E.on Se · XETR:EOAN
E.on — Non-Deal Roadshow (June 2007)
38 slides from E.on's roadshow presentation, Jun 15, 2007
Slide 1: E.ON – At the vanguard of European integration
“E.ON – At the vanguard of European integration“ Dr. Marcus Schenck, Member of the E.ON AG Board of Management and CFO Zurich/Geneva Roadshow June 15, 2007
Slide 2: Current market environment is challenging but offers a broad range of opportunities
Current market environment is challenging but offers a broad range of opportunities for E.ON EU market Global climate integration change discussion Opportunities EU move into Global security of competitive world for supply discussion 1
Slide 3: E.ON has specified the strategic direction for value-enhancing 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 4: E.ON holds an excellent position to benefit from European market integration
Active promotion of EU energy agenda Being a truly European company, E.ON holds an excellent position to benefit from European market integration Ongoing EU market integration E.ON’s well-diversified EU position Example: y Over 60 GW installed generation regional power markets capacity (after acquis
Slide 5: E.ON will bundle all European trading units
Optimized group set-up 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 ho
Slide 6: E.ON will bundle responsibilities for fossil new build
Optimized group set-up 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 Euro
Slide 7: New Renewables and Climate Protection unit
Optimized group set-up 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 proje
Slide 8: 70% of E.ON's €60 bn investment program is value enhancing growth
Updated investment & growth program 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 Acqui
Slide 9: Organic investments into generation technologies and renewables are key growth areas
Updated investment & growth program 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 G
Slide 10: E.ON will grow its generation position across Europe by ~50% until 2010
Updated investment & growth program Ambitious operational targets 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 End
Slide 11: Acquisition of Endesa assets/Viesgo gives good generation positions in new markets
Updated investment & growth program Ambitious operational targets 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 b
Slide 12: Generation growth linked with a progressive climate protection target
Updated investment & growth program Ambitious operational targets 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
Slide 13: Wind power project pipeline to support climate protection ambitions
Updated investment & growth program Ambitious operational targets 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
Slide 14: E.ON targets > 10 bcm p.a. in gas upstream
Updated investment & growth program Ambitious operational targets 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
Slide 15: Investing in storage and strategic infrastructure for EU gas supply
Updated investment & growth program Ambitious operational targets 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
Slide 16: E.ON participates in privatizations in South East Europe and Turkey
Updated investment & growth program Ambitious operational targets E.ON participates in privatizations to complement the already strong position across Europe Growth in South East Europe Growth in Turkey Romania: #7 power and gas market in Europe1 y Strengthen E.ON’s existing with attractive long-ter
Slide 17: Russia offers dynamic growth opportunities in power generation
Updated investment & growth program Ambitious operational targets Russia currently offers dynamic growth opportunities for E.ON in power generation Growth opportunities power E.ON’s investment rationale Current entry opportunity in Huge market (7% of world’s energy privatization of OGK’s and TGK’s:
Slide 18: Aim for highest levels of customer satisfaction by 2010
Ambitious operational targets E.ON aims to be one of the large European energy suppliers with the highest levels of customer satisfaction by 2010 E.ON’s customer orientation Customer oriented services: examples y Innovative products & services tailored to customer needs “Go Green Gas & Electricity”
Slide 19: "10 until 10": adjusted EBIT up 10% p.a. on average
Ambitious financial targets “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 inv
Slide 20: Active management of asset portfolio
Ambitious financial targets E.ON is committed to active management of its asset portfolio and to secure expected value contribution by 2010 E.ON’s objective E.ON’s commitment E.ON will review its entire If individual assets do not asset base to ensure that by contribute in line with 2010 all assets
Slide 21: E.ON confirms its Single A flat / A2 target rating
Ambitious financial targets E.ON confirms its new 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 S&P Moody’s company a solid rating is a “must” EdF AA- Aa1 GdF AA- Aa1 y Increased leverage at a single A
Slide 22: E.ON will use the debt factor as future steering measure
Ambitious financial targets E.ON will use the debt factor as future steering measure € in millions 2006 Liquid funds 6,189 Securities and funds (fixed assets) 7,146 Total financial assets 13,335 Total financial liabilities -13,472 Net financial position -137 Provisions for pensions, net -3,960 Provi
Slide 23: Rating objective converted into a financial target
Ambitious financial targets Our rating objective will be converted into a financial target defined by E.ON 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
Slide 24: Capital structure will be managed actively in both directions
Ambitious financial targets 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
Slide 25: Growth program will utilize balance sheet and lift cash flow generation
Ambitious financial targets Growth program will utilize E.ON’s balance sheet in the next 3 years and result in a step change for cash flow generation Cash generation from investment program after 2010 – schematic graph Cash flow from operations Cash flow after investments1 € 42 bn growth Investments
Slide 26: Target capital structure shall be achieved by end of 2008
Ambitious financial targets 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
Slide 27: Future dividend policy and share buyback
Ambitious financial targets E.ON’s future dividend policy and share buyback y E.ON‘s dividend policy will not be changed - confirmation of a payout ratio of 50-60% of adjusted net income y Based on the respective capital structure the payout range will be utilized over time; if necessary further sha
Slide 28: Summary: E.ON's objectives and commitments (1)
Summary: E.ON’s objectives and commitments (1) Active promotion E.ON’s “competition initiative” : Promotion of of EU energy agenda competition and EU market integration y Market coupling between German and neighboring Optimized group power markets set-up y Power and gas interconnection projects, e.g
Slide 29: Summary: E.ON's objectives and commitments (2)
Summary: E.ON’s objectives and commitments (2) Active promotion of EU energy agenda Implement cross-regional integration measures latest by January 2008: Optimized group y Unified Trading Unit set-up y Unified Fossil Generation New Build Unit Updated investment y Unified Renewables & Climate Protect
Slide 30: Summary: E.ON's objectives and commitments (3)
Summary: E.ON’s objectives and commitments (3) Active promotion of EU energy agenda Successfully deploy € 60 bn investment including Optimized group € 42 bn growth investment program by 2010: set-up y Acquisition of Endesa Assets/Viesgo Updated investment y Comprehensive generation new build program
Slide 31: Summary: E.ON's objectives and commitments (4)
Summary: E.ON’s objectives and commitments (4) Active promotion Operational growth: of EU energy agenda y Grow European generation capacity by 50% by 2010 y Double gas storage capacity in NW-Europe until 2015 Optimized group y Extend gas upstream position to ≥ 10 bcm/a set-up Climate protection: y R
Slide 32: Summary: E.ON's objectives and commitments (5)
Summary: E.ON’s objectives and commitments (5) Active promotion of EU energy agenda Optimized group y E.ON portfolio by 2010: All assets deliver expected set-up financial/strategic value Updated investment y “10 until 10”: Increase EBIT by 10% p.a. on average & growth program until 2010 y Realize ta
Slide 33: Back-up Charts
Back-up Charts
Slide 34: Future cost of capital will slightly increase
Taking into account the target capital structure E.ON‘s future cost of capital will slightly increase Annual Δ Update Report - %-pts. - 05/2007 2004-2006 Risk-free interest rate 5.1% -0.8% 4.3% Market premium 5.0% -1.0% 4.0% Beta factor (unlevered) 0.39 0.24 0.63 Beta factor (levered) 0.70 0.15 0.85
Slide 35: 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 36: Forward-looking statements disclaimer
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
Slide 37: Notes
Notes: 36
Slide 38: Notes
Notes: 37