E.on Se · XETR:EOAN
E.on — Investor Day (January 2013)
62 slides from E.on's investor day presentation, Jan 30, 2013
Slide 1: Capital Market Day Cleaner & better energy
Capital Market Day Cleaner & better energy January 30, 2013
Slide 2: Agenda
Agenda Strategy delivery since 2010 Sector environment and financial impact Strategic implications Financial outlook Questions & answers 2
Slide 3: Key messages
Key messages Expedite transformation: Restructure business in depressed competitive European wholesale markets Pursue new growth opportunities in renewables, distributed energy and outside Europe Networks to remain stabilizer of portfolio Focus on capability-driven business approach and drive effici
Slide 4: Agenda
Agenda Strategy delivery since 2010 Sector environment and financial impact Strategic implications Financial outlook Questions & answers 4
Slide 5: Strategic priorities, November 2010
Strategic priorities, November 2010 Transformation Strategic priorities From To Integrated across Focus on competitive 1 Further streamline portfolio value chain businesses Eurocentric Targeted expansion 2 Improve efficiency and make organization more effective outside Europe Selective efficiency Su
Slide 6: Strategy delivery: portfolio streamlining and efficiency
Strategy delivery 1 €15bn portfolio streamlining 2 Efficiency & effective organization 20 €bn >2 ~€17bn of disposals achieved ~10.9 Heading for ~€20bn ~9.5 15 2011 Cost Cost 2015 controllable inflation savings controllable €bn 10 costs costs Objectives Establish performance culture Improve and accel
Slide 7: Strategy delivery: expansion outside Europe, less capital more value
Strategy delivery 3 Expansion outside Europe 4 Less capital, more value Russia More investment discipline Hurdle rate above cost of capital (%) 5.0 Infrastructure US Dec 12 Turkey renewables 3.0 Most other 2.5 2.0 2.0 activities 1.5 1.5 1.0 Wind offshore Brazil E&P 2010 2012 Jan 12 Strong increase o
Slide 8: Strategy delivery – Summary
Strategy delivery – Summary What we delivered Disposal target of Streamline 1 portfolio at least €15bn achieved Improve Launched E.ON 2.0 efficiency & program, effective 2 make E.ON annual cost cuts of more Investment €200m so far effective Less capital, more value Entered into Brazil Expand in & Tu
Slide 9: Agenda
Agenda Strategy delivery since 2010 Sector environment and financial impact Strategic implications Financial outlook Questions & answers 9
Slide 10: Game changer – Demand & supply
Game changer – Demand & supply European power demand down over 4% since 2008 EU generation capacity 3250 Strong and constant growth of renewable capacity 2012 vs. 2008 Completion of large conventional new-build pipeline Germany -2% 3000 (legacy - initiated before 2008) UK -7% TWh Few closures of con
Slide 11: Game changer – Inefficient carbon policies
Game changer – Inefficient carbon policies Strong renewables growth in Europe Main incentive scheme bust TWh mt CO2 €/t CO2 2005- 400 Solar 1,000 40 2007 750 30 2008- 300 Wind 500 20 2012 Offshore 200 2013- Wind 250 10 2020 Onshore 0 0 CO2 100 Other -250 -10 price 0 Renewables 2005 2008 2011 2014 20
Slide 12: Game changer – Political interventions
Game changer – Political interventions Political interventions impacting E.ON across the continent Expectations Further fragmentation instead of integration across Europe Netherlands Sweden 2012: coal tax 2012: hydro tax Continued erosion of increase competitive markets Belgium Germany Austerity to
Slide 13: Earnings development
Earnings development Deviation from 2010 expectations for 2013 EBITDA Key observations November 2010 guidance Political interventions* 2013E EBITDA >€13bn pre disposals 2011E-2013E disposal effect: up to €2bn European power markets 2013E EBITDA >€11bn post disposals European gas markets Below expect
Slide 14: Agenda
Agenda Strategy delivery since 2010 Sector environment and financial impact Strategic implications Financial outlook Questions & answers 14
Slide 15: Earnings prospects
Portfolio and expectations November 2010 Portfolio* Expectations Conventional generation Nuclear: substantial free cash flow contribution with + Rus- long-term growth option E&P sia Fossil: difficult patch but recovery in mid-term and RES high value of flexibility DE Earnings prospects Gas midstream
Slide 16: Earnings prospects
New starting point in 2013 Portfolio* Key issues Conventional generation Nuclear: + Brazil Phase-out Germany, exit from growth options Turkey Prepare for cash-out from dismantling RES Fossil: collapse of spark spreads and low value of Rus- flexibility Earnings prospects DE sia Sales E&P Gas midstrea
Slide 17: Assessment of key beliefs
Assessment of key beliefs 2010 2013 Decoupling of growth trends within and outside Europe New more customer- and technology-based business models Need for performance culture Financial constraints drive de-leveraging and new investment approaches Satisfactory returns from optimization of European po
Slide 18: Outlook on business environment
Outlook on business environment Europe Outside Europe Technology developments Core European gas & power Our core international target New technologies enjoy markets to offer little support marketsH support of policy makers and near- to mid-term due toH gain competitiveness N a growing prioritization
Slide 19: Strategy – Same objectives, adapted priorities
Strategy – Same objectives, adapted priorities Adapted strategic priorities Rebalancing of portfolio towards cash and profitability 1 Focus discretionary capex on transformation Investment Less capital, 2 Further improve capital management more value 3 Efficiency and restructuring Performance Effici
Slide 20: Discretionary capex
1 Prioritize investments Planned capex by type Key observations 8 Maintenance capex Necessary to maintain existing assets in operation Discretionary capex Largely stable 6 Distribution networks Necessary to keep license to operate 4 Inflexible: to significantly reduce capex would have to exit busine
Slide 21: Prioritize investments
1 Prioritize investments Planned capex per unit Key drivers 8 Generation Conventional generation and gas midstream capex reduced to maintenance-only level by 2015 6 E&P After strong expansion, E&P capex in the range of reserve replacement requirements for the next years 4 Regional units Broadly stab
Slide 22: Improve capital management
2 Improve capital management IRR outperformance over WACC* Key developments in % Lessons learned from recent experience Bubble size indicates 5.0 Avoid big cluster risks investment size Adjust portfolio faster to changing 4.0 fundamentals Enter into partnerships to mitigate risks 3.0 Apply higher hu
Slide 23: Efficiency & restructuring – E.ON 2.0
3 Efficiency & restructuring – E.ON 2.0 E.ON 2.0 controllable cost target Key developments €bn Current status 11 >€2bn of cost savings 0.5 ~€1.3bn reduction of controllable costs post cost inflation 0.5 >50 projects and ~6,000 detailed measures handed over 10 0.8 to line management -0.2 0.8 0.5 Cont
Slide 24: Efficiency & restructuring – E.ON 2.0
3 Efficiency & restructuring – E.ON 2.0 Generation: “Lean transformation” Rollout of pilots Focus of blueprint Plant organization Process Several pilots Plant improvements successfully completed Structure, <<shape>> manager Staffing, sizing Unit‘s specific At Scholven improvements improvement potent
Slide 25: Restructuring European commodity businesses
3 Restructuring European commodity businesses Midstream gas Generation Reorganization of Global Gas and Trading Streamlining of overhead functions All sales activities transferred to regional units, Bundling of generation functions in Hanover especially gas sales Drastic reduction of hierarchical la
Slide 26: Leverage capabilities – Renewables
4 Leverage capabilities – Renewables Project pipeline (GW)* Leverage pipeline and competencies 21.5 Speed up capital rotation Development North Free up capital to further develop pipeline 6.6 America 37% Sell stakes of selected assets post commissioning 3.6 Europe Offer continued, world-class O&M se
Slide 27: Leverage capabilities – Renewables
4 Leverage capabilities – Renewables Planned capacity build out Cost reduction offshore Total attributable capacity by technology (GW) Installation cost category distribution 6.0 Solar and other 0% 20% 40% 60% 80% 100% 4.0 Biomass Turbine Foundation Installation Offshore Electrics Contingency / othe
Slide 28: Leverage capabilities – Distribution networks
4 Leverage capabilities – Distribution networks Regulated asset bases (RABs) 2012* (€bn) Example of distribution expertise German gas distribution: efficiency scores (in %) Germany ~13 in regulatory benchmarking 2012* 100 Sweden ~8.8** German average 90 Spain Not applicable** Hungary ~1.5 80 Czech R
Slide 29: Leverage capabilities – Distribution networks
4 Leverage capabilities – Distribution networks Pro forma EBITDA* E.ON‘s business backbone 3 Distribution contributes roughly 30% of E.ON‘s total group EBITDA €bn 2 2.9 2.8 3.0 1 Adjusted for disposals, the EBITDA contribution of the segment has been very robust amid turbulent 0 times 2010 2011 2012
Slide 30: Leverage capabilities – Distributed energy
4 Leverage capabilities – Distributed energy Distributed energy EBIT(DA) 2010-2012 (€bn) Distributed energy capex plan (€bn) 0.5 0.45 0.45 0.45 0.4 0.4 0.4 0.4 Step-up of ~50% 0.4 0.3 0.3 0.3 0.3 0.2 0.2 0.2 0.2 EBITDA 0.2 EBIT 0.1 0.1 0.0 0.0 2010 2011 2012 2011 2012 2013 2014 2015 Focus of activit
Slide 31: Leverage capabilities – Distributed energy
4 Leverage capabilities – Distributed energy New additional approach: foundation of E.ON Connecting Energies (ECT) Concept Six business lines Multi-country and multi-site approach Focus on energy hotspots (like shopping malls and hospitals) Multi-site multinational Energy Hotspots Bundle technical a
Slide 32: Profitable growth Outside Europe - Brazil
5 Profitable growth Outside Europe - Brazil Current portfolio and main projects Achievements & priorities Parnaiba TPP* Market situation ~2.2GW gas Power demand in 2012 dampened by weak economy MPX assets outside JV 50% JV MPX-E.ON However, government incentive package expected to Power plants in op
Slide 33: Profitable growth Outside Europe - Turkey
5 Profitable growth Outside Europe - Turkey Turkey portfolio Achievements & priorities Baskent DisCo Owned by Enerjisa 3.5m customers Market situation 10.4TWh consumption Strong and balanced Turkish economy continues to drive Istanbul W power demand, expected to rise further at 5-6% p.a. G 2.3 H H G
Slide 34: Earnings prospects – Mid-term portfolio target
Mid-term portfolio target Portfolio Key drivers Regional Units Networks to remain stabilizer of portfolio: + Brazil stable or slightly growing earnings and positive free Turkey cash flow generation Forge customer-based business models around RES Rus- DE distributed energies sia Earnings prospects Sa
Slide 35: Dividend and debt policy
Dividend and debt policy Dividend policy Debt policy Targeted payout of 50-60% of underlying net income Achieve debt factor of <3.0x over the mid-term 90% 4 Average payout 2010-2012 58% 3 60% 2 30% 1 0% 0 2010 2011 2012 N 2013 2010 2011 2012 N Target onwards Sustainable remuneration for shareholders
Slide 36: Conclusion
Conclusion E.ON will expedite its ongoing We will further adjust business E.ON to re-adjustH transformation models N towards a new balance From asset focus to Invest with and for customers between cash consumers and capabilities based upon their needs cash generators From commodity focus to Rotate c
Slide 37: Agenda
Agenda Strategy delivery since 2010 Sector environment and financial impact Strategic implications Financial outlook Questions & answers 37
Slide 38: Preliminary unaudited 2012 results - Overview
Preliminary unaudited 2012 results - Overview EBITDA1: €10.8bn (+16%) EBIT1: €7.0bn (+29%) Underlying net income1: ~€4.3bn (+70%) Underlying EPS1, 2: ~2.2 €/share Dividend: 1.10 €/share Economic net debt: ~€36bn 2012 results within guidance range 1. Adjusted for extraordinary effects 2. Based on num
Slide 39: Key drivers of group EBITDA development
Key drivers of group EBITDA1 development Preliminary unaudited 2012 results In € billion 01.01.2011 - 31.12.2011 9.3 Generation: nuclear exit 1.5 Gas: wholesale 1.2 Gas: revaluation of participations 0.2 E.ON 2.0: controllable cost reduction 0.2 Region Russia: increased generation capacity 0.1 Power
Slide 40: Economic net debt development
Economic net debt development Main drivers 2010-2012 (in €bn) Key observations Economic net debt 2010: ~37 Net financial position 20 Net financial position 2010 Disposals main driver for improvement: Capex Substantial proceeds already by end 2012 Further proceeds pending for 2013 Operating cash flow
Slide 41: Outlook 2013 - Overview
Outlook 2013 - Overview EBITDA1: €9.2 – 9.8bn Underlying net income1: €2.2 – 2.6bn Underlying EPS1, 2: 1.15 – 1.35 €/share New 2013 outlook now post disposals 1. Adjusted for extraordinary effects 2. Based on number of shares outstanding (1.905 billion) 41
Slide 42: Key drivers for 2013 vs. 2012 EBITDA and EPS
Key drivers for 2013 vs. 2012 EBITDA1 and EPS1 EBITDA1 (in €bn) Underlying EPS1 (in € per share) 2012 EBITDA1 10.8 Underlying EPS 20121 ~2.2 Disposals Disposals Gas midstream E&P CO2 certificates Power portfolio Other EBITDA effects Revaluation one-off 2012 Depreciation E&P volumes Interest normaliz
Slide 43: Exploration & production – Volume overview
Exploration & production – Volume overview Volume expectation – North sea fields Reserves expectation* – North sea fields (in mboe) ~26 - 30 (in mboe) ~24 - 28 224 219 Other fields Rita 198 Babbage ~18 - 22 Elgin-Franklin 169 Huntington 142 Njord 4.8 11 Skarv ~5 2011A 2012E 2013E 2014e 2015e 2011A 2
Slide 44: EBITDA outlook 2013 by segments
EBITDA1 outlook 2013 by segments In € billion 2012A 2013 vs.12 Main drivers Generation 2.4 below Mainly absence of free CO2 allocation Renewables 1.3 above Increased capacities Exploration & Production 0.5 above Additional volumes mainly from Norwegian fields Optimization & Trading 1.4 below Mainly
Slide 45: Key take-aways
Key take-aways Expedite transformation: Restructure business in depressed competitive European wholesale markets Pursue new growth opportunities in renewables, distributed energy and outside Europe Networks to remain stabilizer of portfolio Focus on capability-driven business approach and drive effi
Slide 46: Agenda
Agenda Strategy delivery since 2010 Sector environment and financial impact Strategic implications Financial outlook Questions & answers 46
Slide 47: Appendix
Appendix 47
Slide 48: Generation – Business snapshot
Generation – Business snapshot EBIT(DA) – Main drivers 2012 vs. 2011 (€bn) Key earnings drivers – 2013 and beyond 4.0 3.8 2013: 3.5 (+) Absence of prior year (+) E.ON 2.0 3.0 2.8 2.4 nuclear one-off (-) Lower transfer prices / spreads 2.5 2.1 2.0 (-) Political intervention 1.5 1.5 1.1 (-) Price/volu
Slide 49: Conventional generation – European portfolio
Conventional generation – European portfolio Capacity retirements (GW) 1, 2 Main retirements 0 Retirements Country MW1 Fleet Driver Steam Other -1 2012 Staudinger 3 Germany 293 Steam Economic Steam LCPD -2 Veltheim 2 & 4 Germany 329 Steam Economic Grain 1 & 4 UK 1300 CCGT LCPD CCGT Other -3 Escucha
Slide 50: Addressing the CCGT issue
Addressing the CCGT issue Strong deterioration of CCGT economics Response Reduce maintenance costs 40 Maintenance intervals lengthened due to lower 30 utilization €/kW Maintenance costs lowered through restructuring of 20 long-term service agreements 10 Reduce fixed costs 0 Switch from CCGT mode to
Slide 51: Renewables – Business snapshot
Renewables – Business snapshot EBIT(DA) – Main drivers 2012 vs. 2011 (€bn) Key mid-term earnings drivers 1.6 1.5 2013: (-) Hydro: price volume 1.4 1.3 (+) Additional capacities 1.2 effect 1.2 1.1 0.9 0.9 (-) Deconsolidation of 430 MW US onshore wind 1.0 (+) RES: Higher volumes (-) Disposal of 350 MW
Slide 52: Trading & Optimization – Business snapshot
Trading & Optimization – Business snapshot EBIT(DA) – Main drivers 2012 vs. 2011 (€bn) Key mid-term earnings drivers 3.0 2013: 2.5 (+) Gazprom settlement 2.5 2.2 (+) First impact of E.ON 2.0 2.0 (+) Infrastructure (-) Absence of one-offs from Gazprom settlement 1.4 1.5 1.2 revaluations (-) Absence o
Slide 53: Exploration & Production – Business snapshot
Exploration & Production – Business snapshot EBIT(DA) – Main drivers 2012 vs. 2011 (€bn) Key mid-term earnings drivers 0.8 2013: 0.7 0.7 (-) Forced outage Elgin 0.7 (+) COD of Skarv in December 2012 0.6 0.5 0.5 (-) Problems at Njord (+) Production start of Huntington 0.5 0.4 0.4 (-) Shut down at Rit
Slide 54: Exploration & production – Long term view
Exploration & production – Long term view Indicative production development 2013-2022 Main developments 2013-2022 (mboe) Fields running out of production to be potentially 70 replaced by new fields currently under exploration and development (expected production startup 60 year): 50 Norway Fogelberg
Slide 55: Region Germany – Business snapshot
Region Germany – Business snapshot EBIT(DA) 2012 vs. 2011 – Main drivers (€bn) Key mid-term earnings drivers 3.0 2.8 2013: 2.5 (+) Higher grid revenues 2.4 (+) Further E.ON 2.0 contribution 2.5 1.9 (+) First impact E.ON 2.0 (-) Disposal of regional distribution companies 2.0 1.5 1.5 1.5 (+) Provisio
Slide 56: Other EU regions – Business snapshot
Other EU regions – Business snapshot EBIT(DA) 2012 vs. 2011 – Main drivers (€bn) Key mid-term earnings drivers 3.0 2013: 2.6 (-) Disposal of UK Central 2.5 2.3 (+) Net positive E.ON 2.0 impact 2.0 Networks 2.0 1.7 (-) Disposal of JMP participation 1.5 1.5 1.3 Post 2013: 1.0 (+) Further E.ON 2.0 savi
Slide 57: Distribution – Regulatory cycle
Distribution – Regulatory cycle Regulatory periods Power Gas Current Next Germany 2009-2013 2014-2018 2013-2017 Sweden 2012-2015 2013-2016 Spain 2013-2016 Not relevant* Current Next Hungary 2013-2016 2010-2013 2014-2017 Czech Republic 2010-2014 2010-2014 Romania 2013-2017 2013-2017 Slovakia 2012-201
Slide 58: Russia – Business snapshot
Russia – Business snapshot EBIT(DA) 2012 vs. 2011 – Main drivers (€bn) Key mid-term earnings drivers 0.8 2013: 0.7 (+) Efficiency improvements 0.6 0.6 0.5 Mainly driven by higher (+) Positve FX effect 0.4 volumes (full year 0.4 (-) Lower spreads 0.4 contribution from new 0.3 plants with COD 2011) 0.
Slide 59: Key 2013 assumptions and changes vs. old guidance
Key 2013 assumptions and changes vs. old guidance Assumptions Change of EBITDA Assumed average achieved prices outright generation Old 2013 target pre disposals3 11.95 CE market (€/MWh) Nordic market (€/MWh) 55 55 47 44 43 42 Disposals 2013 2013 2013 2013 Old1 New2 Old1 New2 Old 2013 target post dis
Slide 60: E.ON Group – EBITDA and EBIT by segments
E.ON Group –EBITDA1 and EBIT1 by segments Preliminary unaudited 2012 results In € billion EBITDA1 EBIT1 2012 2011 +/-% 2012 2011 +/- % Generation 2.4 2.1 +14 1.5 1.1 +29 Renewables 1.3 1.5 -13 0.9 1.1 -19 Optimization & Trading 1.4 0.2 - 1.2 -0.2 - Exploration & Production 0.5 0.7 -28 0.3 0.5 -42 Ge
Slide 61: From EBITDA to underlying EPS (2011-2013)
From EBITDA1 to underlying EPS1 (2011-2013) In € billion 2011A 2012E 2013E EBITDA1 9.3 10.8 9.2 – 9.8 Depreciation 3.9 3.8 ~3.8 Adj. interest expense 1.8 ~1.3 ~1.7 Taxes2 0.8 ~1.1 ~1.2 Minorities 0.4 0.4 ~0.3 Underlying net income1 2.5 ~4.3 2.2 – 2.6 Underlying EPS (€/share)1 1.3 ~2.2 1.15 – 1.35 1.
Slide 62: Disclaimer
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