E.on Se · XETR:EOAN
E.on — Merger or Acquisition (March 2018)
69 slides from E.on's merger presentation, Mar 13, 2018
Slide 1: Creating the future of energy
Growth Focus Discipline Creating the future of energy http://www.energyfortomorrow.de/ March 13th, 2018
Slide 2: Creating the future of energy
Creating the future of energy EBIT (€ bn) • Focus: Europe’s first energy player with exclusive downstream focus ~51 • Unique downstream footprint: RAB and customer numbers rise >60%1 Enel2 Future Engie2 Nat. Grid2 Iberdrola2 • Earnings quality: network EBIT share rises to ~80%1 E.ON • Strong
Slide 3: Creating two focused energy companies
Creating two focused energy companies Structure today ~77% E.ON innogy RWE Target structure Future E.ON 16.67% RWE 3
Slide 4: Acquisition of innogy via innovative asset exchange
Acquisition of innogy via innovative asset exchange innogy Total equity value: ~€22bn Asset exchange (limited cash impact) 16.67% Stake in Future E.ON (~€3.7bn) 1. Acquisition of RWE‘s 76.8% stake in innogy via asset exchange 2. RWE to get in exchange: E.ON & innogy Renewables • 16.67% in new E.ON v
Slide 5: Transacting from a position of strength
Transacting from a position of strength E.ON today E.ON today (’17) Future E.ON (’17) Group EBITDA EBIT €3.1bn1 Upper end of guidance €5bn1 ~€8bn2 ANI €1.4bn1 +58% YoY END €19.2bn1 Leverage target of 3.9x achieved before monetization of Uniper Energy Networks ~€23bn ~€37bn RAB1, 4 RAB2, 4 Pa
Slide 6: Unique downstream position across Europe
Unique downstream position across Europe Excludes npower UK customers subject to transaction with SSE Energy Networks (RAB) Sweden1 UK Customer Solutions (number of customers) ~€4bn ~1m - ~7m1 NL/BE CEE3 - ~4m2 ~€11bn4 ~13m Germany3 Turkey1 ~€20bn ~14m ~€1bn ~9m 1. E.ON 2017 reported, 2. innogy 2017
Slide 7: Focus, scale and efficiency pre-requisite for success
Focus, scale and efficiency pre-requisite for success Mega trends accelerate and reinforce each other Empowered • Future E.ON’s unique downstream positioning fully customers captures benefits of energy mega trends Focus, scale and efficiency needed Digitization in New Energy World New culture & Elec
Slide 8: Acceleration of strategy execution & reset of E.ON
Acceleration of strategy execution Unique strategic position • Focus on high-performance regulated networks and state-of-the-art customer solutions Position of strength • Reduction of portfolio complexity • Enhanced earnings quality: ~80% of EBIT1 is regulated • Aiming to deliver absolute Transition
Slide 9: Value creation for shareholders
Value creation for shareholders Realization of valuation premium Potential for 12 premium 11 Renewables innogy acquisition at ~10x valuation 1011x EV/EBITDA EV/EBITDA 9 8 Instant Platform Shareholder 7 redeployment of for high value capital Synergies 6 creation (€600-800m) 5 4 3 Renewables1 9 1. Ent
Slide 10: Integration of innogy provides for strong synergy potential
Integration of innogy provides for strong synergy potential Estimated synergies (€ m)2 Synergy focus1, 2 Corporate Functions & IT €600-800m Energy Sales & Customer Solutions ~100% Energy Networks ~55% ~25% • Strong synergy potential of €600-800m • 10-15% of controllable costs ~5% • ~5000 FTEs affect
Slide 11: Attractive earnings & dividend profile secured long-term
Attractive earnings & dividend profile secured long-term EBIT development3 Synergies to over-compensate Share of regulated network earnings (EBIT) 6 fading nuclear earnings E.ON today Future E.ON 5 4 ~65%1 3 ~80%2 2 1 0 2018 2019 2020 2021 2022 Regulated Non-regulated E.ON stand-alone Enlarged E.ON
Slide 12: Future E.ON's key financials
Future E.ON‘s key financials EBITDA ~€8bn1 Energy Networks ~80% Customer Solutions regulated2 Non-Core EBIT ~€5bn1 EPS EPS accretion from second year after completion Aiming to deliver absolute annual dividend growth Dividend (fixed dividend for 2018: €0.433) 1. Future E.ON pro-forma 2017 (innogy da
Slide 13: Pro forma economic net debt
Pro forma economic net debt E.ON today1 (€ bn) Future E.ON2, 3 (€ bn) Includes: ~35 • Acquisition of 23.2% minority shares • €1.5bn cash payment from RWE ~€2.8bn debt Further deleveraging measures ~19.2 to be realized in ‘18 (€ bn) transferred to RWE ~5.0 + Monetization of Uniper shares ~3.6 • Nucle
Slide 14: Investor agreement with RWE ensures equal treatment of shareholders
Investor agreement with RWE ensures equal treatment of shareholders Preamble • RWE to act purely as financial investor Corporate • Right to nominate one Supervisory Board member Governance Shareholder • Not allowed to increase stake above 16.67% structure and rights • Not allowed to sell to an E.ON
Slide 15: Clear path to obtain full control, irrespective of PTO acceptance rate
Clear path to obtain full control, irrespective of PTO acceptance rate 2018 2019 2020 2021 1st Closing 2nd Closing • E.ON becomes ≥76.8% • Transfer of E.ON and innogy RES Assets shareholder in innogy Voluntary public • Transfer of Kelag participation and gas storage assets of • RWE becomes 16.67% in
Slide 16: Investment highlights
Investment highlights Starting from position of strength: Creating the future of energy Growth Aiming to deliver absolute annual dividend growth Focus Unique downstream positioning with ~80% regulated earnings1 Renewables value crystallization and €600-800m synergies Discipline High commitment to st
Slide 17: Standalone strength
Growth Focus Discipline Standalone strength E.ON standalone Dr. Johannes Teyssen – CEO and Dr. Marc Spieker - CFO March 13th, 2018
Slide 18: Delivering step by step – Strategy & Operations
E.ON standalone Delivering step by step – Strategy & Operations Portfolio reset completed New culture & capabilities Operational excellence • €3.8bn Uniper disposal: • ~€1bn total contract value • + ~500MW onshore wind decision to accept Fortum’s in B2B new solutions in US in 2017 offer (2017) • + ~
Slide 19: Each pillar with focused and disciplined growth
E.ON standalone Each pillar with focused and disciplined growth Customer Solutions Energy Networks Renewables Total Customer # E.ON power RAB E.ON operated capacity +~2m +~€2-3bn +~2GW ~€21- ~24m ~8GW 22bn ~22m ~€19bn ~6GW 2017 2025 2017 2020 2017 2020 • Energy sales: reinvent with • Grow & sustain
Slide 20: Attractive stand-alone profile
E.ON standalone Attractive stand-alone profile EBIT growth EPS growth Dividend growth Aiming to deliver absolute annual dividend growth Group CAGR: +5-10% +40% +3-4% CAGR ~8GW 5.3GW €2.8 – €0.60 – 3.0bn 0.70 2017 2020 €0.30 €0.431 Core CAGR: +5-6% 2018 2020 2018 2020 2017 2018 1. Fixed for FY2018 (p
Slide 21: E.ON's guiding principles
E.ON standalone E.ON‘s guiding principles Absolute annual dividend Sustainable & resilient Drive value creation growth EPS growth Operational Capital Customer-led Digitization excellence discipline 21
Slide 22: Strong delivery of financial targets
E.ON standalone Strong delivery of financial targets Deleveraging achieved: EBIT1 vs. guidance Adj. Net income1 vs. guidance significant reduction of END €2.7- €2.8- €1.2- ~€7bn €3.1bn €3.1bn €1.4bn €3.1bn €3.1bn €1.45bn €26.3bn €0.6- €0.9bn €19.2bn €1.0bn 5.3x 3.9x 2016 2017 2016 2017 2016 2017 Gui
Slide 23: Deleveraging creates balance sheet headroom
E.ON standalone Deleveraging creates balance sheet headroom Economic net debt € bn Hybrid Scrip dividend 26.3 cancelled cancelled 21.5 19.2 19.2 ~5.3x EBITDA ~4.4x ~3.9x ~4.0x ~3.9x EBITDA EBITDA EBITDA EBITDA ~3.0x EBITDA FY 16 Q2 17 FY 17 FY 17 Post headroom Mid-term deleveraging target Achieved (
Slide 24: Disciplined capex drives EBIT growth
E.ON standalone Disciplined capex drives EBIT growth Old plan ~€8bn net capex1 New plan ~€9.5bn net capex1 ~20% 2017 2018 2019 2018 2019 2020 EBIT flat within range (€ bn) EBIT driven up by additional capex (€ bn) Core EBIT CAGR ~5-6% 3.1 Group EBIT CAGR ~3-4% 2.8 24 2018 2019 2020 2018 2019 2020 1.
Slide 25: Capex split 2018-2020
E.ON standalone Capex split 2018-2020 Capex1 2018 Capex1 2018-2020 Increase in capex drives the Growth 5-6% EBIT growth target of the core business ~€ 3.5bn ~€ 9.5bn 1.0 26% 25% Segments have to 1.0 compete for capital and Focus against other uses of funds Strict adherence to return 1.5 49% Discipli
Slide 26: Sustainable performance - Phoenix & beyond
E.ON standalone Sustainable performance - Phoenix & beyond Phoenix measures fully implemented Fokus (Ger) & SWAT (UK) next wave Gross savings to Restructuring costs (upfront) ~270m 400m offset margin EBIT contribution pressure ~€120m savings ~130m ~£100m savings 2017 2018 Total 2018 2019 2020 beyond
Slide 27: 2018 Guidance
E.ON standalone Group guidance FY 2018 EBIT 2017 EBIT1 (€ bn) €3.1bn Includes ~€100m restructuring costs 3.0 in Customer Solutions (UK, Germany) 2018 Guidance 2.8 2017 Actuals Adj. Net Income 2017 Adj. Net Income (€ bn) €1.4bn 1.5 1.3 Guidance range 1. Adjusted for non operating effects. 27
Slide 28: Segment EBIT guidance FY 2018
E.ON standalone Segment EBIT guidance FY 2018 EBIT1 2017 Actuals Pro forma2 2018 Drivers for 2018 € bn + Sweden: power tariff increase Energy 1.9 2.0 – Germany: reversal of regulatory effects, new Networks regulatory period gas, concession loss HH + Germany: Non-recurrence of a negative one-off effe
Slide 29: Attractive EBIT and EPS growth profile
E.ON standalone Attractive EBIT and EPS growth profile Adj. EBIT Adj. Earnings per Share (EPS) Illustrative • Refinancing benefits of up to ~€200m1 (~2/3 Core EBIT CAGR ~5-6% effective in 5-10% p.a. 2018) Group EBIT CAGR ~3-4% • ~€4.5bn maturing bonds between 2018 – 2020 2018 2019 2020 2018 2019 202
Slide 30: Delivering step by step – Attractive dividends
E.ON standalone Delivering step by step – Attractive dividends Absolute dividend growth 2018: Fixed Dividend Aiming to deliver absolute annual dividend growth €0.431 €0.30 €0.21 FY 2016 FY 2017 FY 2018 Dividend Dividend Dividend 1. Fixed for FY2018 (paid in 2019). 30
Slide 31: FOCUS – medium-term framework
E.ON standalone E.ON FOCUS – medium-term framework Our basis for steering the company Capital Structure Strong BBB/Baa Return ROCE1 Dividend 8 – 10 % EBIT3 EPS3,4 Payout Fixed dividend: €0.435 Group Group Absolute + 3-4% + 5-10% Cash dividend growth Cash conversion rate2 ≥ 80 % Executive Compensatio
Slide 32: Investment highlights
E.ON standalone Investment highlights From deleveraging to focused and disciplined growth Deliver sustainable EPS growth and Growth aiming for absolute annual dividend growth Focus Management team with strong shareholder focus Discipline Strict capital discipline and high-performance culture 32
Slide 33: Appendix
Appendix
Slide 34: Energy Networks
Growth Focus Discipline Energy Networks E.ON standalone
Slide 35: Energy Networks - The heart of E.ON
E.ON standalone Energy Networks - The heart of E.ON Regulated asset base 20171 Grid length (‘000 km) 1 Sweden Germany ∑ Grid length: 976 €4.0bn €10.7bn ∑ Grid length: 107 490 349 ~€23.1bn2 60 137 2 CEE & 45 Turkey Germany Sweden CEE & Turkey €8.5bn3 EBIT4 2017 Market share (%) Sweden ~75% of €0.5bn
Slide 36: Energy Networks - Higher capex leads to power RAB growth
E.ON standalone Energy Networks - Higher capex leads to power RAB growth Germany Sweden Czech Republic Power RAB Power RAB Power RAB +12-16% +6-10% +11-15% ~€8bn ~€3.8bn ~€1.4bn 2017 2020 2017 2020 2017 2020 36
Slide 37: Multi-decade RAB growth engine
E.ON standalone Multi-decade RAB growth engine Energy Networks capex1 €1.7 – 1.8bn Cautious planning +€300m – • Main driver is additional replacement €400m investments • Conservative assumptions on Renewables and E-mobility roll-out €1.4bn €1.4bn Potential upsides to “new normal”-level • Acceleratio
Slide 38: Major transformation in Energy Networks
E.ON standalone Major transformation in Energy Networks Future energy network system will need to combine Energy Network player different layers of infrastructure From To Data center Energy network operator Holistic system provider EMS Platforms Digital layer VPP Smart Home Network control center Lo
Slide 39: Turkey with extraordinary high RAB growth
E.ON standalone Turkey with extraordinary high RAB growth Downstream Business Market & Regulation RAB development Established in 3 high-growth regions Constructive regulatory environment: in bn TL, nominal Leading electricity network operator: − Allowed WACC for 2016-2020 regulatory period has
Slide 40: Operational excellence – digitization in practice
E.ON standalone Operational excellence – digitization in practice Digital workforce Asset replacement decisions Introduce digital application used by every field worker Conventional approach Predictive maintenance comprising all functionalities necessary in the daily work Tool Data driven decisions
Slide 41: Aspiration to develop the platform for energy transition
E.ON standalone Aspiration to develop the platform for energy transition Further decentralization and fragmentation lead to a need for local rebalancing P2P Regional Trading Energy Flex- Local System Markets Energy System Increasing system responsibility Transformative Platform assumed by regional o
Slide 42: Opportunities in adjacent businesses - Broadband
E.ON standalone Opportunities in adjacent businesses - Broadband A Growing from existing assets B Entering Fiber-to-the-Home (FttH) market E.ON's existing fiber-optic infrastructure E.ON's new fiber-optic infrastructure Fiber-optic cables in every street Telco X's and to every backbone household Mob
Slide 43: EBIT outlook – Stability despite two major regulatory reviews
E.ON standalone EBIT outlook – Stability despite two major regulatory reviews Lower allowed returns • Lower allowed returns reflect lower bond yields • Benefits from maturing legacy bonds to be attributed to Energy Higher RAB Networks driving EPS growth €1.9bn Positive one-off German pension cost pa
Slide 44: Customer Solutions
Growth Focus Discipline Customer Solutions E.ON standalone
Slide 45: Energy sales is the anchor of customer solutions
E.ON standalone Energy sales is the anchor of customer solutions Customer focused portfolio E.ON’s market positions Energy Sales is the anchor business EBIT3 2017 €526m Energy Sales EBIT4 B2B Heat & New B2B ~25% Customer B2C Solutions B2C Top 3 Energy ~75% Sales B2M Top 3 Energy Sales: 22m1 customer
Slide 46: Transformation of energy sales
E.ON standalone E.ON is leading the transformation of energy sales Standard tariff customer numbers declining Attractive products Innovative and green tariffs 7 6.3m complemented by smart meter rollout accounts in m 6 Customer 5 Turnaround in 4 customer numbers Protecting revenues Q1 16 Q2 16 Q3 16
Slide 47: Tariff innovations
E.ON standalone Increase customer attraction while reducing cost to acquire Product offering and selection of sales channels lead to… …increase in customer numbers… 200k innovative tariffs sold since June 2017 ~24m Tariff innovations > 5,000 E.ON Plus products (devices as add-on to tariffs) sold ~22
Slide 48: Closing the gap - Cost to serve to be reduced dramatically
E.ON standalone Closing the gap - Cost to serve to be reduced dramatically Measures to reduce cost Efficiency programs Cost to serve ambition to serve €/customer account Other Fokus Metering & Installation Smart Meter ~€120m savings Debt Rollout resolution Servicing SWAT and Backoffice ~£100m saving
Slide 49: Re-inventing our customer business with the digital attacker
E.ON standalone Re-inventing our customer business with the digital attacker Cost <€ 10 Market Synergies efficiency Market Leading across regions leading Cost to Serve cost of change 1-click Single Innovative Fast platform for Customer proposition journey time to market tariff innovations Data +50 N
Slide 50: New Solutions - Strive for leadership with innovative products
E.ON standalone New Solutions - Strive for leadership with innovative products B2B B2M B2C District heating PV + battery Decentral generation Product offering Energy efficiency City quarter solutions Smart home Flexibility & storage Integrated city energy solutions Smart meter Digital energy solutio
Slide 51: B2B - E.ON to become a leading Energy Service Company in Europe
E.ON standalone B2B - E.ON to become a leading Energy Service Company in Europe Ambitious organic growth of TCV1 … …to translate into EBIT2 over time ~ €250-300m ~>2 x ~+25% CAGR ~2 x 2016 2017 … 2020 2025 2016 2017 2020 2025 Become a leading Energy Service Company Decentral Energy Flexibility & Dig
Slide 52: B2M – E.ON is a reliable partner for cities and communities
E.ON standalone B2M – E.ON is a reliable partner for cities and communities Investments with low risk and high return Project examples Capex2 2018-2020 ROCE > 10% > €250m capex project close to Stable (long-term) earnings ~€ 800m Stockholm, COD 2019 Högbytorp, Stockholm 15-20 year contracts 100
Slide 53: B2C - E.ON drives the electrification of the home and mobility
E.ON standalone B2C - E.ON drives the electrification of the home and mobility E.ON product offering for the electrification of home Translating into decent EBIT in the next decade EBIT1 €m PV + battery E.ON Plus + E.ON SolarCloud smart meters E-mobility Home solutions heating Example: PV + battery
Slide 54: Disciplined investment plan to support growth opportunities
E.ON standalone Disciplined investment plan to support growth opportunities Temporary high investments for smart meter & IT Medium-term EBIT development Capex1 2018-2020 €2.4bn Customer Solutions EBIT2 2017-2020 Asset-backed investments Other €526m E-mob Restructuring Heat & New charges Heat & Solut
Slide 55: Renewables
Growth Focus Discipline Renewables E.ON standalone
Slide 56: Position of strength
E.ON standalone Position of strength ~4 GW1 ~3 GW1 Highlights €0.5bn EBIT 2017 (~18% of core EBIT) Stella Arkona ~95% Long-term contracted Rampion or hedged until 2020 Morcone 1 Strong track record with ~7 GW1 delivered 1.4 GW1 0.2 GW1 Under construction: 0.6 GW1 0.2 GW1 Active in 3 technologies and
Slide 57: Growth trend unbroken – RES to dominate global power generation
E.ON standalone Growth trend unbroken – RES to dominate global power generation Capacity additions forecast Bid prices per technology Industry trends Annual build rate avg. 2018-’301 (EUR/MWh) Offshore Onshore 109 103 Decarbonization merchant2 66 59 GW 55 44 GW 43 38 GW Strong cost decrease 17 GW 7
Slide 58: E.ON aims to grow at scale in Onshore
E.ON standalone E.ON aims to grow at scale in Onshore Onshore Offshore Capitalize on attractive Leverage existing Solar PV ~8 GW pipeline options in Europe • From boutique +40%2 to industrial +20-25% • Capex light ~1 GW1 ~5 GW1 2017 2020 2017 2020 1. Operated capacity 2. ~400MW net capacity addition
Slide 59: High share of contracted revenues provides stability and visibility
E.ON standalone High share of contracted revenues provides stability and visibility High earnings stability and visibility Clear guiding principles • High earnings stability • Secure long-term stable off-take ~95% hedged or long-term contracted1 agreements for new investments • Revenue optimization
Slide 60: Integral part of E.ON - Modular value crystallization
E.ON standalone Integral part of E.ON - Modular value crystallization Develop & Sell & (Operate) Build & Sell & Operate Build & Keep • Rapid monetization of value • Reduce exposure in certain • Resilient long-term cash flows • Capex light geographies • Strong operational capabilities ensure • Additi
Slide 61: Technical/digital excellence to drive down LCOE
E.ON standalone Technical/digital excellence to drive down LCOE1 Predictive maintenance roll-out Array layout optimizer Self-learning algorithms to optimize wind park layout in 60% order to increase 10% production and reduce 2017 2018 2019 2020 wake effects Transparent and effective capex and Single
Slide 62: Play at scale in Onshore - Attractive pipeline in Tier 1 geographies
E.ON standalone Play at scale in Onshore - Attractive pipeline in Tier 1 geographies Gross capacity additions 2018-2020 (MW) Onshore pipeline Onshore pipeline ∑~2GW ~5.9 ~1.8 GW GW COD COD COD COD COD 2016 2017 2018 2019 2020 100% PTC Nordic New Projects Onshore Offshore1, 2 80% PTC UK (Pre- FID pip
Slide 63: Financial Appendix
Growth Focus Discipline Financial Appendix E.ON standalone
Slide 64: Highly stable business profile
E.ON standalone Highly stable business profile Business profile FY EBITDA 20171 High share of regulated and long-term contracted earnings (~3/4 of EBITDA) Operations in Energy Networks under stable, well 15% Energy Networks established frameworks in low risk markets with strong regulatory track
Slide 65: E.ON today – Regulated Energy Networks at the heart
E.ON standalone E.ON today – Regulated Energy Networks at the heart Key financials Core EBIT1 2017 Share of regulated/ 2017 long-term contracted businesses2 Group EBIT1 Customer Solutions Energy Networks Renewables €3.1bn Adj. Net Income1 €1.4bn €0.5bn €1.9bn €0.5bn Regulated/contracted Merchant Str
Slide 66: 2017 yet another year of strong delivery
E.ON standalone 2017 yet another year of strong delivery Highlights Key Financials1 EBIT Adj. Net Income EBIT and Adj. Net Income at the upper end €m €m of the guidance range Economic Net Debt € bn -7.1 3,112 3,074 26.3 +58% Adj. Net Income + 58% versus FY 2016 1,427 19.2 904 Economic net debt reduc
Slide 67: Investor Relations contacts
E.ON Investor Relations contacts Alexander Karnick T+49 (201) 184 28 38 Head of Investor Relations [email protected] Martina Burger T +49 (201) 184 28 07 Manager Investor Relations [email protected] Dr. Stephan Schönefuß T +49 (201) 184 28 22 Manager Investor Relations stephan.schoenefu
Slide 68: Financial calendar & important links
Financial calendar & important links Transaction Website: http://www.energyfortomorrow.de/ Financial calendar May 8, 2018 Quarterly Statement: January – March 2018 May 9, 2018 2018 Annual Shareholders Meeting May 14, 2018 Dividend Payment August 8, 2018 Half-Year Financial Report: January – June 201
Slide 69: Disclaimer
Disclaimer This presentation contains information relating to E.ON Group (“E.ON") that must not be relied upon for any purpose and may not be redistributed, reproduced, published, or passed on to any other person or used in whole or in part for any other purpose. By accessing this document you agree