E.on Se · XETR:EOAN
E.on — Debt Investor Presentation (June 2010)
40 slides from E.on's debt investor presentation, Jun 2, 2010
Slide 1: Non-Deal Debt Investor Call
Non-Deal Debt Investor Call Dr. Marcus Schenck, Chief Financial Officer E.ON AG 2 June 2010
Slide 2: Major reorganization of the Board of Management
Major reorganization of the Board of Management E.ON AG Dr. Teyssen Dr. Schenck Stachelhaus1 CEO CFO Executive HR Finance Group Human Resources Strategy & Corporate Accounting IT Development Group Procurement Controlling & Corporate Planning Legal & Compliance Investor Relations Corporate Incident &
Slide 3: Business & Strategy Update – Performance & Streamlining
Business & Strategy Update – Performance & Streamlining Financial Status 2
Slide 4: E.ON Group – Financial highlights
E.ON Group – Financial highlights First quarter, in € million 2010 2009 +/- % Sales 26,227 25,935 +1 Adjusted EBITDA 4,657 3,973 +17 Adjusted EBIT 3,709 3,100 +20 Adjusted net income 2,086 1,801 +16 Cash provided by operating activities 3,122 2,886 +8 Economic investments 1,902 1,896 - Economic net
Slide 5: Current strategic priorities
Current strategic priorities E.ON development from 2005 onwards Growth Performance and streamlining y New markets (Russia, Italy, Spain, France) y PerformtoWin Achieve sustained cost and performance improvements y Global scale in renewables y Investment prioritization Strengthen business through sel
Slide 6: Current strategic priorities: operational performance
Current strategic priorities: operational performance Break-down by Market Unit Status €m y PerformtoWin to improve Adjusted EBIT by € 1.5 ~1,500 1500 bn in 2011 ~100 y Already € 600 m delivered in 2009 ~300 y ~€ 1000 m expected in 2010 1000 y Key projects in 2009: ~400 y Optimization infrastructure
Slide 7: Current strategic priorities: organic investments (1/2)
Current strategic priorities: organic investments (1/2) Investments 2009 and investment plan 2010-12 2009 investments € bn y € 9.2 bn of cash-effective investments: lower than 12 planned as some amounts were moved from 2009 10 2.8 to 2010 y € 2.8 bn asset swaps: mainly Yuzhno Russkoye 8 2010-12 inve
Slide 8: Current strategic priorities: organic investments (2/2)
Current strategic priorities: organic investments (2/2) Progress on major projects in 2010 Conventional generation n Irsching 5: 860 MW CCGT, 50% interest, in commercial operation since March 2010 o Emile Huchet: 860 MW CCGT, 100% interest, in commercial operation since March 2010 p Scandale: 830 MW
Slide 9: Current strategic priorities: portfolio streamlining (1/2)
Current strategic priorities: portfolio streamlining (1/2) Transaction Expected Cash closing proceeds Statkraft asset swap Dec 2008 8 y Close to € 6 bn of proceeds Disposal of 0.5 GW to EnBW May 2009 9 from: Disposal and swap of hydro-electric generation Aug 2009 9 y Thüga: € 2.9 bn capacity with Ve
Slide 10: Current strategic priorities: portfolio streamlining (2/2)
Current strategic priorities: portfolio streamlining (2/2) Disposal of E.ON US1,2,3 Portfolio streamlining $ 0.9 bn $ 7.6 bn Proceeds from disposals >€10bn by 2010 $ 6.7 bn € 0.7 bn € 5.7 bn y ~€ 6 bn of proceeds from disposal of E.ON US € 5.0 bn (including € 0.4 bn pension provisions) ¨ debt factor
Slide 11: Treatment of E.ON US
Treatment of E.ON US y E.ON US will be treated as income from discontinued operations Consolidated from Q2 onwards for the entire year 2010, as well as retroactively for financial 2009 statements ¨ Relative comparison 2010 vs. 2009 unaffected y E.ON US is treated as part of Adjusted EBIT and Adjuste
Slide 12: Power generation forward hedging
Power generation forward hedging Hedging of outright power 100 y Outright power (nuclear and hydro) major factor 80 of E.ON’s commodity exposure 60 % band of y 2010 and 2011 outright power hedged close to generation 40 maximum possible hedged 20 y 2010 outright power for a significant part hedged 0
Slide 13: Business developments power
Business developments power Power demand in Germany Business developments at E.ON TWh +1.4% YoY in Jan 2010 +5.1% YoY in Feb 2010 Electricity sales group in Q1 2010 45 y Residential customers and SMEs +11% 2007 y Industrial and commercial customers +2% 2008 40 y Sales partners +9% 2009 2010 35 Forwa
Slide 14: Business developments gas
Business developments gas Gas demand in ‘big six’ EU countries1 Business developments at E.ON TWh +7.7% YoY in Jan 2010 Gas sales volumes in Q1 2010 500 +11.1% YoY in Feb 2010 y E.ON Ruhrgas +15% 400 2009 y Germany +12% 300 2010 y Outside Germany and Trading +29% y E.ON group +7% 200 Source: nationa
Slide 15: Outlook 2010
Outlook 20101 Key positives Key negatives y 2010 achieved price CE outright power +8€/MWh y Portfolio measures (disposals) y Further contribution from PerformtoWin y Several positive one-offs in Q2 2009 (MU Italy, SNET in France and PEG) y Strong improvement of regulated activities in CE y Regulatio
Slide 16: Business & Strategy Update – Performance & Streamlining Financial Status
Business & Strategy Update – Performance & Streamlining Financial Status 15
Slide 17: E.ON Group – Economic net debt
E.ON Group – Economic net debt in € million Mar 31, 2010 Dec 31, 2009 Liquid funds 7,564 6,116 Non-current securities 3,747 3,670 Total liquid funds and non-current securities 11,311 9,786 Financial liabilities to banks and third parties -35,661 -35,579 Financial liabilities to Group companies -2,24
Slide 18: E.ON Group – Development of economic net debt
E.ON Group – Development of economic net debt March 31, 2010, in € billion 31.12.09 31.03.10 -44.7 -43.9 +3.1 -0.4 -1.1 -1.8 +1.0 Investments Divestments Cash provided Change in Other by operating pension activities obligations due to lower interests 17
Slide 19: E.ON's capital structure is managed based on the debt factor
E.ON‘s capital structure is managed based on the debt factor Development of E.ON’s Debt factor Financial discipline y Debt factor of 3x defines our target capital 3.4x 3.3x structure 3x y Debt factor range between 2.8x and 3.3x is compatible with Single A target rating (based on 1.9x current rating
Slide 20: S&P and Moody's confirmed long-term and short-term ratings for E.ON
Both S&P and Moody’s recently confirmed their long-term and short-term ratings for E.ON, all with a stable outlook Moody’s, Standard & Poor’s, 30 April 2010 11 May 2010 19
Slide 21: Financial liabilities of the E.ON Group
Financial liabilities of the E.ON Group € in billion Maturity profile (as of 31 Mar 2010)4 31 Mar 2010 31 Dec 2009 5.0 Bonds1 28.9 29.0 4.5 in EUR 18.0 18.3 4.0 in GBP 4.8 4.8 3.5 in USD 3.1 2.9 3.0 2.5 in CHF 1.6 1.5 2.0 in SEK 0.7 0.6 1.5 in JPY 0.6 0.7 1.0 0.5 other currencies 0.1 0.2 0.0 Promiss
Slide 22: Funding needs 2010
Funding needs 2010 y Debt maturities, investments, and dividend payout have been (will for the most part be) covered by cash provided from operating activities and disposals. y Funding peaks (if any) in the course of the year are expected to be bridged by commercial paper. We expect our funding need
Slide 23: E.ON's interest rate policy
E.ON’s interest rate policy Key elements of E.ON’s interest rate policy y E.ON's business model is capital intensive and has a very long-term investment horizon y As E.ON is not a cyclical company, funding at variable rates does not provide a hedge for business risks y Risk capital is mainly allocat
Slide 24: Back-up Charts
Back-up Charts
Slide 25: E.ON Group – Adj. EBIT and adj. EBITDA by market unit
E.ON Group – Adj. EBIT and adj. EBITDA by market unit First quarter, in € million Adjusted EBIT Adjusted EBITDA 2010 2009 +/-% 2010 2009 +/- % Central Europe 1,638 1,651 -1 2,030 2,021 - Pan-European Gas 713 824 -13 841 926 -9 U.K. 433 75 +477 545 188 +190 Nordic 234 223 +5 326 294 +11 U.S. Midwest
Slide 26: Key drivers of group Adjusted EBIT Q1 2010 vs. Q1 2009
Key drivers of group Adjusted EBIT Q1 2010 vs. Q1 2009 in € billion 31.03.09 3.1 Adjusted EBIT Q1 2009 +0.3 UK Retail margin +0.2 Network regulation Central Europe +9.9 +9,6 +0.2 EET optimization, mainly power +0.1 New markets +0.1 PerformtoWin -0.2 Portfolio effects -0.1 Other 31.03.10 3.7 Adjusted
Slide 27: Market units – Key financial figures 2009
Market units – Key financial figures 2009 € in million Sales Adjusted Adjusted Capital ROCE Cost of Value Operating EBITDA EBIT Employed (%) Capital (%) Added Cash Flow Central Europe 41,419 6,479 4,817 22,171 21.7 9.2 2,771 5,180 Pan-European Gas 20,640 2,275 1,754 17,638 9.9 8.8 194 645 U.K. 10,09
Slide 28: Hedging of E.ON's outright generation (ratio & price)
Hedging of E.ON‘s outright generation (ratio & price) (as of March 31, 2010) Central Europe 2009 ~ 60 €/MWh 1 2010 ~ 68 €/MWh 1 2011 ~ 60 €/MWh 1 2012 ~ 55 €/MWh 1 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Nordic 2009 ~ 50 €/MWh 1 2010 ~ 46 €/MWh 1 2011 ~ 44 €/MWh 1 2012 ~ 40 €/MWh 1 0% 10% 20% 30
Slide 29: Hedging of E.ON's spread generation
Hedging of E.ON’s spread generation (as of March 31, 2010) Central Europe1 United Kingdom 2010 2010 2011 2011 2012 2012 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Italy Spain 2010 2010 2011 2011 2012 2012 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0% 10%
Slide 30: Significant replacement requirements
Significant replacement requirements Development of EU27 power supply TWh/year (excl. replacements) y Large Combustion Plant Directive (LCPD) will 5000 mean up to 50 GW of plant needs to be replaced 4000 y New renewables will need 90+% fossil backing 3000 2000 Power demand growth is important, but 1
Slide 31: European generation portfolio – new builds
European generation portfolio – new builds Under construction Under construction Name Type Capacity (MW)1 Start-up date In operation 1 Irsching 4 CCGT 540 2011 2 Datteln 4 Coal 1,100 2012 3 Malzenice CCGT 430 2010/11 4 Gönyü 1 CCGT 430 2011 5 Grain CCGT 1,275 2010 11 6 Maasvlakte 3 Coal 1,100 2013 7
Slide 32: European generation portfolio – major upgrades
European generation portfolio – major upgrades Capacity Completion Major upgrade projects Name Type (MW)1 date Completed upgrades 1 Ratcliffe Coal 2,000 2013/14 2 Oskarshamn Nuclear 470 2011/12 3 Maasvlakte 1 & 2 Coal 1060 2012 4 Terni Hydro 550 2008/10 2 5 Los Barrios Coal 570 2009 1 3 Good economi
Slide 33: Financial contribution from European new builds
Financial contribution from European new builds Estimation of the contribution of the new built capacities1 to the Group‘s EBIT/EBITDA (€bn2) in 2015 1,8 €1.8 bn y Total estimated Adj. EBIT contribution stemming 1,4 0,7 Conventional from € 15 bn capital employed in new builds in €1.2 bn 2015 is appr
Slide 34: E.ON's European CO2 emission profile and allocation 2008-2012
E.ON’s European CO2 emission profile and respective allocation for the 2008-2012 trading period 2 in mn tons CO 2 y CO2 allocation for the 2008-12 trading period estimated roughly at ~56 mn tons p.a. excluding 722 the contribution from contracted capacity 15 y In 2009, E.ON emitted a total of 94 mn
Slide 35: Pan-European Gas Adjusted EBIT and outlook
Gas wholesale Implication: Supply and sales is a main driver for PEG EBIT reduction Adjusted EBIT Pan-European Gas Outlook 2,631 €m y Despite cold winter, European gas markets are still oversupplied Non-Regulated 1,633 344 y Spot gas prices in Europe now below Henry hub levels Non-Regulated 751 1,75
Slide 36: Long-term contracts (LTCs)
Long-term contracts (LTCs) Gas sourcing of Pan-European Gas in 2009 TWh y LTCs support long-term investments in supply chain Others1 y ~35 LTCs provide >90% of gas portfolio 92 y Duration of each contract is typically around 25-30 years Netherlands y Overall philosophy: 15% Germany y Producer bears
Slide 37: LTC mechanisms to restore profitability of Supply & Sales
LTC mechanisms to restore profitability of Supply & Sales Main elements of LTCs Key issues addressed Duration • Base price level • Structure of price formula Pricing • Composition of competing fuels • Spot gas elements • Payment terms Delivery Point • Intra-year flexibility Flexibility • Multi-annua
Slide 38: Longer term prospects
Longer term prospects Development of world gas demand Gas demand is returning to growth bcm up to 40% y Return of economic growth ~3,150 y Climate protection measures Non Power y Role of gas in power generation Gas smoothes transition to lower carbon world Power y Global commodity, abundantly availa
Slide 39: Mechanism to manage volume issues
Mechanism to manage volume issues Schematic representation of volume issues Take-or-pay principles y No obligation to take but obligation to pay a minimum volume y Volume not taken but paid for can be made up in subsequent years (“make up gas”) y Earlier payments for make up gas are credited at the
Slide 40: Forward-looking statements disclaimer
This presentation may contain forward-looking statements based on current assumptions and forecasts made by E.ON Group management and other information currently available to E.ON. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual