Rwe Ag · XETR:RWE
Rwe — FY2010 Earnings Presentation
56 slides from Rwe's earnings presentation, Feb 24, 2011
Slide 1: Managing through the cycle
Managing through the cycle Fiscal year 2010 analyst and investor conference call Essen, February 24, 2011 Jürgen Großmann Rolf Pohlig Stephan Lowis Chief Executive Chief Financial Vice President Officer Officer Investor Relations
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: Today's Agenda
Today’s Agenda A Jürgen Großmann FY 2010 highlights & strategy update B Rolf Pohlig FY 2010 group results and divisional performance & outlook C Jürgen Großmann Outlook RWE AG | FY 2010 Conference Call | February 24, 2011 3
Slide 4: Successful fiscal year 2010
Successful fiscal year 2010 Strong operating performance: EBITDA +12%, operating result +8%, recurrent net income +6% All divisions except Trading / Gas Midstream with at least double-digit earnings growth Integration of Essent concluded and further streamlining of RWE’s organisational structure Goo
Slide 5: Utilities are facing four major challenges
Utilities are facing four major challenges Low electricity prices and pressure on generation spreads, inter alia due to unexpected strong growth of renewable energies German nuclear fuel tax 2011 – 2016 Negative gas-to-oil-spread due to decoupling of oil and gas prices Tighter CO2-regime from 2013 o
Slide 6: Our response to steady the course and safeguard future growth
Our response to steady the course and safeguard future growth Continued > Maintain strategic and regional focus strategic > Continue to reduce RWE’s CO2 intensity to market average by focus ... 2020 > Pursue organic growth, especially in renewables and upstream ... combined > Reduce capex level 2011
Slide 7: Europe remains our core market
Europe remains our core market RWE’s core business remains electricity and gas along the entire value chain We build on our leading positions in our core markets to look for further growth Regional growth markets mainly CEE/SEE, especially Turkey Grow our renewables business in and around our tradit
Slide 8: Our strategy to reduce the financial impact of CO2
Our strategy to reduce the financial impact of CO2 Certificates to be purchased Mitigating factors C. in million t p.a. Organic growth 150 – 160 +100 > Commissioning of new build projects (bulk before or in 2013) > Increase in profits from renewable energies > Increase in profits from upstream gas &
Slide 9: Surpassing the peak of our investment cycle – capex programme 2011 to 2013
Surpassing the peak of our investment cycle – RWE's capex programme 2011 to 2013 Capex programme 2011 – 2013 cut by approx. € 3 bn compared to previous programme € billion < 7.5 Portfolio divestments1 Portfolio 6.4 0.8 divestments1 5.9 1.3 ~5 ~5 1.1 0.9 1.5 0.5 1.0 1.2 0.9 1.4 0.3 0.7 1.3 0.9 0.2 0.
Slide 10: Set the stage for international growth
Set the stage for international growth > More than 50% of our capex will be spent Share of growth capex1 on growing our business and improving efficiency Growth / > More than 60% of our capex will be spent Replacement / in our international business €18bn efficiency maintenance enhancement > Committ
Slide 11: Building up CO2-free generation – RWE Innogy
Building up CO2-free generation – RWE Innogy continues with its ambitious investment programme > Clear commitment to grow our renewable Capacity1 growth targets (in GW) business > Focused capex programme 2011 – 2013 leads >4.5 to adjustment of targets. We expect to achieve 3.4 our 4.5 GW target in 2
Slide 12: RWE Dea: Significant earnings growth based on own field developments
RWE Dea: Significant earnings growth based on own field developments > Clear commitment to grow upstream Ramp-up of gas/oil production gas and oil position Target of 70 mm boe/a > Production development of RWE Dea until 2016 is mainly driven by seven major field develop- ments > Shift in capex progr
Slide 13: The need for flexible power generation capacity
The need for flexible power generation capacity > Strong increase in renewable capacity leads to Strong growth in renewables1 ... increased volatility between demand and supply of electricity GW >100 54 > Current swing capacity2 is more than 30 GW, 46 which is currently covered Reliable capacity > D
Slide 14: German electricity generation market – reliable wholesale capacity
German electricity generation market – Development of reliable wholesale capacity GW > 13.5 GW conventional new build projects will go 90 online between 2010 and 2013/14 gas Traditional hard coal demand range > A lot of these projects are replacement plants. 60 In 2009 and 2010 approx. 0.9 GW of old
Slide 15: Efficiency programme well on track
Efficiency programme well on track Cumulative operating result contribution of the programme compared to 2006 In € million 1,400 Upgrade 2011 – 2012 of € 200 m 200 900 Programme 2006 – 2012 700 9 of € 1,200 m 450 9 1,200 100 9 200 9 2007 2008 2009 2010 2011 2012 > Efficiency programme of € 1.2 bn 20
Slide 16: Today's Agenda
Today’s Agenda A Jürgen Großmann FY 2010 highlights & strategy update B Rolf Pohlig FY 2010 group results and divisional performance & outlook C Jürgen Großmann Outlook RWE AG | FY 2010 Conference Call | February 24, 2011 16
Slide 17: RWE Group key performance indicators
RWE Group key performance indicators January – December Change € million 2010 2009 in % External revenue 53,320 47,741 11.7 Cash flows from operating activities 5,500 5,299 3.8 EBITDA 10,256 9,165 11.9 Operating result 7,681 7,090 8.3 Non-operating result -767 498 - Financial result -1,936 -1,990 2.
Slide 18: Performance of the Germany Division (I) – Power Generation
Performance of the Germany Division (I) Power Generation Business Area (RWE Power) January – December: operating result: +16.7% € million + Lower fuel prices (c. +€700 million) and costs associated with CO2 4,000 certificates (c. +€270 million) 3,428 + Lower realised electricity prices but higher vo
Slide 19: Forward selling by RWE Power in the German market
Forward selling1 by RWE Power in the German market (Base-load & peak-load forwards in €/MWh) 150 130 2011 forward 110 90 70 50 30 > 20% > 50% > 70% > 80% > 90% 150 130 2012 forward 110 90 70 50 30 > 10% > 25% > 30% > 35% > 50% 150 130 2013 forward 110 90 70 50 30 > 10% 01/01/2008 07/01/2008 01/01/20
Slide 20: Performance of the Germany Division (II) – Sales and Distribution Networks
Performance of the Germany Division (II) Sales and Distribution Networks Business Area January – December: operating result: +16.5% € million 1,575 + Efficiency enhancements Sales 1,352 + Weather induced higher gas volumes - Lower electricity margins Distribution networks + Positive volume effect du
Slide 21: Performance of the Netherlands/Belgium Division (Essent)
Performance of the Netherlands/Belgium Division (Essent) January – December: operating result: +117.2% € million 391 + First-time consolidation of Essent in Q4 2009 + Operating performance: higher gas sales mainly due to weather effects - Upfront costs for Eemshaven power plant project which was tra
Slide 22: Performance of the United Kingdom Division (RWE npower)
Performance of the United Kingdom Division (RWE npower) January – December: operating result: +10.1% € million + Positive f/x effects and cost reductions / efficiency improvements 272 247 Power generation: - Market driven reduction in generation margins - One-off items with positive impact in 2009 R
Slide 23: Performance of the Central Eastern and South Eastern Europe Division
Performance of the Central Eastern and South Eastern Europe Division January – December: operating result: +11.2% € million + Positive f/x effects 1,173 1,055 + Czech Republic: Improved gas network and sales business but lower gas sales volumes to distributors - Hungary: Improved electricity network
Slide 24: Performance of the Renewables Division (RWE Innogy)
Performance of the Renewables Division (RWE Innogy) January – December: operating result: +28.6% € million + First-time consolidation of Essent wind activities (+€ 23 million) 72 + Commissioning of Rhyl Flats wind farm (90 MW) in December 2009 56 - Less wind in North-Western Europe - Upfront costs o
Slide 25: Performance of the Upstream Gas & Oil Division (RWE Dea)
Performance of the Upstream Gas & Oil Division (RWE Dea) January – December: operating result: +50.2% € million + Higher oil prices 305 + Positive f/x effects 203 - Lower gas prices - Lower production volumes + German business: lower royalties 2009 2010 + Reduced exploration costs Guidance for 2011:
Slide 26: Performance of the Trading/Gas Midstream Division
Performance of the Trading/Gas Midstream Division (RWE Supply & Trading) January – December: operating result: -102.1% € million Trading 985 + First-time consolidation of Essent’s trading activities (+€96 million) - Performance below very high level of fiscal year 2009 Supply -21 - Absence of signif
Slide 27: RWE's gas procurement portfolio
RWE’s gas procurement portfolio (As of 2011) Long-term oil-indexed purchase contracts (take-or-pay) Own production 33% Russia NBP 38% Norway approx. 47 bcm p.a. TTF 9% Germany 20% Netherlands > Our gas procurement portfolio is solely managed by RWE Supply & Trading > ~50% or 24 bcm p.a. of overall g
Slide 28: RWE's long-term oil-indexed gas purchase portfolio
RWE’s long-term oil-indexed gas purchase portfolio bcm p.a. RWE’s long-term oil-indexed gas purchase portfolio at the end of the relevant year 30 25 20 15 contract revisions initiated 2010 10 5 contract revisions initiated 2009 0 2009 2012 2015 2018 2021 2024 2027 2030 2033 2036 > Some 50% of the vo
Slide 29: Non-operating result
Non-operating result January – December Change € million 2010 2009 (absolute) Capital gains 68 35 33 Impact of commodity derivatives on earnings -337 720 -1,057 Restructuring, other -498 -257 -241 Total -767 498 -1,265 Capital gains: No major capital gains in 2009 and 2010 Impact of commodity deriva
Slide 30: Financial result
Financial result January – December Change € million 2010 2009 (absolute) Net interest -810 -635 -175 Interest accretion to non-current provisions -940 -957 17 Other financial result -186 -398 212 Total -1,936 -1,990 54 Net interest > Higher interest expenses due to increased debt used to finance ou
Slide 31: Cash flow statement
Cash flow statement January – December Change € million 2010 2009 (absolute) Funds from operations (FFO) 7,849 6,094 +1,755 Change in working capital -2,349 -795 -1,554 of which variation margins -1,158 321 -1,479 Cash flows from operating activities 5,500 5,299 +201 Capex on fixed assets -6,379 -5,
Slide 32: Financial flexibility is key to us
Financial flexibility is key to us Expected development of leverage factor Unchanged target of solid A rating 3.X Leverage factor will exceed target of max. 3.0x in 2011 but we have initiated measures to bring it back below our threshold mid-term 2.8 2.8 Target of ≤ 3.0 Up to € 8 bn disposals betwee
Slide 33: Today's Agenda
Today’s Agenda A Jürgen Großmann FY 2010 highlights & strategy update B Rolf Pohlig FY 2010 group results and divisional performance & outlook C Jürgen Großmann Outlook RWE AG | FY 2010 Conference Call | February 24, 2011 33
Slide 34: Outlook for 2011 – 2013
Outlook for 2011 – 20131 € million EBITDA 10,256 c. -15% c. 9,000 c. 8,000 7,681 Operating c. -20% result c. 5,700 c. 5,000 3,752 Recurrent c. -30% c. 2,300 c. 2,000 net income 2010 2011e before disposals after disposals 2013e Dividend € 3.50/share2 Pay out ratio of 50% – 60% of recurrent net income
Slide 35: RWE's threefold financial targets
RWE’s threefold financial targets Attractive dividends Pay out ratio of 50% – 60% of recurrent net income Balancing the stakeholders’ interests Leverage Ca. 9 bn growth capex … Keep leverage factor below … 2011 – 2013 < 3.0x mid-term to support Invest in mid-term growth, solid “A” rating especially
Slide 36: Back-up
Back-up RWE AG | FY 2010 Conference Call | February 24, 2011 36
Slide 37: Reconciliation to recurrent net income
Reconciliation to recurrent net income January – December 2010 2010 2010 2009 Change € million reported non-rec. recurrent recurrent (absolute) Operating result 7,681 0 7,681 7,090 591 Non-operating result -767 767 0 0 0 Financial result -1,936 0 -1,936 -1,799 -137 Taxes on income -1,376 -323 -1,699
Slide 38: RWE's capex programme 2011 to 2013: how capex leads to earnings growth
RWE's capex programme 2011 to 2013 How capex leads to earnings growth Day to day investments 6.7 (Including portfolio divestments1) (-0.3) Mainte- Thereof grid 3.2 nance 6.7 Growth and replacement projects 11.6 (Including portfolio divestments1) (-0.5) Efficiency Electricity generation enhancements
Slide 39: RWE's portfolio is financially slightly long CO2
Compared to the marginal plant RWE's portfolio is already today financially slightly long CO2 t/MWh Pass-through factor 0.9 > Factor by which CO2 price is reflected in power price 0.8 2009 2010 > Set by marginal plants which on average 0.7 Long have a higher emission factor than the 0.6 Short- marke
Slide 40: Managing CO2: physical measures and financial optimisation
Managing CO2: We complement physical measures by comprehensive financial optimisation Specific CO2 emissions exposure (t/MWh) 0.80 0.67 Market average New Renew- CDM/JI Portfolio New builds ables optimi- builds Renew- 0.45 and shut sation ables Shut downs2 downs/ Portfolio lower optimi- load sation
Slide 41: Wind energy requires increasing load-adjustments
Wind energy requires increasing load-adjustments – challenge and opportunity for utilities Course of residual electricity demand on February 2nd – 9th, 2009 and projection for 2020 2009 wind capacity installed: 24 GW 2020 wind capacity installed: 45 GW 90 GW 90 GW Increasing 80 demand 80 ~50 GW 70 7
Slide 42: RWE Group electricity production (by geographic regions)
RWE Group electricity production (by geographic regions) January – December Other Total Total in TWh Germany UK NL/BE Internat. 2010 2009 Lignite 65.4 5.6 71.0 70.9 Nuclear 45.2 45.2 33.9 Hard coal 38.6 10.4 5.7 0.5 55.2 44.1 thereof contracts 23.4 23.4 16.2 Gas 12.1 23.8 6.8 0.1 42.8 29.7 Renewable
Slide 43: RWE Group electricity sales volume (by geographic regions)
RWE Group electricity sales volume (by geographic regions) January – December Total Total in TWh Germany UK NL/BE Poland Hungary Other 2010 2009 Private and commercial 26.4 19.1 11.9 2.3 5.6 65.3 59.3 customers Industrial and corporate 59.7 30.8 10.1 4.4 5.8 110.8 95.7 customers Distributors 94.4 6.
Slide 44: RWE Group gas sales volume (by geographic regions)
RWE Group gas sales volume (by geographic regions) January – December Czech Total Total in TWh Germany Rep. NL UK Other 2010 2009 Private and commercial 29.0 35.6 60.6 48.8 3.2 177.2 130.5 customers Industrial and corporate 43.3 21.6 56.3 4.6 9.3 135.1 106.4 customers Distributors 74.5 8.6 83.1 95.1
Slide 45: Germany: Clean Dark Spread versus hard coal and CO2 prices
Germany: Clean Dark Spread (CDS) versus hard coal and CO2 prices 100 25 2010 80 20 forward 60 15 40 10 20 5 0 0 2011 100 80 25 20 forward 60 15 40 10 20 5 0 0 2012 100 80 25 20 forward 60 15 40 10 20 5 0 0 2013 100 25 20 75 forward 15 50 10 25 5 0 0 01.01. 01.07. 01.01. 01.07. 01.01. 01.07. 01.01. 2
Slide 46: Germany: Clean Spark Spread versus natural gas and CO2 prices
Germany: Clean Spark Spread (CSS) versus natural gas and CO2 prices 40 40 2010 30 30 forward 20 20 10 10 0 0 2011 40 40 30 30 forward 20 20 10 10 0 0 2012 40 40 30 30 forward 20 20 10 10 0 0 2013 40 40 30 30 forward 20 20 10 10 0 0 01.01. 01.07. 01.01. 01.07. 01.01. 01.07. 01.01. 2009 2009 2010 2010
Slide 47: UK: Clean Dark Spread versus hard coal and CO2 prices
UK: Clean Dark Spread (CDS) versus hard coal and CO2 prices 100 25 2010 80 20 forward 60 15 40 10 20 5 0 0 2011 100 80 25 20 forward 60 15 40 10 20 5 0 0 2012 100 80 25 20 forward 60 15 40 10 20 5 0 0 2013 100 80 25 20 forward 60 15 40 10 20 5 0 0 01.01. 01.07. 01.01. 01.07. 01.01. 01.07. 01.01. 200
Slide 48: UK: Clean Spark Spread versus natural gas and CO2 prices
UK: Clean Spark Spread (CSS) versus natural gas and CO2 prices 40 20 2010 30 15 forward 20 10 10 5 0 0 2011 40 20 30 15 forward 20 10 10 5 0 0 2012 40 20 30 15 forward 20 10 10 5 0 0 2013 40 20 30 15 forward 20 10 10 5 0 0 01.01. 01.07. 01.01. 01.07. 01.01. 01.07. 01.01. 2009 2009 2010 2010 2011 201
Slide 49: Development of TTF gas price and brent oil price since January 2009
Development of TTF gas price and brent oil price since January 2009 (EUR/MWh) 40 5 2011 30 0 20 -5 10 -10 0 -15 40 5 2012 30 0 20 -5 10 -10 0 -15 Jan 2009 Apr 2009 Jul 2009 Oct 2009 Jan 2010 Apr 2010 Jul 2010 Oct 2010 Feb 2011 Spread Crude Brent (in EUR, normalised to TTF) TTF forward Relative devel
Slide 50: Development of net debt
Development of net debt € billion Capex Dividends Issuance Acquisitions/ Cash flows Others Change hybrid capital disposals/ from including in pension, (less debt (de)consoli- operating f/x effects nuclear, impact) dations activities mining provisions 35 +2.2 -0.9 +0.2 -5.5 +6.4 30 +0.7 29.0 +0.1 25.
Slide 51: Financial liabilities and assets
Financial liabilities and assets (as of Dec. 31, 2010) Financial liabilities Financial assets Split of in billion Euros in billion Euros securities 25 10 17% 19.8 7.9 20 7.4 2,1 8 1,3 15.9 0,7 1,0 0,6 15 0,7 0,3 2,5 2,5 5 10 0,7 0,7 16,4 14,9 3 5 3.9 0,4 3,2 3,4 1,4 0,3 0.5 0,6 1,5 0,2 0 0 Short ter
Slide 52: Capital market debt maturities and sources of financing
Capital market debt maturities and sources of financing Capital market debt maturities1 Strong sources of financing in € bn Fully committed for liquidity syndicated loan 2.5 20 back-up (€ 4.0 bn up to Nov. 2015) € 0.0 bn 2.0 16 1.5 12 Commercial paper $ 0.7 bn ($ 5.0 bn) (up to 1 year) 1.0 8 € 0.5 b
Slide 53: Capital market debt currency and interest exposure
Capital market debt currency and interest exposure (as of 31.12.2010) 19% 28% € 18.1 bn1 € 16.7 bn2 72% 81% € £ Interest rate fixing expiry > 1 year Interest rate fixing expiry < 1 year 1 Capital market debt = bonds of € 16.3 bn and hybrid of € 1.8 bn; including cross-currency swaps 2 Capital market
Slide 54: Conventional power plant new build programme
Conventional power plant new build programme € bn1 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Lingen 0.5 (Gas, 876 MW) BoA 2&3, Neurath 2.6 Units G F (Lignite, 2,100 MW) Hamm 2.3 Units D E (Hard coal, 1,528 MW) Staythorpe 0.8 Units 1 -4 (Gas, 1,650 MW) Pembroke 1.2 Units 1 -5 (Gas, 2,188 MW)
Slide 55: RWE Innogy major project portfolio
RWE Innogy major project portfolio € bn1 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Gwynt y Môr 2.4 (Wind offshore, 576 MW, 60%) Greater Gabbard 1.9 (Wind offshore, 504 MW, 50%) Markinch (Biomass CHP 0.3 42 MWe, 80 MWth, 100%) Nordsee Ost 1.0 (Wind offshore, 295 MW, 100%) Capacity and earning
Slide 56: RWE Dea's largest field developments
RWE Dea's largest field developments RWE Capex1 Production start share (€ bn) 2011 2012 2013 2014 2015 2016 West Nile Delta (Egypt) 40% 2.6 Breagh (UK) 70% 0.5 Reggane (Algeria) 19.5% 0.5 Luno (Norway) 20% 0.5 Jordbær (Norway) 10% 0.2 NC193 (Libya) 100% 0.4 NC195 (Libya) 100% 0.3 1 RWE‘s share in ca