33.0 31.12. HelveticWind Deutschland GmbH • Berlin 0.03 EUR 29.0 31.12. France Centrale Electrique de la Plaine • Dremil Lafage – EUR 33.3 31.12. Italy Biopower Sardegna S.r.l. • Milan 0.1 EUR 10.5 31.12. E.ON Produzione Centrale Livorno Ferraris S.p.A. • Milan 10.0 EUR 25.0 31.12. HelveticWind Italia S.r.l. • Milan 0.01 EUR 29.0 31.12. 92 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements Report of the statutory auditor on the consolidated financial statements ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements 93 94 ANNUAL REPORT 2015 | BKW Group Consolidated Financial Statements ANNUAL REPORT 2015 Financial Statements of BKW AG 96 ANNUAL REPORT 2015 | Financial Statements of BKW AG

FINANCIAL STATEMENTS OF BKW AG Income Statement

CHF millions 2014 2015 Dividend income 241.4 105.6 Interest income 54.2 42.1 Other operating income 0.5 0.5 Total earnings 296.1 148.2

Interest expense – 41.9 – 40.0 Other financial expenses – 23.7 – 0.7 Other operating expenses – 6.4 – 5.6 Direct taxes – 0.2 – 1.1 Total expenses – 72.2 – 47.4 Net profit 223.9 100.8 ANNUAL REPORT 2015 | Financial Statements of BKW AG 97

FINANCIAL STATEMENTS OF BKW AG Balance Sheet

CHF millions 31.12.2014 31.12.2015

Assets Cash and cash equivalents 1.5 1.3 Receivables ––with third parties 0.2 0.3 ––with shareholdings 51.4 75.6 Prepaid expenses and accrued income 6.0 5.7 Total current assets 59.1 82.9 Loans 1,472.0 1,438.4 Other financial assets ––with third parties 15.1 13.4 Investments 1,362.4 1,362.4 Total non-current assets 2,849.5 2,814.2 Total assets 2,908.6 2,897.1

Liabilities Trade accounts payable ––with third parties 2.8 0.2 ––with shareholdings 0.1 0.0 Other current liabilities 0.3 1.1 Deferred income and accrued expenses 13.7 13.4 Total current liabilities 16.9 14.7 Non-current interest-bearing liabilities ––Bonds 1,163.4 1,163.4 ––Loans payable 311.0 277.0 Total non-current liabilities 1,474.4 1,440.4 Total liabilities 1,491.3 1,455.1 Share capital 132.0 132.0 Statutory capital reserves ––Reserves from capital contributions 26.1 26.1 Statutory retained earnings 1,155.0 1,155.0 Voluntary retained earnings ––Profit carried forward 7.9 154.3 ––Net profit 223.9 100.8 Unappropriated retained earnings 231.8 255.1 Treasury shares – 127.6 – 126.2 Total shareholders’ equity 1,417.3 1,442.0 Total liabilities and shareholders’ equity 2,908.6 2,897.1 98 ANNUAL REPORT 2015 | Financial Statements of BKW AG

FINANCIAL STATEMENTS OF BKW AG Notes to the Financial Statements

Accounting and valuation principles

In the reporting year, BKW AG, Bern applied the financial reporting legislation that came into effect on 1 January 2013 for the first time. The previous year’s figures in the balance sheet and income statement have been adjusted to meet the new classification rules in order to ensure comparability.

Treasury shares are now reported as a negative item under equity. Reserves for treasury shares have been reversed accordingly. The 2014 financial statements essentially correspond to those approved at the General Meeting on 8 May 2015.

Receivables

Receivables are stated at their nominal value minus operationally necessary impairments. The receivables stated in the balance sheet are mainly current account receivables from BKW Energy AG.

Fixed assets

The holdings retained by BKW AG have been valued individually at acquisition cost minus any necessary impairments. Finance loans exist in respect of BKW Energy AG and are valued at the nominal value minus any necessary impairments.

Non-current liabilities

The bonds include the convertible bond and the regular bonds. The registered bonds are stated as loans payable. Non-current liabilities are valued at nominal value.

Investments

Direct Share capital ownership Company name, legal form, headquarters Purpose CHF in % Energy, Networks, BKW Energy Ltd., Bern Services 132,000,000 100.0 BKW Netzbeteiligung Ltd., Bern Networks 25,100,000 50.1 BKW Grid Switzerland Ltd., Bern Networks 100,000 100.0 sol-E Suisse AG, Bern Energy 100,000 100.0

The companies in which BKW AG holds indirect interests are listed on pages 88 to 91.

Dividend income

Dividend income in the reporting year relate to the cash dividend of BKW Energy Ltd.

In the previous year, dividend income was higher due to non-cash dividends. In 2014, BKW AG issued a convertible bond for its own shares. For this purpose, shares previously carried as treasury shares in the BKW Energy Ltd. balance sheet were allocated to BKW AG in the form of a dividend. BKW Energy Ltd. also distributed a dividend in respect of the shareholding in Swissgrid Ltd., which was consequently incorporated into BKW Netzbeteiligung Ltd. as a contribution in kind. ANNUAL REPORT 2015 | Financial Statements of BKW AG 99

Bonds

CHF millions 31.12.2014 31.12.2015 3 % debenture bond 2007 – 2022 200.0 200.0 3.375 % debenture bond 2009 – 2019 350.0 350.0 1.875 % debenture bond 2010 – 2018 150.0 150.0 2.5 % debenture bond 2010 – 2030 300.0 300.0 0.125 % convertible bond 2014 – 2020 163.4 163.4 Total 1,163.4 1,163.4

In September 2014, BKW issued a convertible bond amounting to CHF 163.4 million to run to 30 September 2020 with an interest rate of 0.125 %. The conversion period runs until 20 September 2020. On the balance sheet date the conversion price was CHF 38.47.The conversion price and conversion rate will be adjusted if a dividend of more than CHF 1.20 per share is paid out.

Share capital

The BKW AG share capital at 31 December 2015 amounts to CHF 132 million and is divided into 52,800,000 registered shares at a par value of CHF 2.50 each.

Major shareholders

31.12.2014 31.12.2015 Canton of Bern 52.54 % 52.54 % Groupe E Ltd. 10.00 % 10.00 % E.ON SE 6.65 % 6.65 % Treasury shares 8.35 % 8.13 %

Treasury shares

BKW AG Group companies Total CHF millions Number CHF millions Number CHF millions Number At 31.12.2013 0.0 0 315.5 4,518,050 315.5 4,518,050 Additions 0.0 170 0.0 170 Transfer 303.0 4,332,123 – 303.0 – 4,332,123 – 0.0 0 Disposals 0.0 0 – 7.1 – 109,123 – 7.1 – 109,123 At 31.12.2014 303.0 4,332,123 5.4 76,974 308.4 4,409,097 Adjustment 1 – 175.4 – 175.4 0 Additions 0.2 10,000 0.2 10,000 Transfer – 1.5 – 41,172 1.5 41,172 0.0 0 Disposals – 7.1 – 128,146 – 7.1 – 128,146 At 31.12.2015 126.1 4,290,951 – 0.0 0 126.1 4,290,951

1 Adjustment following application of the new financial reporting act

As a result of the provisions of the new Financial Reporting Act, the treasury shares held by BKW AG are now stated as a negative item under equity. Previously, treasury shares were stated in current assets and a reserve created to cover the entire stock of the BKW Group at the original acquisition value of CHF 308.4 million in the balance sheet. Owing to the market price as on 31 December 2014, which was lower than the acquisition value, an impairment of CHF 127.6 million was recorded in respect of the treasury shares in the financial statements of BKW AG. The value 100 ANNUAL REPORT 2015 | Financial Statements of BKW AG

adjustment reported in the 2014 financial year under other financial expenses was CHF 19 million. With application of the new provisions, treasury shares were transferred to equity at carrying value with no effect on income at 1 January 2015. The previously retained reserve for treasury shares was reposted to the profit carried forward with no effect on income.

Contingent liabilities

CHF millions 31.12.2014 31.12.2015 Guarantees for consolidated companies in favour of third parties 112.3 186.1

Shares held by members of the Board of Directors and Group Executive Board

Members of the Board of Directors

Number of shares 31.12.2014 31.12.2015 Urs Gasche Chairman 2,777 3,377 Hartmut Geldmacher Deputy Chair 2,520 3,120 Kurt Rohrbach 2nd Deputy Chair 12,757 12,055 Marc-Alain Affolter Member 3,720 4,320 Roger Baillod Member 1,600 2,200 Dr. Georges Bindschedler Member 5,720 6,320 Barbara Egger-Jenzer Member 400 400 Dr. Eugen Marbach Member (until 09.05.2015) 3,000 n/a Dominique Gachoud Member (from 09.05.2015) n/a 250 Kurt Schär Member 1,000 1,000 Beatrice Simon-Jungi Member 1,000 1,600 Philippe Virdis Member (until 09.05.2015) 4,520 n/a Total 39,014 34,642

In 2015, the Members of the Board of Directors acquired a total of 4,800 shares in the scope of the BKW share purchase programme. (2014: 4,200 shares). The share-based payments from the purchase amount to CHF 40,000 (2014: CHF 21,000) and correspond to the benefit in fair value of the preferential purchase of BKW shares.

Members of the Group Executive Board

Number of shares 31.12.2014 31.12.2015 Dr. Suzanne Thoma CEO 7,333 13,493 Christophe Bossel Head of Networks 3,681 5,966 Dr. Monica Dell’Anna Head of Market (until 03.09.2015) 3,075 n/a Ronald Trächsel Head of Finance & Services 1,289 3,870 Hermann Ineichen Head of Production 6,112 8,693 Renato Sturani Head of Renewables & Efficiency 3,143 5,428 Total 24,633 37,450

Individual shares held by members of the Board of Directors and Group Executive Board are subject to a blocking period of up to three years. ANNUAL REPORT 2015 | Financial Statements of BKW AG 101

APPROPRIATION OF RETAINED EARNINGS Proposal to the General Meeting

CHF Profit carried forward 154,269,896 Net profit 100,809,009 Unappropriated retained earnings 255,078,905

The Board of Directors proposes that retained earnings be appropriated as follows:

CHF Dividend of CHF 1.60 per share entitled to a dividend 1 77,615,685 Balance carried forward 177,463,220 Total 255,078,905

1 Dividends are not paid on treasury shares of BKW AG. The number of shares that are entitled to receive a dividend at the time of preparation of the financial statements, amounts to 4,290,951. The last trading day on which a right to receive dividends is granted is 17 May. As of 18 May, the shares will be traded ex-dividend. Had all shares been entitled to receive a dividend, the dividend payment would have amounted to CHF 84,480,000 and the balance carried over would be CHF 170,598,905.

Subject to approval by the General Meeting, the following will be paid out:

CHF Dividend per share 1.60 Minus 35 % withholding tax 0.56 Net dividend 1.04

Bern, 11 March 2016

In the name of the Board of Directors Chairman of the Board Urs Gasche 102 ANNUAL REPORT 2015 | Financial Statements of BKW AG Report of the statutory auditor on the financial statements ANNUAL REPORT 2015 | Financial Statements of BKW AG 103 104 ANNUAL REPORT 2015 | Financial Statements of BKW AG ANNUAL REPORT 2015 Investor Information 106 ANNUAL REPORT 2015 | Investor Information

INVESTOR INFORMATION Important information on the share, bonds and financial calendar

Performance of the BKW share 31.12.2014 – 31.12.2015

25 31.12.2014 30.06.2015 31.12.2015

BKW registered Swiss Performance Index (indexed)

Performance of the stock markets in 2015 was heavily affected by the abolition by the Swiss National Bank (SNB) of the CHF/EUR exchange rate cap. The SNB’s announcement resulted in immediate losses on the financial markets. The BKW share also lost around 5 % in price. However, the initial negative reaction was gradually corrected and the share market recovered.

On 23 February, BKW indicated that its 2014 result would be significantly stronger than had previously anticipated. Both operating profit and net profit increased significantly compared with the previous year. The BKW share recorded significant price increases as a result. .

Following publication of the 2014 Financial Report on 19 March, with a detailed presentation of the strong financial result, the BKW share once again increased in value and outperformed the SPI by some margin. By the mid-year point, as a result of the dividend payment and in line with the slightly downward trend of the market as a whole, in terms of the SPI, the share price dropped slightly.

However, it rose once again in the third quarter. Alongside the successful acquisitions undertaken in this period, BKW presented a good half-year result at the beginning of September. BKW was able to offset practically the entire effect of lower electricity prices and the negative effects of the exchange rate.

In the fourth quarter, the share price was constant at CHF 37.00. The BKW share closed at CHF 38.00 on 31 December, a gratifyingly high gain of 29 % over the course of the year and significantly outperforming the SPI (just under + 3 %). ANNUAL REPORT 2015 | Investor Information 107

Listing The shares of BKW AG are listed on the main segment of the SIX Swiss Exchange. There is also a listing on the BX Bern Exchange.

Ticker symbol on SIX and BX BKW Securities number 13 029 366 ISIN code CH0130293662

Appropriation of retained earnings The Board of Directors proposes to the General Meeting a dividend of CHF 1.60 per share for the 2015 financial year. The dividend will be paid out on 20 May 2016.

Restrictions on share transferability The Company may refuse to register an acquirer of shares in the register of voting shareholders for the following reasons: a) If the acquisition results in a natural person, a legal entity or a partnership holding (directly or indirectly) more than 5 % of the entire share capital. The same restriction applies to legal entities, partnerships, groups of persons or joint ownerships that are bound by capital or voting rights, shared management or otherwise linked. Moreover, the restriction applies to all natural or legal persons or partnerships that act in concert to acquire shares; b) If the acquirer has not expressly declared that he has acquired the shares in his own name and on his own behalf.

Major shareholders

31.12.2014 31.12.2015 Canton of Bern 52.54 % 52.54 % Groupe E Ltd. 10.00 % 10.00 % E.ON SE 6.65 % 6.65 % Treasury shares 8.35 % 8.13 %

In the previous year, E.ON SE issued a convertible bond in the amount of EUR 113 million maturing in September 2018 that is convertible into BKW shares. The conversion price is EUR 32.21.

The proportion of shares held by the public (free float) is 22.7 %. The BKW share is listed on the Swiss Performance Index (SPI). 108 ANNUAL REPORT 2015 | Investor Information

Key figures per share

CHF 31.12.2014 31.12.2015 Result 5.96 5.29 Equity 50.28 51.05 Dividend 1.60 1.60 Dividend yield (in %) 1 5.4 4.2 Price/earnings ratio 1 4.9 7.2 Year-end price 29.45 38.00 Year high 33.75 38.95 Year low 28.25 26.70

1 Based on year-end price

Bonds At 31 December 2015, BKW had the following bonds outstanding:

Nominal amount Term Due ISIN code 1.875 % debenture bond CHF 150 million 2010 – 2018 15.10.2018 CH0117843596 3.375 % debenture bond CHF 350 million 2009 – 2019 29.07.2019 CH0103164577 3 % debenture bond CHF 200 million 2007 – 2022 27.04.2022 CH0030356718 2.5 % debenture bond CHF 300 million 2010 – 2030 15.10.2030 CH0117843745 0.125 % convertible bond CHF 163.4 million 2014 – 2020 30.09.2020 CH0253592742

The conversion price of the convertible bond issued in the previous year reduced slightly compared with the original value as a result of the dividend paid for 2014, and is now CHF 38.47. The convertible bond can be converted into around 4.2 million registered shares in BKW, which are covered by BKW’s stock of treasury shares. The bond will be repaid at the nominal value on 30 September 2020. So far no conversion rights have been exercised.

Financial Calendar General Meeting 13 May 2016 Ex-dividend date 18 May 2016 Dividend payment 20 May 2016 Publication of 2016 half-year results 6 September 2016

Contact: [email protected] ANNUAL REPORT 2015 | Investor Information 109 110 ANNUAL REPORT 2015 | Investor Information

Production Facts and Figures

Installed 2014 2015 Energy production, BKW BKW Change portion 1 BKW portion purchases purchases versus 2014 % MW GWh GWh % Own power plants and Group companies Hydroelectric plants Aarberg 100.0 15.0 82.9 84.7 2.2 Bannwil 100.0 27.0 146.7 130.5 – 11.0 Kallnach 100.0 8.1 64.3 54.4 – 15.4 Kandergrund 100.0 18.8 97.7 98.4 0.7 Mühleberg 100.0 45.0 165.9 154.5 – 6.9 Niederried-Radelfingen 100.0 15.0 77.4 74.4 – 3.9 Spiez 100.0 18.6 104.2 100.4 – 3.6 Simmentaler Kraftwerke AG 100.0 29.1 108.7 91.3 – 16.0 Elektrizitätswerk Grindelwald AG 100.0 1.4 7.4 6.0 – 18.9 EWR Energie AG (Schattenhalb 1) 100.0 0.0 8.1 0.0 – 100.0 Société des forces électriques de la Goule SA 100.0 5.2 27.1 19.7 – 27.3 Onyx Energie Produktion AG 100.0 20.0 88.4 82.5 – 6.7 Idroelettrica Lombarda S.r.l. 100.0 42.0 202.6 115.5 – 43.0 Total hydroelectric plants 245.2 1,181.4 1,012.3 – 14.3

Nuclear power plants Mühleberg 100.0 373.0 3,022.7 2,933.9 – 2.9

Fossil-fuel power plants Tamarete Energia S.r.l. 60.0 62.0 47.8 113.3 137.0

New renewable energy Photovoltaics Switzerland 100.0 1.5 1.9 1.8 – 5.3 Biomass Switzerland 100.0 1.4 21.8 19.9 – 8.7 Small hydro Switzerland 100.0 15.3 68.9 71.1 3.2 CHI.NA.CO S.r.l. 100.0 10.0 53.3 34.2 – 35.8 BKW Hydro Valle d’Aosta S.r.l. 100.0 8.0 35.5 30.2 – 14.9 Juvent SA 100.0 17.5 50.5 52.7 4.4 Fresnoy 100.0 19.3 0.0 13.9 Bockelwitz wind farm 100.0 15.0 16.3 20.5 25.8 BKW Holleben Wind GmbH 100.0 25.5 35.6 42.7 19.9 BKW Bippen Wind GmbH 100.0 27.6 42.9 45.3 5.6 BKW Dubener Platte Wind GmbH 100.0 40.0 62.9 71.1 13.0 BKW Landkern Wind GmbH 100.0 8.0 12.7 15.0 18.1 Wind Farm S.r.l. 100.0 41.4 54.0 47.7 – 11.7 Wind Farm Buglia S.r.l. 100.0 20.0 31.2 30.4 – 2.6 Wind International Italy S.r.l. 100.0 82.8 129.1 119.3 – 7.6 Volturino Wind S.r.l. 100.0 25.2 63.2 59.3 – 6.2 Green Castellaneta S.p.A. 100.0 56.0 124.8 126.9 1.7 Total new renewable energy 414.5 804.6 802.0 – 0.3

Total own power plants and Group companies 1,094.7 5,056.5 4,861.5 – 3.9

1 The energy portion may deviate from the capital shareholding due to special energy supply agreements. ANNUAL REPORT 2015 | Investor Information 111

Installed 2014 2015 Energy production, BKW BKW Change portion 1 BKW portion purchases purchases versus 2014 % MW GWh GWh % Holdings and purchasing rights Hydroelectric plants Bielersee Kraftwerke AG BIK 50.0 17.7 53.3 55.4 3.9 Officine idroelettriche di Blenio SA 12.0 50.0 129.1 134.4 4.1 Electra-Massa AG 16.1 54.8 83.0 111.9 34.8 Electricité de la Lienne SA 25.0 24.9 53.0 60.0 13.2 Engadiner Kraftwerke AG 29.7 121.8 484.1 435.0 – 10.1 Gommerkraftwerke AG 25.5 33.4 75.6 85.7 13.4 Grande Dixence SA 13.3 206.0 267.3 383.5 43.5 Kraftwerke Hinterrhein AG 7.6 50.0 128.2 121.7 – 5.1 Kraftwerke Mattmark AG 11.1 29.3 62.3 63.5 1.9 Forces Motrices de Mauvoisin SA 19.5 82.2 179.1 242.2 35.2 Kraftwerke Oberhasli AG 50.0 551.0 823.7 981.4 19.1 Kraftwerk Sanetsch AG (KWS) 50.0 9.0 18.4 19.4 5.4 Officine idroelettriche della Maggia SA 10.0 57.2 165.1 141.5 – 14.3 Aarewerke AG 10.0 4.0 21.5 11.6 – 46.0 Flumenthal 37.9 9.5 54.6 47.5 – 13.0 Société des Forces Motrices du Châtelot SA 11.7 4.6 9.2 8.3 – 9.8 Argessa AG 63.0 20.8 54.4 67.9 24.8 Total hydroelectric plants 1,326.3 2,661.9 2,970.9 11.6

Nuclear power plants Kernkraftwerk Leibstadt AG 14.7 171.0 1,390.0 1,263.9 – 9.1 Cattenom 3.0 155.0 1,060.7 1,040.8 – 1.9 Fessenheim 5.0 90.0 606.5 636.7 5.0 Total nuclear power plants 416.0 3,057.2 2,941.4 – 3.8

New renewable energy Mont-Soleil solar power plant 100.0 0.2 0.6 0.6 0.0

Fossil-fuel power plants E.ON Produzione Centrale Livorno Ferraris S.p.A. 25.0 200.0 420.4 793.7 88.8 GDF SUEZ Kraftwerk Wilhelmshaven GmbH & Co. KG 33.0 241.0 0.0 200.1 Total fossil-fuel power plants 441.0 420.4 993.8 136.4

Unmanaged energy from financial interests 39.4 52.5 62.9 19.8

Total holdings and purchasing rights 2,222.9 6,192.6 6,969.6 12.5 Total production including purchases 3,317.6 11,249.1 11,831.1 5.2

1 The energy portion may deviate from the capital shareholding due to special energy supply agreements. 112 ANNUAL REPORT 2015 | Investor Information ANNUAL REPORT 2015 | CORPORATE GOVERNANCE 113

ANNUAL REPORT 2015 Corporate Governance 114 ANNUAL REPORT 2015 | CORPORATE GOVERNANCE Corporate Governance

BKW’s Board of Directors and the Group Executive Board attribute great importance to good corporate governance in the interests of its shareholders and other stakeholders such as customers, public corporations and employees. In addition to the relevant provisions of Swiss Company Law, and the Ordinance against Excessive Compensation in Listed Stock Companies, the basic principles and rules relating to corporate governance at BKW are embodied in BKW’s articles of incorporation, organisational regulations, code of conduct and regulations governing the BKW Board Committees.

With the implementation and ongoing optimisation contained on pages 137 to 149. The information of these recognised corporate governance princi- disclosed in this report reflects the situation at ples, BKW seeks to guarantee the required level 31 December 2015. Any material changes that have of transparency and provide shareholders with the been agreed or have occurred between this date most comprehensive view of the Group, allowing and the printing of this report are listed in Note them to make investment decisions that are based 10. The articles of incorporation of BKW AG (www. on sound facts. Moreover, with a balanced com- bkw.ch/statutes), the Group Executive Board or- bination of management and controls, BKW also ganisational structure (www.bkw.ch/organisation) manages the company in a value-driven, sustain- and other useful information can be found on the able manner according to statutory requirements. BKW website. This also enhances our corporate value. Sustain- able corporate management is a high priority for BKW and is in line with the GRI Sustainability Reporting Guidelines.

The management structure of BKW is designed so that responsibilities are clearly assigned and unilateral concentration of powers and conflicts of interest are avoided. In line with this, the functions of Chairman and CEO are separate. In May 2015, Dominique Gachoud, General Director of Groupe E Ltd., was elected to the BKW Board of Directors. Groupe E Ltd. and BKW each hold a 10 % shareholding in the other company. Dominique Gachoud withdraws from all meetings of the BKW Board of Directors where a possible conflict of interest may arise. All members of the Board of Directors are independent and have no executive functions. All members were nominated individually for election to the Board of Directors at the General Meeting in May 2015. For many years, the Board of Directors has included both male and female members. Therefore, the Board of Directors also ensures the diversity of its membership.

The information below is presented in accordance with the current requirements of the corporate governance guidelines of SIX Swiss Exchange and is based on the Swiss Code of Best Practice for Corporate Governance 2014 produced by economiesuisse, the Swiss employers’ organisation. Remuneration of the top level management of the company is reported in the Remuneration Report ANNUAL REPORT 2015 | CORPORATE GOVERNANCE 115

1 Group structure and shareholders

1.1 Operational Group structure

Group Management Finance Production Renewables & Market Networks & Services Efficiency BKW Energy Ltd. BKW Deutschland GmbH antec group AG cc energie sa Arnold AG ––BKW Energie Dörpen ––ahochn AG ––Baumeler Leitungs- BKW Grid Switzer- C.D.N.E. S.p.A. Beteiligungs-GmbH ––ahochn AG, Rotkreuz bau AG land Ltd. Electra Italia S.p.A. ––STKW Energie Dörpen BEBAG Bioenergie ––Curea Elektro AG sol-E Suisse AG GmbH & Co. KG Bätterkinden AG Onyx Energie Dienste AG BKW Netzbeteili- ––STKW Energie Dörpen gung Ltd. Verwaltungs-GmbH Biomassekraftwerk ––BKW Energie Wilhelms- Otelfingen AG Elektrizitätswerk haven Beteiligungs-GmbH BKW Bippen Wind GmbH Grindelwald AG ––KAE Kraftwerks- & BKW Borkum West II EWR Energie AG Anlagen-Engineering GmbH Beteiligungs-GmbH IWAG Ingenieure AG BKW France SAS BKW Dubener Platte Onyx Energie ––BKW Hydro Allevard SAS Wind GmbH Mittelland AG BKW Italia S.p.A. BKW Erneuerbare ––Onyx Energie Netze AG ––BKW Hydro Valle d’Aosta Energien GmbH Société des forces élec- S.r.l. triques de la Goule SA ––CHI.NA.CO S.r.l. BKW Holleben Wind GmbH ––Idroelettrica Lombarda BKW ISP AG S.r.l. ––A. Dietrich Kälte Klima ––Tamarete Energia S.r.l. Lüftung AG BKW Wallis AG ––BKW ISP Gebäude- technik AG Elektrizitätswerke Wynau AG ––Cantoni Haustechnik AG Ingenieurgemeinschaft ––EES Jäggi-Bigler Inc. DI Anton Bilek + ––Elektro Aebi AG DI Gunter Krischner GmbH ––Elektro Feuz AG Kraftwerk Gohlhaus AG ––Hertig Haustechnik AG ––inelectro sa Kraftwerk Lauenen AG ––Karl Waechter AG Kraftwerk Spiggebach AG ––Kasteler-Guggisberg AG Kraftwerk Utzenstorf AG ––Lutz Bodenmüller AG ––Marzolo & Partner AG Kraftwerke Fermelbach AG ––Neukom Installa- Kraftwerke Kander Alp AG tionen AG ––Schönenberger & Part- Kraftwerke Milibach AG ner AG Sanitäre Anlagen Kraftwerke Ragn d’Err AG ––Weber AG, Stäfa Onyx Energie Produktion AG BKW Landkern Wind Simmentaler Kraftwerke AG GmbH TID Technische Informa- BKW Wind Italia S.r.l. tionen & Dienstleistungen ––Green Castellaneta S.p.A. P. Tschannen GmbH BKW Wind Service GmbH TW Energie AG Gesellschaft Mont-Soleil Holzwärme Grindelwald AG Juvent SA Parc Eolien de Fresnoy Brancourt SAS Regionaler Wärmever- bund AG Heimberg- Steffisburg (REWAG) Solare Datensysteme GmbH ––Solar Data Systems Inc. Volturino Wind S.r.l. Wind Farm S.r.l. Wind Farm Buglia S.r.l. Wind International Italy S.r.l. 116 ANNUAL REPORT 2015 | CORPORATE GOVERNANCE

Listed Group companies Scope of consolidation of the BKW Group BKW AG has its headquarters in Bern, and has With the exception of BKW itself, BKW’s consol- been listed on the SIX Swiss Exchange and the BX idation group only includes companies that are Berne eXchange since 12 December 2011. On 31 not listed separately on the stock exchange. The December 2015, BKW’s stock market capitalisation individual holdings of BKW in companies that are amounted to CHF 1,843.3 million. fully consolidated in the Consolidated Financial Statements are listed on pages 88 to 91. In all About the BKW share cases, the holding corresponds to the percentage Securities code BKW of shares and voting rights. Securities number 13.029.366 ISIN CH0130293662 Trading currency CHF Type of security Registered share

1.2 Major shareholders Holding Holding in % at 31.12.2014 at 31.12.2015 Canton of Bern 52.54 52.54 Groupe E Ltd. 10.00 10.00 E.ON SE 6.65 6.65 BKW AG and Group companies 8.35 8.13

No other shareholders registered more than 3 % of 2 Capital structure the voting rights of BKW during the reporting year in accordance with Article 20 of the Federal Stock 2.1 Capital Exchanges and Securities Act (BEHG). The share capital of BKW as of 31 December 2015 No disclosures were made in compliance with the amounts to CHF 132,000,000.00 and is divided into Stock Exchanges Act for the reporting year. 52,800,000 fully paid-up registered shares, each with a par value of CHF 2.50. The Company has not 1.3 Cross shareholdings issued any participation certificates or dividend rights certificates. There is cross-shareholding between BKW and Groupe E Ltd. BKW holds a 10 % share of voting 2.2 Authorised and conditional share capital rights and share capital in Groupe E Ltd. (687,500 shares) and Groupe E Ltd. has a 10 % share of As of 31 December 2015, BKW has no authorised voting rights and share capital share in BKW share capital or conditional share capital. (5,280,000 shares). ANNUAL REPORT 2015 | CORPORATE GOVERNANCE 117

2.3 Changes in equity for the last three reporting years Statutory Statutory Voluntary Total Share capital profit profit Treasury shareholders’ CHF thousands capital reserves reserves reserves shares equity At 1 January 2013 1 132,000 26,129 1,154,961 69,945 0 1,383,035 Dividend payment – 63,360 – 63,360 Net profit 2013 64,710 64,710 At 31 December 2013 2 132,000 26,129 1,154,961 71,295 0 1,384,385 Dividend payment – 63,360 – 63,360 Addition of treasury shares – 127,581 – 127,581 Net profit 2014 223,883 223,883 At 31 December 2014 3 132,000 26,129 1,154,961 231,818 – 127,581 1,417,327 Dividend payment – 77,548 – 77,548 Sale of treasury shares 1,394 1,394 Net profit 2015 100,809 100,809 At 31 December 2015 132,000 26,129 1,154,961 255,079 – 126,187 1,441,982

1 of which reserves for treasury shares CHF 359,845 thousand 2 of which reserves for treasury shares CHF 315,523 thousand 3 In the reporting year, BKW applied the financial reporting legislation that came into effect on 1 January 2013 for the first time. The previous year’s figures have been adjusted to meet the new classification rules in order to ensure comparability. Treasury shares are now reported as a negative item under equity. Reserves for treasury shares have been reversed accordingly.

2.4 Shares and participation certificates –– If the acquisition results in a natural person, a legal entity or a partnership holding (directly All 52,800,000 registered shares in BKW with a par or indirectly) more than 5 % of the entire share value of CHF 2.50 each are fully paid up. All shares capital. The same restriction applies to legal carry equal voting rights. Every share represented entities, partnerships, groups of persons or joint at the General Meeting is entitled to one vote. The ownerships that are interrelated or otherwise company does not print or provide certificates for linked and/or act in concert to acquire shares. registered shares. However, any shareholder may –– If the acquirer has not expressly declared that request that certification of their shareholding be he has acquired the shares in his own name and issued free of charge. on his own behalf.

BKW has not issued any participation certificates. Nominees may be registered, but these shares carry no voting rights. 2.5 Dividend rights certificates 2.7 Convertible securities and options BKW has not issued any dividend rights certificates. In September 2014, BKW completed a full issue of a convertible bond amounting to CHF 163 million 2.6 Restrictions on transferability and nominee to run from 30 September 2014 to 30 September registration 2020, with an interest rate of 0.125 % per annum. The conversion price was CHF 38.90, which equat- Registered BKW shares can only be transferred by ed to a conversion rate of 128.53755 shares per assignment or according to the provisions of the bond at a nominal value of CHF 5,000.00 per bond. Swiss Intermediated Securities Act. BKW must be Fractions are paid out in cash. The conversion price notified of the assignment. The Company may re- and conversion rate will be adjusted if a dividend fuse to register an acquirer of shares in the share of more than CHF 1.20 per share is paid out. The register for the following reasons: General Meeting of BKW AG on 8 May 2015 agreed 118 ANNUAL REPORT 2015 | CORPORATE GOVERNANCE

to the payment of a dividend of CHF 1.60 per 3 Board of Directors share. Therefore, in accordance with Section 6 (a) (iv) of the bond’s terms of issue, the conversion According to the articles of incorporation, the price and conversion rate were adjusted on 12 Board of Directors shall consist of between 7 and May 2015 to CHF 38.47 and 129.97141 shares per 10 members. There are currently ten members bond respectively. The convertible bond can be who are all non-executive and independent. In converted into around 4.2 million registered shares May 2015, Dominique Gachoud, General Director in BKW, which are guaranteed by BKW’s stock of of Groupe E Ltd., was elected to the BKW Board of treasury shares. The conversion period runs from Directors. Groupe E Ltd. and BKW each hold a 10 % 10 November 2014 to 20 September 2020. The shareholding in the other company. Dominique bond will be repaid at the nominal value on 30 Gachoud withdraws from all meetings of the BKW September 2020. So far, no conversion rights have Board of Directors where a possible conflict of been exercised. interest may arise. This means that no member of the Board of Directors is also a member of the BKW The company has not issued any options. Group Executive Board or of the management body of any Group company. Two members are appointed to the Board of Directors by the Canton of Bern in accordance with Article 762 of the Swiss Code of Obligations (OR) and Article 19 of the articles of incorporation.

Year of Composition birth Nationality Role Held office since Urs Gasche1 1955 Switzerland Chairman 2011 (2002*) Deputy Chair of the Hartmut Geldmacher 1955 Germany Board 2011 (2009*) 2nd Deputy Chair of the Kurt Rohrbach 1955 Switzerland Board 2012 Marc-Alain Affolter2 1952 Switzerland Member 2011 (2007*) Dr. Georges Bindschedler1 1953 Switzerland Member 2011 (2007*) Kurt Schär2 1965 Switzerland Member 2012 Roger Baillod2 1958 Switzerland Member 2013 Dominique Gachoud 1954 Switzerland Member 2015 Barbara Egger-Jenzer1,3 1956 Switzerland Member 2011 (2002*) Beatrice Simon-Jungi3 1960 Switzerland Member 2011 (2010*)

1 Member of the Remuneration and Nomination Committee 2 Member of the Audit and Risk Management Committee 3 Representative of the Canton of Bern * This date is the year of election to the Board of Directors of BKW FMB Energy Ltd. before transition to the holding structure.

3.1 Members Professional background, career Since 2011 Member of the Swiss National Council Urs Gasche (1955, CH) Since 2010 Partner in the attorneys-at-law and Lawyer business consultants firm, Mark- Board member since 2011 (2002*) walder Emmenegger (formerly Mark- Chairman of the Board, Chairman of the walder & Partner), Lawyer without Nomination and Compensation Committee forensic activity, mainly working on ANNUAL REPORT 2015 | CORPORATE GOVERNANCE 119

the Boards of companies, founda- Seats on the Boards of for-profit companies tions and associations in the energy –– Member of the Supervisory Board and Chairman sector (BKW), in the health sector of the Accounts, Finance and Audit Committee and in cultural institutions of Bayernwerk AG, Regensburg 2002–2010 Finance Minister of the Canton of –– Chairman of the Supervisory Board of Rhein- Bern, Member of the Executive Main-Donau AG, Munich Council and Representative of the –– Member of the Supervisory Board and Chairman Canton of Bern on the Board of of the Accounts, Finance and Audit Committee Directors of BKW FMB Energy Ltd. of Hansewerk AG, Quickborn

Seats on the Boards of listed companies Seats on the Boards of other legal entities None None

Seats on the Boards of for-profit companies Seats on the Boards of industry associations and non-profit –– Member of the Board of Kumagra AG, Bern organisations –– Member of the Board of thunerSeespiele AG, Chairman of the Board of the Bayerische Thun EliteAkademie foundation, Munich

Seats on the Boards of other legal entities Other major activities –– Chairman of the Board of the Schloss Jegenstorf None foundation, Jegenstorf –– Member of the Board of the Schweizerisches Alpines Museum foundation, Bern Kurt Rohrbach (1955, CH) Degree in Electrical Engineering Seats on the Boards of industry associations and non-profit Board member since 2012, Deputy Chair of the organisations Board –– Chairman of the Swiss medical technology industry association (FASMED), Muri bei Bern Professional background, career –– Chairman of the Quality Alliance Eco-Drive asso- 1980–2015 Variety of roles at BKW ciation, Zurich 2000–2012 CEO and Chairman of the Group Executive Board Other major activities Member of the Swiss National Council Seats on the Boards of listed companies None

Hartmut Geldmacher (1955, D) Seats on the Boards of for-profit companies Degree in Business Studies Member of the Board of Groupe E Ltd., Board member since 2011 (2009*), Deputy Chair of Granges-Paccot the Board Seats on the Boards of other legal entities Professional background, career –– Chairman of the Association of Swiss Electricity Since 2011 Independent businessman Companies (VSE), Aarau 2002–2011 Member of the Board of Manage- –– Director of Schweizer Kurse für Unternehmens- ment and Employee Relations Direc- führung (SKU), Zurich tor at E.ON Energie AG, Munich –– Director of economiesuisse, Zurich 1980–2002 Various management positions at –– Director of eurelectric, Brussels E.ON Energie AG and the then Preus- senElektra AG, Hanover Seats on the Boards of industry associations and non-profit organisations

Seats on the Boards of listed companies –– Member of the Board of the Canton of Bern None Trade and Industry Association, Bern 120 ANNUAL REPORT 2015 | CORPORATE GOVERNANCE

–– Deputy Chair of the Swiss Energy Council, Bern Prior to 1985 Development engineer at various –– Managing Director and Joint Owner of Devaux & companies Rohrbach GmbH, Büren an der Aare Seats on the Boards of listed companies Other major activities None None Seats on the Boards of for-profit companies –– Chairman of the Board of Affolter Holding SA, Barbara Egger-Jenzer (1956, CH) Malleray Teacher, lawyer –– Chairman of the Board of Affolter Technolo- Board member since 2011 (2002*), Deputy Chair gies SA, Malleray of the Nomination and Compensation Committee, –– Member of the Board of Esco SA, Representative of the Canton of Berne Les Geneveys-Coffrane –– Member of the Board of AFManagement SA, Professional background, career Malleray Since 2002 Member of the Executive Council –– Member of the Board of Affolter Pignons SA, and Head of the Department of Malleray Construction, Transport and Energy of the Canton of Bern Seats on the Boards of other legal entities 1987–2002 Independent lawyer in Bern and None Canton of Bern Ombudsman for age and residential matters Seats on the Boards of industry associations and non-profit 1976–1979 Primary school teacher in Mätten- organisations bach and Rohrbach None

Seats on the Boards of listed companies Other major activities None None

Seats on the Boards of for-profit companies –– Member of the Board of BLS AG, Bern Georges Bindschedler (1953, CH) –– Member of the Board of BLS Netz AG, Bern Dr. iur., lawyer and notary Board member since 2011 (2007*), Member of the Seats on the Boards of other legal entities Nomination and Compensation Committee None Professional background, career Seats on the Boards of industry associations and non-profit Since 2006 Delegate of the Board of Directors of organisations merz+benteli ag, Niederwangen None 2002–2006 Professional director and independent entrepreneur Other major activities 1985–2002 Delegate of the Board of Directors Executive Councillor of the Canton of Bern and CEO of von Graffenried Holding AG

Marc-Alain Affolter, (1952, CH) Seats on the Boards of listed companies High-school engineering diploma None Board member since 2011 (2007*), Member of the Audit and Risk Management Committee Seats on the Boards of for-profit companies –– Vice Chairman of the Board of Habegger Professional background, career Maschinenfabrik AG, Thun Since 1985 CEO of the Affolter –– Vice Chairman of the Board of Helvetic Holding SA group, Malleray Estates AG, Bern ANNUAL REPORT 2015 | CORPORATE GOVERNANCE 121

–– Chairman of the Board of Lüthi Holding AG, Beatrice Simon-Jungi (1960, CH) Burgdorf Degree in commerce –– Vice Chairman of the Board of Remaco AG and Board member since 2011 (2010*), Representative Member of the Board of Remaco Wealth Man- of the Canton of Berne agement AG, both in Basel (Group structure) –– Chairman of the Board of Micamation AG, Däl- Professional background, career likon, and QBIS AG, Wallisellen (Group structure) Since 2010 Finance Minister of the Canton of –– Member of the Board of Berakom AG, Konolfin- Bern and Member of the Executive gen, and of Ursella AG, Hergiswil (NW) (Group Council structure) 2006–2010 Member of the Bern cantonal parlia- –– Member of the Board of Arton Real Estates AG, ment Zurich 2003–2010 Mayor of Seedorf 1995–2003 Member of Seedorf municipal Seats on the Boards of other legal entities council –– Member of the Board of PK-Aetas, BVG foundation, Bern Seats on the Boards of listed companies –– Member of the Board of the UniBern research None foundation, Bern –– Member of the Board of the Swiss Heart Foun- Seats on the Boards of for-profit companies dation, Bern Member of the Board of Schweizer Salinen AG, –– Chairman of the Board of the Werner and Hedy Pratteln Berger-Janser foundation for cancer research, Bern Seats on the Boards of other legal entities –– Vice Chairman of the Steinmann foundation Member of the Board of the Kulturhalle Lyss foun- Schloss Wyl, Schlosswil dation, Lyss –– Member of the Board of the “zum Delphin” foundation, Zurich Seats on the Boards of industry associations and non-profit –– Vice Chairman of the Schärpeter mutual associ- organisations ation, Bern None

Seats on the Boards of industry associations and non-profit Other major activities organisations Executive Councillor of the Canton of Bern –– President of the University Board of Bern Uni- versity of Applied Sciences until the end of 2015 –– Member of the Board of FUP Freiheit, Unterne- Kurt Schär (1965, CH) hmertum, Publizistik foundation, Bern, Strate- Radio/TV electronics engineer, marketing planner giedialog 21 foundation, Zurich, and Schweizer and Board of Swiss Board School Monatshefte foundation, Zurich (Group struc- Board member since 2012, Deputy to the Chair of ture) the Audit and Risk Management Committee –– Member of the Board of the Mitarbeiterbeteili- gung bei der Internationalen Treuhand AG foun- Professional background, career dation, Basel Since 2014 Owner of Sunnsite Management AG –– Vice Chairman of the Board of the MeinungsFrei- 2001–2014 CEO of Biketec AG, manufacturer of heit und MedienVielfalt foundation, Ber the Flyer electric bicycle in Huttwil 1999–2000 VP Sales & Marketing at Hélio Cour- Other major activities voisier None Prior to 1999 Product management and sales management functions, including in the telematics section of Contact Systems Ltd. 122 ANNUAL REPORT 2015 | CORPORATE GOVERNANCE

Seats on the Boards of listed companies Seats on the Boards of listed companies None None

Seats on the Boards of for-profit companies Seats on the Boards of for-profit companies –– Chairman of the Board of Emmental Tours AG, Member of the Board of Migros-Genossen- Burgdorf schafts-Bund in Zurich –– Chairman of the Board of Herzroute AG, Burgdorf –– Chairman of the Board of Härzdörfli AG, Madiswil Seats on the Boards of industry associations and non-profit –– Vice Chairman of the Board of Striebig AG, organisations Lucerne None –– Member of the Board of Stöcklin Möbel AG, Aesch (BL) Seats on the Boards of industry associations and non-profit –– Chairman of the Board of Sorglos Design AG, organisations Luthern None –– Member of the Board of IE Engineering Group AG, Zurich Other major activities –– Chairman of the Board of Brau AG Langenthal, None Langenthal

Seats on the Boards of other legal entities Dominique Gachoud (1954, CH) –– Member of the Board of the WBM (workplace Degree in electrical engineering for disabled persons) foundation, Madiswil Member of the Board of Directors since 2015 –– Member of the Board of the Pension Fund Foundation of the company Striebig AG, Lucerne Professional background, career –– Member of the Board of the Risiko-Dialog Since 2012 Member of the Board of foundation St. Gallen Groupe E Ltd. –– Chairman of the Board of the Taunerhaus 2005–2012 Director of Energy Sales at Roggwil foundation, Roggwil Groupe E Ltd. 2000–2004 Director of Energy Sales at EEF, then Seats on the Boards of industry associations and non-profit EEF and ENSA (Electricité organisations Neuchâteloise SA) None Prior to 2005 Various roles in electricity companies in the Canton of Fribourg Other major activities Member of the Board of the Green Liberal Party of Seats on the Boards of listed companies the Canton of Bern None

Seats on the Boards of for-profit companies Roger Baillod (1958, CH) –– Chairman of the Board of Groupe E Celsius Ltd., Degrees in business studies and auditing Fribourg Board member since 2013, Chair of the Audit and –– Chairman of the Board of Groupe E Connect SA, Risk Management Committee Granges-Paccot –– Chairman of the Board of SACAO SA, Givisiez, Professional background, career Givisiez Since 1996 Chief Financial Officer of Bucher –– Member of the Board of Gaznat SA, Vevey Industries AG in Niederweningen, –– Member of the Board of Unigaz SA, Givisiez Zurich –– Member of the Board of Fingaz SA, Vevey 1993–1996 Member of the management of two –– Member of the Board of Petrosvibri SA, Vevey * This is the year of industrial companies –– Member of the Board of Groupe E Greenwatt SA, entry to the Board of BKW FMB Energy Ltd. 1984–1993 Auditor and consultant at ATAG Ernst Granges-Paccot before transition to & Young AG in Zurich and St. Gallen the holding structure. ANNUAL REPORT 2015 | CORPORATE GOVERNANCE 123

Seats on the Boards of other legal entities total number of such mandates per member shall Vice Chairman of the Association of Swiss Electric- be limited to 10. ity Companies (VSE), Aarau Multiple mandates held within a single Group are Seats on the Boards of industry associations and non-profit counted as one mandate. In justified cases, the organisations Board of Directors may also grant exceptions for –– Chairman of the regioGrid association of canton- a transitional period of no more than 6 months in al and regional energy utilities, Aarau each case for no more than two additional man- –– Member of the Cantonal Energy Commission of dates. the Canton of Fribourg –– Member of the Board of the foundation for 3.3 Election and term of office energy-efficient public buildings of the Canton of Fribourg With the exception of the two representatives appointed by the Canton of Bern, the Members of Other major activities the Board of Directors are elected individually by None the General Meeting.

Retirements and resignations during the reporting period The term of office for Members of the Board of Philippe Virdis and Dr. Eugen Marbach both retired Directors elected by the General Meeting shall be as members of the Board of Directors on expiry one year and shall end at the conclusion of the of their term of office at the end of the General next General Meeting. Members may be re-elected Meeting on 8 May 2015. Mr Virdis previously rep- subject to an age limit of 70 years. The term of of- resented the BKW shareholder Groupe E Ltd. The fice for Members appointed by the Canton of Bern General Meeting elected Dominique Gachoud as under the terms of article 762 of the Swiss Code Mr Virdis’ replacement. of Obligations (OR), is determined by the Executive Council. 3.2 Statutory provisions on the number of permitted activities The Chairman of the Board of Directors and Mem- bers of the Remuneration and Nomination Com- According to Article 21 of the articles of incorpora- mittee are also elected by the General Meeting. tion, Members of the Board of Directors may hold No provisions which deviate from the statutory no more than 10 senior managerial and governing provisions on the nomination of the Chairman, the body mandates in for-profit companies outside Members of the Remuneration and Nomination of the BKW Group, no more than 5 of which may Committee or the independent proxy are permitted be stock-exchange listed companies, and no more in the articles of incorporation. than 10 mandates with other legal entities such as foundations and associations that are required 3.4 Internal organisation to be entered in the commercial register. Man- dates with companies that are controlled directly Division of roles in the Board of Directors or indirectly by the Company are not included in According to Swiss company law and article 18 of this numerical limitation. Seats on the Board of the articles of incorporation, the Board of Direc- industry associations and non-profit organisations tors is responsible for overall management of the are not counted, provided that the total number company and supervision of its corporate bodies. of mandates per member does not exceed 10. It decides on all matters that are not delegated Mandates in senior management and governing to other corporate bodies, either by law or by the bodies of companies and legal entities in which organisational regulations as defined in article 20 the Company is directly or indirectly involved, or of the articles of incorporation. mandates that are taken up on the instruction of the Company, are also not included. However, the 124 ANNUAL REPORT 2015 | CORPORATE GOVERNANCE

The Board of Directors acts as a single body. In The CEO and other members of the Group Exec- addition to the statutory standing committees, it utive Board participate in each meeting of the may also create further committees of Members Board of Directors in an advisory capacity, unless and delegate further activities to these in separate instructed otherwise by the Chairman of the regulations or by modifying existing regulations. Board of Directors. Senior company management, members of the BKW Audit Department and other The Board of Directors decides as a collective experts may also be invited to the meetings in an body. Its members have no personal authority in advisory capacity. The secretary of the Board of respect of the company and therefore cannot issue Directors, Fabian Stadler, attends the meetings of instructions except as decided by the Board of the Board of Directors. Directors and the organisational regulations or the committee regulations. Committees The Board of Directors may decide to delegate The internal organisational structure of the Board some of its activities and responsibilities to com- of Directors is laid down in the articles of incor- mittees from among its own members. The Board poration and the organisational regulations. No of Directors is supported by two standing commit- special functions are defined other than Chairman tees, the Audit and Risk Management Committee and the two Deputy Chairs. The Secretary need not and the Remuneration and Nomination Committee. be a member of the Board. The Board of Directors may also establish ad hoc committees at any time for matters such as major The Board of Directors adopts its resolutions at investments, alliances and cooperations. meetings and in telephone or video conferences. It is quorate when the majority of its members The functions, organisation and responsibilities of are present at the meeting or participating in the the Audit and Risk Management Committee and telephone or video conference. Resolutions are the Nomination and Compensation Committee are adopted by a simple majority of members. In case defined in the relevant detailed directives author- of parity of votes, the Chairman shall have a cast- ised by the Board of Directors. In the case of ad ing vote. Minutes shall be taken of the discussions hoc committees, the Board of Directors will elect and resolutions. The minutes shall be approved by the members from among its own members at the the Chairman before being distributed to the other first meeting following the General Meeting. members of the Board, and being accepted at the next meeting of the Board of Directors. Audit and Risk Management Committee The Audit and Risk Management Committee is The Board of Directors shall meet as often as busi- composed of three members elected by the Board ness requires; in general there are six meetings of Directors. The Chairman of the Audit and Risk per year. The dates of the ordinary meetings shall Management Committee is also elected by the be agreed at an early stage so that all members Board of Directors, while the Deputy Chairman is may attend in person. Moreover, the Chairman of elected by the Audit and Risk Management Com- the Board of Directors or the Deputy Chair in a mittee. representative capacity shall convene meetings of the Board of Directors whenever business dictates. Members of the Audit and Risk Management In addition, any member may ask the Chairman Committee of the Board to convene a meeting by submitting their reasons in writing. Prior to each Board meet- Roger Baillod Member of the Board of Direc- ing, the members of the Board of Directors shall tors, Chairman receive the documents that allow them to prepare Kurt Schär Member of the Board of Direc- for the items on the agenda. In 2015, seven meet- tors, Deputy Chairman ings were held in the presence of the CEO and the Marc-Alain Affolter Member of the Board of Direc- tors, Member other members of the Group Executive Board. ANNUAL REPORT 2015 | CORPORATE GOVERNANCE 125

The Audit and Risk Management Committee and Tax, and the Head of Internal Audit, as well supports the Board of Directors in supervising the as one or two representatives of the external financial management of the company. In particu- auditor. If required, the Chairman may call upon lar, it assesses the quality of the accounting and further members of the Group Executive Board, internal control system and proposes the appropri- the extended Group Executive Board, senior man- ate decisions to the Board of Directors. agement or external experts to attend and provide information. Role –– Discussion concerning the consolidated financial The Audit and Risk Management Committee is statements and the half-yearly consolidated authorised to negotiate and adopt resolutions financial statements with the internal and ex- provided that a majority of its members are pres- ternal auditors ent; resolutions are adopted by simple majority –– Oversight of the subordinate internal auditor of votes. In case of parity of votes, the Chairman and assessment of the activities of the external shall have a casting vote. The regulations of the auditor and its collaboration with the internal Audit and Risk Management Committee stipulate auditor. that at least four ordinary meetings should be –– Preparation for the appointment or discharge held per year. of the external auditor and the Head of Internal Audit, for submission to the Board of Directors. The Committee convened three times during the –– Assessment of the quality of accounting and fi- 2015 financial year. No external consultants were nancial reporting to the Board of Directors based engaged. on an assessment by the internal and external auditors. Remuneration and Nomination Committee –– Assessment of the organisation and effective- In accordance with Article 24 of the articles of ness of the internal control system. incorporation, the Remuneration and Nomination –– Assessment of compliance and the associated Committee comprises three members who are each organisational structure. elected from the Board of Directors by the General –– Assessment of the risk situation in the context Meeting for a term of one year. These members of the financial statements, the budget and me- may be re-elected. The Remuneration and Nomina- dium-term planning of the Board of Directors. tion Committee decides how to organise all other –– Regular and timely reporting to the Board of matters regarding its operation. Directors on the Committee’s activities and results. Members of the Remuneration and Nomination Committee Responsibilities –– Authorisation of accounts involving credit Urs Gasche Chairman of the Board of approved by the Board of Directors, with the Directors, Chairman proviso that any extraordinary credit overdrafts Barbara Egger-Jenzer Member of the Board of Direc- are reported to the Board of Directors. tors, Deputy Chairman –– Awarding of audit contracts. Georges Bindschedler Member of the Board of Direc- tors, Member –– Fostering of direct contact through the Chair- man and members of the Committee with the internal and external auditors and with the CEO The Remuneration and Nomination Committee and CFO. deals with developing principles for the selection –– Setting the amount of compensation paid to the of candidates for the Board of Directors and the Head of Internal Auditing and of the external Group Executive Board, and, in particular, at top auditor. corporate level, with the remuneration strategy and performance targets and criteria of the BKW Meetings of the Audit and Risk Management Group. It assists the Board of Directors in estab- Committee are normally attended by the CEO, the lishing and reviewing the remuneration system CFO, the Head of Corporate Controlling, Accounting and remuneration principles, and in preparing the 126 ANNUAL REPORT 2015 | CORPORATE GOVERNANCE

proposals to the General Meeting in respect of With responsibility for the operational manage- the total amount of remuneration to be paid to ment of the Group, the CEO represents the Group the Board of Directors and the Group Executive to third parties. Board. The Remuneration and Nomination Com- mittee submits motions to the Board of Directors The Group Executive Board consists of the CEO in respect of all transactions negotiated under its and the five division heads of the BKW Group. De- responsibility. cisions of the Group Executive Board are made by the CEO in consultation with the other members of The role and responsibilities of the Remuneration the Group Executive Board. The other members of and Nomination Committee are described on pages the Group Executive Board have a right to a voice 137 to 149 of the Remuneration Report. and may submit motions. The Group Executive The CEO participates in the meetings of the Remu- Board generally met every two weeks during the neration and Nomination Committee in an advisory 2015 financial year. Subject to the authority of capacity and has the right to submit motions. the General Meeting, the Board of Directors and The CEO does not attend meetings during which the Board Committees, the Group Executive Board her own remuneration and/or performance are supports the CEO in her responsibility for the discussed. If required, the Chairman may call upon operational management of the BKW Group. The further members of the Group Executive Board, business divisions are managed directly by their the extended Group Executive Board, or exter- respective division heads. The Group Executive nal experts to attend and provide information. Board may delegate tasks and authorisations The Remuneration and Nomination Committee within its remit. It also performs preparatory work is authorised to negotiate and adopt resolutions on matters that are within the remit of official provided that a majority of its members are pres- bodies at a higher level. ent; resolutions are adopted by simple majority of votes. In case of parity of votes, the Chairman On 8 May 2015, the Board of Directors issued a shall have a casting vote. new set of organisational regulations that have been adjusted to meet the requirements of the Or- According to its regulations, the Remuneration and dinance against Excessive Compensation in Listed Nomination Committee meets as often as business Stock Corporations (VegüV) and the new articles requires, however at least three times a year. Two of incorporation. In this respect, the role of the meetings were held during the 2015 financial year. Board of Directors has been strengthened, while reflecting the strategy and new corporate organi- 3.5 Competence regulations sational structure and reducing the complexity of the previous regulations. The Board of Directors is responsible according to law for the overall management and supervision Competences of the Board of Directors of the BKW Group. In accordance with Article 716a In addition to its statutory duties, and the busi- para. 1 of the Swiss Code of Obligations (OR), this ness reserved to it in the articles of incorporation, responsibility is both non-transferable and inalien- the Board of Directors has the following particular able. In addition, the Board of Directors is author- roles and competences: ised to adopt a resolution on all matters that have not been reserved for the General Meeting by law –– Definition of the raison d’être or in the articles of incorporation. –– Definition of the overarching company strategy –– Approval of highly strategic business, based on Pursuant to article 20 of the articles of incorpo- the raison d’être and potential economic con- ration, the Board of Directors delegates the full sequences, or of individual projects that could operational business management to the CEO and foreseeably have significant negative conse- defines her responsibilities in the organisational quences for the public image of BKW regulations. The CEO is the Chairman of the Group –– Approval of business that is not planned for in Executive Board and is supported by its members. the budget or medium-term planning, where BKW’s investment exceeds an amount of CHF 25 million ANNUAL REPORT 2015 | CORPORATE GOVERNANCE 127

–– Approval of the expansion of geographical cover- the Group Executive Board within the context of age into new countries the instructions of the Board of Directors –– Approval of the legal organisation and top-level –– Appointment of other employees of the BKW management structure (Group Executive Board) Group, particularly the Heads of Business Units –– Approval of financial matters such as budgets for their areas of responsibility, as members of and planning, financial statements, the BKW the extended Group Executive Board. Annual Report and accounting standards, and –– Management of the Group Executive Board and establishing the BKW Group’s financing and personnel under the CEO investment policy –– Creation of the performance assessment and –– Approval of the principles for operation of the preparation of the remuneration review and as- internal control system and risk management of sessment for the members of the Group Execu- the BKW Group, and assessment of the signifi- tive Board to be submitted to the Remuneration cant risks and Nomination Committee –– Ensuring compliance with applicable standards –– Supervision of the Group Executive Board and creation of suitable supervisory bodies to ensure Competences of the CEO that the company remains on target to reach The CEO has the following particular roles and the defined objectives, meets basic commercial competences: requirements and acts in accordance with the measures adopted by the Board of Directors –– Integration of company strategy and operational –– Coordinating between the Group Executive business management by: Board and Board of Directors to ensure that the (I) Ensuring the commercial success of the com- Board of Directors is provided with accurate pany in the context of the overall economic information at an early stage and industry conditions –– Ensuring compliance with the raison d’être, (II) Developing the main aspects of the imple- regulations and codes of conduct, and with mentation of the overall company strategy, applicable requirements of legislation and the including financing, for the attention of the articles of incorporation Board of Directors –– Representing the company to employees and (III) Ensuring the strategic direction set by the third parties, in particular ensuring effective Board of Directors communication with shareholders and stake- (IV) Leading the operational management of the holders, including representatives of govern- company ments, regulators and organisations (V) Reporting on the success of highly strategic –– Supporting the Chairman in his role of leading business transactions that have been au- the Board of Directors and preparing for meet- thorised by the Board of Directors, in general ings of the Board of Directors around two years after their approval –– Implementation of the decisions of the Board of Directors and its committees –– Oral reporting to the Board of Directors about the day-to-day business and important events The CEO has delegated her roles and competenc- of the BKW Group, and about any measures es to qualified subordinate positions that she taken, unless requested by the Board of Direc- instructs and monitors accordingly. tors to provide written reports. In the event of extraordinary events, the CEO shall inform Responsibilities of the Group Executive Board the Chairman of the Board of Directors without The Group Executive Board has the following par- delay ticular roles and competences: –– Preparation of the financial plans of the company and responsibility for the overall financial –– Contributing significantly to the process of en- results in accordance with the targets set by the suring commercial success within the context of Board of Directors the Group strategy and instructions of the CEO –– Decision-making on the organisational structure –– Actively participating in the leadership, planning and the roles and competences of members of and implementation of the company strategy 128 ANNUAL REPORT 2015 | CORPORATE GOVERNANCE

–– Coordinating and harmonising the activities and At each of its meetings, the Board of Directors is business actions of the individual divisions from informed by the CEO and the other members of the perspective of the BKW Group’s overarching the Group Executive Board about current business interests through close cooperation with the and key business transactions. The Chairman of other members of the Group Executive Board the Board of Directors is also informed of current –– Contributing proposals for strategic planning and business at regular meetings and discussions its execution, introduction and monitoring outside of the meetings of the Board of Directors. –– Defining and implementing the principles for In the case of extraordinary events, the CEO shall cooperation within the BKW Group inform the Chairman of the Board of Directors –– Determining the central risks and risk manage- without delay. ment –– Promoting ethical behaviour and compliance Business that must be dealt with by the Board with internal and external rules and regulations of Directors is first discussed in a meeting of the –– Responsibility for leadership of the assigned Presiding Board. The participants in this meeting divisions are the Chairman of the Board of Directors, the –– Decision-making on the entry of the purchaser CEO, the other members of the Group Executive of shares in the register of BKW AG shares with Board and Dr. Antje Kanngiesser (Head of Group voting rights, unless the decision falls under the Management). remit of the Board of Directors. This authorisation may be delegated in full or in part to The Board of Directors is also kept up to date as subordinate organisational units follows: –– Preparation, implementation and creation of the –– A report submitted in spring on the financial annual plans and budget statement for the previous financial year and a report submitted in autumn on the financial The Group Executive Board may resolve to delegate statement for the first half of the current year. part of its role and competences or the prepara- These reports are accompanied by an estimation tion, execution and monitoring of decisions of the of the anticipated annual result (forecast) based Group Executive Board to committees. The com- on current business performance. position, organisation, roles and competences of –– Comprehensive information about risk man- permanently staffed committees shall be defined agement in conjunction with the planning and in separate regulations. The roles and organisation financial statements of ad hoc committees shall be determined in the resolution adopted to create them. In respect of Monitoring instruments of the Board of Directors the decommissioning of the Mühleberg nucle- in relation to the Group Executive Board ar power plant, the Group Executive Board has The Board of Directors is responsible for setting delegated some of its roles to the Group Executive up and monitoring the risk management, compli- Board Committee for the KKM Decommissioning ance and internal audit processes within the BKW Project. Group.

Additional information about the Group Executive Risk management Board is provided in Section 4 below. The Group Executive Board is responsible for implementing the risk management process as spec- 3.6 Information and monitoring instruments in ified by the Board of Directors. The Board of Direc- relation to the Group Executive Board tors and the Group Executive Board are supported by the Corporate Risk Management office, which The Board of Directors shall assume responsibil- reports to the CFO. The Group Executive Board is ity for supervision of its own committees and advised by a Risk Committee, chaired by the CFO. shall monitor the work of the CEO and the Group During the reporting year, the Risk Committee met Executive Board by means of a range of reporting twice and reported to the Group Executive Board. processes and rights to inspect business processes and business transactions: ANNUAL REPORT 2015 | CORPORATE GOVERNANCE 129

Risk management identifies and assesses risks to the audit of the annual financial statements, and which the entire BKW Group is exposed, and for- on any priority issues determined by the Commit- mulates risk reduction measures. It takes account tee. In the event of serious shortcomings such as of internal and external events, and analyses and the detection of criminal acts or serious breaches controls the risks of potential threats to people of fundamental duties of care, the Internal Audit and the environment, risks relating to the security team will also provide the Audit and Risk Manage- of the electricity supply, risks to BKW’s reputation ment Committee with a report. and to its liquidity, equity capital and results. The Group’s risk bearing ability is also assessed. BKW’s external auditor is Ernst & Young AG, Bern

A system of limits applies to market, credit and liquidity risks. Individual measures are taken to counter the risks arising in relation to extraordinary market situations, and operational and strategic risks. Implementation of, and compliance with, the measures required for control purposes are monitored on a regular basis. Areas of trading and finance/treasury which are prone to higher risk are subject to more in-depth controls.

Compliance The Board of Directors is responsible for ensuring compliance with applicable standards through its approval and regular inspection of the governance principles and code of conduct. The CEO ensures that an appropriately organised system is set up and that controls of compliance with applicable standards are implemented in all areas of the BKW Group. She provides the Board of Directors with a report to this effect at least once a year. In addition, she undertakes an annual comprehensive risk assessment and informs the Board of Directors of the results.

The Board of Directors and Group Executive Board are supported by the Compliance team which forms part of the Group Management division. The main role of the Compliance team is to ensure awareness of potential compliance risks, to train and advise employees in relation to compliance issues, to ensure the existence of the internal framework and to manage the whistle-blower process.

Audit Internal Audit submits a quarterly report on its auditing activities to the Audit and Risk Management Committee. In particular, the report covers audits of transaction and business processes for the whole Group. Internal Audit also reports annually to the Audit and Risk Management Committee on 130 ANNUAL REPORT 2015 | CORPORATE GOVERNANCE

4 Group Executive Board

The Group Executive consists of the heads of the business divisions. As CEO, Suzanne Thoma chairs the Group Executive Board.

From left to right: Martin Schweikert, Head of Corporate Communications, Ronald Trächsel, CFO, Christophe Bossel, Member of the Group Executive Board, Suzanne Thoma, CEO, Renato Sturani, Member of the Group Executive Board, Hermann Ineichen, Member of the Group Executive Board, Antje Kanngiesser, Head of Group Management

Composition Year of Nationality Role birth Dr. Suzanne Thoma 1962 Switzerland CEO Christophe Bossel 1968 Switzerland Head of Networks Hermann Ineichen 1957 Switzerland Head of Production Renato Sturani 1967 Germany, Italy Head of Renewables & Efficiency Ronald Trächsel 1959 Switzerland CFO / Head of Finance & Services

The position of Head of Market was vacant at 31 December 2015 and at the time of publication. This business area is being managed temporarily by the CEO (Sales), the Head of Production (Sales Italy) and the CFO (Trading). ANNUAL REPORT 2015 | CORPORATE GOVERNANCE 131

Suzanne Thoma (1962, CH) Professional background, career P.h.D. in chemical engineering Since 2013 Head of Networks CEO, Member of the Group Executive Board since 2012–2013 Head of Asset Management in Net- 2010 works 2009–2012 Head of Production, Yverdon Work- Professional background, career shop, SBB, Transportation Since 2013 CEO 2005–2009 Management position in the devel- 2010–2013 Head of Networks opment of medical devices 2007–2009 Head of the Automotive Division of 1996–2005 Management roles in a variety of the WICOR Group in Rapperswil industrial concerns 2002–2007 CEO of Rolic Technologies Ltd, a high-tech supplier in the electrical Seats on the Boards of listed companies sector None 1990–2002 Various roles in a variety of countries for Ciba Spezialitätenchemie AG Seats on the Boards of for-profit companiesn (now BASF AG) None

Seats on the Boards of listed companies Seats on the Boards of other legal entities –– Member of the Board of Schaffner Holding AG, None Luterbach –– Member of the Board of UPM Corporation, Mandates held on the instruction of BKW Helsinki –– Deputy Chair of the Board of Onyx Energie Mit- telland AG, Langenthal Seats on the Boards of for-profit companies –– Chairman of the Board of cc energie sa, Murten Member of the Board of Beckers Group, Sweden –– Member of the Board of The Swiss Centre for Electronics and Microtechnology (Schweizer- Seats on the Boards of other legal entities isches Zentrum für Elektronik und Mikrotech- None nik AG) (CSEM) – Research and Development, Neuenburg Mandates held on the instruction of BKW –– Deputy Chair of EDJ, Energie du Jura SA, –– Chairman of the Board of Arnold AG, Wangen an Delémont der Aare –– Member of the Board of Spontis SA, Avenches –– Chairman of the Board of BKW ISP AG, Oster- mundigen Seats on the Boards of industry associations and non-profit organisations

Seats on the Boards of industry associations and non-profit None organisations

None Other major activities None Other major activities None Hermann Ineichen (1957, CH) Degree in electrical engineering and MSC in Christophe Bossel (1968, CH) Energy Management Degree in engineering and material sciences, and Head of Production, Deputy to the CEO, Member of an EMBA (Executive Master of Business Adminis- the Group Executive Board since 2000 tration) Head of Networks, Member of the Group Executive Professional background, career Board since 2013 Since 2013 Head of Production 2001–2013 Head of Energy Switzerland 1996–2000 Head of Trading 132 ANNUAL REPORT 2015 | CORPORATE GOVERNANCE

Prior to 1996 Head of Pricing at Centralschweizer- Seats on the Boards of for-profit companies ische Kraftwerke AG None

Seats on the Boards of listed companies Seats on the Boards of other legal entities None None

Seats on the Boards of for-profit companies Mandates held on the instruction of BKW None –– Chairman of the Board of antec group AG, Risch, ahochn AG, Dübendorf and ahochn AG, Rotkreuz, Seats on the Boards of other legal entities Risch (Group structure) None –– Member of the Board of BKW ISP AG, Ostermun- digen Mandates held on the instruction of BKW –– Chairman of the Board of Replacement nuclear Seats on the Boards of industry associations and non-profit power plant Muehleberg Ltd, Mühleberg organisations –– Chairman of the Board of Replacement nuclear None power plant Beznau Ltd, Döttingen –– Vice Chairman of the Board of Resun AG, Aarau Other major activities –– Member of the Board of Kernkraftwerk Leib- None stadt AG, Leibstadt –– Member of the Board of Onyx Energie Mittel- land AG, Langenthal Ronald Trächsel (1959, CH) –– Member of the Board of Engadiner Kraft- lic.rer.pol werke AG, Zernez CFO and Head of Finance & Services, Member of –– Member of the Board of Grande Dixence SA, Sion the Group Executive Board since 2014 –– Member of the Board of Kraftwerke Oberhasli AG, Innertkirchen Professional background, career Since 2014 CFO and Head of Finance & Services Seats on the Boards of industry associations and non-profit 2008–2014 CFO of the globally active Sika group organisations 2000–2008 CEO and CFO of the globally active None Vitra 1995–1999 CFO of Ringier International Other major activities None Seats on the Boards of listed companies None

Renato Sturani (1967, CH, I) Seats on the Boards of for-profit companies Mechanical engineer –– Chairman of the Board of Wyss Samen und Head of Renewables & Efficiency, Member of the Pflanzen AG, Zuchwil Group Executive Board since 2013 –– Member of the Board of Création Baumann Holding AG, Langenthal Professional background, career –– Member of the Board of ContourGlobal GP LTD, Since 2013 Head of Renewables & Efficiency New York 2011–2013 Head of Renewable Energy at Alpiq 2002–2011 Head of Electricity Generation West- Seats on the Boards of other legal entities ern Region at Alpiq None Prior to 2002 National and international management positions at ABB Alstom Power Mandates held on the instruction of BKW –– Member of the Board of Swissgrid Ltd., Bern Seats on the Boards of listed companies –– Member of the Board of Kraftwerke None Oberhasli AG, Innertkirchen ANNUAL REPORT 2015 | CORPORATE GOVERNANCE 133

Seats on the Boards of industry associations and non-profit Management contracts organisations BKW has not delegated any management responsi- None bilities to third parties outside the Group.

Other major activities None 5 Compensation, shareholdings and loans Retirements and resignations during the reporting period All information on compensation, shareholdings During the reporting year, Monica Dell’Anna re- and loans of the members of the Board of Direc- signed from the Group Executive Board as Head tors and the Group Executive Board can be found of Markets with effect from September 2015, and in the Remuneration Report on pages 137 to 149. left BKW on 31 December 2015.

Statutory provisions on the number of permitted activities According to Article 21 of the articles of incorporation, Members of the Group Executive Board may hold no more than 6 seniorl managerial and governing body mandates in for-profit companies outside of the BKW Group, no more than 3 of which may be stock-exchange listed companies, and no more than 5 mandates with other legal entities such as foundations and associations that are required to be entered in the commercial register. Before accepting such new mandates, the members of the Group Executive Board are obliged to obtain the permission of the Chairman of the Board of Directors. Mandates with companies that are controlled directly or indirectly by the Compa- ny are not included in this numerical limitation. Seats on the Board of industry associations and non-profit organisations are not counted, provided that the total number of mandates per member does not exceed 10. Mandates in senior management and governing bodies of companies and legal entities in which the Company is directly or indirectly involved, or mandates that are taken up on the instruction of the Company, are also not included. However, the total number of such mandates per member shall not exceed 10.

Multiple mandates held within a single Group are counted as one mandate. In justified cases, the Board of Directors may also grant exceptions for a transitional period of no more than 6 months in each case for no more than two additional mandates. 134 ANNUAL REPORT 2015 | CORPORATE GOVERNANCE

6 Shareholders’ participation decisions concerning the relaxation or lifting of rights restrictions on transferability of registered shares. The following provisions are taken from the BKW 6.3 Convening the General Meeting and setting articles of incorporation. The current articles of the agenda incorporation are available to shareholders free of charge on request. Notice of the General Meeting is to be given by the Board of Directors at least 20 days prior to the 6.1 Voting-right restrictions and representation date of the meeting. A meeting may also be called by one or more shareholders whose combined Shareholders’ rights may only be exercised by shareholding represents at least 10 % of the share persons listed in the share register as a sharehold- capital. This must be requested in writing, stating er with voting rights. There are no limitations on the agenda items and motions. voting rights for BKW shareholders attending the General Meeting. Shareholders representing shares with a par value of at least CHF 1 million may ask for an item to Every shareholder with a voting right can attend be included on the agenda. This request must be the General Meeting in person or be represent- submitted no later than 50 days before the date of ed by another shareholder or the independent the General Meeting. designated representative. Shareholders may also assign their proxy and voting instructions elec- 6.4 Entries in the share register tronically; the Board of Directors shall determine the details by which this is done. The independent Entitlement to attend or to be represented at the proxy is obliged to exercise the assigned voting General Meeting is based on the status of entries rights as instructed by the shareholder. If instruc- of shareholders with voting rights in the share tions are not provided, the vote must be withheld. register on the fifteenth day before the General Meeting. Public corporations, legal entities and trading companies are represented by their corporate bodies, partners or legal representatives, or by representa- 7 Changes of control and de- tives with special written power of attorney. fensive measures Every share listed in the share register with voting Under the terms of article 6 of the articles of rights is entitled to one vote at the BKW General incorporation, BKW has opted to increase the Meeting. Shareholders who have participated in threshold for a mandatory takeover offer to 49 % the management of the company in any form shall in accordance with article 135 of the Financial not be entitled to vote on the resolution to grant Market Infrastructure Act (FinfraG). discharge of the Board of Directors. There are no agreements or plans for the benefit The Chairman shall have full power to determine of members of the Board of Directors and/or the the procedure for voting and elections. He may, Group Executive Board in the event of changes of in particular, order that an open vote or election control. be repeated at any time by means of a written or electronic ballot or election, if he is in doubt about the result, or order a secret ballot. 8 Auditor

6.2 Statutory quorum Term of office BKW’s auditors are appointed on an annual basis. Decisions at the General Meeting require a simple The current auditors are Ernst & Young Ltd.; the majority of votes unless otherwise provided by firm has acted as BKW’s auditor since 1990. The law. A simple majority of votes also applies to lead auditor is Roland Ruprecht. ANNUAL REPORT 2015 | CORPORATE GOVERNANCE 135

Fees 9 Information policy The Auditors’ fees for expenditures incurred by statutory audits of BKW and its consolidated BKW is committed to the timely dissemination Group companies amounted to CHF 817,000 for of transparent and comprehensive information to the reporting year. The fees for auditing services its shareholders and clients as well as its employ- including non-mandatory audits and reviews, and ees and the general public. It regularly informs consulting in financial reporting and tax matters, the media about important events related to its amounted to CHF 125,000. business activities. A press conference on its financial position is held at least once a year. Along Information instruments of the external auditors with a written invitation to the General Meeting, Oversight and control of the external auditor is a shareholders receive a shareholders’ letter and key responsibility of the Audit and Risk Manage- an order form for the Annual Report. Information ment Committee (cf. Section 3.4 under ‘Audit and on share prices is published in compliance with Risk Management Committee Responsibilities’). the applicable legal requirements for disclosure. These meetings are also attended by the external BKW publishes media releases as well as special auditors, who have appropriate rights of co-de- information for shareholders and investors (in par- termination. The Audit and Risk Management ticular Annual Reports and the results of General Committee holds four ordinary meetings per year, Meetings) on the Internet (www.bkw.ch). in which the external auditor sometimes participates. The external auditor attended for parts of the agenda at two ordinary meetings during the 10 Significant changes since 2015 reporting year. 31 December 2015 On behalf of the Audit and Risk Management Com- mittee, the external auditors examine the annual Organisational changes financial statements according to the Swiss Code No significant changes. of Obligations (OR) as well as the consolidated annual financial statements. Towards the end of Changes in personnel the year, the external auditors must advise the Deputy Chair Kurt Rohrbach and two other mem- Committee of the audit priorities they have set for bers of the Board of Directors, Dominique Gachoud the forthcoming year and the rationale for these and Beatrice Simon-Jungi, will retire from the priorities. The Committee must approve this audit Board when their period of office ends at the ordi- plan and may commission the external auditors to nary General Meeting on 13 May 2016. conduct additional specific audits. With effect from the 2016 General Meeting, the The performance of the external auditors and Canton of Bern will now only have one representa- their independence are assessed annually by the tive on the BKW Board of Directors. Audit and Risk Management Committee. This assessment is based on the quality of the reports, Mr. Gachoud had been elected as the repre- implementation of the audit plans approved by sentative of BKW’s shareholder Groupe E Ltd. the Committee, and collaboration with the inter- Groupe E Ltd.’s nomination for election of his nal auditors. With regard to independence, the successor is Mr. Paul-Albert Nobs, Director General Committee examines the relationship between the of Cremo AG and member of the Board of Directors budgeted audit fee and the fee for other services of Groupe E Ltd. provided by the auditing company, and what these additional services include. 136 ANNUAL REPORT 2015 | CORPORATE GOVERNANCE ANNUAL REPORT 2015 Remuneration Report 138 ANNUAL REPORT 2015 | REMUNERATION REPORT Remuneration Report

1 Introduction by the Chair not linked to the achievement of each individu- of the Remuneration and al’s targets. The performance-related component is much more closely affected by the positive Nomination Committee performance of the share price as a result of the good cooperation and leadership of the Group Ex- Dear Shareholders, ecutive Board even in the currently volatile energy sector. The remuneration system for the Board The Remuneration Report provides you with an of Directors has not been modified. As before, its overview of BKW’s salary policy and system of re- members receive a fixed payment and are able to muneration. It contains detailed information about purchase a certain number of shares at a preferen- the remuneration paid to the Board of Directors tial price. The fixed fees and attendance allow- and the Group Executive Board during the 2015 ances remained unchanged during the reporting financial year, and lists the shareholdings of the year compared with 2014. Indeed, these have been members of these boards in BKW AG. stable since 2009.

The Remuneration Report meets the requirements The 2015 General Meeting was informed of the of the Swiss bonds act, the Ordinance against Ex- changes through the 2014 Remuneration Report cessive Compensation in Listed Stock Companies, and accepted this with strong approval, expressed and the SIX Swiss Exchange guideline on Corporate through the votes taken on the overall remunera- Governance information, and is based on the Swiss tion of the Group Executive Board and on the 2014 Code of Best Practice for Corporate Governance. Remuneration Report. We consider this to be a key signal that our long-term approach and focus on In 2014, BKW reviewed the system of remunera- stability are the correct ways to respond to ever tion of the Group Executive Board and made the faster changing and growing challenges, rather following changes: From the 2015 financial year, than a salaries policy that focuses on short-term the base salary has been incrementally increased, profits. the short-term variable remuneration reduced and a long-term profit-sharing bonus in the form of At the 2016 General Meeting, we will present the shares with a three-year blocking period intro- overall remuneration of the Board of Directors for duced. The purpose of the long-term component the period up to the next General Meeting, the is to encourage the Group Executive Board to lead overall remuneration of the Group Executive Board the company in a far-sighted, sustainable manner, for the 2017 financial year, and this Remuneration thus ensuring a permanent increase in the compa- Report for approval within the scope of a consul- ny’s value. In this way, the Group Executive Board tative vote. is pursuing the same interests as also form the priority for shareholders. Kind regards

The process of transforming BKW into a leading energy and infrastructure services provider will continue over the years to come. Inter-divisional cooperation forms a key element to the success of this transformation and therefore to the positive overall performance of BKW, on the basis of its integrated business model. The individual success of individual members of the Group Executive Urs Gasche Board, which is easily measured in Swiss francs, Chairman of the Remuneration and Nomination is weighed lower than the overall success and Committee leadership shown. In this context, it is coherent and apt to quantify and reward this cooperation on the basis of a measure of overall success. As a consequence, the number of shares allocated is ANNUAL REPORT 2015 | REMUNERATION REPORT 139

2 BKW Salaries Policy General Meeting until the next General Meeting. The overall amount of remuneration of the Group BKW offers salaries in line with market expecta- Executive Board that is approved by the General tions. These take particular account of the long- Meeting relates to the amount paid for the full term interests of the company. In addition, BKW financial year that follows the General Meeting. A aims to recruit suitable personnel from the labour consultative vote will also be taken on the Remu- market and to encourage them to make a long- neration Report for the completed remuneration term commitment to the company. period.

Within the scope of its salaries policy, BKW The members of the Board of Directors receive regularly reviews its remuneration system and, only a fixed remuneration and any meeting or where appropriate, sets new rates and participa- attendance allowances, together with estimated tion programmes for the Board of Directors and employer contributions and any pension payments, Group Executive Board. Recently during the 2014 additional insurance payments and additional financial year, an industry benchmarking exercise benefits in kind. There is no performance-related was carried out by the specialist firm of consult- component for members of the Board of Directors. ants, Mercer. This process included a review of the This ensures the independence of the Board of level and structure of remuneration. The informa- Directors in its supervision of the Group Executive tion was benchmarked against similarly-sized and Board. Remuneration is paid out in cash. comparably-structured listed electricity and energy companies in Switzerland with similar business The remuneration of the members of the Group activities, as well as industrial and service compa- Executive Board consists of a fixed annual base nies. Mercer also supported BKW in developing the salary and a variable remuneration element, plus system of remuneration of the Group Executive any estimated employer contributions and pension Board. BKW has adopted a very simple remuner- payments, additional insurance payments and ation system that focuses on stability. In accord- additional benefits in kind. The variable remuner- ance with this, the basic salary and the long-term ation comprises a short-term performance-related profit sharing element for the Group Executive cash element, and a long-term element that is Board are measured at a sustainable market level. paid in the form of shares. The short-term variable The short-term variable remuneration, however, remuneration is paid to individual members of the is set at a low level. No changes were required in Group Executive Board according to the achieve- respect of the remuneration system for the Board ment of personal targets. The performance targets of Directors. may comprise company and division-specific targets, personal targets or targets calculated on the basis of comparisons with the market, other 3 System of remuneration companies or comparable benchmarks.

3.1 Overview of overall remuneration 3.2 Board of Directors

The fundamental details of the remuneration of a) Fixed payment (base remuneration) the members of the Board of Directors and the The fixed remuneration of the Board of Directors Group Executive Board are governed by Articles comprises a fixed Board member fee. The level of 27 and 28 of the articles of incorporation. This the fee depends on the particular role (Chairman document can be found on the BKW website or Deputy Chair), and the membership and roles under “Investor Relations”. Each year, the Board pertaining to Board committees. of Directors submits the maximum total amount of remuneration of the Board of Directors and the b) Attendance allowances Group Executive Board to the General Meeting for A fixed attendance allowance is paid for each its approval. The overall amounts approved by the meeting of the Board of Directors or committee in General Meeting for remuneration of the Board of which the Board member participates. The Chair- Directors relate to the period of office from the man does not receive an allowance for meetings. 140 ANNUAL REPORT 2015 | REMUNERATION REPORT

c) Share-based remuneration If performance is deemed to have been appropri- Once a year, the Board of Directors determines the ate, the CEO is entitled to a variable remuneration number of BKW shares that members of the Board of 20 % of her base salary, while the other mem- of Directors may acquire, as well as the preferen- bers of the Group Executive Board are entitled to tial price. This arrangement is designed to moti- 10 %. In the case of excellent performance, the vate members of the Board of Directors to achieve CEO may receive 30 % of her base salary as variable a sustainable increase in BKW’s enterprise value. remuneration and the other members of the Group Share-based payments comprise the benefit in fair Executive Board, 20 %. The maximum variable value of the preferential purchase of BKW shares. remuneration is therefore subject to an upper limit The shares acquired through this arrangement are and is always less than one third of the base sal- subject to a three-year blocking period on their ary. The short-term variable remuneration is paid sale; this is taken into account when measuring out in cash during the calendar year following the the remuneration for the deduction specified year for which it is awarded. in item 3.3 of Circular no. 37 of the Federal Tax Administration of 22 July 2013 on the taxation of Irrespective of whether performance targets are employee shareholdings. met, the variable remuneration may be reduced or revoked in exceptional circumstances. Such d) Other remuneration exceptional circumstances arise if the company’s The other remuneration paid to the members of existence is under threat and the payment of the Board of Directors comprises fixed expense dividends and/or any profit-sharing payments due payments, payments by BKW to the national social to employees is cancelled. In this case, there may insurance funds and any withholding taxes. be no claim to short-term variable remuneration despite achievement of targets. Any reductions in BKW does not grant loans or credit to members the dividend payment made to finance investment of the Board of Directors. Until 31 May 2015, BKW projects shall have no impact on the calculation of paid pension contributions in respect of a member the variable remuneration. of the Board of Directors who was in a full-time role. Otherwise, no pension contributions are paid The basis for the new rules concerning remu- to members of the Board of Directors. neration of the Group Executive Board was only adopted following its ratification by the General 3.3 Remuneration of the Group Executive Board Meeting on 8 May 2015, and the rules applicable also to the Board of Directors will not come a) Fixed annual base salary fully into force until 2016. The annual targets are The base salary provides recompense for the role agreed in December of each year for the following held within the organisation. This takes into ac- financial year. Both the Board of Directors and the count the person’s experience, scope of responsi- Remuneration and Nomination Committee rely bility and influence on the company’s success. The on quantitative and qualitative objectives for the base salary is paid in cash. assessment of performance in respect of targets for the 2015 financial year. These will also be set b) Short-term variable remuneration for the 2016 financial year. The short-term variable remuneration is dependent on the achievement of annual targets. These The short-term variable remuneration for the focus on the progress made over the course of the 2016 financial year will be assessed according to year to implementing the strategy, and the annual the following targets, each of which has equal financial results achieved. The Remuneration and weighting:

Nomination Committee prepare an overall assess- EBIT Strategy implementation ment, taking into account the general economic CEO 50 % 50 % situation and industry-specific environment in Other Group which the company operated. Executive Board members 50 % 50 % ANNUAL REPORT 2015 | REMUNERATION REPORT 141

EBIT relates to that of BKW AG. BKW’s budget 4 Organisation and is prepared excluding reserves, so the budgeted competences in setting EBIT is a stretch figure. If the budgeted EBIT is achieved, this equates to maximum target perfor- remuneration rates mance. Extraordinary, unforeseeable events such as the removal of the CHF/EUR cap are taken into At the request of the Board of Directors the General account in assessing the level of target perfor- Meeting ratifies the maximum overall amount of mance. remuneration of the Board of Directors in respect of the period of office starting from the General The strategy implementation relates to the per- Meeting until the next General Meeting, and of sonal contribution made according to the individu- the Group Executive Board in respect of the next al’s role and influence. financial year. The details of the remuneration system and the consequences of the General Meet- c) Long-term profit sharing ing’s failure to ratify the proposal are governed The long-term profit sharing programme is aimed by Articles 26 to 28 of the articles of incorpora- at securing long-term success and is linked to the tion. The articles of incorporation also define the opportunities and risks associated with the share prerequisites and maximum amount of additional price performance. The financial interests of the contribution that can be paid to a member of the Group Executive Board are thus aligned with the Group Executive Board appointed during a remuner- interests of long-term shareholders. ation period for which the proposed remuneration has already been ratified by the General Meeting Except in exceptional circumstances, the long- (article 28). term profit sharing amounts to 30 % of the CEO’s base salary for the current financial year and 20 % Membership of the Nomination and Remuneration for other members of the Group Executive Board. Committee It is first calculated in Swiss francs and then paid out in the form of blocked BKW AG shares at the Urs Gasche Chairman of the Board of average share price for the month of November of Directors, Chairman the corresponding financial year. The allocation of Barbara Egger-Jenzer Member of the Board of Direc- shares for the current financial year is carried out tors, Deputy Chairman each December. The blocking period is three years Georges Bindschedler Member of the Board of Direc- tors, Member from the date of issue. d) Pension contributions and social security According to article 25 of the articles of incorpora- contributions tion, the Remuneration Committee is particularly Pension contributions include the employer concerned at senior company management level contributions to the pension fund. The BKW with the remuneration strategy and performance pension fund (Pensionskasse BKW) operates a de- targets and criteria of the BKW Group. In addition, fined-benefit pension plan in accordance with the it is authorised to develop principles regarding the statutory requirements for occupational pensions selection of candidates to the Board of Directors (BVG). The pension benefits therefore also include and the Group Executive Board. Due to this addi- the employer’s share of any corrective payments tional role, the Board of Directors has given the arising from increases in the insured salary in remuneration committee the name of Remuneration addition to the ordinary employer contributions. and Nomination Committee, and this is reflected in Social security contributions include the employ- the organisational regulations and regulations of er’s contributions to the national social insurance the Remuneration and Nomination Committee. The funds. All remuneration subject to social security Remuneration and Nomination Committee assists contributions is recorded gross. the Board of Directors in establishing and reviewing the remuneration system and the remuneration principles, and in preparing the proposals to the General Meeting in respect of the total amount of 142 ANNUAL REPORT 2015 | REMUNERATION REPORT

remuneration to be paid to the Board of Directors The table below shows how the responsibilities and the Group Executive Board. and competences are divided between the General Meeting, the Board of Directors and the Remunera- tion and Nomination Committee.

Overview of roles and responsibilities Remuneration and Annual Nomination Board of General Object Committee Directors Meeting Maximum total amount of remuneration of the Board of Directors and the Group Executive Board PS 1 S 2 R 3 Additional amount for the remuneration of newly nominated members of the Group Executive Board4 R 4, 5 BKW’s salary policy and remuneration system PS R Remuneration principles and system for the Board of Directors and Group Executive Board PS R Performance criteria for remuneration of the CEO and the members of the Group Executive Board PS R 5 Individual remuneration of the Board of Directors PS R 6 Performance assessment and individual remuneration of the CEO PS R 6 Performance assessment and individual remuneration of the members of the Group Executive Board (excluding the CEO) R 4, 5, 6 Remuneration Report PS R CV 7 Principles governing the selection of candidates for election or re-election to the Board of Directors PS R Election, dismissal and succession planning for members of the Group Executive Board PS R Treatment of elections and succession planning for the Board of Directors PS R

1 PS means preparation and submission to Board of Directors 2 S means submission to the General Meeting 3 R means ratification 4 CEO’s proposal 5 Within the scope of the articles of incorporation 6 Within the scope of the maximum total amount approved by the General Meeting 7 CV means consultative vote

5 Remuneration paid to the 5.1 Board of Directors Board of Directors and This section provides information about the remu- Group Executive Board neration paid to members of the Board of Directors for the financial years 2015 and 2014, and a com- The remuneration amounts are disclosed for the parison with the maximum overall remuneration accounting period (in this case, financial year) in ratified by the General Meeting 2015 in respect of which they are accounted for in the annual finan- the 2015/16 term of office. cial statements, in accordance with the accounting principle of accrual. During the 2015 financial year, no changes were made to the fixed remuneration of the members of the Board of Directors or to the attendance allowances. For individual members of the Board, ANNUAL REPORT 2015 | REMUNERATION REPORT 143

payment is made in whole or in part to their em- holding taxes that have been incurred. In the case ployers. of the member of the Board of Directors who was in a full-time role until 31 May 2015, the other By contrast with the original presentation for the payments also include the pension contributions 2014 financial year, the attendance allowances paid by BKW. The other members of the Board of paid to members of the Board of Directors for the Directors do not receive any pension contributions. 2015 financial year are now reported separately rather than being included in the fixed remuner- Share-based payments comprise the benefit in fair ation amounts. The already reported amounts value of the preferential purchase of BKW shares. for the 2014 financial year have therefore been In 2015, each member of the Board of Directors restated accordingly. The amount of attendance was offered the opportunity to purchase 600 BKW allowance paid varies for each member of the shares at a preferential price of CHF 20.00 per Board of Directors according to their attendance share (2014: 600 shares at CHF 20.00 per share). AUDITED at the meetings and participation in the Audit and The underlying market value was CHF 33.00 per Risk Management Committee and Remuneration share (2014: CHF 30.50 per share). and Nomination Committee. The Chairman does not receive an allowance for meetings. No loans or credits have been granted to active or former members of the Board of Directors or par- The other payments comprise the fixed expenses ties related to them. Moreover, no typical market

payments, which remain unchanged, the social remuneration has been paid to persons related to AUDITED security contributions and any statutory with- the members of the Board of Directors.

Remuneration of members of the Board of Directors in 2015

Fixed Attendance Share-based Other CHF thousands remuneration allowance payments remuneration Total Urs Gasche Chairman 280 5 51 336 Hartmut Geldmacher Deputy Chair 52 14 5 44 115 Kurt Rohrbach 1 2 nd Deputy Chair 270 8 5 210 493 Marc-Alain Affolter Member 40 20 5 15 80 Roger Baillod Member 50 20 5 16 91 Dr. Georges Bindschedler Member 40 18 5 6 69 Barbara Egger-Jenzer 2 Member 40 14 5 59

Dr. Eugen Marbach Member (until 08.05.2015) 17 4 5 5 31 AUDITED Dominique Gachoud Member (from 08.05.2015) 27 10 7 44 Kurt Schär Member 40 20 5 65 Beatrice Simon-Jungi 2 Member 40 6 5 6 57 Philippe Virdis Member (until 08.05.2015) 17 6 3 26 Total 913 140 40 373 1,466

1 Full-time post until 31.05.2015. 2 All remuneration, including attendance allowances, was paid to the canton of Bern. 144 ANNUAL REPORT 2015 | REMUNERATION REPORT

Remuneration of members of the Board of Directors in 2014

Fixed Attendance Share-based Other CHF thousands remuneration allowance payments remuneration Total Urs Gasche Chairman 280 3 46 329 Deputy Chair Antoinette Hunziker-Ebneter (until 09.05.2014) 30 10 4 44 Deputy Chair Hartmut Geldmacher (from 09.05.2014) 47 18 3 41 109 Kurt Rohrbach 1 2 nd Deputy Chair 522 3 108 633 Marc-Alain Affolter Member 40 28 3 15 86 Roger Baillod Member 46 22 3 15 86 Dr. Georges Bindschedler Member 40 26 3 6 75 AUDITED Barbara Egger-Jenzer 2 Member 40 18 5 63 Dr. Eugen Marbach Member 40 18 13 71 Kurt Schär Member 40 28 3 11 82 Beatrice Simon-Jungi 2 Member 40 14 5 59 Philippe Virdis Member 40 18 9 67 Total 1,205 200 21 278 1,704

1 Full-time post. 2 All remuneration, including attendance allowances, was paid to the canton of Bern.

Maximum overall remuneration for the term of The 2015 General Meeting ratified a proposal for a office 2015/16 maximum overall amount of CHF 1,500 thousand in The General Meeting ratifies the maximum overall respect of remuneration of the Board of Directors amount of remuneration of the Board of Direc- for the 2015/16 term of office. Calculated for the tors for its term of office, i.e. from the General period of eight months to 31 December 2015, the Meeting (each May) until the next General Meeting payments to members of the Board of Directors (the following April). However, since the present amounted to CHF 857 thousand. The amounts Remuneration Report refers to the financial year already paid out and yet to be paid in 2016 (from and therefore takes the 31 December 2015 as its January to April 2016) are within the maximum cut-off date for information to be disclosed, the overall amount ratified by the General Meeting. amount disclosed in this report has been adjusted to a period of eight months (May to December 2015).

Maximum overall remuneration of the Amount actually paid out for the period Board of Directors May 2015–April 2016 May–December 2015 Period January–April 2016 Information for the CHF 1,500 thousand CHF 857 thousand General Meeting 2016

The General Meeting 2016 will receive a report on 5.2 Remuneration paid to the Group Executive the entire remuneration period (General Meeting Board 2015 to General Meeting 2016). The Remunera- tion Report for the 2016 financial year will show In 2015, the new remuneration system detailed an overall view of the remuneration period from in 3.3 was applied for the first time. This system the General Meeting 2015 to the General Meeting focuses on the creation of sustainable, long-term 2016. value. ANNUAL REPORT 2015 | REMUNERATION REPORT 145

The objectives of the Group Executive Board were Significant progress has been made in leadership to implement the strategy and therefore to achieve to ensure that the transformation of the company a strong financial position for BKW: he Group Ex- progresses in a strong, sustainable fashion. A new ecutive Board has clearly achieved both objectives. understanding of leadership has been developed Implementation of the strategy has been driven among the company’s senior management, and rapidly. In addition to strengthening the Energy the dialogue initiated around a shared vision will business and developing Networks, significant continue in 2016. This work has been accompanied steps were made in in very quickly and successfully by Group-wide projects that have focused on lean expanding the energy and infrastructure services processes and more efficient workflows, with the business (for further details see pages 7 et seq and aim of providing high-quality customer-oriented 38 et seq of this Annual Report). The operating re- services. Ultimately, BKW’s reporting was convinc- sult (EBIT) was improved by 10 % in comparison with ing enough to raise the marketing value of the the previous yeat, to CHF 382 million (for details brand. see page 14 et seq of this Annual Report). It must be emphasised that these achievements were made The performance achieved is recognised through in the most adverse conditions in 2015. Alongside the fixed base remuneration and the share-based the continuing downwards trend in the price of long-term profit sharing system. The reported electricity, the unfavourable CHF/EUR exchange variable remuneration is based on the achievement rate in particular exerted considerable pressure on of individual quantitative and qualitative annual operations. objectives that depend on the role and scope of influence of each Group Executive Board member. In this climate, the new remuneration system has already proven its worth, focusing on the positive The year-on-year increase in the fixed remunera- overall performance of BKW through inter-divisional tion and associated decrease in short-term variable cooperation and leadership. Thanks to single-mind- remuneration and the increase in long-term profit ed efficiency improvements and cost management, sharing can be attributed both to the 2015 change active management of our energy position, the in the remuneration system described in the stabilising effect of the Networks business and introduction above and to the stepwise increase further expansion of the Services business, it was in remuneration of the Group Executive Board to a possible to offset some of the negative impact market level that is comparable with other busi- of the electricity price and exchange rate curves, nesses in the sector. As a result, the total remuner- and to exceed the ambitious EBIT targets by some ation of the highest earning member of the Group margin. BKW remains on course, and this has been Executive Board (CEO Suzanne Thoma) increased recognised and rewarded by shareholders and ana- by 18 % during the reporting year, while that of the lysts alike. Group Executive Board as a whole increased by 20 %.

Remuneration of members of the Group Executive Board and the highest-earning member in 2015

Dr. Suzanne Thoma Group Executive CEO Board (including CEO) CHF thousands 2015 2015 Fixed remuneration 612 2,929 Short-term variable remuneration 183 595 Long-term profit sharing (share-based payments) 155 547 Pension benefits 285 1,282 AUDITED Total 1,235 5,353 146 ANNUAL REPORT 2015 | REMUNERATION REPORT

As in the previous year, at 31 December 2015, In 2014, the Board of Directors initiated the pro- there were no loans outstanding payable by active cess of changing the system for Group Executive or previous members of the Group Executive Board Board members to receive shares at a preferential or parties related to them. Moreover, no securities, rate into a long-term share-based profit sharing advances or any form of credit had been provided system. For 2014, the Board of Directors therefore

AUDITED and therefore there are no corresponding receiva- determined for the final time the number of BKW bles. Neither has any typical market remuneration shares that members of the Group Executive Board been paid to persons related to the members of could acquire, as well as the preferential price and the Group Executive Board. the blocking period. In 2014, each member of the Group Executive Board was offered the opportu- During the reporting year, the CEO received an al- nity to purchase 600 BKW shares at a preferen- location of 4,920 shares, while the total allocation tial price of CHF 20.00 per share. The underlying

to all members of the Group Executive Board was market value was CHF 30.50 per share. In contrast AUDITED 17,341. The shares acquired through this arrange- to the reporting year, therefore, the share-based ment are subject to a three-year blocking period remuneration reported for 2014 contains both el- on their sale; this is taken into account with a ements. In 2014, the CEO received an allocation of AUDITED deduction of 16.038 % in accordance with item 3.3 6,013 shares, while the total allocation to all mem- of Circular no. 37 of the Federal Tax Administra- bers of the Group Executive Board was 20,391. tion of 22 July 2013 on the taxation of employee shareholdings.

Remuneration of members of the Group Executive Board and the highest-earning member in 2014

Dr. Suzanne Thoma Group Executive CEO Board (including CEO) CHF thousands 2014 2014 Fixed remuneration 527 2,646 Profit sharing 158 531 Share-based payments 136 442

Pension benefits 224 859 AUDITED Total 1,045 4,478

Maximum overall remuneration for the 2016 6 Shareholdings financial year The 2015 General Meeting ratified a proposal for a At 31 December 2015 and 2014, the members of maximum overall amount of CHF 5,900 thousand the Board of Directors and the Group Executive in respect of remuneration of the Group Executive Board of BKW and/or persons related to them held Board for the 2016 financial year. The allocation of shares in the company as indicated in the table in the remuneration for 2016 will be reported in the the following table: Remuneration Report 2016. ANNUAL REPORT 2015 | REMUNERATION REPORT 147

Shareholdings of members of the Board of Directors

Dr. Eugen Marbach Member (until 09.05.2015) 3,000 n/a AUDITED Dominique Gachoud Member (from 09.05.2015) n/a 250 Kurt Schär Member 1,000 1,000 Beatrice Simon-Jungi Member 1,000 1,600 Philippe Virdis Member (until 09.05.2015) 4,520 n/a Total 39,014 34,642

Individual shares held by members of the Board of Directors are subject to a blocking period of up to three years.

Shareholdings of members of the Group Executive Board

Hermann Ineichen Head of Production 6,112 8,693 AUDITED Renato Sturani Head of Renewables & Efficiency 3,143 5,428 Total 24,633 37,450

Individual shares held by members of the Group Executive Board are subject to a blocking period of up to three years.

7 Employment contracts Directors, however the mandate is subject solely with members of the Group to the annual election to the Board of Directors held at the General Meeting. Members of the Executive Board and Board of Directors are delegated by the sharehold- contracts with members of ers and enter into a contractual relationship. No the Board of Directors employment contracts exist between BKW and members of the Board of Directors.

In accordance with article 29, contracts between The provisions of the employment contracts of the company and members of the Board of Direc- the members of the Group Executive Board were tors or the Group Executive Board that include adjusted in accordance with the Ordinance against compensation of these members must only be Excessive Compensation in Listed Stock Compa- concluded for a period of less than one year or nies before 31 December 2014. All Group Executive with a notice period of maximum 12 months. Board members during the reporting period had permanent employment contracts with a termina- Fixed-term or permanent mandate agreements tion period of 12 months. The employment con- may be concluded with members of the Board of tracts do not provide for any severance payments. 148 ANNUAL REPORT 2015 | REMUNERATION REPORT

8 Report of the statutory auditor on the remuneration report ANNUAL REPORT 2015 | REMUNERATION REPORT 149 150 ANNUAL REPORT 2015 | ADDRESSES AND LEGAL NOTICE

Addresses Legal Notice

Investor Relations Editorial team BKW AG Finance & Controlling, Investor Relations Corporate Communications, Bern Viktoriaplatz 2 CH-3013 Bern Concept and design Tel +41 58 477 53 56 Process Brand Evolution, Zurich Fax +41 58 477 58 04 www.process-group.com [email protected] Photography Media Relations Suzanne Schwiertz, Zurich BKW AG www.foto-schwiertz.ch Media Relations Viktoriaplatz 2 Printing CH-3013 Bern Neidhart + Schön, Zurich Tel +41 58 477 51 07 www.nsgroup.ch Fax +41 58 477 57 90 [email protected]

This report contains statements that constitute expectations and forward-looking statements. Because these statements are subject to risks and uncertainties, actual future results may differ materially from those expressed or implied by the expectations and statements. This report is published in German, French and English. The German version is authoritative.

ISSN 1663-4578 (print) KS16E2000 (print) 1663-4578 ISSN ISSN 2234-9065 (online)

BKW AG Viktoriaplatz 2 CH-3013 Bern Telephone +41 58 477 51 11 www.bkw.ch