E.on Se · XETR:EOAN
E.on — Debt Investor Presentation (August 2007)
53 slides from E.on's debt investor presentation, Aug 30, 2007
Slide 1: Funding Program Roadshow
Funding Program Roadshow August 30 – September 6, 2007
Slide 2: Agenda
1. Introduction 2. Financial highlights 3. Investment and Growth Program 4. Finance Strategy 5. Funding Structure 1
Slide 3: E.ON is the world's largest investor-owned energy services provider
E.ON is the world's largest investor-owned energy services provider E.ON’s industry leadership is founded on its integrated business model with sustainable operations along the entire value chain: y E.ON is vertically integrated, with operations upstream (power generation and natural gas production)
Slide 4: 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 8,4 Adjusted EBIT1 - € in billion 7.3 6.8 Market Cap. € 67.6 bn Economic N.D. € 18.2 bn 5.7 4.3 3.4 Market Cap. € 40.3 bn
Slide 5: Agenda
1. Introduction 2. Financial highlights 3. Investment and Growth Program 4. Finance Strategy 5. Funding Structure 4
Slide 6: E.ON Group – Financial highlights
E.ON Group – Financial highlights € in billion; according to IFRS H1 2007 H1 2006 FY 2006 Sales 35.6 34.2 64.1 Adjusted EBITDA 7.0 6.6 11.8 Adjusted EBIT 5.4 5.1 8.4 Adjusted net income 3.1 2.8 4.7 Cash provided by operating activities 4.8 2.8 7.2 Economic net debt -16.4 -22.9 -18.2 5
Slide 7: E.ON Group – Adjusted EBIT by market unit
E.ON Group – Adjusted EBIT by market unit € in billion; according to IFRS H1 2007 H1 2006 FY 2006 Central Europe 2.5 2.5 4.2 Pan-European Gas 1.6 1.7 2.3 U.K. 0.7 0.5 1.2 Nordic 0.5 0.4 0.5 U.S. Midwest 0.2 0.2 0.4 Corporate Center -0.1 -0.2 -0.4 Adjusted EBIT 5.4 5.1 8.4 6
Slide 8: E.ON Group - Outlook 2007
E.ON Group - Outlook 2007 Expected adjusted Group EBIT To be 5 – 10 % above 2006 level Expected adjusted EBIT by Market Units: Central Europe To be above 2006 level Pan-European Gas To be on par with 2006 level U.K. To be broadly in line with 2006 level Nordic To be significantly above 2006 level U.
Slide 9: E.ON's balance sheet
E.ON‘s balance sheet according to IFRS; € in billion H1 2007 y The relation of gross financial Goodwill and intangible assets 19 liabilities to total equity was Property, plant and equipment 43 approx. 1 to 4 on June 30, Companies accounted for under the equity method 8 Share investments 12 2007 Non
Slide 10: Agenda
1. Introduction 2. Financial highlights 3. Investment and Growth Program 4. Finance Strategy 5. Funding Structure 9
Slide 11: E.ON has specified the strategic direction for its development
E.ON has specified the strategic direction for its short- and long-term value-enhancing development Active promotion Market integration, competition, climate protection, security of EU energy agenda of supply: Framework for short- and long-term value creation Optimized group Earnings potential from
Slide 12: 70% of E.ON's EUR 60 bn investment program are value enhancing
70% of E.ON’s € 60 bn investment program initiated until 2010 are value enhancing growth projects E.ON’s investment for projects € 3 bn € 60 bn initiated 2007 - 2010 € 10 bn Mainten./ € 11.7 bn Replacem. € 10 bn 30% € 60 bn € 25.3 bn Growth 70% Investm. plan Acquisition Investments New Mainten./ Tot
Slide 13: E.ON's EUR 60 bn investment plan is well under way
E.ON's € 60 bn investment plan is well under way Investments initiated between 2007 – 2010 (bn €) ~ 60 ~ 10 Acquisition of Endesa assets/Viesgo Organic growth generation 4 new plants under construction ~ € 1.5 bn ~ 12 € 42 bn excl. renewables for growth ~3 Renewables Energi E2 Renovables Ibéricas ~
Slide 14: E.ON achieves its objective of a strong pan-European position
E.ON achieves its objective of a strong pan-European position Nordic #4 in power generation United Kingdom #3 in power/gas retail #2 in power generation #2 in power/gas retail European gas supply #1 in gas supply France #3 in power generation CEE including Germany #2 in power generation Spain #1 in
Slide 15: 10 until 10: adjusted EBIT growth of 10% p.a.
“10 until 10”: E.ON will increase its adjusted EBIT by 10 % p.a. on average until 2010 Adjusted EBIT target 2007 – 2010 in € bn Average growth of 10 % p.a. 1.0 12.4 1.7 1.3 Operational improvement 8.4 New incl. Trading Current growth growth integration investment from investment plan 07 – 09 and net
Slide 16: Agenda
1. Introduction 2. Financial highlights 3. Investment and Growth Program 4. Finance Strategy 5. Funding Structure 15
Slide 17: Major elements of E.ON's new finance strategy
Major elements of E.ON‘s new finance strategy E.ON commits itself to a Single A flat / A2 target rating. E.ON’s steering measure is the Debt factor (= Economic net debt / Adjusted EBITDA). E.ON’s target capital structure corresponds to a Debt factor of 3x. E.ON pursues an active capital structure ma
Slide 18: E.ON commits itself to a Single A flat / A2 target rating
E.ON commits itself to a Single A flat / A2 target rating (based on current rating agencies’ methodology) Reasoning Ratings of E.ON‘s Peers y For a leading power and gas Standard & Poor's Moody's company a solid rating is a “must” EdF AA- stable Aa1 stable y Increased leverage at a single A GdF AA-
Slide 19: E.ON uses the Debt factor as its core steering measure
E.ON uses the Debt factor as its core capital structure steering measure € in billion H1 2007 FY 2006 Liquid funds 7.9 6.2 Securities and funds (fixed assets) 6.9 7.1 Total financial assets 14.8 13.3 Total financial liabilities -14.3 -13.5 Net financial position 0.5 -0.1 Provisions for pensions, net
Slide 20: A Debt factor of 3x is compatible with the rating target
A Debt factor of 3x is compatible with the rating target Target rating: Single A flat / A2 Current guidance from Current guidance from Standard & Poor‘s Moody‘s FFO1,3/ Adjusted net debt3 > 20%4 FFO1,3/ Adjusted net debt3 19-24%4 RCF2,3/ Adjusted net debt3 15-20%4 Debt factor (Economic Net Debt / Ad
Slide 21: Capital structure will be managed actively in both directions
E.ON‘s capital structure will be managed actively in both directions Debt factor Consequence considerably y Higher cash returns to shareholders below 3x y However, value creating investments are prioritized 3x y In line with target capital structure considerably y Strict investment discipline; portf
Slide 22: Target capital structure shall be achieved by end of 2008
Target capital structure shall be achieved by end of 2008 Investment program Cash returns to shareholders ~30 bn € investments planned Regular dividend will be until end of 2008 supplemented by share buyback of 7 bn € E.ON’s Debt factor 3.0x 1.9x Target: 1.5x Debt factor of 3x by 2008 2004 2005 2006
Slide 23: Share buyback
Share buyback y Since June 27, 2007, E.ON has bought back around 11.6 million shares with a total value of approximately € 1.4 billion.1 y E.ON intends to repurchase own stock in the amount of € 3.5 billion by the end of 2007, and another € 3.5 billion during 2008. All shares acquired will be cancel
Slide 24: Agenda
1. Introduction 2. Financial highlights 3. Investment and Growth Program 4. Finance Strategy 5. Funding Structure 23
Slide 25: E.ON's capital market liabilities will increase
E.ON‘s capital market liabilities will increase y E.ON has funding plans of approximately € 30 bn over the course of the next four years, including refinancing of existing maturities. y The peak funding year is 2008. y Financing becomes an important and ongoing issue for E.ON. 24
Slide 26: Financial instruments of E.ON AG and finance subsidiaries
Financial instruments of E.ON AG and finance subsidiaries June 2007 Current Expectation Financial instrument Volume Utilization Financial instrument Volume Medium Term Note Program € 20 bn € 7.2 bn Medium Term Note Program € 30 bn USD bonds tbd EURO Commercial Paper Program € 10 bn € 1.0 bn EURO Com
Slide 27: E.ON's refinancing plans – access to all major markets
E.ON‘s refinancing plans – E.ON has access to all major markets Benchmark Bond Transactions (EUR, GBP and USD) Issuance in other selected currencies (e.g. CHF, EuroYen, SEK) Instrument and market mix Reverse Inquiry drawings under E.ON’s to diversify our investor MTN Program base and ensure demand C
Slide 28: Back-up Charts
Back-up Charts
Slide 29: Market units – Key financial figures 2006
Market units – Key financial figures 2006 € in billion Sales1 Adjusted Adjusted Capital ROCE2,3 Cost of Value Operating EBITDA1 EBIT1 Employed2,3 (%) Capital2,3 (%) Added2,3 Cash Flow1 Central Europe 27.2 5.7 4.2 19.3 21.6 9.0 2.4 3.8 Pan-European Gas 22.9 3.1 2.3 15.5 13.5 8.2 0.8 0.6 U.K. 12.5 1.8
Slide 30: Transformation into a pure energy group almost completed
Transformation into a pure energy group almost completed1) Acquisitions Transaction Closing date Divestments Transaction Closing date volume (bn €) volume (bn €) 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 Gerresheimer Glas 0.5
Slide 31: E.ON will bundle all European trading units
To maximize value from cross-market and cross-commodity optimization, E.ON will bundle all European trading units New unit energy trading1 Drivers for value creation Single market access and bundled y Bundled competencies and market know- optimization and market information how with improved speed t
Slide 32: E.ON will bundle responsibilities for fossil new build
E.ON will bundle the responsibilities for fossil new build to guarantee best technical solutions and highest efficiency New unit fossil new build Drivers for value creation Realization of new build for all Convoy approach for new build (e.g. 1,050 MW hard fossil plants in Europe coal convoy Datteln,
Slide 33: New Renewables and Climate protection unit
New Renewables and Climate protection unit will drive economies of scale, best practice & strong revenue growth New unit Renewables1 & Climate Drivers for value creation Protection2 1 Optimize development Renewables business & operation of E.ON’s y High quality renewable project pipeline renewable p
Slide 34: Organic investments into generation technologies and renewables
Organic investments into leading generation technologies and renewables are key areas of E.ON’s growth initiative in € bn E.ON’s investment for projects initiated 2007 - 2010 Acquisition of Endesa ~ 10 assets/Viesgo € 42 bn Organic growth generation ~ 12 € 18 bn Growth w/o renewables maintenance/ €
Slide 35: E.ON will grow its generation position across Europe by ~50%
E.ON will grow its generation position across Europe by ~ 50 % until 2010 with superior value proposition Planned capacity additions1 Value enhancing generation growth in GW E.ON’s objectives: Nordic 7.3 8.5 UK y Rapidly integrate Endesa assets/Viesgo and 10.5 12.5 strengthen acquired positions CE W
Slide 36: New fossil-fired power plants already under construction
7 new fossil-fired power plants already under construction under construction Trimble County 2 Oskarshamn (upgrade) planned U.S. Midwest Coal 750 MW Nuclear 430 MW Start 2010 Start 2008/12 Malmö Maasvlakte 3 Gas CHP 440 MW Coal 1100 MW Start 2009 Start 2012 Grain Datteln 4 Gas CHP 1200 MW Coal 1100
Slide 37: Wind power project pipeline
Substantial wind power project pipeline will be supple- mented to support E.ON’s climate protection ambitions Major E.ON wind projects Renewable growth Nordic Diverse portfolio of on- and offshore y OKG wind 15 MW (2008) y Rödsand II 212 MW (2011) projects in important EU regions for wind power: Ger
Slide 38: Acquisition of 100% of Energi E2 Renovables Ibéricas
Acquisition of 100% of Energi E2 Renovables Ibéricas Assets acquired y Existing portfolio 260 MW y Development portfolio 560 MW 240 MW of which already under construction 90 MW in operation + Investment € 1.3 bn 505 MW y Purchase price € 722 mn in development y Development capex ~ € 0.6 bn Excellent
Slide 39: Generation growth linked with climate protection target
E.ON links its generation growth ambitions with a progressive climate protection target E.ON’s specific CO2 emissions Climate friendly generation growth in t/MWh E.ON’s long-term objective: y Reduction of specific carbon emissions by 50 % by 2030 (compared to 1990) 0.72 - 50 % Implementation strateg
Slide 40: Development of electricity prices in selected markets
Development of electricity prices in selected markets EEX, UK, Nord Pool, French and US Forward prices Cal 2008 Key drivers Last 12 Months July 2007 y UK forward prices appear to be driven 90 mainly by the UK natural gas and CO2 prices. 80 y Nordic forward prices appear to be driven mainly by the CO
Slide 41: Europe – Coal and CO2 prices
Europe – Coal and CO2 prices ARA (Coal) – Last 12 months July 2007 Key Messages 90 y Coal market 80 Coal prices increased on the back of strong Pacific demand USD/t 70 60 and high freight rates. y Freight rates 50 Freight rates remained high due 40 to high demand and continued 22.7.07 29.7.07 8.7.07
Slide 42: Western Europe will increasingly rely on gas imports
Western Europe1 will increasingly rely on gas imports 675-730 E.ON’s response to Europe’s in bcm 635-685 9% 22% Supply gap increasing reliance on gas 570-610 535 8% 11% imports2 7% 12% 10% Advanced projects3 11% 11% y Long-term gas import 9% 11% 11% Other non-EU imports contracts remain backbone 26%
Slide 43: Development of Europe's gas import infrastructure
E.ON contributes to the necessary development of Europe’s gas import infrastructure Yushno Russkoje a y Estimated start of production 2008. Gas field a Se y Proven reserves of 7002 bcm or at least 25 years. Production Existing transit pipeline n t s S e a ar K e Yamal of approx. 25 bcm p.a. (equival
Slide 44: E.ON targets > 10 bcm p.a. in gas upstream
E.ON targets > 10 bcm p.a. in gas upstream E.ON’s gas production growth Strengthening of E.ON’s upstream in bcm p.a. and supply position Target: > 10 bcm p.a. E.ON’s objectives: y Extend gas production to > 10 bcm p.a. ~6 y Strengthen the successful partnership ~3 with our largest gas supplier Gazpr
Slide 45: Acquisition of 28% of Skarv-Idun area in Norway
Acquisition of 28% of Skarv-Idun area in Norway License interests transferred to E.ON: y 28% of unitized Skarv-Idun fields PL 212B y 40% of PL1 159 and 25% of PL 212, 212B and 262 PL 159 Investment (E.ON's share) ~ € 1.7 bn PL 262 y Purchase price $ 892.5 mn y Development capex Skarv-Idun ~ $ 1,400
Slide 46: LNG imports in line with E.ON's strategy
LNG imports in line with E.ON‘s strategy to broaden the basis for gas supplies Existing LNG terminal Wilhelmshaven LNG terminal under construction • Capacity planned 10 bcm/a LNG terminal planned • Investment (100%) estimated at around € 0.7 bn • Commissioning expected for 2010 or 2011 Krk • Allianc
Slide 47: Investment into storage and strategic infrastructure
E.ON will invest into storage and strategic infrastructure to contribute to a secure and diversified EU gas supply Storage working gas capacity: Invest in storage and strategic E.ON Ruhrgas North West Europe1 networks in bcm p.a. >4 E.ON’s objectives: y Extend gas storage capacity to secure 2.5–4.5
Slide 48: Acquisition of Endesa assets/Viesgo
With acquisition of Endesa assets/Viesgo, E.ON will gain good quality generation positions in new European markets France Italy 65% share in SNET (Endesa) Endesa Italia y 2.5 GW coal-fired generation y 7 GW diversified generation to be extended through new (whereof at least 70% available CCGT and wi
Slide 49: Russia – Growth opportunities in power generation
Russia – Growth opportunities in power generation Potential regions: Urals/ Characteristics for the regions: North West Central Volga Western Siberia y Privatization of generation planned 2007/08 y Strong industrialization and profound growth perspectives in power demand y Lack of generation and agi
Slide 50: Turkey – Opportunities from privatization and new build
Turkey – Opportunities arising from privatization and new build requirements Bulgary Market size 3 Black Sea 600 Greece 1 2 Georgia TWh 2005 13 Armenia 2025 Istanbul 400 Ankara Iran 200 Ägäis Iraq 0 Syria D F I E TR PL CZ RO HU Mediterranean Sea Expected opportunities Potential sale of private stake
Slide 51: A debt factor of 3x is in line with rating agency requirements
A debt factor of 3x is in line with the requirements of the rating agencies for an A flat / A2 rating Setting the target leverage: simplified example1 Net debt 3,000 / Debt factor 3x EBITDA 1,000 Depreciation 300 Funds from operations (FFO) 666 Interest expense 153 + FFO / Net debt 22% Taxes 181 Ran
Slide 52: E.ON's nuclear provisions
E.ON‘s nuclear provisions – a conservative approach for long-term liabilities Asset Retirement and Similar Provisions / Prepayments to Swedish Nuclear Fund 30.06.2007 € in millions IFRS Nuclear waste management and related provisions 14.520 Non-nuclear obligations (conventional and gas storage) 1.00
Slide 53: Forward-looking statements
This document may contain forward-looking statements based on current assumptions and forecasts made by E.ON Group management. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or pe