STADTWERKE MNCHEN

ANNUAL REPORT 2016

SWM GROUP IN FIGURES

in EUR million 2012 2013 2014 2015 2016

Key operating figures

Revenues 1)
4,498.5 6,320.3 6,095.2 6,554.9 6,320.6
Electricity 1,326.6 1,648.1 1,768.6 2,011.3 1,863.3
Gas 1a)
1,781.9 3,171.9 2,862.2 2,935.3 2,815.5
District Heating 377.2 404.8 341.9 367.7 346.2
Water 144.1 146.1 149.5 157.0 156.7
Public Transport 423.7 444.4 455.8 482.9 510.6
Public Pools 18.6 19.4 18.6 19.9 18.8
Telecommunications 181.5 193.9 204.2 217.0 232.8
Other 244.8 291.6 294.4 363.9 376.6
Consolidated net income for the year 214.8 204.2 81.4 538.7 164.3
EBIT 463.7 403.9 365.7 472.3 517.6
EBITDA 717.8 782.1 776.5 928.7 935.9
Structure of assets and capital
Fixed assets 6,998.2 7,728.4 8,190.5 7,836.5 7,952.4
Current assets 2)
3,406.5 2,802.3 2,862.9 2,824.8 2,715.2
Shareholders' equity 3)
5,266.7 5,387.0 5,385.5 5,074.0 4,742.6
Debt and liabilities 3)
5,138.1 5,143.7 5,667.8 5,587.4 5,925.0
Non-operating financial assets 4)
3,662.8 3,099.3 2,839.8 2,992.0 2,514.5
Bank borrowings 1,904.3 2,035.4 2,347.2 2,433.8 2,448.9
Total assets 10,404.8 10,530.7 11,053.4 10,661.40 10,667.6
Cash flow/capital expenditure/
depreciation and amortisation
Cash flow from operating activities 5)
656.7 793.9 488.2 765.5 490.4
Quick ratio 6)
432% 303% 246% 320% 283%
Capital expenditure on property,
plant and equipment (PPE) 320.1 748.3 1,047.3 799.1 746.5
Equity investments 7)
280.7 601.8 140.5 204.1 194.0
Employees
Employees 8)
7,737 8,359 8,660 8,843 9,022
Key ratios
ROS 9)
10.6% 5.6% 2.1% 4.2% 0.2%
Equity ratio 3)
50.6% 51.2% 48.7% 47.6% 44.5%
Reinvestment rate 10)

(tangible and intangible fixed assets) 104% 189% 183% 180% 123%

1)
Revenues, excl. electricity and energy tax
1a)
As of 2013: incl. oil
2)
Including deferred tax assets, prepayments and accrued income, and excess of plan assets over pension liabilities
3)
Including pro-rata investment grants, pro-rata income grants and pro-rata construction cost grants
4)
Securities held as fixed and current assets, incl. cash and cash equivalents
5)
As of 2015 pursuant to German Accounting Standard DRS 21
6)
(Current assets (see 3) less inventories )/current liabilities
7)
Investments in affiliated companies and equity participations, excluding loans to companies in which participating interests are held and in
affiliated companies
8)
Average number of employees in the fully consolidated companies (excluding trainees, temporary employees, seasonal employees)
9)
Result from ordinary operations/revenue
10)
Ratio of capital expenditure on PPE and investments in intangible assets to scheduled depreciation and amortisation

Note: Small rounding differences may occur in percentages and figures.

CONTENTS

02
02 03 LETTER FROM THE MANAGEMENT BOARD

04
04 13 OUR STRATEGY

14
14 62 FINANCIAL REPORT
14 G ROUP MANAGEMENT REPORT
30 CONSOLIDATED FINANCIAL STATEMENTS
34 N OTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
61 AUDITORS REPORT
62 R EPORT OF THE SUPERVISORY BOARD
2 ANNUAL REPORT 2016 STADTWERKE MNCHEN
Letter from the Management Board

DEAR SWM CUSTOMERS AND

BUSINESS PARTNERS,

In a difficult market environment, SWM succeeded in increasing its EBIT by nearly 10 % to EUR518 million in
2016. SWM thus continued the favourable development it had recorded in the previous year, which shows
thatour core business is still resting on a rock-solid foundation. Further contributions were made by the cost-
reduction measures within the framework of our Sustainably fit programme and rising revenues from energy
generation from renewable sources. This provides confirmation for us that the early and decisive entry into
renewable energies was the correct decision not only from an ecological, but also from an economic perspec-
tive, giving SWM more favourable prospects than other energy suppliers in Germany.

Nevertheless, SWM closed the 2016 financial year in negative territory, posting a consolidated net loss of
EUR164 million. This was due to extraordinary non-recurrent burdens arising from the exit from nuclear power.
Impairments on gas extraction plants also had to be recognised in the balance sheet, as we adopted even more
conservative expectations for future gas prices.

In the future, too, the market environment in our business segments will remain challenging: energy supply
continues to be characterised by substantial structural changes. In public transport, high investments in the
expansion and modernisation of our infrastructure and vehicle fleet are on the agenda. We will continue the
refurbishing of our public pools. This means that SWM will continue to operate at the crossroads between
margin erosion in its traditional core business and the enormous capital required to finance important invest-
ments in the future.

We are taking on these challenges with confidence. In autumn 2016, we thus launched the SWM22 initiative,
a far-reaching strategy and efficiency enhancement project that will help us make our income positive, further
improve our competitiveness and find answers for innovative and important solutions to major urban issues of
our time. What will Munich look like in the future? What economic, social and technological trends will shape
our business? What new income and efficiency potential will emerge for us from these developments?

We took a close look at these and many other questions in interdisciplinary work groups. The interdisciplinary
approach was chosen because we are firmly convinced that our ability to offer new services through improved
networking across all business units and thus tap new business areas will be an important key to our future
business success.

The project will run throughout 2017, but critical elements of our strategy have already be confirmed or
developed further:

}}We remain a trail blazer in the expansion of renewable energies and stick to our ambitious goals in both the
electricity and heating segments: By 2025, we intend to be generating sufficient green electricity in our own
plants to cover all of Munichs consumption. With our district-heating vision, which is unique in Germany, we
want to turn Munich into Germanys first city to generate its district heating entirely from renewable energies
by 2040 with a key contribution from the use of geothermal energy.
}}Together with our MVG subsidiary, we intend to significantly expand our mobility services: We want to offer
people environmentally benign and city-friendly ways to rapidly reach their destinations in Munich.
}}We will continue the extension of the fibre-optic high-speed network that we are installing together with
our M-net telecommunications subsidiary.
 ANNUAL REPORT 2016 STADTWERKE MNCHEN 3
Letter from the Management Board

FROM LEFT TO RIGHT,

FROM TOP TO BOTTOM: 
DR FLORIAN BIEBERBACH,
WERNER ALBRECHT, INGO WORTMANN,
HELGE-UVE BRAUN.

}}We intend to take a more holistic view of our customers in the future and offer them our services via a
digital interface. In addition, we continue to feel responsible for ensuring that everybody in Munich and the
region receives excellent value for money in the basic services of energy, heating, water, mobility and
telecommunications in the future, too.
}}SWM will use the increasing technological capabilities to actively connect people, services and equipment.

The vision we are pursuing with all these ambitious plans is that of turning the City of Munich into an integrated
system sustainable, digital, efficient and still worth living. When doing so, we can build on our strong brand,
our broad customer base and the great trust in SWM as a company serving the citizens of Munich and the
region.

We are aware of the fact that SWMs realignment requires a great deal of willingness to change on the part of
our employees. We are therefore all the more pleased that they are accompanying us on our journey with a
motivated and constructive attitude. They have thus earned our gratitude and respect! We also wish to thank
our shareholder, the City of Munich, for supporting our efforts to sharpen our strategy. In return, we will make
a contribution to keeping Munich running with both long-standing and also numerous new services in the
same reliable manner as in the past 100 years.

Sincerely yours,

Dr Florian Bieberbach Werner Albrecht Ingo Wortmann Helge-Uve Braun

Chief Executive Officer Director, Personnel and Director, Public Transport Director, Technology
Social Affairs
 ANNUAL REPORT 2016 STADTWERKE MNCHEN 5
Our Strategy

SWM GUARANTOR OF RELIABLE ENERGY AND

DRINKING WATER, MOBILITY AND COMMUNICA-
TIONS SERVICES IN MUNICH AND THE REGION
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 SWMs long-term success.

Change is necessary to In addition, we have repeatedly been confronted with high

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.
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 Munichs
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 SWMs continued ability to realize
its ambitious projects out of its own resources in the
future.
6 ANNUAL REPORT 2016 STADTWERKE MNCHEN
Our Strategy
SWM22: future-oriented, integrated,
income-boosting
Against this background, we initiated the SWM22 strategy
project in autumn 2016. Its ambitious goals: stabilise EBIT
at a sound level and, above all, develop sustainable solu-
tions to the challenges we are facing in our markets. In
this exercise, we are putting every aspect of our business
model under the microscope starting with our vision and
mission. The guiding principles of our deliberations are:
}}Encourage networking across all units
}}Facilitateand demand entrepreneurial action
}}Strengthen the strategic focus
}}Allocate resources efficiently
Very much in keeping with the first guiding principle,
multidisciplinary work groups examined trends in society,
business and technology. Their guideposts were the ques-
tions of what Munich will look like in the future, how we
at SWM can play a proactive role in shaping this transfor-
mation and what business potential will emerge for us
from these developments. In early 2017, we translated the
answers and results into a new strategy aimed at ensuring
that we continue to fulfil our task of providing basic public
services: with our wide range of services, we contribute to
the functioning of Munich in the same reliable manner as
in the past 100 years.
SWM WILL FOCUS EVEN MORE STRONGLY ON ONSHORE WIND ENERGY IN THE FUTURE.
Provide: ensure ecologically benign
provision of basic services
SWMs customers will continue to receive excellent value
for money in the basic services of energy, heating, water,
telecommunications and mobility.
Our commitment to our renewable energies expansion
campaign and its ambitious goal will remain unchanged:
by 2025, we intend to be generating sufficient green elec-
tricity in our own plants to cover all of Munichs consump-
tion. However, we are adjusting the course leading to this
goal. Although we will continue to focus on wind energy,
currently the most productive and most profitable technol-
ogy for the generation of renewable energies, we will shift
the weighting of our onshore/offshore portfolio in the
direction of onshore.
Onshore wind energy has priority
Nevertheless, we have good news to report from our most
recent offshore project: the Sandbank wind park we are
realizing together with Vattenfall. In January 2017, con-
struction of the last of a total 72 wind energy converters
was completed 90 kilometres west of the island of Sylt
approximately three months ahead of the original schedule.
The wind parks regular operation is scheduled to produce
an annual electricity volume theoretically covering the re-
quirements of 400,000 Munich households. In September
2016, we moreover announced that we are taking a stake
in the Raskiftet onshore wind park in Norway. In

cooperation with the two Norwegian municipal energy
utilities Eidsiva Energi and Gudbrandsdal Energi, we will
construct 31 wind energy converters, with a total capacity
of 112 megawatts, some 200 kilometres northeast of Oslo,
with completion slated for early 2019. Our stake of 60% in
this park will correspond to the requirements of approxi-
mately 84,000 Munich households.
Services along the value chain
In addition to the construction of new wind parks in
Germany and Scandinavia, our focus is mainly on develop-
ing our own operating capabities along the entire value
chain. In this new orientation, we also see a new role for
ourselves a transition from strategic investor to active
operator, providing services along the entire value chain.
In photovoltaics, we intend to seize opportunities that
present themselves: If economically attractive opportunities
for the development, operation and marketing ofground-
installed photovoltaics systems arise in Bavaria, we will
pursue them. In addition, our new M-Solar Plus system
allows homeowners to generate their own solar electricity
at low cost, thereby realizing their own personal energy
turnaround right on their own roofs. In these projects, we
handle all technological and administrative processes in
cooperation with regional partners that are specially
trained installation engineers.
Holistic energy turnaround: 100% green heating
The heating market is also of great significance for the
energy turnaround. Here, our vision is to turn Munich into
Germanys first city to generate its district heating entirely
from renewable energies by 2040. We continue to stick to
this goal, too. The key contribution to green heating will be
made by geothermal energy. After all, a virtually inexhaust
ible and emission-free energy source is literally underfoot
deep in the ground in Munich in the form of hot-water
accumulations virtually a gift from nature.
Since autumn 2016, the Freiham geothermal plant has
covered the base load for heating requirements of the new
Freiham district that is being constructed there and neigh-
bouring districts in the western part of Munich. From 2018
onwards, a further geothermal plant will be built on the site
of the Heizkraftwerk Sd power station, which is slated
to commence operation as early as in late 2019. Our plans
provide for the construction of three further geothermal
plants by 2025. Since November 2015, we have therefore
analysed the ground under the City of Munich in a large-
scale seismic measuring campaign to identify the most
suitable locations. In the future, our activities in the area of
geothermal energy will increasingly include projects outside
Munich. In addition, we acquired two already operating
geothermal plants in Drrnhaar and Kirchstockach, both
ANNUAL REPORT 2016 STADTWERKE MNCHEN 7
Our Strategy
SWM WILL DEVELOP AND OPERATE PHOTOVOLTAIC PLANTS TO THE
EXTENT TO WHICH THIS IS ECONOMICALLY VIABLE.
located south of Munich, in the year under review, which
generate green electricity for more than 32,000 house-
holds.
We continue to see great potential in the expansion of our
district cooling business. Our goal is to systematically ex-
pand our generation capacities in Munichs downtown area
in particular. District cooling facilitates environmentally
benign air-conditioning of buildings. In downtown Munich,
cold water is transported in insulated and closed cooling
pipes to customers sites, where it takes up heat from the
buildings air-conditioning. The integration of the under-
ground Stadtbach stream as a natural cold source makes
cold-water generation especially eco-friendly.
Our strategy in the area of conventional energy generation
provides for modernisation of our existing combined heat
and power (CHP) plants making the best possible use of
government grants. This will allow us to provide the gas-
based generation capacities that will be required into the
2030s in an economically sound manner. Furthermore, we
YET ANOTHER AWARD FOR SWMS
COMMITMENT TO THE ENERGY
TURNAROUND
For the successful implementation of our renewable energies
expansion campaign, we received the renowned Energy
Award in the Utilities & Municipal Providers category in
October 2016. The Energy Awards are bestowed on outstan-
ding projects undertaken within the context of the energy
turnaround. The initiators are the Handelsblatt business
newspaper and General Electric. A jury made up of prominent
representatives from the energy industry, the media and
politics gathered in Berlin to assign awards in a total of five
categories.
8 ANNUAL REPORT 2016 STADTWERKE MNCHEN
Our Strategy
UNIQUE SWIMMING POOL VARIETY, EXCELLENT DRINKING WATER, AFFORDABLE HOUSING: SWM CAN BE RELIED ON.
are considering the addition of CHP-compatible gas and
steam plants to our generation park to close potential
supply gaps until electricity and heating requirements can
be satisfied completely from renewable sources.
Services for Munichs high quality of life
Compared to energy, our business units Water and Public
Pools are admittedly less significant from a purely econo
mic perspective, but they are nevertheless extremely im-
portant for the quality of life in Munich and for Stadtwerke
Mnchens reason for existence. Every day, SWM supplies
fresh-from-the-source drinking water from the foothills of
the Bavarian Alps to Munich. The drinking water from the
three catchment areas the Mangfall valley, the Loisach
valley, and an area of moraine deposits east of Munich
known as the Schotterebene is one of the best in
Europe. In 18 modern indoor and outdoor pools, ten
attractive sauna landscapes, the Prinzregenten ice stadium
and two modern fitness centres, the Munich public pools
offer city-dwellers a wide range of opportunities to keep
themselves fit and healthy, spend leisure time and relax.
SWM is continuously enhancing its public pools. At pres-
ent, the Olympic swimming pool is being refurbished with-
out closing the pool to the public, and Cosimawellenbad,
Munichs only wave pool, is also being modernised and
undergoing general refurbishment. Cosimawellenbad will
presumably reopen in summer 2017. The pool will then
offer an expanded children paddling area, a swimming and
wave pool, new courses and an attractive sauna a further
enhancement of the swimming pool variety offered to all
citizens of Munich. We will continue to further develop the
relatively stable Water and Public Pool business units in a
demand-oriented and forward-looking manner in the
future, too.
Infrastructure: create affordable housing
In a prosperous metropolitan region such as Munich,
boasting a continuously growing population, basic require-
ments also include the availability of residential and com-
mercial space.
By offering affordable company flats, we intend to win and
retain qualified new employees for our company. In our
company-flat expansion campaign, we will therefore build
approximately 500 new company flats by 2022, nearly
doubling our portfolio. With this expansion campaign, we
will not only ease the burden arising from Munichs high
cost of living for our employees, but also reduce the ten-
sions characterising the Munich residential property mar-
ket. In total, we will invest at least EUR 120 million in this
campaign. The first construction projects with a total of
45 dwelling units, launched in 2014, were successfully
completed in the year under review.

Steer: design the
Munich of tomorrow
The networks operated by SWM are important lifelines of
the City of Munich and the region. We will not only oper-
ate them in a forward-looking and reliable manner, but
also make them technologically fit for the future.
Digitisation is a key driver of our strategy in this area. Not
only does it create opportunities for efficiency enhance-
ment through leaner structures and operations, but it will
also pave the way to the Munich of tomorrow. We will
develop new offerings through enhanced networking, also
with other business units.
We will continue or even expand our franchise strategy. In
the future, we will continue to apply for franchises in the
Munich metropolitan area where appropriate also with
partners.
ONE OF SWMS BIGGEST INVESTMENTS FOR THE FUTURE: A FIBRE-OPTIC NETWORK EVERYWHERE IN MUNICH.
ANNUAL REPORT 2016 STADTWERKE MNCHEN 9
Our Strategy
Fibre-optic network: the path to the digital world
By 2021, we intend to hook up a further 35,000 buildings,
with more than 230,000 flats, in a total of 27 roll-out
areas to the fibre-optic high-speed network that we are
installing together with our M-net telecommunications
subsidiary. Nearly 70% of all Munich households will then
have direct access to this powerful data highway. Beyond
Munichs city limits, too, M-net, together with various
cooperation partners, will continue to make sizeable in-
vestments in a future-proof broadband infrastructure. In
addition, a different type of data network will pave the
way towards a real smart city: a low-frequency long-
range radio network for the energy-saving connection of
terminal devices to the Internet of Things, the introduc-
tion of which SWM is analysing. With the set-up of such a
network, SWM intends to tap new revenue sources, e.g. in
the monitoring of relevant infrastructures or in the area of
traffic and transport management.
10 ANNUAL REPORT 2016 STADTWERKE MNCHEN
Our Strategy
From transport company to mobility
service provider
Against this background, intermodal mobility will also play
a role for the future development of our Mnchner Ver-
kehrsgesellschaft (MVG) subsidiary. In addition to its tradi-
tional core business of public-transport services, MVG has
already expanded its range of offerings over the last few
years through additional mobility services for individual
requirements, e.g. cooperations with car-sharing providers
or the MVG Rad public bike-rental system. The path is
clear: MVG is evolving from bus, underground and tram
operator into a comprehensive mobility service provider
with a focus on extended mobility solutions from the start-
ing point to the destination of a trip, going far beyond
classic public transport with bus, underground and tram
lines. All these offerings are interlinked via our digital
mobility platform, which will be expanded continuously
in the future, too.
Valid quantification of the economic potential that autono-
mous driving or driverless rail systems may have in real-life
application are not yet possible at the current juncture. We
are nevertheless keeping a close eye on these develop-
ments in order to be able to offer marketable solutions in
good time. The existing technological potential will set the
stage for new mobility concepts that will make transport
and traffic in Munich even more city-friendly and environ-
mentally benign and are useful complements to existing
mobility offerings.
Munichs continued growth creates particular pressure to
act. The persistent stream of people moving to the city
causes the existing transport networks to reach the limit of
their capacities. The substantial reinvestment and new-
construction requirements in infrastructure and vehicles
will only be feasible if adequate user financing is ensured
and sufficient public funds are made available. In addition,
suitable funding is a prerequisite for MVGs continued
ability to provide its transport services from its own
resources. Apart from an ongoing focus on efficient cost
structures and income from new business areas, MVG
relies on policy-makers support in the creation of suitable
framework conditions.
EASY MOBILITY IN MUNICH: MVG BRINGS
TOGETHER PUBLIC TRANSPORT, CAR
S HARING AND RENTAL BIKES.
 ANNUAL REPORT 2016 STADTWERKE MNCHEN 11
Our Strategy

Connect: enhance the development of Envisage: design an integrated system for

innovative customer services the city of the future

SWM will use the continuous enhancement of technologi-
cal capabilities to actively connect people, services and
equipment.
One of the biggest assets of our company is our customers
strong trust and our numerous customer contacts, an in-
creasing share of the latter taking place via digital commu-
nication channels. Impressive figures demonstrate this:
significantly more than 500,000 users follow SWM and its
subsidiaries on Facebook; the MVG apps are used more
than one million times on an average day. We intend to
further enhance this high level of customer retention and
develop new requirements-geared offerings across SWMs
entire range of services.
In line with our residential and business customers needs,
we provide a broad range of different electricity products
and accompanying services, which we are expanding con-
tinuously. One focal point is on the development of digital
business models and energy services such as M-Wrme
Plus, our service for state-of-the-art heating that brings
together our own advisory capabilities and the expertise of
manufacturing companies and local tradespeople to the
benefit of our customers.
In the long run, the measures described in the three pillars
above will allow us to create the prerequisites for realising
the idea of a city of the future as an integrated system.
In the area of energy supply, for instance, this will involve
further expansion of our flexibility pool, in which numerous
generation units and electricity consumers are linked up
managed by SWM.
We are convinced that the newly gained experiences and
capabilities resulting from the SWM22 project, in con
junction with the expertise gathered in the contribution
to urban development we have made for more than
100years, are of great value. This being the case, we will
adopt an even more targeted approach in future when
searching for value-adding ways to market our capabilities.
Like M unich, which sets an example for other cities in
many respects, we also intend to be a role model for other
utility and mobility companies.

District cooling is another highly promising area: an envi-

ronmentally benign, energy-efficient and low-cost alterna-
tive to conventional air-conditioning systems. At present,
we are expanding our district cooling grid, setting the
stage for hooking up more and more Munich building
owners in the future.

Opportunities: digitisation of energy supply

By adopting the Digitisation of the Energy Turnaround Act
(Gesetz zur Digitalisierung der Energiewende) in September
2016, the German Federal Government set the framework
conditions for intelligent electricity metering systems, lay-
ing the foundation for digitisation of the energy supply.
Presumably from 2018 onwards, users with an annual
consumption in excess of 10,000 kilowatt-hours will be
equipped with digital electricity meters known as smart
meters in conjunction with a gateway. From 2020 on-
wards, these devices will also become mandatory for users
with an annual consumption of 6,000 kilowatt-hours and
above. Thanks to its high market share, SWM is excellently
positioned to use this new physical interface to our cus-
tomers and offer attractive add-on services on this basis.

SWM WILL CONTINUE TO DEVELOP DIGITAL BUSINESS MODELS.

12 ANNUAL REPORT 2016 STADTWERKE MNCHEN
Our Strategy
WORK-LIFE-BALANCE AND FAMILY-FRIENDLY OFFERINGS: A STRONG EMPLOYER.
Social responsibility
strong constant in eventful times
We will continue to fulfil our responsibilities vis--vis
employees and society in the future, too.
SWM as an employer:
partner-oriented and socially responsible
In its role of employer, SWM has to compete with numer-
ous renowned companies for qualified employees at the
attractive location of Munich. We face this challenge with
confidence: We have set ourselves the ambitious goal of
ranking among Munichs 5 most attractive employers by
2025. The stage has been set: We are pursuing a f orward-
looking strategy, offer diverse job opportunities and main-
tain a value-based corporate culture. Our credible posi-
tioning as a sustainable, reliable and socially responsible
employer is helping us score against a large number of
renowned corporations in the keenly competitive Munich
labour market.
We offer our employees a family-friendly environment that
permits an adequate work-life balance. This includes vari-
ous flexitime models as well as options for child care and
support in the care of elderly parents. In the year under
review, for instance, we adopted a policy granting easier
access to mobile work or home office opportunities
throughout the organisation. Another major milestone is
our new day-care centre, where a total of 36 children of
our employees will be cared for from September 2017
onwards.
In addition, we have always fostered a diverse staff. To
prevent any form of marginalisation or discrimination, we
regularly raise our leaders and employees awareness of
correct, appropriate and respectful social dealings with
one other. In 2016, for instance, we again initiated various
qualification measures, e.g. on responses to sexism and
the German General Anti-Discrimination Act (Allgemeines
Gleichstellungsgesetz, AGG).
For as many as 28 years, we have joined forces with Spec-
trum e.V. in Stadtwerkeprojekt, assisting young people
with difficult backgrounds in getting their careers off the
ground or supporting them in their professional training.
Also in cooperation with Spectrum e.V., we have now
launched a vocational preparation measure aimed at help-
ing young refugees gain access to the labour market. Our

common goal is to help participating refugees obtain
apprenticeship entry maturity within one year, allowing
them to find their way into dual vocational training. An
accompanying mentoring system will also facilitate the
integration of the initially 13 participants outside the
workplace.
Responsibility does not end at our
organisations boundaries
Integration has also been the guiding theme of the SWM
Education Foundation ever since its establishment in 2007.
It is committed to improving the educational opportunities
of disadvantaged Munich children and adolescents. With a
foundation capital totalling EUR 20 million and annual
funding of EUR 600,000, it ranks among the largest edu-
cational foundations in Germany. In its nine years of opera-
tion, the SWM Education Foundation has already reached
more than 6,000 young people within the framework of a
total of 95 sponsored projects. Since 2016, the SWM
CONTRIBUTING TO THE COMMON GOOD: SWMS SOCIAL PROJECTS.
ANNUAL REPORT 2016 STADTWERKE MNCHEN 13
Our Strategy
E ducation Foundation has also been sponsoring projects in
the region. In addition, it has awarded a prize for out-
standing commitment to educational work with disadvan-
taged children, adolescents and young adults since 2013.
In the year under review, the recipient of this prize was
Wilhelm-Busch-Realschule in Munichs Neuperlach district.
The school, where some 60 % of the students have a
migration background, is a particularly strong advocate
of educational equity in many areas.
There are, however, other areas, too, in which we are en-
gaged in a large number of projects and initiatives aimed
at fostering a diverse, lively and equitable urban society.
One such example is the project in which customer service
employees counsel low-income households individually and
free of charge at their homes about ways to save electri
city, heating and warm water. And last but not least, we
support a diverse cultural landscape in Munich and recrea-
tional and professional sports with all kinds of endeavours.
14 ANNUAL REPORT 2016 STADTWERKE MNCHEN
Financial Report

FINANCIAL REPORT

1429
GROUP MANAGEMENT REPORT

15 BUSINESS MODEL
16 BUSINESS REPORT
26 FORECAST, RISK AND OPPORTUNITY REPORT

3033
CONSOLIDATED FINANCIAL STATEMENTS

30 CONSOLIDATED BALANCE SHEET

31 CONSOLIDATED INCOME STATEMENT
32 CONSOLIDATED CASH FLOW STATEMENT
33 SCHEDULE OF CONSOLIDATED SHAREHOLDERS' EQUITY

3462
NOTES TO THE CONSOLIDATED FINANCIAL
S TATEMENTS

34 GENERAL INFORMATION
34 CONSOLIDATION GROUP
35 CONSOLIDATION PRINCIPLES
37 ACCOUNTING POLICIES
41 NOTES TO THE CONSOLIDATED BALANCE SHEET
46 NOTES TO THE INCOME STATEMENT
49 OTHER INFORMATION
54 THE EXECUTIVE BODIES OF STADTWERKE MNCHEN
GMBH
56 MOVEMENTS IN NON-CURRENT ASSETS 2016
58 AFFILIATED COMPANIES AND MAJOR EQUITY
PARTICIPATIONS
61 INDEPENDENT AUDITOR'S REPORT
62 REPORT OF THE SUPERVISORY BOARD

GROUP MANAGEMENT REPORT
1. Business Model
SWM (Stadtwerke Mnchen) makes a major contribution
to the quality of life of the people in the Munich region.
From energy and water supply to local public transport and
telecommunications to Munichs public swimming pools,
SWM offers excellent services at fair prices. In these efforts,
it focuses on sustainably attractive offerings generating
long-term benefits for its customers and the citizens of the
Munich region. To achieve these goals, SWM has played an
active role in the international energy markets for a long
time.
SWM is managed via a total of eight business units
described below.
Business unit Energy Sales
The Energy Sales business unit is the partner for its custom-
ers in all aspects revolving around energy and water supply
and innovative customer solutions. SWM has held a firmly
embedded position in Munich and the region for decades.
In conjunction with its positive image, which is characterised
by sustainability, reliability and customer orientation, this
forms the basis for successful sales in all business lines and
customer segments.
Business unit Trade
The Trade business unit is the key component of the energy
management and business model aimed at optimising the
energy business of SWM Group and hedging it against risks.
Its most important responsibilities are market-geared pro-
curement and marketing of energy and the management of
the Group's aggregated market price risks (mainly electricity,
natural gas, coal and CO2). In this respect, the business unit
is the interface between generation, distribution and individ-
ual SWM majority shareholdings on the one hand, and the
energy markets on the other.
Business unit Generation and Upstream
Regional
The Generation and Upstream business unit operates and
maintains all electricity and district heating power stations
in the Munich region that feed their output into the Munich
grids as well as the district cooling generation plants.
Supraregional
The supraregional activities within the Generation and
Upstream business unit focus on the area of renewable
energies and efforts to ensure sustainable gas supplies.
ANNUAL REPORT 2016 STADTWERKE MNCHEN 15
Group Management Report
In its renewable energies expansion campaign, SWM plans
to generate enough power from its own plants to cover all
of Munichs electricity requirements by 2025. To achieve this
goal, SWM is continuously increasing the share of electric-
ity generation from renewable sources. However, it is not
possible to generate enough green electricity in Munich and
the region for a city with a population of more than one
million. This is why SWM is also active at a supraregional
level in Germany and Europe.
To safeguard a secure and affordable natural gas supply for
Munich, SWM also engages in oil and gas exploration and
production in Northern Europe via the Bayerngas Norge AS
Group. The gas upstream activities are a key pillar of SWM's
corporate strategy, the goal being to reduce dependence on
international oil and gas groups and/or politically instable
source regions such as Eastern Europe or the Middle East.
Business unit Energy Networks
Expansion and operation of distribution networks for
electricity, gas, district heating and water are key elements
of the basic public services SWM provides to the citizens of
Munich.
The main task of the Energy Networks business unit is to
continue to ensure above-average supply quality and reli-
ability for SWM customers despite increased cost pressure
resulting from incentive regulation.
Business unit Water
Water is the most important food. To satisfy the drinking-
water requirements of the citizens of Munich, SWM supplies
top-quality fresh-from-the-source drinking water from the
foothills of the Bavarian Alps every day.
Business unit Public Transport
The Public Transport business unit comprises Mnchner
Verkehrsgesellschaft mbH (MVG) and the public transport
operations of Stadtwerke Mnchen GmbH. MVG is the
passengers contracting partner. Stadtwerke Mnchen
GmbH is responsible for providing all underground and
tramway transport services on behalf of MVG. The bus
services are performed by MVG, Stadtwerke Mnchen
GmbH and private cooperation partners. SWM holds an
equity interest under company law in one of these co
operationpartners Mnchner Linien GmbH & Co. KG.
Business unit Telecommunications
The product portfolio of the Telecommunications busi-
ness unit comprises a broad range of Internet, voice and
bandwidth services for residential and business customers
on a fixed-network and mobile-communications basis. As
16 ANNUAL REPORT 2016 STADTWERKE MNCHEN
Group Management Report

a regional provider, the Telecommunications business unit Since yearend 2015, contribution margins of gas-fired
offers services to large sections of Bavaria, the greater Ulm power plants have slowly recovered in peak-load operation.
area and the Main-Kinzig district in Hesse. The s ervices This development also continued steadily throughout 2015,
are performed jointly by M-net Telekommunikations with additional support in summer and autumn arising from
GmbH (M-net), SWM Services GmbH (SWM Services) and temporary downtimes at French nuclear power plants.
Stadtwerke Mnchen GmbH. Towards the end of the year, it was even possible to reach
cost coverage. By contrast, base-load coal-fired power
Business unit Public Pools plants saw an erosion of their contribution margins in the
In 18 modern indoor and outdoor pools, ten attractive course of the year due to surging coal prices and closed
sauna landscapes, the Prinzregenten ice stadium and two 2016 only just about in cost-covering territory.
modern fitness centres, M-Bder offers pool visitors a wide
range of opportunities to keep themselves fit and healthy, CO2 certificates, rolling front year, EUR/t CO2
spend leisure time and relax.
18
16

2. Business Report 14
12
10
Economic environment 8
6
4
Energy markets 2
The Joint Economic Forecast Project Group continues to see 0
Jan. 12
Apr. 12
July 12
Oct. 12
Jan. 13
Apr. 13
July 13
Oct. 13
Jan. 14
Apr. 14
July 14
Oct. 14
Jan. 15
Apr. 15
July 15
Oct. 15
Jan. 16
Apr. 16
July 16
Oct. 16
Dec. 16
the German economy in a stable upswing. Preliminary
statistics indicate that the country's gross domestic product
Source: Reuters
grew by 1.7% in 2016. The expansion was mainly supported
by private consumption, especially employment growth and
the dynamic trend in incomes. In addition, the residential In early 2016, the price of CO2 certificates slumped from
construction market was stimulated by what are still histori- EUR8 to lows in the order of EUR4. Apart from falling oil
cally low interest rates. and gas prices, one major reason was a supply surplus of
some two billion emission allowances. Pressure on certificate
For SWM, developments in the energy markets are of pivotal prices eased following the agreement on the annual emis-
importance. This applies particularly to the contribution mar- sion allowance reduction factor in the EU's Environmental
gins of power plants and the prices of emissions allowances, Committee (in mid-December 2016).
natural gas, oil and coal. In the wake of production cuts, oil
prices rebounded from their lows in the course of the year Gas front year, NCG (Net Connect Germany), EUR/MWh
under review. Since other energy prices are closely connect-
ed to oil prices, they likewise gained ground compared to 30
28
their lows. Overall, however, energy prices remain at low
26
levels in virtually all links of the value chain. 24
22
20
Clean Dark Spreads and Clean Spark Spreads, EUR/MWh 18
16
14
20
12
15 10
Jan. 12
Apr. 12
July 12
Oct. 12
Jan. 13
Apr. 13
July 13
Oct. 13
Jan. 14
Apr. 14
July 14
Oct. 14
Jan. 15
Apr. 15
July 15
Oct. 15
Jan. 16
Apr. 16
July 16
Oct. 16
Dec. 16

10
5
0 Source: European Energy Exchange; data supplied by Reuters
5
10
15
Due to falling oil prices, high output volumes in Europe
Jan. 14
Apr. 14
July 14
Oct. 14

Dec. 16
Jan. 12
Apr. 12

Oct. 12
Jan. 13
Apr. 13
July 13
Oct. 13

Jan. 15
Apr. 15
July 15
Oct. 15
Jan. 16
Apr. 16
July 16
Oct. 16
July 12

and sizeable LNG imports, gas prices continued their

Clean Dark vs. Base Clean Spark vs. Peak pronounced downward trend discernible as of autumn
Source: Reuters 2015 into the first quarter of 2016, too. With LNG imports
falling considerably short of expectations later in the year,
 ANNUAL REPORT 2016 STADTWERKE MNCHEN 17
Group Management Report

however, supply decreased noticeably, which apart from has led to a further increase in customer churn rates. The
the repercussions of rising oil prices resulted in a price annual report published by the German Federal Network
increase to the vicinity of EUR18/MWh. Agency (Bundesnetzagentur BNetzA) likewise confirms
this increase in churn rates. All indications suggest a contin-
Brent crude, front month, USD/bbl uation of this trend. The key motivation for such switches
remains the price, but regionality plays an important role,
130 too.
120
110
100 The energy turnaround, together with the digitalisation
90
80 mega-trend, is leading to sustained changes in customers'
70
expectations and behaviour. End-customer sales have thus
60
50 taken on a completely different level of complexity and
40
30
market dynamics, with customer interfaces, in particular,
20 changing substantially. New suppliers from other industries
Jan. 12
Apr. 12
July 12
Oct. 12
Jan. 13
Apr. 13
July 13
Oct. 13
Jan. 14
Apr. 14
July 14
Oct. 14
Jan. 15
Apr. 15
July 15
Oct. 15
Jan. 16
Apr. 16
July 16
Oct. 16
Dec. 16
enter the market with data and IT-based business models,
increasing the pressure to innovate. At the same time,
Source: International Petroleum Exchange (IPE) in London; data supplied by Reuters
digitisation is also creating new opportunities to add value
over and above pure energy supply. In particular, product
Due to global crude oil overproduction, inventory levels bundles combining energy supply with energy technology
increased strongly in early 2016. This drove prices to and customised digital solutions for individual customer
extremelylow levels of USD 30/bbl at one point (Brent vari- segments are gaining significance. In the heating market,
ety). Subsequently, the rapid plunge in crude oil production the competitive situation has also intensified further due to
caused by price erosion, especially in the US, and a global the continuing trend towards decentralised supply models
increase in demand resulted in a trend reversal. In late No- and, in some instances, self-supply. Examples include con-
vember 2016, OPEC member states' agreement on output tracting solutions, tenant electricity models, combined heat
cuts triggered price stimuli reinforcing the upward trend. At and power stations, increased use of renewable technolo-
30 December 2016, the oil price closed the year at a signifi- gies and municipalities' own supply initiatives for areas and
cantly improved level of USD 56.82/bbl (Brent variety). quarters.

Coal API#2 (ARA), rolling front year, USD/t API A moderate upward trend in wholesale gas and electricity
prices in the course of 2016 induced many customers from
120 the industrial and service segments to opt in favour of early
110
conclusion of supply contracts with a duration of several
100
90 years at price levels they assumed to be more favourable. By
80 contrast, individual customers are increasingly adopting an
70
60 exchange-related approach and cover their requirements via
50 forward and spot market products.
40
30
20 Competitive intensity remains high in the key account
Jan. 12
Apr. 12
July 12
Oct. 12
Jan. 13
Apr. 13
July 13
Oct. 13
Jan. 14
Apr. 14
July 14
Oct. 14
Jan. 15
Apr. 15
July 15
Oct. 15
Jan. 16
Apr. 16
July 16
Oct. 16
Dec. 16

segment, too, permitting only low specific margins. This

has consequences: initial market participants that do not
Source: Intercontinental Commodity Exchange; data supplied by Reuters
consider large key accounts to be part of their core business
have begun to exit this business segment.
From spring 2016 onward, coal prices for deliveries in the
following year 2017 rose continuously up to the area Conditions in energy policy
of USD 70 per tonne (API#2). Amongst other things, this is In 2016, quite a series of legislative measures were adopted
due to the Chinese government's decision to scale back its at the European level in order to achieve the targets set
own coal production. in the 2030 framework for energy and climate policy:
reduce CO2 emissions by 40%, increase the share of
Conditions on the sales market renewable energies to 27%, increase energy efficiency by
In the residential and business customer segments, competi 27% and expand interconnection capacities by 15%. In
tive pressure, which was high to begin with, increased even November 2016, the European Commission published its
further in 2016. This applies to both electricity and natural winter package, which contains drafts for amendments
gas. The main reasons were the market entry of new players to the Building Efficiency Directive, the Energy Efficiency
from other industries and the high premiums competitors Directive, the Renewable Energies Directive and five further
offer in Internet price comparison portals, which, for their legislative proposals. The focus was mainly on three goals:
part, advertise very aggressively. This competitive intensity drive forward the expansion of renewable energies, offer
18 ANNUAL REPORT 2016 STADTWERKE MNCHEN
Group Management Report
consumers energy at fair prices, and give priority to energy
efficiency. A further focal point revolved around the ad-
justments required in electricity market design in order to
integrate the increasing share of renewable energies in the
market and ensure cost-effective supply reliability.
In Germany, legislators meanwhile adopted a new electrici-
ty market design. The measures that apply now are to help
optimise and safeguard the electricity market. Key elements
include the principle of free electricity pricing and the intro-
duction of capacity and grid reserves.
Furthermore, the new German Combined Heat and Power
Act (Kraft-Wrme-Kopplungsgesetz; KWKG) went into
effect at the beginning of 2016. The KWKG subsidises the
construction of new gas-fired CHP plants and for the first
time also existing gas-fired power plants.
In late 2016, the German Acts on the Reorganisation of
Responsibility in Nuclear Waste Management (Gesetze ber
die Neuordnung der Verantwortung der kerntechnischen
Entsorgung) were adopted. They contain the final regula-
tions for the issue of nuclear power. Among other things,
they define the amounts plant operators have to pay to
the German Federal Government in order to obtain release
from any future responsibility for actions or financial contri-
butions to interim storage and final disposal.
The parliamentary procedure for the German Act for the
Modernisation of Grid Charges (Gesetz zur Modernisierung
der Netzentgelte), which also addresses new regulations for
avoided grid user charges, was not yet completed in late
2016.
Against the background of the Paris Climate Agreement
and Germany's long-term climate targets, the German
Federal Government adopted the Climate Action Plan
2050. This plan is geared to the goal of reducing green-
house gas emissions by 80% to 95% by 2050 compared
to their 1990 level and as an interim target by 55% by
2030. The Climate Action Plan also defined sector-specific
targets for 2030 for the first time. They provide for the
energy sector to scale back its greenhouse gas emissions
to approximately 50% of their 2014 level by 2030. In
addition, electricity generation in coal-fired power plans is
to be reduced gradually.
Conditions in the public transport sector
The key drivers of conditions in the public transport sector
are the German Passenger Transportation Act (PBefG),
European state aid regulations [EU Regulation 1370/2007]
and contract award legislation. The provisions of the
German Passenger Transportation Act (PBefG), which
was amended with effect from 1 January 2013, are being
challenged in a number of court proceedings. Municipal
public transport operators must be in a position to provide
transport services under competitive terms. This results not
only from legal, but also from financial framework condi-
tions of local public transport systems.
Competition for public funding for transport infrastruc-
ture expansion and maintenance will become even fiercer.
Federal financial assistance under the Municipal Transport
Financing Act (GVFG) will now continue beyond 2019.
According the current status, however, cost-intensive
refurbishing projects for the existing infrastructure will not
qualify for subsidies in future either. Going forward, the
hitherto available unbundling funds will be part of states'
budgets without being earmarked for any specific purpose.
The question of whether they will be appropriated to public
transport at the state level remains unanswered. At the
same time, there is a huge and increasing need to renew
existing infrastructures in Munich, too a situation that
is indicative of the national trend. In the City of Munich,
local public passenger transport also faces quantitative,
qualitative and economic challenges due to an increase in
demand associated with population and commuter growth,
especially at peak hours. Given the constant rise in costs
and limited potential for further rationalisation, this trend is
resulting in tighter financing conditions.
Business development
Business unit Energy Sales
In 2016, electricity and gas sales declined slightly versus
the previous year. District heating sales increased year-on-
year in 2016. Water sales were maintained at the previous
year's level. SWM Versorgung implemented various cus-
tomer retention measures to intensify customer relations,
especially in Munich. Various market research studies
confirm that SWM Versorgung boasts consistently high, or
rising, customer satisfaction scores. In the Munich region,
SWM Versorgung continues to focus on a strong foothold
with a view to strengthening the customer relationships
that exist there and sustainably acquiring new customers.
The M-Strom Garant (electricity) and M-Erdgas Garant
(gas) tariffs, which had been newly launched in the previ-
ous year, have become an established part of the market.
They supplement our own product portfolio, explicitly ad-
dressing customers outside Munich, and offer limited-time
price guarantees. To harness the new challenges raised by
the energy turnaround and digitalisation, SWM develops
new products and services in a comprehensive innovation
management framework. One example is the M/Solar Plus
product introduced in 2016, which enables customers to
generate their own solar power. Customers also have the
option of adding an electricity storage device allowing
them to optimise their own consumption with an energy
management system.

Despite high competitive pressure in Munich, SWM main-
tained its excellent market position and kept the number
of electricity and gas customers in the private and business
customer segments at the previous year's level by success-
fully attracting new customers.
In the business customer segment, margins are still under
strong pressure. Nevertheless, important key accounts
were retained with long-term contracts. Flexible, struc-
tured and, above all, exchange-aligned products safe-
guarded a substantial part of SWM's volume sales, espe-
cially in the key account and individual customer segments.
Voluntary self-commitment to CO2 emissions reductions,
in particular among internationally operating corporations,
has significantly boosted demand for customised green
electricity products geared to enterprises' specific reduc-
tion targets. While this increases complexity, it also offers
additional revenue and margin potential.
In the key account business, the SWM shareholdings
Bayerngas and Energie Sdbayern (ESB) intensified their
marketing of electricity, in addition to gas supply, the
background being customers increasing demand for
comprehensive end-to-end services.
The sales strategies will also be continued over the next
few years. In particular, SWM will set its sights on further
intensification of customer retention measures, innovative
marketing approaches and optimised distribution channels
in new customer acquisition as well as on a product policy
in which the classic commodity business is supplemented
by new innovative products and services.
Business unit Trade
In 2016, one focal point was again successful integration of
further foreign participations or SWM's respective stakes in
such companies into the Group's portfolio management. In
addition, a second focal point was successful implementa-
tion of process improvements and automation to enhance
cost efficiency.
In the Plattform Energie GmbH purchasing pool, SWM's ESB
shareholding is responsible for portfolio management and
energy procurement with a total volume of approximately
4 terawatt-hours for electricity and natural gas for currently
26 municipal partners.
Business unit Generation and Upstream
Regional
SWM is well-positioned in the combined-heat-and-power
(CHP) market. The technical availability, performance, effi-
ciency and flexibility of joint electricity and district heating
generation in SWMs own CHP plants are continually opti-
mised. The goal is to ensure high availability levels, especially
during periods of high electricity demand. The use of heat
ANNUAL REPORT 2016 STADTWERKE MNCHEN 19
Group Management Report
storage systems, in particular, helps decouple the timing of
electricity and heat sales. At the Heizkraftwerk Sd site,
the planning process for the integration of district cooling,
geothermal energy and heat storage systems has com-
menced. In this connection, the German Combined Heat and
Power Act of 2016 (Kraft-Wrme-Kopplungsgesetz; KWKG)
provides a fundamental opportunity to further modernise the
CHP plants at the Freimann and Sd sites in the period until
2022. The approval process for the replacement of disused
gas turbines at the Freimann site has been initiated. A final
decision on this project will be made in 2017. Asset replace-
ment at further CHP plants is being analysed.
Within the framework of the district heating vision 2040,
which aims to turn Munich into Germanys first city to gen-
erate its district heating entirely from renewable energies by
2040, SWM will increase the share of district heating gained
from renewable energies, especially geothermal energy.
Drilling for the Freiham geothermal plant was completed in
February 2016. The plant went productive upon commence-
ment of the 2016 heating season. It supplies approximately
12 mega-watts of green heating to the new Freiham district
and neighbouring districts in the western part of Munich.
From 2018 onwards, a further geothermal plant will be built
on the site of the Heizkraftwerk Sd power station. The
drilling site will be prepared in February 2017. The plant is
slated to commence operation as early as towards the end
of 2019. SWM's plans provide for the construction of four
additional geothermal plants by 2025. Evaluation of the
data gathered in the recently completed large-scale seismic
campaign in the south of Munich will take until mid-2017. In
addition, 2016 also saw SWM's acquisition of two companies
operating one geothermal plant each in Drrnhaar and Kirch-
stockach, respectively, generating green electricity for more
than 32,000 households.
In the area of wind power, SWM is pursuing various projects
together with Bavarian municipalities. Given the statutory
restrictions (the 10-H Distance Rule, which requires wind
turbines to be placed at least ten times their height away
from residential areas), however, hardly any progress has
been recorded. Initial plans for a second wind turbine at the
Munich Freimann waste disposal park are being drawn up in
cooperation with Abfallwirtschaftsbetrieb Mnchen (AWM),
Munich's municipal waste management company.
Capacities of the Stachus district cooling centre will be
expanded by the end of 2017, and a further district cooling
centre at Odeonsplatz is in the execution planning stage.
Additional sites for district cooling centres are being analysed.
Initial projects for ground-water-based cooling and heating
provision to key accounts are to be realized in 2017.
Supraregional
In its renewable energies expansion campaign, SWM focus-
es on wind energy, the currently most cost-effective form
20 ANNUAL REPORT 2016 STADTWERKE MNCHEN
Group Management Report
of electricity generation from renewable sources, which is
also independent of other resources. In addition, it does
not compete with food production.
In 2016, too, major milestones were reached within the
framework of the renewable energies expansion campaign:
in the Sandbank offshore wind energy project (288 MW,
SWM stake: 49%), the first wind energy converters
were commissioned in September ahead of schedule.
Since August 2016, SWM has been involved in the Austri
Raskiftet onshore wind project in Norway (112 MW, SWM
stake: 60%). Here, the first preparatory construction
measures have been initiated; completion of the wind park
is slated for late 2018/early 2019. The capacity of the wind
parks held by wpd europe GmbH (SWM stake: 33%) in its
own portfolio grew to 377 megawatts in 2016.
After multi-year construction activities, the Gwynt y Mr
and DanTysk offshore wind parks were largely turned
over to regular operation, while residual work from the
construction phase still has to be completed at the Global
TechI offshore wind park. In the onshore wind parks
Sidensj, SWM 50 MW, Havelland and SWM Wind Onshore
France electricity generation is still falling short of the
plans, which is mainly due the fact that wind levels are
below the forecast averages.
The Andasol 3 solar thermal power plant in Spain has
exceeded expectations from a technological perspective.
A lawsuit was filed against the Spanish government due to
retroactive reduction in the feed-in tariff already intro-
duced several years ago. A court decision will probably not
be handed down until several years have elapsed.
The projects that have already been realised, together with
those that have been initiated, will give SWM access to
generation capacities totalling approximately 3.5 billion
kilowatt-hours of green electricity in its own plants. This
corresponds to more than 50% of Munichs electricity
consumption. That said, the generation capacity that has
been achieved so far will have to be expanded significantly
in order to reach the goal of the renewable energies expan-
sion campaign.
The earnings generated by the upstream subsidiary, Bayern-
gas Norge AS, were again subdued by low natural gas and
oil prices in 2016. Thanks to a cost-reduction programme
launched in summer 2016 and addressing exploration, staff
and administrative costs in particular, the company's oper-
ating result nevertheless exceeded expectations. Because
of lower price expectations for the coming years, however,
impairments on a number of field shareholdings of Bayern-
gas Norge AS were necessary, so a high annual loss was
incurred in 2016.
Field development for Cygnus in the United Kingdom and
Ivar Aasen in Norway made good headway: both fields
commenced operations in December 2016. The contractual
relationship for the construction of the production rig for
the Hejre field was dissolved by extraordinary termination.
After completion of the drilling campaign, the planning
process for a different development option for the Hejre
field is now being accelerated.
The existing licence portfolio is being optimised, taking
account of the market environment and the risk profile of
the shareholding. Producing fields' output of both natural
gas and oil is still stable and sound. Production at the Volve
field was discontinued in September 2016. Installation
dismantling is proceeding as scheduled.
The strategy project initiated in autumn 2015 continues.
Due to a further, asymmetrical capital increase, in which
both SWM Gasbeteiligungs GmbH & Co. KG and Bayern-
gas GmbH participated, the stake in Bayerngas Norge AS
held directly by SWM Gasbeteiligungs GmbH & Co. KG
increased slightly from 78.77% to 79.49%. Including the
shareholdings held indirectly via Bayerngas GmbH, the
stake in Bayerngas Norge AS now stands at 90.69%, up
from previously 89.97%.
Business unit Energy Networks
In 2016, SWM Infrastruktur GmbH was converted into SWM
Infrastruktur GmbH & Co. KG. Concurrently, a transfer of
ownership of the electricity grid, which had previously been
operated by Stadtwerke Mnchen GmbH on a leasehold
basis, was implemented. With this move, SWM mainly
responded to the fact that leasehold models are in a worse
position from a regulatory perspective than ownership
models.
Reorientation of incentive regulation was finalised with the
adoption of the amendment to the German Incentive Reg-
ulation Ordinance (Anreizregulierungsverordnung, ARegV).
The new regulation system eliminates the time delay of up
to seven years between capital expenditure and the relevant
revenue recognition. The new regulatory provisions take ef-
fect upon commencement of the respective third regulation
periods (gas: 2018; electricity: 2019).
To ensure SWM's ability to offer its customers a supply grid
operating in an cost-effective and environmentally benign
manner, operation of the Niederpframmern gas transfer sta-
tion was resumed in 2016. This has considerably enhanced
the quantitative and qualitative gas supply reliability in the
territory covered by SWM. The Schwabing transformer sta-
tion was newly constructed to further enhance the reliability
of electricity supply.
In 2016, receivables due from grid user charges reached
their lowest level since the start of the deregulation process.
Risks arising from insolvency law were countered by system

adjustments, with the risk of endowment challenges, for
instance, now being virtually excluded.
SWM participated in several franchise award procedures
for both electricity grids and gas distribution networks and
succeeded in winning three new franchises, while losing
in one franchise award procedure. In addition, two local
or municipal utilities were successfully supported in the
remunipalisation of their electricity or gas grids. SWM Infra-
struktur GmbH & Co. KG will pursue a proactive approach
in the new role it plays in the market, i.e. that of meter
point operator responsible for universal service including the
function of smart meter gateway administrator pursuant to
the Digitisation of the Energy Turnaround Act (Gesetz zur
Digitalisierung der Energiewende).
The necessary preparatory work for the rollout of state-of-
the art metering installations and intelligent meter systems
due to commence in 2017 was performed in the M/Smart
project in 2016.
In addition, competition for downstream grids is discernible
in Munich. Measures aimed at early identification of areas
offering potential opportunities and customer requirements
were introduced and grid-side customer support was
intensified.
The legal prerequisites for the construction of the MONACO
high-pressure gas pipeline have been put in place. Construc-
tion preparation measures have been initiated, which means
that pipeline installation can commence in 2017.
Business unit Water
Protection of drinking water quality is a top priority for
SWM. This is the reason why organic farming with meth-
ods that are water and environmentally friendly are used in
the three drinking water catchment areas the Mangfall
valley, the Loisach valley and an area of moraine deposits
east of Munich known as the Schotterebene. With its
ecoFarmer initiative, SWM specifically promotes organic more than 1.7%. In addition, the newly built 1.3 kilometre
farming in the Mangfall valley. The goal is to further expand
the existing organically farmed agricultural land in coopera
tion with local communities and residents. SWM has
secured water rights to safeguard Munich's long-term
drinking-water supply. For this purpose, SWM already ob-
tained a permit from the water authorities for the Forsten-
rieder Park pumping station and approval of the extraction
and routing of groundwater from the Loisach valley catch-
ment area near Farchant/Oberau in late 2015.
To preserve supply reliability and high drinking-water quality
in future, too, SWM remains proactively committed to a
municipal water-supply structure.
Business unit Public Transport
In 2016, MVG again met its objective of making sure that
services were provided out of its own resources. Various
ANNUAL REPORT 2016 STADTWERKE MNCHEN 21
Group Management Report
MVGs passenger figures
in millions
600 578
566
544
555
550 536
512 522
500
500
450
400
350
300
2009 2010 2011 2012 2013 2014 2015 2016
measures were taken to continue to secure the financing of
the existing level of service. Thanks to a sustained increase
in demand, passenger numbers climbed further in 2016,
from 566 million to 578 million. In total, the Public Trans-
port business unit had 3,861 employees at 31 December
2016, 1,010 thereof at MVG.
Customer satisfaction surveys showed top marks in 2016,
too. Given the ongoing rise in demand, planning for the
future expansion of services continued (MVG services
campaign 20102020). The focus was on the expansion
of two-minute intervals on particularly highly frequented
underground sections in the city centre. From a structural
perspective, there is an urgent need for the construction of
a new U9 underground route running from the Impler-
strasse to the Mnchner Freiheit stops, the new northern
and western tangential tram routes, and the tram route to
the northern part of Munich.
In 2016, the services campaign involved spendings totalling
around EUR270 million for underground, bus and tram
projects. Investments mainly focused on state-of-the-art
vehicles, the tram system and the refurbishment and mod-
ernisation of the underground infrastructure. Overall, MVG
thus expanded its underground, bus and tram services by
Steinhausen tram line was opened. By 31 December
2016, the MVG-Rad bicycle-rental service, which was
available year round, recorded 53,411 registered custom-
ers and 341,000 rental transactions. The prospects of the
Public Transport business unit will be shaped, first, by the
predicted further growth in demand, which will be very
challenging and push up costs substantially, and second, by
a sharp rise in the need to refurbish underground facilities
and replace rail vehicles. The approval procedure for the
latter at the technical supervisory authority is still very
complex. As existing depot capacities are fully utilised,
capacities will have to be added at new or extended sites.
One key task for the next few years will thus be to secure
financing in an environment that has become much more
challenging and complete the upcoming construction
work without major disruptions to ongoing day-to-day
operations.
22 ANNUAL REPORT 2016 STADTWERKE MNCHEN
Group Management Report

Business unit Telecommunications high service quality in the pools. A further key element
Together with infrastructure partners, M-net Telekom- is the extensive and holistic range of exercise offers with
munikations GmbH will, over a multi-year-period, invest swimming and aqua courses for all ages. Responsible
several hundreds of millions of euros in the provision of handling of resources such as water and energy helps
fibre-optic broadband networks in Munich, Augsburg and stabilise the earnings contribution made by Public Pools.
Erlangen as well as rural communities. In the fibre-to-the- Pool modernisation continues with the refurbishment of
building (FttB) regions, these networks will permit Internet Cosimawellenbad, Munich's only wave pool, and the gen-
access with transmission rates of up to 300 Mbit/s and eral refurbishment of the Olympic swimming pool, which is
the hook-up of electronic meters. Demand for such higher being carried out without closing the pool to the public.
bandwidths is increasing continuously. The expansion of
a fibre-optic-based infrastructure was thus driven forward M-Bder visitor trends
further. In Munich, the second stage for the inclusion of in thousands
approximately 32,000 additional buildings outside the
Mittlerer Ring beltway commenced, with Hasenbergl and 5000
5,000
Harthof being the first districts to be hooked up.
4,033 4,019
4000
4,000 3,847
3,618 3,558
Further investments focused on linking 21 additional loca-
tions to the M-WLAN public WLAN (WiFi) network. One 3000
3,000

additional element of the telecommunications strategy is

2000
2,000
SWM's digital trunk radio network, which is characterised
by high security standards. Another focal point remains 1000
1,000
the provision of transmission bandwidth in undersupplied 2012 2013 2014 2015 2016

regions.

Business unit Public Pools

The modernisation of the Munich public pool infrastruc- Business situation
ture and a broad range of service offerings in the pools SWM's consolidated group was expanded to include the
led to slightly upward long-term trend in the numbers of fully consolidated Sidensj Vindkraft AB subgroup (SWM's
visitors in indoor pools and saunas. On the other hand, the stake: 100%).
weather pattern in summer 2016 resulted in a sharp plunge
in visitor numbers at the outdoor pools compared to the Results of operations
record summer of 2015, so the overall number of visitors
decreased on a full-year basis in 2016. Revenues
SWMs revenues decreased from EUR6,555 million to
In its attractive offers for all pool and sauna guests, SWM EUR6,321 million.
places special emphasis on customers' requirements and

Revenues and volume sales

Volume sales Revenues Volume sales Revenues
2016 2016 (in kEUR) 2015 2015 (in kEUR)
Electricity (GWh) 23,051 1,863,266 25,989 2,011,253
Gas and Oil (GWh) 147,279 2,815,516 120,912 2,935,267
District Heating (GWh) 4,329 346,248 4,298 367,726
Water (million m) 94 156,704 95 156,961
Public Transport
(million passengers) 578 510,631 566 482,939
Public Pools
(thousand visitors) 3,558 18,813 4,019 19,851
Telecommunications 232,753 217,020
Other 376,644 363,910
6,320,575 6,554,927

Electricity revenues went down by 7.3% to EUR1,863 mil-
lion. This decline was mainly attributable to reduced sales
volumes.
Natural gas and oil revenues fell by EUR120 million to
EUR2,816 million. The decrease in revenues was mainly
due to lower average prices in all customer segments. To
some extent, this trend was offset through sales growth of
21.8%.
District heating sales improved slightly, by 0.7%, in 2016,
but revenues moved in the opposite direction, falling by
EUR21 million, due to lower prices.
Water revenues were virtually unchanged at EUR157million.
SWM recorded passenger growth from 566 million to
578 million in underground, tram and bus services in
the local public transport system. This was one of the
main reasons for the increase in transport revenues from
EUR483 million to EUR511 million.
In Munich's public pools, the weather pattern in summer
2016 resulted in a decrease in visitor numbers from 4.0 mil-
lion to 3.6 million compared to the record summer of 2015.
Accordingly, revenues contracted by EUR1.0 million.
In the highly competitive telecommunications market, SWM
maintained its successful performance, increasing revenues
from EUR217 million to EUR233 million. This performance
can mainly be attributed to future-proof fibre-optic offer-
ings and competitive prices.
Development of further significant items
in the income statement
Other operating income decreased by EUR183 million
to EUR283 million year-on-year. The 2015 financial year
included non-recurrent effects from the transfer of real-
estate properties from Stadtwerke Mnchen GmbH to the
city of Mnchen. In addition, application of the German
Accounting Directive Implementation Act (Bilanzrichtlinie-
Umsetzungsgesetzes, BilRUG) resulted in the reclassification
of other income to revenues.
Cost of materials decreased from EUR4,715 million to
EUR4,503 million, mainly due to a reduction in sales vol-
umes and lower procurement prices.
Personnel expenses increased from EUR679 million to
EUR702 million. On a Group-wide basis, the number of
employees (excluding trainees, temporary and seasonal
workers) rose from an average of 8,843 to 9,022 in the
ANNUAL REPORT 2016 STADTWERKE MNCHEN 23
Group Management Report
fully consolidated companies. The increase results mainly
from higher demand for drivers in Public Transport and the
hiring of additional customer service employees in Telecom-
munications. In addition, salary adjustments resulting from
collective bargaining agreements also drove up expenses.
Depreciation decreased by EUR479 million to
EUR620 million.
The previous year's accounts showed write-downs on fields
in the Bayerngas Norge AS Group of EUR570 million. How-
ever, recent developments indicate a continued reduction in
profitability of fields, which was taken into account in the
form of further field write-downs of EUR183 million in the
2016 annual financial statements.
Other operating expenses increased from EUR477 million
to EUR698 million. The key driver was the addition to
provisions for the Isar 2 nuclear power plant. The amounts
set aside for this purpose now also cover the liability release
surcharge attributable to SWM in connection with the reor-
ganisation of nuclear waste management.
SWM intends to reimburse the disposal scheme for the
release from liability for interim storage and final disposal
at the earliest possible date. For this reason, SWM already
began to dispose of long-term financial investments ear-
marked for coverage of these provisions and hold short-
term financial investments instead.
Tax expenses
Taxes decreased from EUR263 million to EUR175 million.
The income tax burden contained therein went down from
EUR213 million to EUR158 million.
Profit
Profit before tax amounted to EUR11 million (previous year
EUR276 million). Consolidated net income after taxes and
before profit transfer came to EUR164 million.
Operating profit after adjustment for one-off effects came
to EUR518 million in the financial year under review, which
corresponds to an increase of EUR45 million year-on-year.
EBITDA rose from EUR929 million to a new record level of
EUR936 million.
SWM's financial result stood at EUR121 million in 2016,
compared with EUR364 million in the previous year. The
improvement in financial result of EUR243 million was
mainly due to lower write-downs on financial investments.
24 ANNUAL REPORT 2016 STADTWERKE MNCHEN
Group Management Report

Net assets In Public Transport, investments focused on the acquisition

SWM's total assets increased slightly from EUR10,661 mil-
lion to EUR10,668 million in the year under review.
Assets
Property, plant and equipment went up from EUR5,124 mil-
lion to EUR5,341 million. This increase was due the
inclusion of the Sidensj Vindkraft AB subgroup in SWM's
consolidation group. In addition, write-downs were offset
by additions, mainly in energy supply and transport services.
Financial investments went down from EUR2,579 million to
EUR2,527 million.
Overall, fixed assets increased by EUR116 million to
EUR7,952 million.
of vehicles, especially the new underground trains. Further
items were the newly built Steinhausen tram line and the
procurement of motor vehicles.
In Public Pools, investments mainly focused on refurbishing
work at the Cosimawellenbad wave pool, as had already
been the case in the previous year.
In Telecommunications, the bulk of investments went into
the further expansion of the telecommunications network
and the continuation of the expansion of the FTTB.
Current assets decreased from EUR2,780 million to
EUR2,670 million, the key contributors being lower invento-
ries and a reduced portfolio of marketable securities. On the
other hand, receivables and other assets were higher.

SWM's fixed asset intensity increased slightly, from 73.5% Liabilities

in the previous year to 74.6%. Shareholders equity pro-
vides 57.0% cover for the long-term assets tied up in the At 31 December 2016, shareholders equity amounted to
Group, compared with 62.5% in the previous year. EUR4.539 million. Including the equity share contained in
the special items for investment and income grants as well as
Overall, investments in property, plant and equipment in subsidies for construction costs, SWMs economic equity
and intangible assets decreased from EUR820 million to ratio decreased from 47.6% to 44.5%.
EUR762 million.
Provisions increased from EUR2,297 million to
Investments in property, plant and equipement EUR2,790 million. This was mainly attributable to com-
and intangible assets pounding of and additions to provisions for disposal costs
for nuclear power operations and additions to provisions for
in kEUR 2016 2015
outstanding invoices.
Energy and Water 394,780 650,108
Public Transport 256,871 64,029 Liabilities decreased by EUR169 million to EUR2.988 million
Public Pools 5,996 4,108 compared to the previous year, the key driver being the
Telecommunications 52,825 46,348 decline in trade accounts payable and other liabilities. The
Central Operations 51,753 55,715
reduction was mainly due to end-of-period effects.

762,225 820,308
Financial position

In Generation, investments were mainly used for the Cash flow

Freiham heating supply and continued operation of the
Freimann site until 2030.
In natural gas extraction, the invested amounts were mainly
used in the exploration and development of gas production
fields.
Cash flow from operating activities amounted to
EUR490 million. Starting from negative consolidated net in-
come of EUR164 million, non-cash impairments on prop-
erty, plant and equipment of EUR644 million and changes
in provisions of EUR403 million were the key drivers of the
positive cash flow.

In Energy Networks, investments focused on the expansion Further components were changes in trade accounts paya-
of distribution installations and networks for energy and ble (EUR334 million), the balance of interest expenses and
water supply and on house and customer connections. interest income (EUR112 million) and the increase in assets
(EUR153 million).

The cash flow from investing activities amounted to
EUR744 million. Outflows for property, plant and equip-
ment (EUR746 million) and intangible assets (EUR16 mil-
lion) primarily concerned Generation, Energy Sales, Public
Transport and Telekommunications. Investments in financial
assets (EUR426 million) mainly comprised investments in
shareholdings in the renewable energies sector, loans to
affiliated companies and investments in securities held as
fixed assets. The Group received interest of EUR19 million
from investments in financial assets.
The cash flow from financing activities amounted to
EUR11 million. Inflows benefited from the shareholder's
contribution to additional paid-in capital of EUR20 million,
borrowings in the form of bank loans of EUR102 million
and grants received of EUR14 million. This was offset by
outflows for the redemption of existing borrowings of
EUR46 million, interest payments of EUR75 million and
outflows to other shareholders of EUR4 million.
In addition, reference is made to the detailed cash flow
overview.
Liquidity
The negative cash flow of EUR243 million resulted
in a reduction in funds available at short notice from
EUR1,440 million to EUR1,201 million.
In 2010 and 2011, SWM took up loans (with maturities
between seven and 20 years) worth some EUR1.5 billion,
primarily in the form of promissory notes, in order to
finance the long-term investments within the framework of
its renewable energies expansion campaign. In total, finan-
cial liabilities now amount to slightly over EUR2,182 million,
of which around 38% was taken up with variable interest
rates. Interest-rate swaps have been used to reduce this
share considerably. In order to mitigate foreign currency
risks, the Gwynt y Mr wind park off the Welsh coast was
financed by taking out loans in pounds sterling along with
the associated hedging in the form of cross-currency swaps.
The outcome of the UK referendum on exit from the
European Union resulted in a depreciation of pound sterling
against the euro in 2016, which means that the hedges
have now been triggered. The current low-interest-rate en-
vironment provided SWM with very favourable refinancing
opportunities. At the same time, the value of the derivatives
portfolio declined, leading to provisions for contingent
losses that add up to a total in the low triple-digit million
range. The impact of a weaker pound sterling and lower
interest rates on provisions for contingent losses and SWM's
2016 net income virtually offset each other. Termination
of a number of derivative transactions against equalisation
ANNUAL REPORT 2016 STADTWERKE MNCHEN 25
Group Management Report
payments has led to a noticeable reduction in provisions on
contingent losses for financing-related derivative transac-
tions. As the equalisation payments more or less matched
the provisions for contingent losses incurred from the termi-
nated transactions, the impact on 2016 net income is minor.
With respect a number of derivative instruments that seem
unsuitable, SWM has filed a lawsuit against one bank on
grounds of incorrect advice.
On the reporting date, Stadtwerke Mnchen GmbH
had unused credit lines totalling kEUR581,500. One
kEUR500,000 credit line has a term running until February
2022.
In addition, there is a kEUR500,000 unused facility provid-
ed by the European Investment Bank for a long-term credit,
which can be drawn until February 2018.
Other affiliated companies had additional undrawn credit
lines totalling kEUR84,391 on the reporting date.
Non-financial performance indicators
The performance of the Stadtwerke Mnchen Group is not
only reflected in economic indicators, but also influenced
by other factors. The indicators outlined below, such as
the trend in electricity generation capacity from renewable
energies and the number of employees, play an important
role for the company's future development.
On average, 9,704 persons were employed in the Group at
the fully consolidated companies during the 2016 financial
year (previous year: 9,533). This figure can be subdivided
into 9,022 employees (previous year: 8,843), 399 trainees
(previous year: 395), 251 temporary staff (previous year:
254) and 32 seasonal workers (previous year: 41).
At the proportionately consolidated companies, 435 staff
members were employed (previous year: 393). This figure
can be subdivided into 405 employees (previous year: 360),
14 trainees (previous year: 15) and 16 temporary staff and
seasonal workers (previous year: 18).
Electricity generation capacity from renewable energies at
Stadtwerke Mnchen Group increased to 2,849,638 mega
watts. The key drivers behind the increase in production
were electricity feed-in from the Sandbank wind park as of
October 2016 and the transition to regular operation at the
DanTysk and Gwynt y Mr wind parks.
26 ANNUAL REPORT 2016 STADTWERKE MNCHEN
Group Management Report
3. Forecast, risk and opportunity report
Forecast report
In its report of autumn 2016, the Joint Economic Forecast
Project Group projected a slight year-on-year deceleration
in Germany's economic growth rate to 1.4% in 2017. One
major reason behind the less buoyant growth rate is a lower
number of working days. The inflation rate is expected to
increase to 1.4% in the wake of the recent rebound in oil
and other energy prices.
In Germany, the business cycle has a significant impact on
energy and transport requirements, given the countrys
large industrial base. SWM thus anticipates unchanged elec-
tricity and gas demand in 2017. Demand for public transport
services can be expected to increase further in the Munich
metropolitan region with its growing population.
Key revenue drivers for 2017 will be renewable energies and
the upstream activities in the North Sea. With Sandbank,
a further offshore wind park will commence operations,
generating additional electricity revenues. The plans of the
Bayerngas Norge AS subgroup provide for rising output
volumes in 2017 from the commencement of production at
the Cygnus and Ivar Aasen fields.
Both the continued efforts to reduce exploration and
production costs at the Bayerngas Norge AS subgroup
and the noticeable effects of the Sustainably fit income-
enhancement programme will contribute to a stabilisation
of revenues.
With the SWM22 project, launched in 2016, SWM intends
to set the stage early on for remaining a successful company
in the future, too.
Against this backdrop, SWM expects a build-up in revenues
on the basis of the 2016 level. EBIT is expected to corres
pond to the average of previous years. Profit after tax will in
all likelihood be positive in 2017. In addition, SWM con
tinues to closely monitor the energy and financial markets
that are relevant for the company.
In 2015, the members of the Supervisory Board and
Management Board of Stadtwerke Mnchen GmbH,
SWMServices and MVG adopted resolutions aimed at
increasing the female quota in leadership positions at
SWM. Targets and deadlines were fixed for the staffing of
both Supervisory Board mandates and Management Board
positions as well as the first two executive levels below the
Management Board.
Risk report
Risk management system
The objective of risk management at SWM is to ensure
the company's success by continuously monitoring and
controlling significant risks.
Risk Controlling submits reports to the Risk Committee and
Management Board within the framework of systematic
risk inventories at half-yearly intervals. For risks arising from
SWMs activities in the energy and financial markets, posi-
tions, profits and losses, risk ratios and VaR limits (value at
risk) are monitored daily in the trading systems. In addition,
detailed reporting lines are submitted to Specialist Risk
Committees.
Treasury and the Energy Trading business unit use only
products that have been approved by the Risk Committees.
Details of the transactions carried out and hedged in the fi-
nancial field and energy trading in 2016 and the derivatives
and valuation units used are set out in the Notes.
Credit risks are taken on only after analysis of the counter-
party's credit quality and monitored daily. The management
of credit risks is based on limits and especially in energy
trading on framework agreements.
Group Internal Audit carries out process-independent
audits to assess the suitability and effectiveness of the risk
management system.
Risk position
Economic risks: The risks mainly originate in the external
economic environment.
The risks emanating from Europe are primarily of a political
nature. If the Brexit process is characterised by hard nego-
tiations, economic relations might deteriorate substantially.
This might lead to a reduction in German exports and do-
mestic investment demand. In the event of an unfavourable
outcome of the upcoming election in France, the German
economy might be confronted with similar risks.
Uncertainty also exists with respect to the United States'
future economic policy. On the one hand, protectionist
tendencies might lead to global trade restrictions. Countries
such as China and Mexico, but also Germany, would be
affected to a particular extent. On the other hand, the eco-
nomic stimuli that seem to be on the cards for the US might
fuel inflation further and lead to a rise in interest rates,
which would have a retarding effect on global economic
growth in the medium term.

Energy market risks: Developments in the energy markets
have a significant impact on the results of operations at
SWM. In its trading activities, SWM therefore pursues the
objective of identifying, evaluating and proactively hedging
market price risks resulting from the production, generation
and sale of electricity, gas and oil, district heating and public
transport. This approach also takes account of market price
risks resulting from SWM's stakes in wind parks and oil and
gas fields in the United Kingdom and Scandinavia.
In addition, SWM's result has been influenced by weather
effects, too: the temperatures observed in winter impact
volume sales of natural gas and especially district heating.
Furthermore, short and long-term fluctuations are discern
ible in the annual revenues of the wind parks in which SWM
holds stakes, depending on wind levels.
Financial risks: Volatile equity prices, interest rates and
exchange rates can impact negatively on SWMs results.
SWMs Treasury Unit aims at centrally pooling the financing
and investment risks and the risks arising from transactions
denominated in foreign currencies for Group companies.
The investment policy is determined by the Financial
Committee and controlled by the guidelines issued by the
Financial Risk Committee. It is based on risk-reducing and
diversified asset allocation.
The use of derivatives aims to minimise interest rate and/or
currency risk in the core business, to stabilise cash flows and
to hedge against rising interest rates.
Thanks to good liquidity and the credit lines available, SWM
has been able to completely cover its financial requirements
at all times and currently classifies liquidity risks as minor in
view of the continued high operating cash flow.
Political and regulatory risks: Political initiatives at the Euro-
pean, national and Bavarian level involve numerous risks for
SWM. The European energy policy involves the risk of sales
volume reductions accompanied by high implementation
costs. Further risks may arise from European competition
regulations (e.g. promotion of renewable energies).
The 2030 framework for energy and climate policy and
the associated legislative measures will likewise lead to
further regulatory intervention. At the national level, various
far-reaching energy-policy decisions were already made last
year (amendment to the German Combined Heat and Power
Act [KWKG], electricity market design, EEG 3.0, Smart Meter
rollout, German Incentive Regulation Ordinance [Anreizreg-
ulierungsverordnung, AregV], financial markets amendment),
ANNUAL REPORT 2016 STADTWERKE MNCHEN 27
Group Management Report
all of which involve various risks for SWM. The details of a
number of regulations must still be laid down in secondary
legislation.
In district heating, requirements regarding climate friend-
liness of energy sources can be expected to become more
stringent in the medium term. A potential switch in the
methodology used for the calculation of primary energy
factors involves the risk of district heating being put at a
disadvantage compared to other heating technologies.
A further risk results from the German Federal Government's
efforts to restructure grid charges, which provide for a
freeze and gradual elimination of avoided grid user charges.
SWM counters the aforementioned risks through transpar-
ency and proactive submission of information to the relevant
associations and respective decision-makers.
Technology and participation risks: Participating interests in
renewable energies involve risks arising from new technolo-
gies and realisation concepts. SWM counters these risks by
choosing its locations carefully, carrying out due diligence
checks, using leading technologies, commissioning experts
and maintaining a diversified portfolio. In the realisation
and operation phase, risks are managed through close
monitoring or representation in the management teams of
the respective participations.
Gas and oil exploration bears the risk of finding the
commodity, as well as technical risks that are reduced by
collaborating with experienced companies and a diversified
portfolio. Technological and project-specific risks in project
implementation can be controlled, but not excluded. SWM
thus pursues risk diversification by investing in various geo-
logical regions and countries and by realising projects with a
variety of partners, all of which have extensive experience in
the gas and oil industry.
Operational risks: SWM uses technically complex instal-
lations for generating and distributing electricity and
district heating, involving the inherent risk of unplanned
downtimes.
Existing risks are minimised through regular maintenance,
high safety standards and emergency plans, as well as many
other quality assurance measures. In addition, the measures
taken by SWM to counter safety and environmental risks
are certified each year by independent experts (International
Organization for Standardization, Eco-Management and
Audit Scheme, Technisches Sicherheitsmanagement).
28 ANNUAL REPORT 2016 STADTWERKE MNCHEN
Group Management Report
Transport sector risks: European and national competition
regulations present the transport area with risks which
SWM counters by maintaining and enhancing its competi
tiveness. Similarly, changes in the framework conditions,
e.g. the still uncertain future of investment promotion
under the Unbundling Law (Entflechtungsgesetz; EntflectG),
especially uncertainties regarding the follow-up regulation
for the funds hitherto provided under the Unbundling Law,
may lead to unpredictable challenges in the financing of the
public transport system. Furthermore, there are technical
risks for the transport infrastructure and transport supplies
that are customary in the sector.
Personnel risks: In the years ahead, many professional
and managerial staff members will reach the statutory
retirement age. At the same time, signs of bottlenecks are
emerging in the labour market for technical and commer-
cial professions, in spite of the stream of people moving to
the Munich area. Not all positions that become vacant can
be filled from SWM's own rank and file. To take account of
this increasingly tight labour market for certain professions
and the upcoming retirements, SWM has set up a Recruit-
ing Centre. In addition, targeted talent management aims
at ensuring internal staffing of specialist and managerial
positions.
Legal risks: Operating activities may involve legal risk
arising from contractual relations to customers and other
business partners. In the last few years, the German Fed-
eral Supreme Court (Bundesgerichtshof BGH) and the
European Court of Justice handed down several decisions
dealing with energy utilities' price adjustment regulations
in contracts with electricity and gas customers. Legal risks
with commercial relevance may arise from such case law,
which is still evolving. The provisions of the German Energy
Industry Act (Energiewirtschaftsgesetz; EnWG) including
regulatory authorities' ordinances and activities may give
rise to legal risks with commercial relevance in connection
with the operating of gas and electricity grids including
grid user charges.
IT and information security risks: SWM applies techno-
logical, physical and organisational measures to counter
potential threats that might affect confidentiality, integrity
or availability of information. Critical information systems
including the information and communications infrastruc-
ture components supporting them are based on redundant
design. In addition, SWM has implemented a systematic
disruption and emergency management system on the
basis of pertinent industry standards.
Overall assessment: No risks that might pose a potential
threat to the continued existence of SWM as a going con-
cern arose in 2016, and none have been identified for 2017.
Against the background of major upheavals in the energy
sector, continuous price fluctuations in the energy markets,
decreasing contribution margins of conventional generation
facilities and economic and technical risks associated with
investments in renewable energies and the upstream seg-
ment are considerable challenges. SWM also faces difficult
tasks due to increasing cost pressure arising from incentive
regulation, increasingly keen competition in sales and, last
but not least, serious uncertainties in the financial markets.
Opportunity report
To ensure its ability to work successfully in a dynamically
changing environment in the future, too, SWM is imple-
menting the SWM22 strategic realignment project, address-
ing the macro-trends of decarbonisation, decentralisation,
urbanisation, digitisation and more stringent regulation.
To seize the opportunities arising from the energy turn-
around, SWM will drive forward its renewable energies
expansion campaign, both regionally and in Europe, and
continue to bank on economically viable projects that pay for
themselves. The expansion of renewable energies not only
contributes to climate protection, but can also help achieve
greater independence from fossil fuels and their suppliers.
The use of environmentally benign fuels in local public trans-
port is gradually being rolled out within the framework of
the renewable energies expansion campaign.
Munich is growing faster than any other city in Germany.
Since 2004, its population has increased by 20% to signifi
cantly more than 1.5 million and the trend continues to
point up. SWM has the opportunity of growing along with
the ever expanding Munich metropolitan region by offering
its utility services and infrastructure solutions.
The Energy Sales business unit of SWM intends to lead one
of Europe's most attractive regions into the future of energy
and ensure sustainably high quality of life. Opportunities
arise from the transition to renewable energies and future-
proof, secure and intelligent infrastructures for energy,
housing, living, mobility and leisure activities. As uncontest-
ed market leader in the City of Munich, Energy Sales is well
positioned to gain a strong market position in the European
metropolitan region of Munich, too.
On a nation-wide level, SWM still seizes the opportunities
that present themselves, e.g. assisting business customers in

their expansion initiatives or acquiring residential customers
via the Internet. SWM sees the widespread use and increas-
ing performance of technology (smartphones, sensors,
networked devices, etc.) and the upcoming introduction
of smart meter technology as an opportunity to develop
novel offerings for comfortable and efficient energy use and
improve its customers' everyday life as a provider of digital
solutions. SWM will thus evolve from a traditional energy
service provider into a network-building energy manager
and provider of digital solutions that improves customers'
everyday life with its products.
One opportunity also results from the growing demand for
future-proof telecommunications solutions. Expansion of
the fibre-optic network and the installation of public WLAN
(WiFi) hot spots continues with a view to further streng
thening Munich as a business location and secure a clear
locational advantage versus other cities. This strategy will be
supplemented by efforts to drive forward the expansion of
broadband networks and public WLAN (WiFi) hot spots in
other Bavarian cities and communities.
Continued expansion of renewable energies will increase
the demand for standby and reserve capacities from flexible
power stations and electricity storage solutions even further.
SWM is able to provide all three types of standby energy
in the electricity industry minute reserve, secondary and
primary standby capacities from its own power plant pool.
The commencement of direct marketing of customer-owned
generation plants using renewable energies will create fur-
ther opportunities for SWM.
Dr Florian Bieberbach Erna-Maria Trixl Werner Albrecht
Chief Executive Officer Director, Sales
Ingo Wortmann Helge-Uve Braun
Director, Public Transport Director, Technology
ANNUAL REPORT 2016 STADTWERKE MNCHEN 29
Group Management Report
The current German Combined Heat and Power Act
(Kraft-Wrme-Kopplungsgesetz; KWKG) allows SWM to re-
place assets at older CHP plants. In the long term, the grad-
ual increase in the use of renewable energies in Munich's
district heating will improve the latters already excellent
environmental track record even further. SWM has devel-
oped a vision for district heating that is to turn Munich into
Germanys first city to generate its district heating entirely
from renewable energies by 2040. To realize this ambitious
vision, SWM will mainly bank on the further development
of geothermal energy as an energy source in the coming
decades. High demand for district cooling will facilitate the
construction of new cooling generation plants; the current
generation sites are suitable locations for such projects.
SWM's resource-saving district heating and cooling products
will play an increasing role, especially in newly constructed
buildings and refurbishment measures in Munich's densely
populated downtown area.
Increasing awareness of climate and environmental pro-
tection issues is benefiting local public transport as a
resource-efficient mobility alternative. As far as economically
possible, MVG will therefore noticeably expand its range of
services as part of a proactive services campaign to meet
the continuous increase in demand. With add-on products
such as the MVG-Rad bicycle-rental service or car-sharing
options that aim to interlink environmentally benign means
of transport, MGV pursues a targeted approach in its role of
multimodal mobility service provider.
Munich, 27 March 2017
Director, Personnel and
Social Affairs
30 ANNUAL REPORT 2016 STADTWERKE MNCHEN
Consolidated Financial Statements

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated balance sheet

in kEUR Notes 31 Dec. 2016 31 Dec. 2015

Assets
Non-current assets 1
Intangible assets 85,026 133,610
Property, plant and equipment 5,340,537 5,124,405
Financial assets 2,526,799 2,578,519
7,952,362 7,836,534
Current assets
Inventories 2 183,813 210,727
Receivables and other assets 3 1,285,045 1,102,583
Securities 4 465,516 575,405
Cash in banks 5 735,581 891,557
2,669,955 2,780,272
Prepayments and accrued income 6 45,036 44,308
Positive difference of plan assets
over pension liabilities 7 255 240
10,667,608 10,661,354

Equity and liabilities

Shareholders' equity 8
Subscribed capital 485,000 485,000
Additional paid-in capital 5,148,187 5,128,230
Retained earnings 1,252,348 906,320
Non-controlling interests 158,462 193,720
4,539,301 4,900,630
Special item for investment grants 9 55,695 64,156
Income grants received 10 35,627 38,653
Provisions and accruals 11 2,790,487 2,296,823
Liabilities 12 2,988,242 3,156,822
Deferred income 13 233,767 163,786
Deferred tax liabilities 14 24,489 40,484
10,667,608 10,661,354
 ANNUAL REPORT 2016 STADTWERKE MNCHEN 31
Consolidated Financial Statements

Consolidated income statement

in kEUR Notes 2016 2015

Revenues 6,509,894 6,741,061

Energy tax 95,397 92,939
Electricity tax 93,922 93,195
Revenues, excl. electricity and energy tax 15 6,320,575 6,554,927
Increase or reduction in inventories of finished
goods or work-in-progress 8,945 1,210
Other capitalised own work 41,288 36,045
Other income 16 283,298 466,046
Cost of materials 17 4,502,578 4,714,572
Personnel expenses 18 701,523 678,845
Depreciation and amortisation 19 619,795 1,098,349
Other expenses 20 697,680 476,540
Financial result 21 121,402 363,733
Result from ordinary operations 22 158,320 212,624
Income taxes 147,192 488,855
Other taxes 22 17,108 49,851
Consolidated net income before profit transfer 164,300 538,706
Profit transferred as a result of a profit
transfer agreement 23 100,310 3
Consolidated net loss 264,610 538,709
Loss attributable to non-controlling interests 31,237 68,479
Consolidated loss 233,373 470,230
Withdrawal from retained earnings 233,373 470,230
Consolidated cumulative loss/profit 0 0
32 ANNUAL REPORT 2016 STADTWERKE MNCHEN
Consolidated Financial Statements

Consolidated cash flow statement

in kEUR 2016 2015

Consolidated net income (before profit transfer and including profit/loss

attributable to non-controlling interests) 164,300 538,706
Depreciation netted with write-ups for fixed assets 644,420 1,393,192
Increase/decrease in provisions 402,570 138,242
Other non-cash-effective expenses/income 20,364 64,804
Increase/decrease in inventories, trade accounts receivable as well as other assets
not classified as investing or financing activities 152,550 148,795
Increase/decrease in trade accounts payable and other liabilities not classified
as investing or financing activities 333,919 7,229
Profits/losses from the disposal of fixed assets 13,118 197,460
Interest expenses/income 112,350 86,566
Other income from equity investments 11,793 7,885
Income tax expenses/credits 158,320 212,624
Income tax payments 157,423 135,842
Cash flow from operating activities 490,429 765,467
Inflows from disposals of property, plant and equipment 41,791 267,795
Outflows for investments in property, plant and equipment 746,459 799,066
Inflows from disposals of intangible assets 6,462 5,308
Outflows for investments in intangible assets 15,766 21,242
Inflows from disposals of financial assets 363,966 34,781
Outflows for investments in financial assets 425,643 268,353
Outflows for the acquisition of shares in consolidated companies 0 8,216
Interest received 19,470 26,978
Dividends received 11,793 7,885
Cash flow from investing activities 744,386 754,130
Inflows from additions to shareholders' equity 19,647 213,275
Inflows from net borrowings 101,562 84,528
Outflows for the redemption of borrowings 45,815 22,902
Inflows from grants received 14,396 31,160
Interest paid 75,079 96,621
Outflows to shareholders of the parent company 3 100,000
Contributions from/payments to other shareholders 4,021 27,764
Cash flow from financing activities 10,687 81,676
Net change in cash and cash equivalents 243,270 93,013
Changes in cash and cash equivalents due to consolidation group 4,096 0
Cash and cash equivalents at the start of the period 1,439,980 1,346,967
Cash and cash equivalents at the end of the period 1,200,806 1,439,980

Breakdown of cash and cash equivalents

in kEUR 2016 2015

Liquid assets 735,581 891,557

Securities 465,516 575,405
Bank borrowings due on demand 291 26,982
1,200,806 1,439,980
 ANNUAL REPORT 2016 STADTWERKE MNCHEN 33
Consolidated Financial Statements

Schedule of consolidated shareholders' equity

Consoli
Non- dated
controlling sharehol-
Parent Company interests ders equity
Sharehol-
ders equity
Additional currency
Subscribed paid-in Retained translation Cumulative Sharehol-
in kEUR capital capital earnings differences profit/loss ders' equity

As of 1 Jan. 2015 485,000 4,914,955 459,277 24,960 0 4,915,718 298,179 5,213,897

Consolidated result
before profit transfer 470,227 470,227 68,479 538,706
Profit transfer 3 3 3
Consolidated net
income/net loss 470,230 470,230 68,479 538,709
Payment into additional
paid-in capital 213,275 213,275 213,275
Payment into other
retained earnings 17,378 17,378 17,378
Settlement of
cumulative loss 470,230 470,230 0 0
Currency translation
differences 30,769 30,769 30,769
Other changes in non-
controlling interests 35,980 35,980
As of 31 Dec. 2015 485,000 5,128,230 912,129 5,809 0 4,706,910 193,720 4,900,630
Consolidated result
before profit transfer 133,063 133,063 31,237 164,300
Profit transfer 100,310 100,310 100,310
Consolidated net
income/net loss 233,373 233,373 31,237 264,610
Payment into additional
paid-in capital 19,957 19,957 19,957
Payment into other
retained earnings 5 5 5
Settlement of
cumulative loss 233,373 233,373 0 0
Currency translation
differences 112,650 112,650 112,650
Other changes in non-
controlling interests 4,021 4,021
As of 31 Dec. 2016 485,000 5,148,187 1,145,507 106,841 0 4,380,839 158,462 4,539,301
34 ANNUAL REPORT 2016 STADTWERKE MNCHEN
Notes to the Consolidated Financial Statements

NOTES TO THE CONSOLIDATED

FINANCIAL STATEMENTS
General information
Stadtwerke Mnchen GmbH (the parent company) is headquartered in Munich and registered in
the Commercial Register of the Munich Local Court (Reg.No. HRB 121920).

The consolidated financial statements for the 2016 financial year have been prepared in accordance
with the German Commercial Code (Handelsgesetzbuch; HGB) in the version laid down in the
Accounting Directive Implementation Act (Bilanzrichtlinie-Umsetzungsgesetzes, BilRUG) and the
supplementary provisions of the German Limited Liability Companies Act (GmbH Gesetz) and in
compliance with the German Accounting Standards (Deutsche Rechnungslegungs Standards; DRS)
published by the Accounting Standards Committee of Germany (Deutsches Rechnungslegungs
Standards Committee e. V.; DRSC). Due consideration has also been given to the requirements of
the German Energy Industry Act (Energiewirtschaftsgesetz; EnWG). The structure of the consoli
dated financial statements has been extended to include utility and transportation-specific items.

Items in the consolidated balance sheet and the consolidated income statement have been aggre-
gated to provide clarity and better information; these items are listed separately and explained in
the notes to the financial statements.

The nature of expense method has been used to prepare the income statement.

Due to the rewording of Section 277 (1) HGB in the BilRUG version, the previous year's revenues
and other operating income are not comparable. Application of the BilRUG version of Section277(1)
HGB would have resulted in revenues and other operating income of kEUR 6,583,693 and
kEUR437,280, respectively, in the previous year.

The redefinition of revenues also led to changes in the composition of cost of materials and other
operating expenses. Application of the BilRUG rules would have led to cost of materials and other
operating expenses of kEUR 4,731,077 and kEUR 460,035 in the previous year.

Consolidation group
In its capacity as parent company, Stadtwerke Mnchen GmbH prepares its consolidated financial
statements in accordance with Section 290 et seq. HGB. Pursuant to Section 313 (2) HGB, a break-
down of the shareholdings of Stadtwerke Mnchen GmbH Group showing companies included in
the consolidated financial statements has been enclosed with the notes to the financial statements.

In addition to Stadtwerke Mnchen GmbH, in its capacity as parent company, the consolidated
financial statements comprise the financial statements of 24 (previous year: 23) fully consolidated
subsidiaries in which Stadtwerke Mnchen GmbH directly or indirectly holds a majority of voting
rights. First of all, the following companies are part of the consolidation group:

}} SWM Versorgungs GmbH (SWM Versorgung)

}} SWM Services GmbH (SWM Services)
}} SWM Infrastruktur GmbH & Co. KG (SWM Infrastruktur)
}} SWM Infrastruktur Region GmbH (SWM Infrastruktur Region)
}} Mnchner Verkehrsgesellschaft mbH (MVG)
}} SWM Kundenservice GmbH (SWM Kundenservice)
}} SWM Gasbeteiligungs GmbH & Co. KG (SWM Gasbeteiligung)
}} M-net Telekommunikations GmbH (M-net)
 ANNUAL REPORT 2016 STADTWERKE MNCHEN 35
Notes to the Consolidated Financial Statements

In addition, the following companies and their major subsidiaries are fully consolidated on the basis
of their respective subgroups:

}} Bayerngas GmbH (Bayerngas)

}} Bayerngas Norge AS (Bayerngas Norge)
}} SWM UK Wind One Limited (SWM UK Wind One)
}} Sidensj Vindkraft AB (Sidensj, since 1 January 2016)

The following three (previous year: three) consolidation entities or companies have been propor-
tionately consolidated in accordance with Section 310 HGB:

}} Energie Sdbayern GmbH subgroup (ESB)

}} Marquesado Solar, S.L. (Marquesado)
}} DanTysk Offshore Wind GmbH & Co. KG (DanTysk)

In addition, three (previous year: three) participations in associated companies have been included
in the consolidated financial statements at equity in accordance with Sections 311 und 312 HGB,
because included companies have a major impact on their business and financial policies.

A total of 26 (previous year: 20) affiliated companies without operations or with only minor
business volumes are not included in the consolidated financial statements in accordance with
Section296 (2) HGB. Further equity participations which, from the point of view of the Group,
are of minor significance for providing a true and fair view of the net assets, financial position and
results of operations are shown as financial investments in the consolidated balance sheet.

SWM Services, a subsidiary and simultaneously the parent company of M-net, is included in the
consolidated financial statements of Stadtwerke Mnchen GmbH (HRB 121920), and is accordingly
not required to prepare separate (subgroup) consolidated financial statements in accordance with
Section 291 (1) and (2) HGB.

SWM Gasbeteiligung, a subsidiary and simultaneously the parent company of Bayerngas and
Bayerngas Norge AS, is included in the consolidated financial statements of Stadtwerke Mnchen
GmbH (HRB 121920) and is accordingly not required to prepare separate (subgroup) consolidated
financial statements in accordance with Section 291 (1) and (2) HGB.

Consolidation principles
The consolidated financial statements and the annual financial statements of the companies
included have been prepared as of the reporting date of the annual financial statements of the
parent company (31 December 2016).

The annual financial statements of the companies included in the consolidated financial statements
have been prepared in accordance with uniform accounting policies, taking account of the specific
requirements applicable to the sector. The company also implemented any further adjustments
tostandard Group accounting and valuation that were required. The same consolidation principles
are applicable on a pro-rata basis to those companies included proportionally in the consolidated
financial statements.

Participations in associated companies are shown as a separate item in the consolidated balance
sheet. As a basic principle, the associated companies use harmonised accounting and valuation
methods throughout the Group. The financial statements of the associated company wpd europe
GmbH apply valuation methods that differ from those applied in the consolidated financial
statements.
36 ANNUAL REPORT 2016 STADTWERKE MNCHEN
Notes to the Consolidated Financial Statements

Capital consolidation
For companies initially included before 1 January 2010, capital has been consolidated by means
ofthe carrying amount method by netting the carrying amounts of first-time investments withthe
proportionate shareholders equity of the respective subsidiaries and joint ventures at the time
when they were acquired or initially included.

For companies initially included or transferred to full consolidation after 1 January 2010, capital
has been consolidated by means of the revaluation method by netting the equity interest with the
proportionate revalued shareholders equity allocable to the parent company in accordance with
Section 301 HGB.

Positive and negative goodwill attributable to initial consolidation

The positive differences arising in capital consolidation in previous years were recognised as good-
will and, as a basic principle, amortised in scheduled amounts over a five-year period using the
straight-line method. As of the reporting date, there was residual goodwill from the initial consoli-
dation of Bayerngas (residual life: one year) und DanTysk (residual life: two years).

The respective goodwill arising from the mergers of NEFkom Telekommunikations GmbH & Co KG
in 2004 and of AugustaKom Telekommunikations GmbH & Co KG in 2006 with M-net in 2006 is
amortised in scheduled amounts over a 15 period using the straight-line method.

Non-controlling interests
Minority interests in consolidated net income are allocated to the non-controlling interests within
shareholders equity.

Debt consolidation
Inter-company receivables, liabilities, provisions and accrued and deferred items are offset or elimi-
nated (Section 303 HGB).

Internal expenses and income

Internal income and expenses between the consolidated companies have been netted (Section
305 (1) HGB). Inter-company profit and loss transfers in the financial year under review were also
eliminated.

Treatment of inter-company results

Inter-company results attributable to internal supplies, deliveries and services have been eliminated
unless they are of minor significance (Section 304 (2) HGB).

Foreign currency translations

The balance-sheet items of subsidiaries financial statements denominated in foreign currencies
have been translated into euro at the spot mid exchange rate as of the reporting date or, in
the case of the shareholders equity item, at the historical exchange rate. Income statement
items are, as a basic principle, translated at average exchange rates. Any differences arising from
thetranslation of the balance sheets due to the translation of the shareholders equity item
at historical exchange rates and the net income item at average exchange rates are, as a basic
principle, recognised in shareholders equity with no effect on the income statement.
 ANNUAL REPORT 2016 STADTWERKE MNCHEN 37
Notes to the Consolidated Financial Statements

Accounting policies

Non-current assets
Intangible assets acquired for a monetary consideration are shown at cost and amortised using the
straight-line method over the economic life of the assets. Impairments are recognised if they are
considered to be of a permanent nature.

Goodwill resulting from capital consolidation in previous year is, as a basic principle, amortised in
scheduled amounts over a five-year period using the straight-line method. Impairments are recog-
nised if they are considered to be of a permanent nature.

Property, plant and equipment are recognised at cost of purchase or production, without consider-
ation of borrowing interest, less scheduled depreciation and impairments. Costs of production of
capitalised own work comprises direct cost of labour, materials, machine output and haulage and
appropriate portions of overheads.

Scheduled depreciation is applied primarily on a straight-line basis using normal useful operating
lives. Assets acquired during the course of the year are subject to pro-rata-temporis depreciation.
In the case of existing declining balance depreciation, the method used is also changed to the
straight-line method as soon as such a change results in higher levels of depreciation.

In deviation from the above principles, the depreciation of non-current assets in the area of natural
gas and oil extraction is recognised in scheduled amounts using the variable charge method of
depreciation.

Capital grants received are deducted from the asset balance if the company in question is both
therecipient of the subsidy and the owner of the asset. Otherwise, capital grants are recognised as
deferred income and written off over a period of 20 years using the straight-line method.

Since 2008, costs of purchase or production of independently usable depreciable movable non-
current assets have been immediately expensed in the year of acquisition if their costs of purchase
or production, adjusted for input VAT, do not exceed EUR 150.00.

Since 2010, independently usable depreciable movable non-current assets whose costs of purchase
or production exceed EUR 150.00 but not EUR 410.00 have been included in a collective item that
is written off immediately.

Financial assets are recognised at cost. In the event of permanent impairment, they are written
down to the lower fair value as of the reporting date. If the reasons leading to lower valuationno
longer apply on the reporting date, a write-up to a level not exceeding the carrying amount is
posted.

Current assets
Inventories (including nuclear fuel rods) are consistently recognised at the lower of market value or
cost. Reasonable valuation adjustments are applied to inventory risks resulting from storage dura-
tion and diminished marketability. Valuation adjustments applied to nuclear fuel rods are calculated
in line with consumption and in line with the useful economic life of the reactor.

Receivables and other assets are shown at nominal value less any impairments reflecting actual
default risk.
38 ANNUAL REPORT 2016 STADTWERKE MNCHEN
Notes to the Consolidated Financial Statements

Receivables due to affiliated companies are netted with liabilities due from affiliated companies if a
netting situation pursuant to Section 387 of the German Civil Code (BGB) exists.

In individual Group companies, no current meter data is available at the reporting date due to the
rolling annual meter reading approach used. This makes it necessary to calculate annual consump-
tion accruals at the reporting date on the basis of current tariffs and an assumed consumption
behaviour. The relevant receivables were extrapolated as of 31 December 2016 and recognized
after netting with advance payments received from customers.

The securities included among current assets are consistently recognised at the lower of cost or
market value.

Cash at banks is recognised at nominal value.

Prepayments and accrued income

Prepayments and accrued income include expenditures realised before the reporting date to the
extent that they comprise expenditure for a particular time after this date.

Positive difference of plan assets over pension liabilities

Reinsurance policies exist for pension liabilities or comparable obligations due to employees
overa long-term horizon. They are recognised at fair value, as stipulated in Section 253 (1)
Sentence4 HGB. Some of them have been pledged to the retired employees. In accordance withto
Section 246 (2) Sentence 2 HGB, these liabilities are netted with the fair value of the reinsurance
cover assets. If the fair value of the cover assets exceeds the liabilities, the overfunding is capitalised
in a separate item, positive difference of plan assets over pension liabilities, pursuant to Section
246(2) Sentence 3 HGB in conjunction with Section 266 (2) HGB.

Shareholders equity
The subscribed capital is recognised at nominal value.

Special item
Capital grants received in relation to fixed assets were shown as special items for investment grants
up until 2009. They are shown at their nominal value less the proportionate reversal recognised in
the income statement, with due consideration being given to the useful economic life of the asset.
The capital grants of 2010 et seq. are deducted from assets.

Income grants received

Construction cost grants received up until 2002 are shown as a separate item at their nominal value
less the pro-rata-temporis annual release recognised in the income statement (5.0 %). Since 2003,
the income grants received have been deducted from costs of purchase or production.

Owing to the transition to accounting according to the German Accounting Law Reform Act
(Bilanzrechtsmodernisierungsgesetz; BilMoG), the income grants received as of 2010 for household
connections and distribution installations less the annual reversal (5.0 %) have been recognised in
deferred income since the 2010 financial year.
 ANNUAL REPORT 2016 STADTWERKE MNCHEN 39
Notes to the Consolidated Financial Statements

Provisions
Pursuant to Section 253 (1) Sentence 2 HGB, provisions are recognised at the amount required
forsettlement according to prudent commercial judgement. Provisions with residual terms of more
than one year are, as stipulated in Section 253 (2) HGB, discounted using the maturity-matched
average market interest rates for the past seven financial years as published by Deutsche Bundes-
bank in accordance with to the German Regulation on the Discounting of Provisions (Rckstellungs
abzinsungsverordnung; RckAbzinsV).

The pension provisions for civil servants and salaried employees were measured actuarially
according to the present value method applying Prof. Dr. Klaus Heubecks guideline tables (2005 G
mortality tables) and an interest rate of 4.01 % (previous year: 4.30 %) based on the German Regu
lation on the Discounting of Provisions (RckAbzinsV), and assuming salary and benefits growth of
1.50% (previous year: 1.50 %). The contractual trend parameters set forth in the benefit collective
bargaining agreement were applied to wage earners and salaried employees.

Pursuant to the procedure stipulated in the German Regulation on the Discounting of Provisions
(RckAbzinsV), the actuarial interest rate under commercial law is derived from an average residual
term of 15 years. In accordance with Section 253 (3) HGB, the actuarial interest rate for the valu-
ation of pension liabilities is based on the average market interest rate for the past ten years. This
valuation method was used for the first time for the 2016 financial year.

The average market interest rate for the past seven years is 3.23 % (previous year: 3.89 %).

The difference between recognition of provisions in accordance with the relevant average mar-
ket interest rate for the past ten financial years and recognition of provisions in accordance with
the relevant average market interest rate for the past seven financial years (Section 253 (6) HGB)
amounts to kEUR 51,788. In a letter dated 23 December 2016, the German Federal Ministry of
Finance published its statement on the effect of Section 253 HGB (new version) on the recognition
of single entities deemed to exist for tax purposes. On these grounds, the profit is transferred in full
to the shareholder.

Pension provisions for employees not covered by collective wage agreements are measured actuar-
ially according to the projected unit credit method uniformly applying Prof. Dr. Heubecks 2005 G
(mortality) guideline tables, taking into account a discount rate pursuant to the German Regulation
on the Discounting of Provisions (RckAbzinsV) of 4.01 % (previous year: 3.89 %) and assuming
pension growth of 1.50 % (previous year: 1.50 %).

Pursuant to the procedure stipulated in the German Regulation on the Discounting of Provisions
(RckAbzinsV), the actuarial interest rate under commercial law is derived from an average residual
term of 15 years. In accordance with Section 253 (3) HGB, the actuarial interest rate for the valu-
ation of pension liabilities is based on the average market interest rate for the past ten years. This
valuation method was used for the first time for the 2016 financial year.

Based on a mean residual term of 15 years, the average market interest rate for the past seven
years is 3.24 % (previous year: 3.89 %).

The difference between recognition of provisions in accordance with the relevant average market
interest rate for the past ten financial years and recognition of provisions in accordance with the
relevant average market interest rate for the past seven financial years (Section 253 HGB) amounts
to kEUR 16. In a letter dated 23 December 2016, the German Federal Ministry of Finance pub-
lished its statement on the effect of Section 253 HGB (new version) on the recognition of single
entities deemed to exist for tax purposes. On these grounds, the profit is transferred in full to
theshareholder.

Reinsurance policies exist for pension liabilities due to employees not covered by collective wage
agreements in the core companies. These policies are recognised at fair value pursuant to Section
253 (1) Sentence 4 HGB, with some of them being pledged to the retired employees. In accord-
ance with Section 246 (2) Sentence 2 HGB, these liabilities are netted with the asset value of the
reinsurance cover. On balance, this results in both a positive difference of plan assets over pension
liabilities and an asset value in the financial year under review, with the latter being recognized
under other assets.
40 ANNUAL REPORT 2016 STADTWERKE MNCHEN
Notes to the Consolidated Financial Statements

Provision calculations for semi-retirement are based on Prof. Dr. Klaus Heubecks 2005 G (mortality)
guideline tables using the entry age normal method without minimum age by for an average
time to maturity of one year applying an actuarial interest rate of 1.59 % (previous year: 2.02 %)
and s alary and benefit growth of 1.50 % (previous year: 1.50 %) with respect to payment arrears,
top-up amounts and lump-sum settlements.

Reinsurance policies exist for some semi-retirement obligations. These policies are recognised at fair
value pursuant to Section 253 (1) Sentence 4 HGB and have been pledged. In accordance with to
Section 246 (2) Sentence 2 HGB, semi-retirement obligations are netted with the asset value of the
reinsurance cover at an affiliated company.

The calculation of provisions for benefit payments is based on Prof. Dr. Klaus Heubecks 2005 G
(mortality) guideline tables using the entry age normal method without minimum age, taking into
account an actuarial interest rate based on the average market interest rate for the past seven
years of 3.23% (previous year: 3.89 %) for an average time to maturity of 15 years, a contribution
cost trend of 1.50 % (previous year: 1.50 %), and a trend for premiums for net present values calcu-
lated using the entry age normal method of 1.50 % (previous year: 1.50 %).

Service anniversary provisions are calculated using the entry age normal method applying Prof.
Dr.Klaus Heubecks 2005 G (mortality) guideline tables, taking into account an actuarial interest
rate of 3.23 % (previous year: 3.89 %) for an average time to maturity of 15 years, salary growth
of 2.50 % (previous year: 2.50 %) and a trend for the contribution measurement limit of 1.50 %
(previous year: 1.50 %).

Provisions for disposal for nuclear power operations are stated at their settlement amount, as set
forth in German commercial law (HGB) accounting principles. The amount of provisions recog-
nised complies with the commercial prudence principle. The provisions for disposing of fuel rods
areaccumulated in relation to combustion (based on kilowatt-hours) or in relation to time (based
ondemand). Decommissioning provisions are accumulated on a straight-line basis. Cost calculations
are based on external expert reports assuming complete installation disposal. The interest rates
applied range between 1.6 % (previous year: 2.0 %) and 3.4 % (previous year: 4.0 %). Price increases
of 3.6 % (previous year: 3.6 %) have been taken into account.

Provision calculations are based on due consideration of all identifiable risks.

The effects of changes in discount rates are recognised in the financial result item.

Liabilities
Liabilities are recognised at their settlement amount.

Deferred income
Deferred income is formed for income received prior to the reporting date and assigned to income
statements for subsequent periods. Such items are released in accordance with contractual
agreements.

Income grants received for household connections and distribution installations are allocated to
deferred income, less the annual amount released (5.0 %).

Foreign currency translation

Assets and liabilities denominated in foreign currencies are translated into EUR using the bid or
offer rate prevailing at the time at which they originated.

Assets and liabilities denominated in foreign currencies with a residual term of less than one year
are translated at the average spot exchange rate applicable on the reporting date, as set forth in
 ANNUAL REPORT 2016 STADTWERKE MNCHEN 41
Notes to the Consolidated Financial Statements

Section 256a HGB. For assets and liabilities with a residual term in excess of one year, translation is
performed at the spot mid exchange rate applying the lower of cost or net realisable value principle
(Section 252 (1) No. 4 HGB).

The spot offered rate as of the reporting date was applied in the translation of the equity and
net income items included in the overview of affiliated companies and equity participation.

Deferred taxes
As a basic principle, deferred taxes are set aside to account for temporary differences between
the carrying amounts in the financial statements and the tax accounts to the extent to which such
differences, after netting with deferred tax assets, lead to deferred tax liabilities. Their valuation
is based on the tax rates that will, in all probability, be applicable at the time of the dissolution
of the temporary differences. No deferred taxes are set aside for temporary differences between
the carrying amounts in the financial statements and the tax accounts within the framework of
the Betrieb gewerblicher Art (BgA) U-Bahnbau und -verpachtung (Commercial Operations for
Building and Leasing of Municipal Underground Railway Systems) single entity deemed to exist
atthe shareholder for tax purposes.

Valuation units
Stadtwerke Mnchen GmbH and individual subsidiaries use derivative financial instruments to
reduce market price risks arising from the purchase and sale of electricity, gas and coal, as well as
emission rights, oil and diesel products, district heating and water. In addition, hedging relation-
ships are also created in relation to interest rate and currency hedges.

To the extent possible, derivatives are shown in the balance sheet as valuation units with the
respective underlying transaction, differentiating by commodity and annual tranche. To hedge
against currency fluctuations in the coal and oil portfolios, the relevant currency hedging trans
actions are also included in USD.

Balance-sheet recognition of valuation units is based on the net hedge presentation method.

If the net balance of all fair values of the underlying and hedging transactions in the relevant
valuation unit is negative, a corresponding provision arising from valuation units is formed for the
resultant contingent loss, in accordance with the principle of prudence. Any positive net balance
of all fair values of the underlying and hedging transactions in the relevant valuation unit is not
recognised.

The fair value of derivative financial instruments corresponds to the market value as of the report-
ing date. To the extent possible, a price quoted in an active market (e.g. exchange price) is used
asthe basis of market value calculation. If derivatives market values cannot be determined reliably
viaan active market, their present value is calculated using generally recognised valuation models
and methods (discounted cash flow method). Market yield curves and forward commodity prices
are the most important components of such models.

Notes to the consolidated balance sheet

1. Non-current assets
The breakdown of the non-current asset items aggregated in the consolidated balance sheet and
the development of these assets in the 2016 financial year are shown in a separate overview (move-
ments in non-current assets) in the notes on the financial statements.

Financial assets include individual items which are shown with a carrying amount of kEUR 51,672,
but for which the fair value as of the reporting date amounted to kEUR 51,117. No impairment has
42 ANNUAL REPORT 2016 STADTWERKE MNCHEN
Notes to the Consolidated Financial Statements

been recognised because these are essentially securities that were to generate continuous income
under typical market conditions and will return to their original value over the long term.

Securities held as fixed assets are to some extent used to cover long-term liabilities such as pension
obligations. A partial amount of kEUR 20,440 (previous year: kEUR 24,098) related to the legal
requirement to back employees semi-retirement claims and is managed as part of trust assets.

2. Inventories

As of As of
in kEUR 31 Dec. 2016 31 Dec. 2015

Raw materials and supplies (including nuclear fuel rods) 115,300 128,196
Unfinished products, unfinished services 16,433 7,595
Finished products and goods 50,099 74,873
Advance payments 1,981 63
183,813 210,727

Of raw materials and supplies, kEUR 32,509 related to nuclear fuel rods (previous year: kEUR 40,996).

3. Receivables and other assets

Thereof Thereof
remaining remaining
As of term up As of term up
in kEUR 31 Dec. 2016 to 1 year 31 Dec. 2016 to 1 year

Trade accounts receivable 683,134 8,924 503,506 129

Accounts due from affiliated companies 2,985 0 5,540 0
Accounts due from other Group companies 49,448 0 15,893 0
Accounts due from shareholder 76,163 0 91,035 0
Other assets 473,315 29,082 486,609 24,794
1,285,045 38,006 1,102,583 24,923

Accounts due from affiliated companies and accounts due from other Group companies mainly
consisted of trade accounts receivable.

As offsetting is permissible, receivables due from the shareholder were offset against liabilities of
kEUR 202,060 due to the shareholder.

4. Securities
The security and fund investments shown in this item are recognised at the lower of cost or
marketprice.
 ANNUAL REPORT 2016 STADTWERKE MNCHEN 43
Notes to the Consolidated Financial Statements

5. Cash at banks
Cash at banks essentially comprised short-term investments in the form of fixed-term deposits and
credit balances on current accounts.

6. Prepaid expenses and accrued income

This item essentially comprised expenses paid in advance by the Bayerngas Norge AS Group,
emoluments paid in advance for January 2017 as well as construction cost grants. A discount on
issued debt of kEUR 1,836 (previous year: kEUR 2,020) was also shown under prepaid expenses
andaccrued income.

7. Positive difference of plan assets over pension liabilities

Pursuant to Section 246 (2) Sentence 2 HGB, the reinsurance cover for pension provisions and semi-
retirement obligations, which is excluded from all other creditors recourse and serves exclusively
to satisfy pension liabilities, was offset with these liabilities. The amortised cost of the offset assets
amounted to kEUR 7,461, the fair value of the assets stood at kEUR 7,371 and the settlement
amount for the offset liabilities amounted to kEUR 7,116.

The positive difference of kEUR 255 by which plan assets exceed pension liabilities was recognised
as a separate asset item pursuant to Section 246 (2) Sentence 3 HGB.

Interest expenses on pension liabilities amounted to kEUR 96. Income from pension assets came to
kEUR 60.

8. Shareholders equity

As of As of
in kEUR 31 Dec. 2016 31 Dec. 2015

Subscribed capital 485,000 485,000

Additional paid-in capital 5,148,187 5,128,230
Retained earnings 1,145,507 912,129
Difference in shareholders equity from currency translation 106,841 5,809
Non-controlling interests 158,462 193,720
4,539,301 4,900,630

Apart from the transfer of kEUR 19,647, the increase in additional paid-in capital was due to a
reinvestment amount of kEUR 310 paid into this item by the City of Munich as of 31 December
2016 as part of the in-period profit transfer settlement of Stadtwerke Mnchen GmbH.

Retained earnings mainly comprised the balancing item from consolidation, offset against net
retained earnings of the subsidiaries and the retained earnings of Stadtwerke Mnchen GmbH.
The consolidation measures recognised in the income statement and the consolidated loss of
kEUR233,373 for the financial year under review were allocated to retained earnings.
44 ANNUAL REPORT 2016 STADTWERKE MNCHEN
Notes to the Consolidated Financial Statements

9. Special item for investment grants

The special item comprises the capital grants received until 2009. The capital grants of 2010 et seq.
are deducted from assets.

10. Income grants received

This item comprises the income and construction grants received until 2002. Since 2003, income
grants received have been deducted from costs of purchase or production.

11. Pensions and accruals

As of As of
in kEUR 31 Dec. 2016 31 Dec. 2015

Pension provisions 775,726 785,171

Tax provisions 260,284 179,819
Provisions for disposal for nuclear power operations 818,040 674,443
less advance payments made 42,854 40,852
775,186 633,591
Other accruals and provisions 979,291 698,242
2,790,487 2,296,823

Pursuant to Section 246 (2) Sentence 2 HGB, the reinsurance cover within the framework of a
pension commitment to employees not covered by collective wage agreements, which is excluded
from all other creditors recourse and serves exclusively to satisfy pension liabilities, was offset
with these liabilities in the 2016 financial year. In one subsidiary, provisions had to be set asideon
account of such offsetting. The amortised costs of the assets amounted to kEUR 615, the fair
valueof the assets stood at kEUR 544, and the settlement amount for the offset liabilities amount-
ed to kEUR 565. The offsetting of assets thus resulted in pension provisions of kEUR 21.

Interest expenses from the compounding of pension liabilities amounted to kEUR 7. Income from
pension assets eligible for offsetting came to kEUR 6.

Tax provisions mainly comprised corporation tax, including solidarity surcharge, and the trade
income tax for the financial year under review as well as previous years. They were charged on to
Stadtwerke Mnchen GmbH by the shareholder within the framework of the Betrieb gewerblicher
Art U-Bahnbau und -verpachtung (Commercial Operations for Building and Leasing of Municipal
Underground Railway Systems) single entity deemed to exist at the shareholder for tax purposes.

Other accruals and provisions were mainly created for outstanding invoices (kEUR 390,426), contin-
gent losses (kEUR 250,062) and personnel obligations (kEUR 122,575).
 ANNUAL REPORT 2016 STADTWERKE MNCHEN 45
Notes to the Consolidated Financial Statements

12. Liabilities

Thereof Thereof Thereof Thereof

Thereof remaining remaining Thereof remaining remaining
remaining term term remaining term term
As of term up between 1 more than As of term up between 1 more than
in kEUR 31 Dec. 2016 to 1 year to 5 years 5 years 31 Dec. 2015 to 1 year to 5 years 5 years

Bank borrowings 2,448,896 355,689 768,825 1,324,382 2,433,816 94,200 863,522 1,476,094
Advance payments received 18,324 16,724 1,600 0 28,770 28,770 0 0
Trade accounts payable 198,894 198,755 139 0 331,099 331,020 79 0
Accounts due to affiliated
companies 1,819 1,819 0 0 1,073 1,073 0 0
Accounts due to other
Group companies 21,673 1,673 20,000 0 22,358 2,358 20,000 0
Other liabilities 298,636 238,180 38,736 21,720 339,706 270,196 45,769 23,741
Thereof: For taxes (37,896) (37,896) (0) (0) (52,453) (52,453) (0) (0)
Thereof: For social security (548) (548) (0) (0) (1,836) (1,836) (0) (0)
2,988,242 812,840 829,300 1,346,102 3,156,822 727,617 929,370 1,499,835

Liabilities due to affiliated companies comprised trade accounts payable. Liabilities due to other
Group companies largely related to loan liabilities.

As offsetting is permissible, receivables due from the shareholder were offset against liabilities of
kEUR 202,060 due to the shareholder.

On the reporting date, Stadtwerke Mnchen GmbH had unused credit lines totalling kEUR 581,500.
One kEUR 500,000 credit line has a term running until February 2022.

In addition, there is a kEUR 500,000 unused facility provided by the European Investment Bank for
along-term credit, which can be drawn until February 2018.

Other affiliated companies had additional undrawn credit lines totalling kEUR 84,391 on the report-
ing date.

13. Deferred income

This item mainly comprised income grants received for distribution installations and household
connections.

14. Deferred taxes

Deferred tax liabilities mainly resulted from consolidation measures recognised in the income state-
ment. Calculations were based on the same tax rate as in the previous year, i.e. 30.0 %.
46 ANNUAL REPORT 2016 STADTWERKE MNCHEN
Notes to the Consolidated Financial Statements

Notes to the income statement

15. Revenues

In the 2016 financial year, revenues were recognized in accordance with the amended version of
Section 277 (1) of the German Commercial Code (Handelsgesetzbuch; HGB) as laid down in the
Accounting Directive Implementation Act (Bilanzrichtlinie-Umsetzungsgesetzes, BilRUG) and can
bebroken down as follows:

in kEUR 2016 2015

Electricity 1,957,188 2,104,448

Electricity tax 93,922 93,195
Electricity, excluding electricity tax 1,863,266 2,011,253
Natural gas and oil 2,910,913 3,028,206
Energy tax 95,397 92,939
Natural gas and oil excluding energy tax 2,815,516 2,935,267
District Heating 346,248 367,726
Water 156,704 156,961
Public Transport 510,631 482,939
Public Pools 18,813 19,851
Telecommunications 232,753 217,020
Other 376,644 363,910
6,320,575 6,554,927

16. Other income

Other operating income mainly comprised income from foreign currency translation (kEUR 51,763),
income attributable to other periods from the reversal of provisions (kEUR 80,295), and income
attributable to other periods from asset disposal (kEUR 25,331).

17. Cost of materials

in kEUR 2016 2015

Cost of raw materials and supplies and for purchased products 3,915,427 4,123,264
Costs of purchased services 587,151 591,308
4,502,578 4,714,572

This item mainly comprised the sourcing of energy for power stations, energy sales and fuel
utilisation as well as external deliveries and supplies for facility operation and maintenance.
 ANNUAL REPORT 2016 STADTWERKE MNCHEN 47
Notes to the Consolidated Financial Statements

18. Personnel expenses

in kEUR 2016 2015

Wages and salaries 538,131 516,361

Social security, pension and other benefit costs 163,392 162,484
Thereof: For pensions (53,326) (50,937)
701,523 678,845

On average, 9,704 persons were employed in the Group at the fully consolidated companies during
the 2016 financial year (previous year: 9,533). This figure can be subdivided into 9,022 employees
(previous year: 8,843), 399 trainees (previous year: 395), 251 temporary staff (previous year: 254)
and 32 seasonal workers (previous year: 41).

At the proportionately consolidated companies, 435 staff members were employed (previous year:
393). This figure can be subdivided into 405 employees (previous year: 360), 14 trainees (previous
year: 15) and 16 temporary staff and seasonal workers (previous year: 18).

19. Depreciation and amortisation

in kEUR 2016 2015

Depreciation and amortisation 628,244 1,108,829

less the depreciation allowance adjustment of investment grants 8,449 10,480
619,795 1,098,349

Depreciation and amortisation included impairments of kEUR 201,538.

20. Other expenses

Other expenses included currency translation losses (kEUR 26,801) as well as expenses attributable
to other periods from asset disposal (kEUR 34,236).

In addition, other expenses included non-recurrent expenses of kEUR 19,594 resulting from the loss
incurred due to accrual of one affiliated company.
48 ANNUAL REPORT 2016 STADTWERKE MNCHEN
Notes to the Consolidated Financial Statements

21. Financial result

in kEUR 2016 2015

Income from other investments 7,024 7,777

Income from profit transfer agreements 4,789 4,570
Income from other long-term securities and loans 10,826 49,281
Other interest and similar income 46,888 45,516
Thereof: From discounting (1,810) (1,513)
Income from associated companies 4,636 132,697
Write-downs on financial assets and marketable securities 16,208 152,355
Expenses arising from loss absorption 20 4,462
Interest and similar expenses 170,065 181,363
Thereof: From compounding (86,578) (89,442)
Thereof: From interest on external loans (60,228) (76,607)
121,402 363,733

22. Taxes

in kEUR 2016 2015

Income taxes 174,085 165,554

Deferred taxes 15,765 47,070
158,320 212,624
Other taxes 17,108 49,851
175,428 262,475

Income taxes mainly comprised corporation tax, including solidarity surcharge, trade tax, as well
as the corporation tax, including solidarity surcharge, and trade tax to be absorbed within the
framework of the Betrieb gewerblicher Art (BgA) U-Bahnbau und -verpachtung (Commercial
Operations for Building and Leasing Municipal Underground Railway Systems) single entity deemed
to exist at the City of Munich for tax purposes.

The other taxes item mainly comprised the tax on nuclear fuel rods and electricity tax to be paid
by the company itself.

23. Profit transfer expenses

In accordance with the profit transfer agreement, the net profit of kEUR 100,310 was transferred
to the Betrieb gewerblicher Art (BgA) U-Bahn-Bau und -verpachtung (Commercial Operations for
Building and Leasing of Municipal Underground Railway Systems) entity of the City of Munich.
 ANNUAL REPORT 2016 STADTWERKE MNCHEN 49
Notes to the Consolidated Financial Statements

Other information

Cash flow statement

Of the figure shown for cash and cash equivalents, kEUR 35,750 was attributable to proportionately
consolidated companies (previous year kEUR 50,717).

Information concerning proportionately consolidated companies

(pro-rata figures)

in kEUR Long-term Short-term

Assets 747,610 100,150

Liabilities 107,107 108,100

in kEUR Operating Other

Costs 350,646 27,803

Income 456,462 6,721

Valuation units and financial instruments

Stadtwerke Mnchen GmbH and individual subsidiaries use derivative financial instruments to
hedge price change, interest rate and currency risks. These instruments primarily comprise futures
and forwards, options and swaps.

Portfolio hedges are formed for all trading transactions in each of the following areas: electricity,
gas, coal, oil, diesel, district heating, water, and CO2. These hedges are categorised according to
time bands (annual tranches) in which countervailing value changes and cash flows have offset
each other and will prospectively offset each other in the future.

To hedge against currency fluctuations in the coal and oil commodity portfolios, the relevant
currency hedging transactions (forward exchange transactions) in USD are also included. Open
currency positions from commodity transactions are closed directly on the market.

The following table shows the total volumes (market values in kEUR) of the trading transaction
riskshedged with the valuation units:

Portfolio hedge

in kEUR 2017 2018 2019 2020

Electricity 56,883 52,201 16,100 2

Gas 286,986 119,867 55,520 21,427
Coal 98,505 0 0 0
CO2 0 0 0 0
Oil 1,606 0 0 0
Diesel 50 0 0 0

An extended netting unit (pursuant to the IDW FA 3 standard promulgated by the Institute
ofPublic Auditors in Germany) has been formed for electricity generation portfolios. It relates to
electricity generation in the companys own power plants. The hedging instruments deployed
50 ANNUAL REPORT 2016 STADTWERKE MNCHEN
Notes to the Consolidated Financial Statements

to hedgethe clean dark spread and the clean spark spread comprise commodity price hedging
derivatives in conjunction with the sale of electricity and the highly likely sale of district heating.
Expenses and income from the netting unit are aggregated. This netting unit generated a positive
contribution margin, so no provisions for contingent losses had to be set aside at the 31 Decem-
ber2016 reporting date.

The netting unit is used to hedge risks to the following levels (in kEUR):

in kEUR 2017 2018 2019 2020

Dark Spread 47,474 37,538 42,839 0

Spark Spread 97,172 96,083 53,052 0

Portfolio valuation units have been established in the area of electricity and gas standard custom-
ers (residential, small business and standard business customers). These hedges are categorised
according to time bands (annual tranches) in which countervailing value changes and cash flows
have offset each other and will prospectively offset each other in the future. Micro valuation units
have been formed for business customers where it is possible to clearly allocate sales and purchas-
ing agreements (back-to-back agreements). The portfolio hedges include forward commodities
transactions and highly likely sales transactions (based on assumptions and empirical values). These
portfolio hedges are hedged to the following levels (in kEUR):

in kEUR 2017 20182020

Electricity 172,819 143,183

Gas 111,752 104,631

The expected highly likely transactions included in the portfolio valuation unit comprise monthly
budgeted sales volumes to electricity and gas customers, and monthly procurement volumes gen-
erated from third-party and the companys own power plants. The budgeted volumes are based
on annual planning approved by the management, which is derived from last years volumes and
expected business trends. Historic sales figures indicate a high probability of occurrence for the
budgeted figures.

In the individual hedging instruments, the relevant price index is selected in a way conforming
withthe underlying transaction as much as possible, subjecting the hedging instruments to the
same commodity price risk as the underlying transactions. The value changes to the underlying
transactions are hedged over a four-year period.

Hedging relationships were also created in relation to interest rate hedges. The interest rate risk
arising from liabilities is hedged. Interest rate swaps are used as hedging instruments. The hedging
horizon extends up to the year 2025. These are micro and portfolio valuation units. In addition,
oneforward exchange transaction and the foreign-exchange swap upon maturity of a cross currency
swap form a valuation unit.
 ANNUAL REPORT 2016 STADTWERKE MNCHEN 51
Notes to the Consolidated Financial Statements

As of the reporting date, the portfolio of the derivative financial instruments serving as hedging
instruments within valuation units consisted of the following components:

Derivatives with Derivatives with

in kEUR Nominal value positive fair value negative fair value

Interest-related transactions 529,776 4,832 67,003

Currency-related transactions 164,681 0 10,071
Other 102,366 25,627 30,377
Total 796,823 30,459 107,451

All hedging relationships prospectively entail a high degree of effectiveness, since the countervail-
ing value changes to the underlying transactions and hedging instruments will presumably fully off-
set each other in the future. The underlying transactions aggregated within the portfolio valuation
units exhibit homogeneous risks.

The dollar offset method is applied cumulatively to quantify the ineffective amount to date. It
entails a comparison of the cumulative market changes to the underlying transactions with the
cumulative market changes to the hedging instruments in absolute monetary amounts from the
designation date. The dollar offset test is performed on each reporting date. In valuation units
involving a 1:1 ratio between purchase and sales agreements (micro valuation units), the company
refrains from quantifying ineffectiveness if all other significant contractual parameters (supply
volumes, delivery dates, prices, etc.) of the underlying and hedging transactions match.

In commodity hedging, ineffectiveness is reported if a net loss arises from the cumulative value
changes to the underlying transactions and the cumulative value changes to the hedging instru-
ments. In interest rate hedging, ineffectiveness is reported as soon as the cumulative value changes
of the underlying and hedging transactions do not fully offset each other.

As of 31 December 2016, a provision for valuation units totalling kEUR 14,159 was formed to
reflect ineffectiveness.

As of the reporting date, the volume of derivative financial instruments not included in valuation
units consisted of the following components:

Derivatives with Derivatives with

in kEUR Nominal value positive fair value negative fair value

Interest-related transactions 645,000 1,406 150,714

Currency-related transactions 437,457 12,449 1,582
Index-related transactions 3,685 0 528
Other 91,441 2,249 20,454
Total 1,177,583 16,104 173,278
52 ANNUAL REPORT 2016 STADTWERKE MNCHEN
Notes to the Consolidated Financial Statements

The derivative financial instruments comprised the following types:

Derivatives with Derivatives with

in kEUR Nominal value positive fair value negative fair value

Options 430,000 0 90,524

Swaps 656,142 13,855 62,300
Forward currency transactions 91,441 2,249 20,454
Total 1,177,583 16,104 173,278

Calculation is carried out on the basis of mark-to-market valuations using present value and option
price models, inter alia.

A contingent loss provision of kEUR 191,099 for pending transactions was created for derivative
financial instruments not included in valuation units.

Units and shares in German investment undertakings within the meaning of

Section 1 of the German Investment Act (InvG)
Note regarding investments within the meaning of Section 285 No. 26 HGB:

The majority of securities held as fixed assets are shares of German investment undertakings within
the meaning of Section 1 of the German Investment Act (KAGB), in which Stadtwerke Mnchen
GmbH holds an interest of more than 10 %.

The investment objective of all investment funds is to achieve continuous value growth through
broad distribution of investments across various asset classes (Markowitz portfolio theory).
Aconservative investment policy is pursued in this context. In addition to compliance with the
provisions of the German Investment Act, risk is monitored on an ongoing basis at both the
manager and investor levels. The option for daily redemption of fund shares is unrestricted.

The following figures were reported as of 31 December 2016:

Value pursuant
in kEUR to Section 36
German Invest- Market value less Dividend payout in
Security Carrying amount ment Act (InvG) carrying amount FY 2016

Master fund 804,406 804,406 0 4,642

Master fund 190,243 252,659 62,416 956

Other financial obligations

}} Stadtwerke Mnchen GmbH has undertaken to meet its obligations arising from its affiliation
with Nuklearhaftpflicht-GbR (nuclear liability company constituted under civil law) for its stake in
KKI 2 at all times.
}} Existing long-term agreements for the procurement and disposal of nuclear fuels involve corre-
sponding obligations, and their volume and price components are variable.
}} To the extent to which employees of Stadtwerke Mnchen GmbH and some of its subsidiaries
are not entitled to retirement benefits under the principles of civil servant or independent benefit
law, for which the company has set aside adequate pension provisions, they are members of
Bayerische Versorgungskammer, the complementary pension fund of the Bavarian municipalities.
 ANNUAL REPORT 2016 STADTWERKE MNCHEN 53
Notes to the Consolidated Financial Statements

The standard levy for the complementary pension fund was 7.75 % (as of 1 January 2013). These
employer contributions are included in the gross total. In 2016, the salary total that is relevant
for levy purposes was kEUR 305,782.
}} The order commitments in the Group amount to a total of kEUR 547,598. Of this amount,
kEUR8,293 is attributable to companies included on a proportional basis.
}} Other financial obligations in the amount of kEUR 1,470,857 exist at fully consolidated affiliated
companies. They primarily comprise financial obligations attributable to long-term supply agree-
ments, current leasing and rental agreements, purchase or consortium agreements, licence or
franchise agreements, property charges and loans.
}} Other financial obligations in the amount of kEUR 527,737 exist at joint-venture companies. They
comprise financial obligations attributable to long-term supply agreements, licence or franchise
agreements and current leasing and rental agreements. Full figures rather than proportional
figures are reported in this respect.

Contingencies
The following contingencies existed as of the reporting date:

in kEUR
Guarantee liabilities 401,317
Thereof: To affiliated companies (0)
Liabilities arising from warranty agreements 5,489

One subsidiary has issued one guarantee declaration for Bayerngas Norge AS in favour of the
Norwegian government and one guarantee declaration for a subsidiary of Bayerngas Norge AS in
favour of the Danish government to cover potential government claims. In addition, one guarantee
declaration has been issued for a supplier within the scope of utilisation of transport capacities
andother technical plants for the processing of natural gas output. One letter of comfort, in which
the company undertakes to satisfy potential claims arising from two guarantee declarations issued
by the contractual partner within the scope of utilisation of transport capacities and other technical
plants for the processing of natural gas output, has been concluded with a further subsidiary.

Bayerngas Norge AS has issued one guarantee declaration in favour of UK government authorities,
according to which it will ensure that its UK subsidiary is at all times adequately capitalised to be
in a position to comply with the obligations arising from the utilisation of production and drilling
licences.

Six letters of comfort, with a volume of around kEUR 5,500 as of the reporting date, had been
issued to counterparties of the trading subsidiary Bayerngas Energy GmbH as of the reporting date.

As of the reporting date, we were not aware of any risks suggesting that the reported contingen-
cies might be utilised. We do not anticipate the guarantees and other obligations to be utilised due
to the counterparties solid financial position.

Relations with affiliated companies and equity participations

Affiliated companies and major equity participations of at least 20 % in accordance with Section
313 (2) HGB are shown in Appendix 2 to the notes to the financial statements.
54 ANNUAL REPORT 2016 STADTWERKE MNCHEN
Notes to the Consolidated Financial Statements

Application of disclosure exemptions

It is intended to utilise the disclosure exemptions pursuant to Section 264 (3) HGB for the following
subsidiaries:

}} SWM Kundenservice
}} MVG

Remuneration for active and former Management Board members, their

surviving dependants and the Supervisory Board
The total remuneration paid to the current members of the Management Board in the 2016
financial year amounted to kEUR 2,055. The amount paid to former Management Board mem-
bers (retirement benefits and benefits for surviving dependants) was kEUR 575. Provisions of
kEUR11,268 had been set aside for pension obligations due to former Management Board
members.

The emoluments paid to the Supervisory Board amounted to kEUR 49 in the 2016 financial year.

Auditors fee
Of the total fee of kEUR 712 charged by the auditor of the consolidated financial statementsfor
the financial year under review, kEUR 421 related to work performed in the auditing of the finan-
cial statements, kEUR 192 to other audit-related services, kEUR 70 to tax advisory services and
kEUR29 to other services. Full rather than pro-rata figures were disclosed for the joint ventures.

Consolidated financial statements

In its capacity as parent company, Stadtwerke Mnchen GmbH prepares consolidated financial
statements for the largest and smallest consolidation group. These statements are submitted for
publication to the operator of the electronic Federal Gazette.

The executive bodies of Stadtwerke Mnchen GmbH

Supervisory Board

Chairman:
Dieter Reiter, Mayor of Munich

Deputy Chairman:
Karl Geigenberger, Group Works Council Chairman

Dr. Ernst Wolowicz, Professional City Councillor

Stephanie Jacobs, Professional City Councillor

Simone Burger, sociologist, Honorary City Councillor

Sabine Krieger, environmental journalist, Honorary City Councillor

Manuel Pretzl, Dipl.-Kaufmann, museum director, Honorary City Councillor

Richard Quaas, publisher, Honorary City Councillor

Alexander Reissl, savings bank employee, Honorary City Councillor

 ANNUAL REPORT 2016 STADTWERKE MNCHEN 55
Notes to the Consolidated Financial Statements

Benno Angermaier, Works Council Chairman

Gerhard Bernhard, Works Council member

Heinrich Birner, trade union director, ver.di Munich district

Karl Hauck, clerk

Martin Marcinek, trade union secretary (until 31 January 2016)

Johann Ramsteiner, senior executive

Franz Schtz, trade union secretary (since 17 February 2016)

Gertraud Wegertseder, Works Council member

Management Board

Chief Executive Officer

Dr. Florian Bieberbach

Director, Public Transport (until 31 October 2016)

Dipl.-oec. Herbert Knig

Director, Public Transport (from 1 November 2016)

Ingo Wortmann

Director, Utilities and Technology (until 31 January 2017)

Dipl.-Ing. Stephan Schwarz

Director, Technology (from 1 February 2017)

Helge-Uve Braun

Director, Sales
Erna-Maria Trixl

Director, Personnel and Social Affairs

Werner Albrecht

Munich, 27 March 2017

Dr. Florian Bieberbach Erna-Maria Trixl Werner Albrecht

Chief Executive Officer Director, Sales Director, Personnel and
Social Affairs

Ingo Wortmann Helge-Uve Braun

Director, Public Transport Director, Technology
56 ANNUAL REPORT 2016 STADTWERKE MNCHEN
Appendix 1 to the Notes

Movements in non-current assets 2016

Cost

Currency Change in
As of translation consolida- Transfers As of
in kEUR 1 Jan. 2016 differences tion group Additions Disposals (+/) 31 Dec. 2016

I. Intangible assets
1. Purchased trademarks, patents,
licences and similar rights 310,744 1,775 0 7,334 21,357 2,770 301,266
2. Goodwill 382,224 9,646 0 0 0 0 391,870
3. Advance payments 9,772 0 0 8,432 0 443 17,761
702,740 11,421 0 15,766 21,357 2,327 710,897
II. Property, plant and
equipment
1. Land, leasehold rights and
buildings including buildings
on non-owned land 2,207,591 0 16,431 40,409 42,425 58,987 2,280,993
2. Generation, production and
sourcing installations 3,919,866 103,801 217,332 170,692 3,294 584,155 4,784,950
3. Distribution installations 4,690,632 1,131 0 46,592 12,095 45,467 4,771,727
4. Track, line equipment and
safety equipment 534,314 0 0 12,149 8,097 17,122 555,488
5. Rolling stock for
passenger services 639,258 0 0 19,222 285 38,830 697,025
6. Other technical equipment,
plant and machinery 531,258 132 0 24,756 3,767 14,320 566,435
7. Operational and
office equipment 306,262 35 0 17,010 16,850 7,204 313,591
8. Advance payments and
construction in progress 1,721,880 24,356 0 415,629 8,145 768,412 1,336,596
14,551,061 127,193 233,763 746,459 94,958 2,327 15,306,805
III. Financial assets
1. Shares in affiliated companies 302,192 0 179,925 31,775 12,064 0 141,978
2. Loans due from
affiliated companies 25,501 0 0 121,696 65,115 0 82,082
3. Equity investments in
associated companies 248,278 0 0 0 0 0 248,278
4. Other investments 339,620 0 66 162,272 493 0 501,333
5. Loans due from other
Group companies 419,491 1,108 0 29,514 5,010 0 442,887
6. Securities held as fixed assets 1,535,086 0 0 80,240 276,495 0 1,338,831
7. Other loans 47,101 0 0 204 5,212 0 42,093
2,917,269 1,108 179,991 425,701 364,389 0 2,797,482

Total 18,171,070 116,880 53,772 1,187,926 480,704 0 18,815,184

 ANNUAL REPORT 2016 STADTWERKE MNCHEN 57
Appendix 1 to the Notes

Cumulative depreciation/amortisation Carrying amounts

Currency Change in
As of translation consolida Transfers As of As of As of
1 Jan. 2016 differences tion group Additions Disposals Write-ups (+/) 31 Dec. 2016 31 Dec. 2016 31 Dec. 2015

199,067 2,235 0 50,566 14,895 0 0 236,973 64,293 111,677

370,063 9,646 0 4,518 0 0 0 384,227 7,643 12,161
0 0 0 4,671 0 0 0 4,671 13,090 9,772
569,130 11,881 0 59,755 14,895 0 0 625,871 85,026 133,610

1,285,186 0 1,977 47,442 7,924 0 0 1,326,681 954,312 922,405

2,190,995 18,866 31,992 230,424 2,827 4,328 159,185 2,586,575 2,198,375 1,728,871
3,782,980 38 0 79,045 11,297 0 2 3,850,768 920,959 907,652

393,386 0 0 15,035 481 0 192 407,748 147,740 140,928

512,476 0 0 23,811 0 0 0 536,287 160,738 126,782

359,265 123 0 33,147 2,823 0 2 389,464 176,971 171,993

227,498 3 0 22,510 14,697 0 192 235,500 78,091 78,764

674,870 485 0 117,075 0 0 159,185 633,245 703,351 1,047,010

9,426,656 18,469 33,969 568,489 40,049 4,328 0 9,966,268 5,340,537 5,124,405

103,049 0 88,148 0 0 0 0 14,901 127,077 199,143

0 0 0 0 0 0 0 0 82,082 25,501

176,665 0 0 4,636 0 0 0 181,301 66,977 71,613

1,163 0 0 399 418 0 0 1,144 500,189 338,457

47,862 0 0 0 0 0 0 47,862 395,025 371,629

10,011 0 0 15,711 5 242 0 25,475 1,313,356 1,525,075
0 0 0 0 0 0 0 0 42,093 47,101
338,750 0 88,148 20,746 423 242 0 270,683 2,526,799 2,578,519

10,334,536 6,588 54,179 648,990 55,367 4,570 0 10,862,822 7,952,362 7,836,534

58 ANNUAL REPORT 2016 STADTWERKE MNCHEN
Appendix 2 to the Notes

Affiliated companies and major equity participations

(min. 20 % shareholding in accordance with Section 313 (2) HGB)

Share
Interest in share capital holders Last annual
Company and registered office 31 Dec. 2016 equity net income

% kEUR Year kEUR kEUR

Affiliated companies (fully consolidated)
Mnchner Verkehrsgesellschaft mbH (MVG), Munich 100 50,000 2016 50,110 01)
SWM Gasbeteiligungs GmbH & Co. KG, Munich 100 25 2016 788,584 398,527
SWM Infrastruktur GmbH & Co. KG, Munich 100 10,100 2016 301,454 01)
SWM Infrastruktur Region GmbH, Munich 100 10,000 2016 10,000 01)
SWM Kundenservice GmbH, Munich 100 100 2016 104 01)
SWM Services GmbH, Munich 100 10,000 2016 10,170 01)
SWM UK Wind One Limited, Sevenoaks 100 653,523 3)
2015 654,862 3)
1,7273)
SWM Versorgungs GmbH, Munich 100 10,000 2016 10,015 01)
Gym Offshore One Limited, Sevenoaks 100 324,371 3)
2015 331,978 3)
7,6923)
Gym Offshore Two Limited, Sevenoaks 100 220,0103) 2015 225,2083) 5,1473)
Gym Offshore Three Limited, Sevenoaks 100 108,048 3)
2015 110,402 3)
2,5573)
Sidensj Vindkraft AB, Gothenborg 100 11 2015 92,119 32,857
Sidensj Vindkraft Elnt AB, Gothenborg 100 5 2015 12,887 175
Bayerngas Norge AS, Oslo 90.69 9,176,600 2)
2015 1,413,5942)
7,197,8702)
Bayerngas Danmark ApS, Copenhagen 90.69 1,4744) 2015 396,1174) 1,461,7474)
Bayerngas Petroleum Danmark AS, Oslo 90.69 161,442 2)
2015 458,709 4)
2,141,3734)
Bayerngas Produksjon Norge AS, Oslo 90.69 19,9522) 2015 491,9062) 24,2942)
Bayerngas UK Limited, Sevenoaks 90.69 7,430 3)
2015 130,290 3)
31,6183)
Bayerngas Europe Limited, Sevenoaks 90.69 97,9913) 2015 18,0713) 94,3803)
M-net Telekommunikations GmbH, Munich 63.84 1,594 2015 100,477 449
Bayerngas GmbH, Munich 56.3 51,061 2015 319,818 88,335
Bayerngas Energy GmbH, Munich 56.3 12,499 2015 5,550 01)
Bayernets GmbH, Munich 56.3 563 2015 11,610 01)
Bayernugs GmbH, Munich 56.3 56 2015 100 01)
Affiliated companies (unconsolidated)
eta Energieberatung GmbH, Pfaffenhofen an der Ilm
(formerly: eta Energieberatung Erwerbs GmbH, Pfaffenhofen
an der Ilm) 100 25 X X X
Geothermie Drrnhaar GmbH & Co. KG, Grfelfing 100 1 2015 8,196 1,579
Geothermie Drrnhaar Verwaltungsgesellschaft mbH,
Grfelfing 100 25 2015 39 2
Geothermie Kirchstockach GmbH & Co. KG, Grfelfing 100 1 2015 4,427 1,160
Geothermie Kirchstockach Verwaltungsgesellschaft mbH,
Grfelfing 100 25 2015 41 2
Mnchner Toiletten GmbH, Munich 100 25 2016 25 01)
SWM Erneuerbare Energien Skandinavien GmbH & Co. KG,
Munich 100 5 X X X
SWM Erneuerbare Energien Verwaltungsgesellschaft mbH,
Munich 100 25 2015 225 200
SWM Gasbeteiligungs Verwaltungs GmbH, Munich 100 25 2015 30 1
 ANNUAL REPORT 2016 STADTWERKE MNCHEN 59
Appendix 2 to the Notes

Share
Interest in share capital holders Last annual
Company and registered office 31 Dec. 2016 equity net income

% kEUR Year kEUR kEUR

SWM Infrastruktur Verwaltungs GmbH, Munich 100 25 X X X
SWM Wind Onshore Frankreich SAS, Paris 100 18,100 2015 16,843 190
SWM 50 MW Windpark Portfolio GmbH & Co. KG, Bremen 100 3,950 2015 12,272 663
Portal Mnchen Betriebs-GmbH & Co. KG, Munich 97 6,400 2015 1,379 362
Gasversorgung Germering GmbH, Germering 90 45 2015 3,795 738
Lockstedt-Siestedt II Netzanschluss GbR, Siestedt 81.82 104 2015 111 2
Bayerngas International GmbH & Co. KG i. L., Munich 79.15 7,915 2015 6 5
Bayerngas International Verwaltungs GmbH & Co. KG i. L.,
Munich 79.15 20 2015 36 2
SWM Wind Havelland Holding GmbH & Co. KG, Munich 75 8 2015 85,737 4,434
SWM Wind Havelland Umspannwerk GmbH, Bremen 75 19 2015 587 27
SWM Wind Havelland Umspannwerk Holdinggesellschaft
Wustermark GmbH & Co. KG, Bremen 75 4 2015 956 4
SWM Windpark Havelland GmbH & Co. KG, Bremen 75 7,725 2015 10,300 5,522
Praterkraftwerk GmbH, Munich 70 35 2015 3,281 177
Austri Raskiftet DA, Nybergsund 60 2402) 2015 26,3132) 6062)
M//Card GmbH i. L., Munich 51 13 2015 156 552
Mnchner U-Bahn-Bewachungsgesellschaft mbH (MUG),
Munich 51 13 2015 30 1
Portal Mnchen Verwaltungsgesellschaft mbH, Munich 51 15 2015 50 1
Joint ventures (consolidated pro rata)
Energie Sdbayern GmbH (ESB), Munich 50 15,400 2015 137,996 47,609
Energienetze Bayern GmbH & Co. KG, Munich 50 18 2015 168,767 01)
Energienetze Bayern Management GmbH, Munich 50 13 2015 98 7
DanTysk Offshore Wind GmbH & Co. KG, Hamburg 49 13 2015 1,081,200 61,601
Marquesado Solar S.L. (Andasol 3), Aldeire 48.91 32 2015 139,354 7,808
Participations in associated companies
(consolidated at equity)
wpd europe GmbH, Bremen 33 62,700 2015 247,471 3,293
bayernServices GmbH, Munich 28.15 56 2015 225 108
Global Tech I Offshore Wind GmbH, Hamburg 24.9 249 2015 169,390 96,841
Major other participations
GVH Gasversorgung Haar GmbH, Haar 50 153 2015 4,003 670
SWM Bayernwind GmbH, Munich 50 50 2015 83 3
Gasversorgung Unterschleiheim GmbH & Co. KG,
Unterschleiheim 49 10 2015 1,248 691
Gasversorgung Unterschleiheim Verwaltungs GmbH,
Unterschleiheim 49 12 2015 25 0
Gehrlicher GmbH & Co. Solarpark Helmeringen KG, Haar 49 1,470 2015 2,525 916
GVI Gasversorgung Ismaning GmbH, Ismaning 49 25 2015 2,664 482
60 ANNUAL REPORT 2016 STADTWERKE MNCHEN
Appendix 2 to the Notes

Share
Interest in share capital holders Last annual
Company and registered office 31 Dec. 2016 equity net income

% kEUR Year kEUR kEUR

Mnchner Linien GmbH & Co. KG, Munich 49 76 2015 155 387
DanTysk Offshore Wind Verwaltungs GmbH, Hamburg 49 13 X X X
Sandbank Offshore Wind GmbH, Hamburg 49 12 2015 570,298 150
VVG Verkehrsverwaltungs GmbH, Munich 49 12 2015 28 8
Gehrlicher GmbH & Co. Solarpark Rothenburg KG, Haar 40 6,000 2015 13,175 1,539
UWB Umspannwerk Betriebsgesellschaft Etzin mbH, Halstenbek 37.5 5 2015 25 1
KOM-Strom bernahmekonsortium GbR i. L., Leipzig 36.3 227 2003 408 244
Windparks Gimbweiler & Mosberg Infrastruktur GbR, Bremen 33.33 24 2015 74 2
Gwynt y Mr Offshore Windfarm Limited, Swindon 30 0
3)
2015 861 3)
1,3873)
Gemeinschaftskernkraftwerk Isar 2 GmbH (KKI2), Essenbach 25 13 2015 51 3
1)
Profit transfer agreements apply.
2)
Exception: in foreign currency (thousand NOK)
Exchange rate at 31 Dec. 2015: EUR 1 = NOK 9.6178 / 2015 annual average exchange rate: EUR 1 = NOK 8.9489
Exchange rate at 31 Dec. 2016: EUR 1 = NOK 9.0874 / 2016 annual average exchange rate: EUR 1 = NOK 9.2921
3)
Exception: in foreign currency (thousand GBP)
Exchange rate at 31 Dec. 2015: EUR 1 = GBP 0.7375 / 2015 annual average exchange rate: EUR 1 = GBP 0.7264
Exchange rate at 31 Dec. 2016: EUR 1 = GBP 0.8535 / 2016 annual average exchange rate: EUR 1 = GBP 0.8193
4)
Exception: in foreign currency (thousand DKK)
Exchange rate at 31 Dec. 2015: EUR 1 = DKK 7.4630 / 2015 annual average exchange rate: EUR 1 = DKK 7.4588
Exchange rate at 31 Dec. 2016: EUR 1 = DKK 7.4345 / 2016 annual average exchange rate: EUR 1 = DKK 7.4454
X: Newly established in 2016
 ANNUAL REPORT 2016 STADTWERKE MNCHEN 61
Independent Auditor's Report

Independent Auditors Report

We have audited the consolidated financial statements prepared by the Stadtwerke Mnchen
GmbH, Munich, comprising the balance sheet, the income statement, the cash flow statement,
the statement of changes in equity and the notes to the consolidated financial statements and
the group management report for the business year from January 1st to December 31 2016. The
preparation of the consolidated financial statements and the group management report in accord-
ance with German commercial law and supplementary provisions of the articles of partnership are
the responsibility of the parent Companys management. Our responsibility is to express an opinion
on the consolidated financial statements and on the group management report based on our audit.

We conducted our audit of the consolidated financial statements in accordance with Section
317 German Commercial Code (HGB) and German generally accepted standards for the audit of
financial statements promulgated by the Institut der Wirtschaftsprfer (Institute of Public Auditors
in Germany). Those standards require that we plan and perform the audit such that misstatements
materially affecting the presentation of the net assets, financial position and results of operations
in the consolidated financial statements in accordance with German principles of proper account-
ing and in the group management report are detected with reasonable assurance. Knowledge of
the business activities and the economic and legal environment of the group and expectations as
to possible misstatements are taken into account in the determination of audit procedures. The
effectiveness of the accounting-related internal control system and the evidence supporting the
disclosures in the consolidated financial statements and the group management report are exam-
ined primarily on a test basis within the framework of the audit. The audit includes assessing the
annual financial statements of those entities included in consolidation, the determination of entities
to be included in consolidation, the accounting and consolidation principles used and significant
estimates made by management, as well as evaluating the overall presentation of the consolidat-
ed financial statements and the group management report. We believe that our audit provides a
reasonable basis for our opinion.

Our audit has not led to any reservations.

In our opinion, based on the findings of our audit, the consolidated financial statements of
Stadtwerke Mnchen GmbH, Munich, comply with the legal requirements and supplementary
provisions of the articles of partnership and give a true and fair view of the net assets, financial
position and results of operations of the group in accordance with German principles of proper
accounting. The group management report is consistent with the consolidated financial statements,
complies with legal requirements, as a whole provides a suitable view of the groups position and
suitably presents the opportunities and risks of future development.

Munich, March 31 2017

Deloitte GmbH

Wirtschaftsprfungsgesellschaft

Dorn Sommer
Wirtschaftsprfer Wirtschaftsprfer
(German Public Auditor) (German Public Auditor)
62 ANNUAL REPORT 2016 STADTWERKE MNCHEN
Report of the Supervisory Board

Report of the Supervisory Board

During the 2016 financial year, the Supervisory Board was regularly and comprehensively informed
at its meetings and by means of written reports about the economic position and development of
the company and about any material transactions. On the basis of the documents and information
submitted, the Supervisory Board monitored the activities of the Management Board and carried
out the tasks for which it is responsible as specified by law and the articles of association.

Six meetings of the Supervisory Board were held during 2016. Its Preparatory Committee, which is
responsible for preparing Supervisory Board meetings, convened in five meetings.

Deloitte GmbH Wirtschaftsprfungsgesellschaft, the independent auditors appointed by decision

of the Supervisory Board on 28 April 2016, audited the single-entity financial statements and
management report of Stadtwerke Mnchen GmbH together with the consolidated financial
statements and the group management report prepared by the Management Board for the
2016 fi
nancial year, and in each case granted an unqualified audit certificate. The audit reports
prepared by the independent auditors were submitted to the members of the Supervisory Board.
The independent auditors were present at the discussion of the annual financial statements by
the Supervisory Board on 2 May 2017. Following its own review, the Supervisory Board raised no
objections to the annual financial statements and management report of Stadtwerke Mnchen
GmbH and proposed to the shareholder that the 2016 annual financial statements be formally
adopted and the management report approved.

Following a review, the Supervisory Board noted the consolidated financial statements and the
group management report for 2016 with approval and raised no objections. The Supervisory Board
proposed to the shareholder that the consolidated financial statements be formally adopted and
the group management report approved.

The Supervisory Board would like to take this opportunity to express its gratitude to the Manage-
ment Board and all employees for their valuable contributions to the success of the group in 2016.

Munich, 2 May 2017

The Supervisory Board

Dieter Reiter
Chairman
Date of publication
May 2017

Picture credits
Cover
Cover SWM/Claudia Leifert
SWM
SWM/Kerstin Groh

Inside pages
p. 03 Stefanie Aumiller Fotografie
p. 04 shutterstock/Bucchi Francesco
p. 06 SWM/Claudia Leifert
p. 07 SWM/Stefan Obermeier
p. 08 Robert Gtzfried
p. 08 Maisch Wolf Architekten
p. 08 Westend61/Corbis
p. 09 M-net
p. 10 MVG/Marcus Schlaf
p. 10 KVR Mnchen/MVG
p. 11 shutterstock/Ross Helen
p. 11 shutterstock/Alexander Kirch
p. 12 istockphoto/Kerkez
p. 13 SWM/Steffen Leiprecht
p. 13 SWM
p. 13 SWM
Stadtwerke Mnchen GmbH
Emmy-Noether-Strasse 2
80992 Munich
Germany
Phone: +49 (0) 89 23 6163 02
E-Mail: info@swm.de

www.swm.de