Alignment with the market and competition

BKW is an essential pillar of the Bern economic region. So it is all the more surprising that while certain political and industrial stakeholders benefit from BKW’s success, they are attempting to hinder BKW at the same time. In doing so, they are jeopardising the company’s value. 

BKW is a good taxpayer for the canton. It also pays the canton around CHF 50 million in dividends and around CHF 50 million in water rates each year (incl. a 50% stake in KWO). BKW also plays an important role as an employer and trainer. Around 11,000 people currently work at BKW, with around 3,000 of them in the canton of Bern. BKW also trains about 400 apprentices.

A substantial portion of the investments go towards facilities in the cantons of Bern, Jura and Solothurn. BKW awards a number of mandates to third parties, meaning that local industry benefits to a large degree.

No. BKW is a publicly listed company organised under private law. In addition to the canton of Bern as the main shareholder (52.54%), the remaining shares are broadly held. With the liberalisation of the energy market, energy suppliers were explicitly allowed into the free market. BKW is now a comprehensive energy and infrastructure service provider. Thus, BKW does not primarily serve a public function, but instead must, like all other companies, focus on the market and its customers and generate a profit. For this reason, BKW, like all other companies, operates in accordance with the principle of economic freedom.

Swiss law makes a distinction between private, semi-public and public companies. For semi-public companies pursuant to Art. 762 CO, such as BKW, the Swiss Code of Obligations applies without limitation. All shareholders, including the canton of Bern, are therefore subject to the provisions of the Swiss Code of Obligations. These cannot be altered by cantonal law. Cantonal laws cannot be used to interfere with the internal processes of a private company.

Yes, BKW can operate in the market in addition to its monopoly business. This is because the principle of economic freedom applies for BKW as it does for all companies in Switzerland. In any case, BKW has always operated in the free market, both domestically and abroad. For example, BKW sold large parts of its energy production in competitive trading on international electricity markets. With the formal partial deregulation of the market in 2009, energy providers like BKW were also exposed to free competition, including in the market for large end customers. And with the current proposed amendment of the Electricity Supply Act, a complete market deregulation, including for small customers, is also planned.

However, among other things, legislators stipulate in the Electricity Supply Act that the monopoly areas must be clearly separated from competitive areas (“unbundling”). Cross-subsidies between the monopoly area and the competitive area are not legally permitted. Likewise, information (e.g. customer data) from the monopoly may not be used by the competitive area. BKW meets these unbundling requirements. Even critics have repeatedly said that BKW has displayed exemplary behaviour. 

BKW has been a publicly listed stock company organised under private law since 2003. As such, it must act in an entrepreneurial manner and aim to generate a profit. Thanks to these clear framework conditions, BKW has developed into a successful energy and infrastructure company and creates added value for shareholders, customers and employees. 

Economic freedom applies for all companies, including those in which the state owns a majority stake. Competition between private and public companies is legally permitted, customary and desirable from an economic perspective. 

This view was confirmed by the Swiss Federal Supreme Court in a ruling on cantonal property insurance in Glarus. In the view of the court, competition from a public company cannot be interpreted as a restriction of the economic activities of private stakeholders. Competition is a core element of a free market economy.

No. This is because a company that, in addition to its activities in the regulated area, also operates in the market must be subject to the same rules as other companies and may not profit from special advantages. Cross-subsidies between the monopoly area and the competitive area are prohibited according to the Cartel Act.

Furthermore, the Electricity Supply Act (ESA) explicitly prohibits cross-subsidies between regulated grids and other business areas. The Electricity Supply Act defines rules for this separation between competitive and monopoly areas (unbundling). BKW meets these requirements.

No. In the Grid business it has a natural monopoly, not a price monopoly. It is also highly regulated and customers pay operating and capital costs defined by regulations as well as a marginal interest rate set by the Federal Council in accordance with internationally recognised guidelines. There can be no profit skimming. BKW cannot impose prices and therefore it cannot generate monopoly profits.

As a result of a political push, breaking up BKW Group is something that has been discussed in the Canton of Bern in the past. As shown by this report (in German) published by the cantonal government, a politically imposed break-up would involve considerable legal, economic, financial and political risks. Such a step would result in a major crisis of confidence, significant reputational damage and massive losses on the stock market. The corporate strategy to date, with its three pillars of energy, networks and services, works. Since 2013, BKW has almost quadrupled its share value – and has continuously increased dividend distributions to shareholders. 

BKW’s dividend has risen continuously: while the distribution was CHF 1.60 per share in 2014, BKW’s Board of Directors will propose a dividend of CHF 2.40 per share to the General Meeting for 2020. BKW once again exceeded the previous year’s record result in 2020 and recorded an EBIT of CHF 475 million. The current corporate strategy has proven its worth, with an average annual shareholder return of nearly 24% and an increase in the company’s value of over CHF 4 billion since the implementation of the current strategy.