Table of Contents Table of Contents
Previous Page  7 / 66 Next Page
Information
Show Menu
Previous Page 7 / 66 Next Page
Page Background

Change is necessary to

preserve what is good

Despite the wide range of services SWM provides to the

citizens of Munich and the region, our business success

largely depends on the revenues generated in our tradi-

tional core business: energy generation, distribution and

sales. However, this keenly competitive and highly regulat-

ed market, in particular, has been subject to eroding mar-

gins for years.

The reasons are manifold. One of them is the energy turn-

around – an endeavour SWM has expressly supported

from the outset and driven forward with great commit-

ment: in our view, the transformation from conventional

energy provision to a supply network based primarily on

renewable energies is imperative but very cost-intensive,

especially during the transitional phase. This applies all the

more to companies proactively shaping this historic trans-

formation by converting their generation infrastructure

– as SWM is doing. On the one hand, we are investing in

new plants generating energy from renewable sources

with a view to ensuring a strong role for us in the energy

market of the future, too. On the other hand, the principle

of ensuring a secure supply does not allow us to simply

take old plants off the grid, which makes maintenance

and, in some instances, replacement investment necessary.

Thanks to forward-looking action and courageous decisions, SWM is in

a better position than many of its competitors in a very critical period for

energy utility companies. However, the current changes faced by German

municipal utilities are so fundamental and permanent that we followed

up on our successful ”Sustainably fit“ cost-reduction programme with the

launch of a further ambitious project in autumn 2016: SWM22 – a group-

wide transformation project. Across business units and hierarchies, we are

designing a strategy that will ensure SWM‘s long-term success.

In addition, we have repeatedly been confronted with high

non-recurrent burdens in the recent past, e.g. those arising

from our shareholding in the Isar 2 nuclear power plant.

And there are even more changes and challenges ahead.

After all, the general demand for heating will decline in

the long term due to the climate change and political initi-

atives such as the Climate Protection Plan 2050 adopted in

Germany in 2016. In addition, the oil price, in actual fact

still the energy reference price, will probably continue to

be volatile in the future, thus affecting our income trend.

Furthermore, capital-expenditure commitments running

into the billions are still required in the areas of public

transport and telecommunications to ensure Munich’s

continued quality of life and prosperity.

Many of these developments were or are foreseeable. We

thus began early on to tap new stable revenue sources,

e.g. in the area of renewable energies. Concurrently, we

realized several initiatives aimed at improving our cost

position. These efforts are indeed bearing fruit, as reflect-

ed in the pleasing operating profit we generated in 2016.

Our analysis shows, however, that they will not suffice to

put a permanent stop to the foreseeable negative income

trend, let alone ensure SWM’s continued ability to realize

its ambitious projects out of its own resources in the

future.

SWM – GUARANTOR OF RELIABLE ENERGY AND

DRINKING WATER, MOBILITY AND COMMUNICA-

TIONS SERVICES IN MUNICH AND THE REGION

ANNUAL REPORT 2016  STADTWERKE MÜNCHEN

5

Our Strategy