BKW FMB Energy Ltd Annual Report 2003

Trade
BKW – a competent and reliable trading partner
Thanks to targeted marketing and a fl exible approach to electricity
production and procurement, BKW has achieved a prominent position
on the international market. Competence and reliability are the
cornerstones of the Group’s success.
Growing importance of
electricity trading
As continental Europe increasingly moves
towards market deregulation, the electricity
trading business has established itself as
a solid pillar of BKW’s business. Backed
by an effi cient marketing strategy and optimal
procurement possibilities provided
by the Group’s own power plants, BKW
performed successfully in the year under
review and consolidated its position as a
reliable trading partner.
Extraordinary trend in
electricity prices
In 2003 the market was impacted by an
increase in general wholesale trading
prices due to rising costs for primary
energy, coupled with growing volatility
due to extreme climate conditions which
made it diffi cult to forecast production
and consumption volumes. The cold
snap at the beginning of 2003, followed
by the disproportionately long spell of
hot weather in the summer, led to some
regional shortfalls in energy. The extraordinary
heat wave during the summer
months also resulted in above-average
discharges of glacier run-off into the res-
ervoirs of affi liated BKW plants. BKW’s
central geographical location, coupled
with forward-looking, cautious management
of energy reserves and the ability
to respond rapidly and fl exibly to market
needs, formed the basis for positive performance
in the trading business.
Consolidation
in the trading market
In 2003, traditional grid operators assumed
a key role in the wholesale electricity
trading business following the withdrawal
of major US companies in 2002.
Several smaller enterprises, mostly in the
power supply business, also began trading
on the electricity market in order to
optimise procurement options. Trading on
energy exchanges in Germany, France and
Austria gained further importance over
bilateral OTC (over-the-counter) trading.
While still relatively young, this business
has fi rmly established itself thanks to clear
legal and regulatory parameters as well as
progressive standardisation and automation
of transactions which have helped to
reduce risks. In the wake of this trend,
BKW extended its trading activities to
European futures exchanges. On the other
hand, volumes traded on spot exchanges
remained on a par with the previous year.
In 2003 BKW introduced additional measures
to minimise risks, with the emphasis
on refi ning risk management processes,
enhancing transparency, and concluding
EFET (European Federation of Energy
Traders) agreements with all the main
trading partners.
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