E.on Se · XETR:EOAN
E.on — Non-Deal Roadshow (September 2006)
48 slides from E.on's roadshow presentation, Sep 7, 2006
Slide 1: Delivering Performance through Profitable Growth – Dublin Roadshow
“Delivering Performance through Profitable Growth“ Dublin Roadshow ING September 07, 2006
Slide 2: Successful development since E.ON's creation
Successful development since E.ON’s creation 2000-2003 2003-2005 since 2005 Transformation into a Integration Growth in the Focused Energy Company and Performance Energy Business 7,333 Adjusted EBIT1 in million € 6,787 5,707 4,258 3,352 2001 2002 2003 2004 2005 1) Non-GAAP financial measure; reconci
Slide 3: Value creation through focus on performance improvement
Value creation through focus on performance improvement 12.1% 12% 11.5% 9.6% 9.9% 10% 9.2% 8% ROCE1 6% Cost of Capital 4% 2% 0% 2001 2002 2003 2004 2005 1) Non-GAAP financial measure; derivation see Annual Report 2005, p. 38-39, and prior annual reports as far as available. 3
Slide 4: Operational improvement in the energy business
Operational improvement in the energy business in million € 91 984 1 billion €1 • Operational improvement of 1bn€1 through: 302 - Operational excellence (e.g. best practice transfer in generation, trading and retail, interface optimization in overhead) 340 - Integration synergies (e.g. TXU, E.ON Ruh
Slide 5: E.ON's proven management philosophy
E.ON’s proven management philosophy y Integration of the acquired business a priority Performance y Continued drive for better performance across all markets & Integration y Standardized processes across businesses, maximizing efficiency y Strengthen the integrated power and gas business in existing
Slide 6: We focus on our current five core markets
We focus on our current five core markets with strong positions in power and gas1 U.S.-Midwest Kentucky: No. 1 in power generation U.K. with 47 % of total 95 TWh. No. 2 in power generation with No. 1 in power/gas retail with 10% of total 400 TWh. 44 % of total 2.8m cust. No. 2 in power/gas retail wi
Slide 7: Energy market environment in Europe is changing
Energy market environment in Europe is changing Rapidly changing Significant capital investment needed in competitive landscape Europe during next 15 years y Privatizations (GdF, EdF) y 250 - 300 GW of new generation capacity needed in Europe y Consolidation in progress (Suez/Electrabel, EdF/Edison)
Slide 8: Combined Pan-European presence will provide new value creation opportunities
The combined Pan-European presence will provide new value creation opportunities and is in line with EU vision European markets emerging EU Vision: One European market Priority Axes identified by the EC TENS Program for power transmission strengthening Regional power markets Nordic market European g
Slide 9: Significant growth steps since 2003
Significant growth steps since 2003 Small and medium size investments of more than € 7 bn Upstream-Projects in the North Sea, including Caledonia, Njord Construction of off-shore Acquisition of wind power Graninge Enfield gas-fired power station Consolidation of Czech downstream Acquisition of Midla
Slide 10: Extend vertically integrated gas business in UK and Nordic markets
Extend vertically integrated gas business in UK and Nordic markets Njord (Norwegian Sea) St. Fergus Scoter Elgin Glenelg Franklin West-Franklin Equity-Gas - Hunter Johnston Holford Ravenspurn Gas Minke - North Storage Orca Bacton NBP Northern Route Emden London Bunde NWE Hub - ZeebruggeHub Aachen So
Slide 11: E.ON continues to solidify its integrated position in Eastern Europe
E.ON continues to solidify its integrated position in Eastern Europe E.ON involvements in power E.ON involvements in gas Czech Rep. Czech Rep. PP VCP SMP ECR ECD JCP* ECE JMP Slovakia Slovakia ZSE SPP ETI E.ON Földgaz Trade EED Moldova E.ON Foldgaz Storage EDE Hungary KÖGÁZ Hungary E.ON Gaz Romania
Slide 12: In Italy E.ON is pursuing opportunities in both power and gas
In Italy E.ON is pursuing opportunities in both power and gas Italian power market E.ON’s strategic moves in power y Europe’s 5th largest power market Investments in power generation (290 TWh) offering potential to reach • Building 800 MW CCGT power plant in significant scale in operations Livorno F
Slide 13: Gas demand in Western Europe is growing while domestic production is declining
Gas demand in Western Europe1 is growing while domestic production is declining 675-730 E.ON’s response to Europe’s in bcm 635-685 570-610 9% 22% Supply gap increasing reliance on gas 535 8% 11% imports2 7% 12% 10% 11% 11% Advanced projects3 y Long-term gas import 9% 11% 11% Other non-EU imports con
Slide 14: E.ON's gas upstream strategy: Strengthen and diversify supply
E.ON’s gas upstream strategy: Strengthen and diversify supply Long term targets: y Build gas upstream position of up to ~ 15 - 20% of the E.ON Ruhrgas supply portfolio y Target regions: North Sea (UK, Norway), Russia Implementation status: y E.ON Ruhrgas gas supply 2005: ~ 59 bcm y Gas production fr
Slide 15: E.ON's share in plateau production of Yushno Russkoje
E.ON’s share in plateau production of Yushno Russkoje: 6.25 bcm, ~10% of current E.ON Ruhrgas supply1 • One of the largest Russian gas fields Yushno- Russkoje located in Western Siberia • Gas reserves2: > ~ 700 bcm • Long-life asset: > 25 years production • Projected start of production: 2007 • Plat
Slide 16: Framework agreement between E.ON and Gazprom on asset swap
Framework agreement between E.ON and Gazprom on upstream/downstream asset swap E.ON and Gazprom agree on the joint development Gas field ea a r aS of the Russian gas field Yushno Russkoje – Existing transit pipeline sS e a nt K e Yamal Gazprom receives participations in E.ON’s Proposed or a r Stockm
Slide 17: North European Gas Pipeline (NEGP)
North European Gas Pipeline (NEGP) New import pipeline to secure supply of Germany Gas field Se a a and other North West European countries with Existing transit pipeline S ea ar n ts K e Yamal Russian gas Proposed or under a r Stockmann Kharasavey B construction Bovanenko Yamburg • Investment (100%
Slide 18: E.ON is planning its first German LNG project in Wilhelmshaven
E.ON is planning its first German LNG project in Wilhelmshaven • Feasibility study to examine the technical and economic conditions for the construction of the first LNG terminal • Initial calculations estimate an investment of approx. € 500 million • Potential LNG supply sources for Europe are the
Slide 19: Current status of the regulation of network fees in Germany
Current status of the regulation of network fees in Germany y Differing interpretations of new rules, with E.ON Hanse E.ON edis BNetzA unduly disadvantaging network operators. E.ON Westfalen E.ON Avacon Weser y Main points of contention with BNetzA: E.ON Mitte E.ON Thüringer - Calculation of the equ
Slide 20: BNetzA concept for incentive regulation in Germany
BNetzA concept for incentive regulation in Germany y Start expected in 2008 y Regulatory cost review for setting of initially allowed revenues y Complete reduction of any inefficiencies within 6-8 years through a revenue cap adjusted on an annual basis, especially with regard to: - inflation - gener
Slide 21: The investment plan focuses more on selective organic growth
The investment plan focuses more on selective organic growth Investment plan 2006-08 in bn € Split of Investments 2006-08 Fixed Assets 18.6 Growth 2.3 • Power generation1 € 3.6 bn 16.3 • Power transmission and distribution € 1.3 bn • Gas transmission, distribution and storage € 1.6 bn • Other € 0.7
Slide 22: Strict strategic and financial investment criteria
All external growth opportunities are subject to E.ON’s strict strategic and financial investment criteria Strategic Criteria Financial Criteria • Market attractiveness • Earnings enhancing in the first full year (returns, growth, regulation, after acquisition country risk) • Returns exceeding cost
Slide 23: Returning value to E.ON shareholders
Returning value to E.ON shareholders +17% 2.75 € +17.5% y Special dividend of € 4.25 per +14.3% 2.35 € share (€ 2.8 billion) paid +9.4% additionally in May 2006 to return 2.00 € +18.5% the value of our Degussa stake to 1.75 € 1.60 € our shareholders. 1.35 € y Commitment to achieving a payout ratio o
Slide 24: E.ON Group – Financial highlights
E.ON Group – Financial highlights First Half in million € 2006 20051 +/- % Sales 36,915 28,174 +31 Adjusted EBITDA2 6,296 5,628 +12 Adjusted EBIT3 4,836 4,271 +13 Consolidated net income 2,827 3,026 -7 Adjusted net income4 2,847 2,163 +32 Cash provided by operating activities 2,773 2,796 -1 Free cas
Slide 25: E.ON Group – Adjusted EBIT by market unit
E.ON Group – Adjusted EBIT by market unit First Half in million € 2006 20051 +/- % Central Europe 2,454 2,337 +5 Pan-European Gas 1,458 803 +82 U.K. 451 613 -26 Nordic 428 428 - U.S. Midwest 165 173 -5 Corporate Center -173 -150 - Core Energy Business 4,783 4,204 +14 Other Activities2 53 67 -21 Adju
Slide 26: E.ON Group - Outlook 2006
E.ON Group - Outlook 2006 Expected adjusted Group EBIT To be above the high level of 2005 Expected adjusted EBIT by Market Units: Central Europe To be slightly above 2005 figure Pan-European Gas To markedly exceed 2005 level U.K. To be significantly higher than 2005 figure Nordic To be below 2005 st
Slide 27: Our vision: the world's leading power and gas company
Our vision: “E.ON - the world´s leading power and gas company“
Slide 28: Back-up Charts
Back-up Charts
Slide 29: Transformation into a pure energy group almost completed
E.ON Group – Transformation into a pure energy group almost completed1) in billion € Acquisitions Transaction Closing Date Divestments Transaction Closing Date Volume Volume Powergen/LG&E 15.3 07/02 E-Plus 4.3 02/00 Ruhrgas (100%) 11.2 01/03 Cablecom 1.0 03/00 TXU retail business 2.5 10/02 Gerreshei
Slide 30: Development of electricity prices on selected markets
Development of electricity prices on selected markets EEX, UK, Nord Pool, French and US Forward prices Cal 2007 Key drivers Last 12 Months July 2006 • UK forward prices appear to be driven 90 mainly by the UK natural gas prices. 80 • Nordic forward prices appear to be driven mainly by the hydrologic
Slide 31: Europe – Coal- and CO2-Prices
Europe – Coal- and CO2-Prices Coal, ARA – Last 12 months July 2006 Key Messages 90 USD/t • Coal –The production problems (South Africa, 80 Colombia) seen in the first half of 2006 have diminished. The physical European coal market is 70 balanced. However, with higher freight rates, the financial mar
Slide 32: Development of gas and oil prices in E.ON's core markets
Development of gas and oil prices in E.ONs core markets UK Gas, Front Month (EUR/MWh) Bunde Gas, Front Month (EUR/MWh) German import price (EUR/MWh) US Gas, Front Month (EUR/MWh) Brent Oil, Front Month (USD/bbl) 55 65 45 55 EUR/MWh USD/bbl 35 45 25 35 15 25 5 15 Jan. Apr. Jul. Okt. Jan. Apr. Jul. Ok
Slide 33: Germany – Regulation of network fees
Germany – Regulation of network fees • Gas transmission: exemption from cost regulation accepted if grid-to-grid competition in transmission can be proved. • Gas distribution and electricity: calculation of allowed costs largely identical. • Cost of Capital: Return on equity 6.5% real (electricity)
Slide 34: Germany - Only network access fees are regulated
Germany - Only network access fees are regulated 2006 (assumed consumption for a household: 3,500 kWh/a) Average price for households1: 19.46 ct/kWh CHP & Renewables Act 1.03 ct/kWh Eco tax 2.05 ct/kWh Grid access fees3 Concession fee2 6.18 ct/kWh 1.79 ct/kWh VAT Only grid fees are regulated (32%) 2
Slide 35: Germany – Development of household power prices
Germany – Development of household power prices in Ct/kWh 2006 (assumed consumption for a household: 3,500 kWh/a) European comparison German development Greece 7 Czech Republic 9.9 Great Britain 10.2 Spain 11.5 18.99 19.46 18.31 17.96 France 12 17.49 17.49 17.11 16.11 5.2 5.58 7.55 Austria 13.4 5.11
Slide 36: Natural gas prices in Germany – High tax burden
Natural gas prices in Germany – High tax burden of 25 percent Average price for households1: 5.08 ct/kWh Import/Production, Transportation, Distribution 75 % 3.80 ct/kWh h kW c t/ 0. 7 Wh VAT ct/k 13 % 0. 55 Eco taxes 0.03 ct/kWh Concession fees 11 % 1% 1 Related to an average price for a fully supp
Slide 37: Gas price adjustment
Gas price adjustment Oil indexation • Main competitors of natural gas are gas oil and fuel oil. • Long-term contracts need an automatic indexation. • Oil indexation secures competitive gas prices. • Example for oil indexation : - Price adjustment every 3 months; 1.1./1.4./1.7./1.10. - Reference peri
Slide 38: E.ON Group - Emissions trading 2005-2007
E.ON Group - Emissions trading 2005-2007 In total, the E.ON Group received CO2 allowances under the European Trading System of about 77.4 Mt CO2/a in 2005 – 2007. y E.ON Energie objected to some of the allocations for its installations, but in general received the expected amount of allowances in Ge
Slide 39: Cornerstones of German NAP draft for 2008 - 2012
Cornerstones of German NAP draft for 2008 - 2012 Ministry of Environment presented NAP Draft for public discussion delivered to EU Commission on June 30, 2006 General reservation: NAP is provisional, final determination of all figures will be made in the new emission trading law – Zuteilungsgesetz 2
Slide 40: Growing investments in power generation
Growing investments in power generation Trimble County 2 U.S.-Midwest Coal 750 MW Oskarshamn Nuclear 480 MW upgrade Start 2010 Start 2006 – 2012 Total investment € 700 mn Total investment € 350 mn Malmö Gas CHP 440 MW Start 2009 Total investment € 326 mn Robin Rigg Maasvlakte 3 Wind 180 MW Coal 1100
Slide 41: Further 3,000 MW can be made available within a short timeframe
In addition to our plans to create new capacity of 2,000 MW by 2012, a further 3,000 MW can be made available within a very short timeframe New capacity and flexibility through Option 2 boosting capacity, lifetime extensions Demothballing of power plants for power plants & demothballing Capacity Inc
Slide 42: E.ON Group – Financial highlights
E.ON Group – Financial highlights in million € 2005 20041 +/- % Sales 56,399 46,742 +21 Adjusted EBITDA2 10,272 9,741 +5 Adjusted EBIT2 7,333 6,787 +8 Consolidated net income 7,407 4,339 +71 Capital employed 60,398 59,063 +2 ROCE (in %)3 12.1 11.5 +0.64 Cost of capital (in %) 9.0 9.0 - Cash provided
Slide 43: Market units – Key financial figures 2005
Market units – Key financial figures1 2005 in million € Oper. Sales Adjusted Adjusted Capital ROCE Pre-tax Cash- Value EBITDA EBIT Employed (%) CoC (%) flow Added Central Europe 24,295 5,284 3,930 17,969 21.9 9.0 3,020 2,318 Pan-European Gas 17,914 1,939 1,536 13,355 11.5 8.2 1,999 441 U.K. 10,176 1
Slide 44: E.ON Group - Split of gross external debt
E.ON Group - Split of gross external debt1 as of June 30, 2006, in billion € Pan- Central Corporate European U.K. Nordic U.S. Midwest E.ON Group Europe Center Gas Bonds 0,0 0,0 0,5 0,5 1,0 7,1 9,1 Commercial Paper 0,0 0,0 0,0 0,3 0,0 3,1 3,4 Bank Loans / others 1,3 0,7 0,2 0,6 0,0 0,1 2,9 Split by M
Slide 45: E.ON Group - Strong financial profile
E.ON Group - Strong financial profile 2005 20046 Adj. EBITDA1 45.9 x 16.9 x Net interest2 Adj. EBITDA1 n/a 178 % Net financial position3 Net financial position3 n/a 0.9 years Cash provided by operating activities Gross external debt4 20% 33% Total Capital5 1) Non-GAAP financial measure; reconciliati
Slide 46: Ratings Moody's – E.ON's ratings compared to peer group
E.ON‘s ratings compared to its peer group As of August 4, 2006 Aa1 EdF Aa1 stable, AA- n.o. • Moody‘s (Aa3, „review for possible downgrade“) GdF Aa1 rev. down, AA – watch neg. - Moody’s has placed its Aa3 credit rating of E.ON AG on review for a possible downgrade, following the Aa2 announcement by
Slide 47: Market unit ratings within the E.ON Group
Market unit ratings within the E.ON Group as of June 30, 2006 E.ON AG/ E.ON International Finance B.V. Aa3 rev. down. / AA- watch neg. E.ON Energie AG E.ON Nordic Holding E.ON Ruhrgas AG E.ON UK Holding E.ON US Invest- Company Ltd. ment Corp. Aa3 rev. down. E.ON Sverige AB E.ON UK plc E.ON U.S. LLC
Slide 48: Statement regarding the Endesa offer
This statement does not constitute an invitation to sell or an offer to buy any securities or a solicitation of any vote or approval. Endesa investors and security holders are urged to read the prospectus and U.S. tender offer statement from E.ON regarding the proposed tender offer for Endesa when t