Rwe Ag · XETR:RWE
Rwe — Debt Investor Presentation (July 2003)
44 slides from Rwe's debt investor presentation, Jul 10, 2003
Slide 1: RWE Bond Offer July 2003
RWE Bond Offer July 2003 As of 10.07.2003
Slide 2: Forward Looking Statement
Forward Looking Statement This presentation contains certain forward-looking statements within the meaning of the US federal securities laws. Especially all of the following statements: • Projections of revenues, income, earnings per share, capital expenditures, dividends, capital structure or other
Slide 3: RWE Group Results Q1
RWE Group Results Q1 January - March 2003 2002 change € million in % Operating result 1,752 1,317 +33.0 Non-operating result 35 297 -88.2 Financial result -754 -569 -32.5 Profit before tax 1,033 1,045 -1.1 Tax -500 -182 -174.7 Profit after tax 533 863 -38.2 Minorities -96 -170 +43.5 Net profit exclu
Slide 4: RWE: What You See is What You Get
RWE: What You See is What You Get n Stable defensive play with growth potential and clear strategy n Leading position in key utility markets achieved - No large acquisitions planned n Strong focus: 94% of EBITDA in the core business n Stable financial structure with strong cash position n High divid
Slide 5: Stable Defensive Play With Growth Potential
Stable Defensive Play With Growth Potential EBITDA margin 40% Water Electricity Gas 20% Environm. Services EBITDA growth 5
Slide 6: Leading Positions in Key Utility Markets Achieved
Leading Positions in Key Utility Markets Achieved Electricity Gas Water Environ- mental Services Germany UK Central Eastern Europe North America 6
Slide 7: The RWE Multi Utility Strategy
The RWE Multi Utility Strategy n Margin is key - Focus on customers with attractive long-term value potential n Market and cost leadership - strong EVA contribution by scale and cost advantages also in times of increased pressure on prices n Regional cooperation between the four business areas - cre
Slide 8: 2003 - Year of Consolidation
2003 - Year of Consolidation Strengthening our competitive position by n Fast integration of our major acquisitions into the Group n Further improving the operating performance n Maintaining a high level of financial stability 8
Slide 9: Integration of Key Acquisitions
Integration of Key Acquisitions Thames delay incl. American Water American Water Integration delay Transgas Integration potential to beat target Integration In line Innogy 2002 2003 2004 2005 2006 ROCE ³ WACC 9
Slide 10: Change in Group Structure Necessary
Change in Group Structure Necessary + Current structure was success factor for fast repositioning after VEW merger + After rapid expansion abroad need for reducing number of managing companies + Rapidly changing market demands more powerful and lean organisation + Increased convergence of electricit
Slide 11: EBITDA Growth at American Water
EBITDA Growth at American Water Non-regulated c$ 50m c9% $ 950 m Non-regulated c9% $ 6m c12% c30% $ 650 m c40% 5: 10% 1- 200 R 2 00 CAG $ 644 m c$900 m EBITDA existing Citizens “Tuck-ins“ Azurix other non- EBITDA 2001 regulated regulated 2005 business business 11
Slide 12: Stable Financial Structure
Stable Financial Structure n Strong cash position: € 12 bn of financial assets n High free cash flow from stable core business n EBITDA / net interest targeted in 2003 at approximately 6x n Debt reduction program Net debt target 2003 below € 24 bn n Above average ratings 12
Slide 13: Development of Net Debt Position
Development of Net Debt Position € billion Net debt Net cash American Smaller Capex Others Currency Net debt Market 31.12.2002 from Water acquisitions translation 31.03.2003 value of operating effect / disposals effect net debt related activities (as of financial 10.01.03) derivatives +0.9 +0.1 -0.5
Slide 14: Rating Updates
Rating Updates Standard & Poor’s (A+, “negative outlook”) n A+ Rating confirmed on March 13, 2003; outlook revised from “stable” to “negative” n Acknowledge “strong business profile” with “about one-half of core operating cash flows coming from stable network operations in Germany and the regulated
Slide 15: Operating Result - Outlook for 2003
Operating Result - Outlook for 2003 January - December 2002 2003 € million forecast Electricity 2,760 Gas 885 Core Water 963 Environmental Services 98 Core business 4,706 RWE Dea Downstream -6 - Non-core Heidelberg 158 Hochtief 28 Others/Holding/Consolidation -382 Total 4,504 15
Slide 16: Outlook for 2003
Outlook for 2003 January - December 2002 forecast for 2003 € million External net sales core business 34,449 double digit growth non-core business 11,997 2/3 down EBITDA core business 7,123 double digit growth non-core business 466 lower Operating result core business 4,706 double digit growth non-c
Slide 17: High Dividend Yield
High Dividend Yield Dividend yield based on year-end price of RWE ordinary shares 2.2% 2.8% 2.1% 3.2% 4.5% Dividend per share bonus 0.10 € 1€ 1€ 1€ 1.33 € 1.00 € 1998/99 1999/00 2000/01 2001* 2002 * € 1/share dividend payment for 6 months of the truncated financial year 2000 as well as € 1/share for
Slide 18: One Group. Multi Utilities. Back-up-Charts
One Group. Multi Utilities. Back-up-Charts
Slide 19: Operating Result by Business Area
Operating Result by Business Area January - March 2003 2002 change € million in % Electricity 919 611 +50.4 Gas 555 295 +88.1 Core Water 300 257 +16.7 Environmental Services 20 28 -28.6 Core business 1,794 1,191 +50.6 RWE Dea Downstream - -16 - Non-core Heidelberg 39 176 -77.8 HOCHTIEF (at equity) -
Slide 20: EBITDA by Business Area
EBITDA by Business Area January - March 2003 2002 change € million in % Electricity 1,290 873 +47.8 Gas 660 357 +84.9 Core Water 475 377 +26.0 Environmental Services 54 69 -21.7 Core business 2,479 1,676 +47.9 RWE Dea Downstream - 16 - Non- core Heidelberg 107 245 -56.3 Others/Holding/Consolidation
Slide 21: RWE Cash Flow Statement I
RWE Cash Flow Statement I January - March 2003 2002 change € million in % Profit after tax 533 863 -38.2 Depreciation, amortization and writebacks 1,074 794 +35.3 Increase / decrease in provisions -111 446 -124.9 Change in deferred taxes 173 37 +367,6 Disposal gains and other non-cash items -31 -618
Slide 22: RWE Cash Flow Statement II
RWE Cash Flow Statement II January - March 2003 2002 change € million in % Operating cash flow 1,902 1,855 +2.5 Net cash used in investing activities (incl. divest.) -4,488 -1,543 -190.9 Net cash provided by financing activities 2,576 1,696 +51.9 Exchange rate changes / others / consolidation 34 -80
Slide 23: Cost Cutting Well on Track
Cost Cutting Well on Track € million 300 2,555 300 1,955 70 achieved Q1 2003 achieved 2003 2004 å 2004 (7/00 - 31.12.2002) target target target 23
Slide 24: Electricity Price Development
Electricity Price Development Forward 2003 Forward 2004 4.0 Wholesale Peak RWE- prices Distributing in cent/kWh1) utilities 3.5 reduced by grid fees Industrial customers: 3.0 Chemicals reduced by grid fees Wholesale Base 2.5 2.0 1.5 1.0 Dec. Apr. Aug. Dec. Apr. Aug. Dec. 01 02 02 02 03 03 03 24 1) a
Slide 25: RWE's Indebtedness is Based on Solid Grounds
RWE’s Indebtedness is Based on Solid Grounds n 5.5% average cost of gross debt (vs. 6.0% previous year) n More than 80% of debt at fixed interest rates, no rating triggers, no financial covenants n Central funding policy for the RWE-Group; RWE AG has domination and profit and loss pooling agreements
Slide 26: Financial Assets and Liabilities Q1 2003
Financial Assets and Liabilities Q1 2003 € 34.5 bn** 2.2 other 3.9 commercial paper 7.8 bank loans € 12.0 bn* 0.8 other financial assets 0.8 other loans 20.6 bonds 2.2 cash & cash equivalents 7.7 securities held as current assets 0.5 securities held as fixed assets financial financial assets liabili
Slide 27: RWE AG: Flexible Funding Structure
RWE AG: Flexible Funding Structure Fully committed syndicated Loan € 5 bn for liquidity back-up and refinancing ( € 2.5 bn 364 days € 2.5 bn 5 years) € 0.0 bn Commercial Paper $ 5.0 bn (up to 1 year) $ 2.9 bn* € 14.6 bn MTN-program (up to 30 years) € 15 bn € 5 bn € 20 bn extended in March 2003 amoun
Slide 28: Debt Reduction Program
Debt Reduction Program Reduction of planned CAPEX € 3 - 4 bn by 2005 Increase of planned disposals (compared to mid-term budget) Optimization of working capital 28
Slide 29: Strong Net Interest Coverage
Strong Net Interest Coverage EBITDA / net interest consolidation of Czech Gas and Innogy for 8 resp. 16 7 months full inclusion of American Water, Czech Gas and Innogy 12 11.2x 9.0x* 8 »6x 4 31.12.02 31.03.03 31.12.03e 29 *) Including realised gains/losses from sale of securities EBITDA/net interest
Slide 30: Maturity Profile of Capital Market Debt
Maturity Profile of Capital Market Debt* 3,5 20,00 3,0 Total: € 19.5 bn** 15,00 2,5 EUR bn (Capital Market Debt) 2,0 EUR bn 10,00 1,5 1,0 5,00 0,5 0,0 0,00 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20
Slide 31: Gross Financial Debt Currency Exposure
Gross Financial Debt Currency Exposure* Total debt as of 31.03.2003: € 34.5 bn €/others $ 15% 33% 52% £ With debt in foreign currencies we hedge the translation risk of our international activities. 31 * including cross-currency swaps
Slide 32: Structural Subordination in the RWE Group
Structural Subordination in the RWE Group RWE AG / RWE Group Finance B.V. (A+ / A 1) 63.2% Thames Water Plc (A+ / A2) Innogy Holdings Plc 10.4% Innogy Plc Thames Water Thames Water American Water Thames Water E‘town Corp. (A- / Baa1) Finance B.V. Utilities Finance Works Co. Inc. Utilities Ltd (A+ )
Slide 33: Conference Call Essen, June 26th, 2003
Conference Call Essen, June 26th, 2003 Harry Roels, CEO Klaus Sturany, CFO 1
Slide 34: New Group Organization: Getting Ready for the European Utilities Future
New Group Organization: Getting Ready for the European Utilities Future n Further implementation of Multi Utility: „One face to the customer“ n Upstream: Fuels and Generation in one hand n Downstream: Combination of all sales activities and distribution networks for electricity and gas in Germany n
Slide 35: New Group Structure as of Oct. 1, 2003
New Group Structure as of Oct. 1, 2003 RWE AG („Group Center“) GENERATION GENERATION Regions Regions Regional Distributors Upstream Gas Sales Transmission (Electricity/Gas) RWE Dea npower Services Renewables Renewables RWE Nat‘l Windpwr Harpen Solutions Hard Coal USA Consol 3
Slide 36: Integration of Continental European Power Generation and Upstream Activities
Integration of Continental European Power Generation and Upstream Activities Environment Target n Further integration of Combined positioning of German continental European markets generation in the market n Increasing political and Unified response regulatory influence in the market n Fierce compet
Slide 37: RWE Power: Our Integrated Upstream Platform
RWE Power: Our Integrated Upstream Platform CURRENT STRUCTURE NEW STRUCTURE RWE AG RWE AG 100% 100% RWE Power Power plants (fossil, nuclear, • Lignite production renewables) RWE Power • Electricity generation (fossil, nuclear, 100% RWE Rheinbraun renewables) 74% Lignite-based 74% 99%1) electricity g
Slide 38: Integration of German Electricity and Gas Activities in Sales and Grid
Integration of German Electricity and Gas Activities in Sales and Grid Environment Target n Parallel customer contacts All products from one source, for each utility thereby enhancing customer services n Customers prefer regional Transfer of more operational partners responsibility to regional units
Slide 39: RWE Energy: Our Integrated Downstream Platform
RWE Energy: Our Integrated Downstream Platform A New Name for Multi Utility in Continental Europe n Merging electricity and gas offers synergies – Sales: Cross utility presence according to customer groups – Distribution Grid: Coordinated network engineering and maintenance – Administration: cost re
Slide 40: RWE Energy Organization
RWE Energy Organization RWE AG RWE Energy AG Northern REC • DEW Czech • 8 gas German long-distance • Mark E distribution (ex RWE Gas) • AVU Republic companies gas transport (Thyssengas) Central REC • ELE Hungary • ELMÜ/ Czech long-distance • rhenag EMÁSZ (ex RWE Plus) • FÖGÁZ gas transport (Transgas
Slide 41: The Regional Energy Companies - Our New Multi Utility Front End
The Regional Energy Companies - Our New Multi Utility Front End Premises for structuring the REC regional energy companies: Sales n Meet EU unbundling requirements Administrative functions n Open up the structures of the regional Customer energy companies to municipal utilities services1 in their re
Slide 42: RWE Innogy, RWE Trading and RWE Thames Water in the New Group Structure
RWE Innogy, RWE Trading and RWE Thames Water in the New Group Structure n Will take over Innogy’s trading operations n Retains its role as wholesale marketer for Group wide commodities n Risk management directly controlled by RWE AG n Retain value from current integrated business model: Supply, gene
Slide 43: Group Center and Group Business Committee: Higher Management Efficiency
Group Center and Group Business Committee: Higher Management Efficiency Executive Board of RWE AG Harry Roels Gert Maichel Klaus Sturany Jan Zilius Business n RWE Energy n RWE Power n RWE Umwelt Responsibility n RWE Thames n RWE Innogy n RWE Systems Water n RWE Trading Functional n Group Strategy n
Slide 44: Reorganization Pays Off: Approx. €300 Million Annual Cost Savings
Reorganization Pays Off: Approx. € 300 Million Annual Cost Savings n We target some €300 million in annual cost savings by 2006. – Some €120 million in annual synergies – Some €180 million in additional annual potential n Realizing synergies will involve some 1,000 job reductions. n We expect the im