E.on Se · XETR:EOAN
E.on — Non-Deal Roadshow (April 2008)
58 slides from E.on's roadshow presentation, Apr 23, 2008
Slide 1: E.ON – At the vanguard of European integration
E.ON – At the vanguard of European integration Paris – Roadshow April 23, 2008
Slide 2: In 2007, E.ON specified its strategic direction and operational setup
In 2007, E.ON specified its strategic direction as well as its operational setup… y Integrate core functions of what is Europe’s broadest power and gas platform with a strong presence in almost 30 European countries y Bundling of all trading activities y Centralize new build activities y Bundling of
Slide 3: … and has set itself clear financial targets
… and has set itself clear financial targets y Adjusted EBIT growth 2006 – 2010 10% p.a. on average, from € 8.4 bn in 2006 to € 12.41 bn in 2010 y Debt factor (economic net debt / adjusted EBITDA) to reach target level of 3.0x latest by end 2008 y € 7 bn share buy back until end 2008 y Dividend grow
Slide 4: 2007 key figures show E.ON delivering on its strategy
2007 key figures shows E.ON delivering on its strategy 9,208 Highlights of the 2007 annual results 8,356 7,293 6,747 y Adjusted EBIT up 10% to € 9.2 bn 5,645 y Adjusted net income up 9% to € 5.1 bn 14.5 y Net income attributable to shareholders 13.8 11.5 12.2 up 29% to € 7.2 bn 9.9 y ROCE 14.5% in 2
Slide 5: E.ON continues to provide attractive cash returns to shareholders
E.ON continues to provide attractive cash returns to shareholders 4.25 4.101 y Dividend to grow y 2007 proposed 3.35 by 10-20% between dividend up 22% to 2.75 2007 and 2010 € 4.101 per share 2.35 2.0 y Payout ratio of 50- y 2007 proposed 47 49 47 51 60% of adjusted payout ratio of 51% net income y €
Slide 6: Investments will surpass the €60 bn mark set on May 31st, 2007
Investments will surpass the € 60 bn mark set on May 31st, 2007 Investment plan presented New investment plan1 Main changes: on May 31st, 20071 ~6 ~22 y Asset swap with Statkraft: + € 4.4 bn (cash neutral) ~24 y Additional investments in renewable energy: ~28 + ~ € 3 bn ~21 y Additional investments
Slide 7: 2008-10 investment plan focuses on conventional power, renewables and gas
2008-10 investment plan focuses on growth in conventional power generation, renewables and gas ~ 63 13 in € bn ~ 10 ~ 50 ~4 ~5 ~ 10 Acquisition of Endesa assets/Viesgo ~6 ~4 Asset swap with Statkraft Expected ~8 Others (mainly power networks) Growth contribution to ~4 ~2 New markets (mainly Russia)
Slide 8: E.ON and Enel/Acciona concluded valuation of Viesgo and Endesa Assets
E.ON and Enel/Acciona have concluded the process regarding the valuation of Viesgo and the Endesa Assets y On April 2nd, 2007, E.ON signed an agreement with Enel and Acciona in order to acquire a significant portfolio of assets in Spain, Italy and France as well as in Poland and Turkey y The formal
Slide 9: Acquisitions and new build deliver E.ON's carbon target of 360 g CO2/kWh
Acquisitions and new build program will deliver E.ON‘s carbon target of 360 g CO2/kWh by 2030. Development of E.ON‘s portfolio 2007-2015 E.ON‘s target portfolio 2030 ~ 90 GW1,2 y ~ 50 % carbon free 50% + (nuclear, hydro and renewables) 61 GW1 ~ 40% 35% ~ 30% 34% y ~ 50 % low carbon ~ 11% (gas + CCS
Slide 10: E.ON has already secured most components for 14 power stations
E.ON has already secured most components for 14 power stations Development of investment cost for New entry costs for a 750 MW a 750 MW hard coal station1 (€ mn) hard coal station1,2 (€/MWh) 80 EEX baseload 1,600 forward 2009-10 60 + 60 % 980 40 20 0 2006 2008 CAPEX Fixed OPEX 2006 2008 Fuel & var.
Slide 11: Advanced conventional new-build projects in the EU
13 advanced conventional new-build projects in the EU, 7 already under construction + two major upgrades Maasvlakte 3 Malmö Oskarshamn (upgrade) Wilhelmshaven 50+ Coal 1100 MW Gas CHP 440 MW Nuclear 430 MW Coal 550 MW Commissioned 2012 Commissioned 2009 Completed 2008/12 Commissioned 2014 Ratcliffe
Slide 12: Four new-build projects in Russia, and one in the U.S. Midwest
Four conventional new-build projects in Russia, and one in the U.S. Midwest U.S. Midwest Russia Yaivinskaya Berezovskaya 400 MW CCGT 800 MW Coal Commissioned 2010 Commissioned 2010 Trimble County 2 Coal 750 MW Commissioned 2010 Shaturskaya Surgutskaya 410 MW CCGT 800 MW CCGT under construction Commi
Slide 13: E.ON's approach to renewables: scaling up the business
E.ON‘s approach to renewables: scaling up the business Strategic context From 'boutique' to industrial scale y Growing role of renewables within y Ambition to lead the sector to industrial scale the triangle ‘energy security – thanks to superior value chain management climate concerns – energy y Inv
Slide 14: E.ON Climate & Renewables: significant progress since May 31st, 2007
E.ON Climate & Renewables: significant progress since May 31st, 2007 Installed capacity (GW) y New market unit E.ON Climate & Renewables up ~ 10 and running: E.ON now the 7th largest wind generator worldwide y Acquisitions of Energi E2 Renovables Ibéricas and ~4 Airtricity North America successfully
Slide 15: E.ON is well positioned to take advantage of tomorrow's opportunities
E.ON is well positioned to selectively take advantage of tomorrow’s opportunities Solar Biomass y JV with Schüco ("Malibu“) gives y Extensive experience in Germany, E.ON a position in cutting edge Sweden and UK thin film (TF) technology y 130 MWel in operation y Joint R&D activities continuing y 300
Slide 16: Western Europe will increasingly rely on gas imports
Western Europe1 will increasingly rely on gas imports in bcm 675-730 635-685 E.ON’s response to Europe’s 570-610 7% 21% Supply gap increasing reliance on gas 525 8% 12% imports2 10% 12% 6% Advanced projects3 8% y Long-term gas import 11% 9% 11% Other non-EU imports 12% contracts remain backbone 7% A
Slide 17: Growing gas imports drive investments across the gas value chain
Growing imports of natural gas drive investments in many parts of the gas value chain Gas pipeline Skarv-Idun y Investments in upstream to reach Gas storage equity gas production of ~ 10 bcm p.a. LNG terminal Upstream project y Development of gas storage capacity in Germany, the UK, Austria and Nord
Slide 18: E.ON's strength in power & gas convergence unlocks significant value
E.ON's strength in power & gas convergence unlocks significant value Convergence in supply Convergence in generation/trading Dual fuel offerings E wie Einfach: continue to gain tremendous success for market share in the UK the first pan-German y Enhanced options for fuel (mn dual-fuel dual fuel supp
Slide 19: Current focus: integration, optimization and portfolio management
E.ON's current focus: integration and optimization of group structure, and portfolio management Integration and optimization Review of E.ON's portfolio of of group structure assets and businesses y Integration of recent and forth- y Whole portfolio to be reviewed coming acquisitions until 2010 y OGK
Slide 20: Recent proposal to EU Commission diversifies geographical presence
Recent proposal to EU Commission is in line with this direction & further diversifies E.ON’s geographical presence Subject of proposal Strategic implications for E.ON y Disposal of transmission grid in y EU pushes hard for open European Germany energy markets y Disposal of 4.8 GW generation y Our pr
Slide 21: We are committed to create value in the short and long term
We are committed to create value in the short and long term y We have already delivered much of what we promised on May 31st, 2007 y Excellent position to benefit from European market integration in the power and gas business y € 50 bn of investments for 2008-10 focused on conventional power generat
Slide 22: Our vision: E.ON - the world's leading power and gas company
Our vision: “E.ON - the world´s leading power and gas company“
Slide 23: Back-up Charts
Back-up Charts Leading positions 23 Group structure 24 Endesa assets/Viesgo 25-28 Russia 29-32 Gas strategy 33-35 Acquisition criteria 36 Power generation strategy 37-41 Hedging ratios 42 Commodity prices 43-44 CO2 position 45 EU targets renewables and CO2-emissions 46-47 Network regulation in Germa
Slide 24: E.ON is one of the world's leading energy companies
E.ON is one of the world’s leading energy companies with a strong market presence in Europe and the U.S.-Midwest Nordic #4 in power generation Renewables #3 in power/gas retail # 7 wind generator United Kingdom European gas supply #2 in power generation #2 in power/gas retail #1 in gas supply Russia
Slide 25: New markets and businesses complement the Market Unit structure
The new markets and businesses will complement E.ON’s existing Market Unit structure E.ON AG MU MU MU MU MU MU MU MU E.ON E.ON Spain Italy Russia Central Pan- U.K. Nordic U.S.- Energy Climate Europe Eur. Mid- Trading & Gas west Renew. New New Regional Functional Market Units Market Units 24
Slide 26: The Agreement enables E.ON to acquire strong growth positions in Europe
The Agreement enables E.ON to acquire strong growth positions in Europe Spain Italy France Viesgo1 + additional generation Endesa Italy (80% participation4) Endesa France (65% participation5) assets y 7.2 GW capacity (of which y 2.5 GW capacity y 3.0 GW generation capacity minimum 70% for E.ON) y No
Slide 27: The valuation process has yielded a fair value of ~€11.8 bn
The valuation process has yielded a fair value of ~ 11.8 bn € in € bn Viesgo Add. assets1 Endesa Europa 4 Total Enterprise value 2.03 0.75 10.75 13.53 ./. Net debt2, Minorities3 1.30 0.01 3.25 4.56 = Equity value 0.73 0.74 7.50 8.97 + Net debt2 1.30 0.01 1.57 2.88 = Transaction value 2.03 0.75 9.07
Slide 28: The transaction adds 7 new-build projects in Spain, France and Italy
The transaction adds 7 new-build projects in Spain, France and Italy Emile Huchet CCGT 860 MW Escatrón 1 Commissioning in 2010 CCGT 800 MW Commissioning in 2008 Monfalcone CCGT 800 MW Commissioning in 2010 Solvay CCGT 400 MW Commissioning in 2011 Tavazzano 9 CCGT 420 MW Commissioning in 2010 Algecir
Slide 29: Process expected to conclude with closing in Q3 2008
The process is expected to conclude with a successful closing in Q3 2008 y Negotiation and signing of Share Purchase Agreements in the next weeks y Conclusion of negotiations on and valuation of the nuclear Drawing Right Agreement y Proceedings to obtain approval of the Spanish Ministry of Industry
Slide 30: E.ON entered the Russian power market through OGK-4
In 2007, E.ON entered the attractive Russian power market through the acquisition of a majority stake in OGK-4. Overview OGK-4 Transaction structure Equity investment Purchase price: € 4.4 bn for 72.7% Mandatory offer:2 € 0.2 bn for 3.4% OGK Generation assets Shareholder structure Key figures 20071
Slide 31: OGK-4: flexible asset portfolio of ~8.6 GW capacity
OGK-4: Attractive, flexible asset portfolio of ~ 8.6 GW capacity with a committed investment program of additional 2.4 GW Shaturskaya GRES Yaivinskaya GRES Surgutskaya GRES-2 • Moscow territory (Central) • Perm territory (Volga) • Tyumen territory (Urals) • Capacity: 1,100 MW • Capacity: 600 MW • Ca
Slide 32: OGK-4 – Spot market price benchmarks 2007
OGK-4 – Spot market price benchmarks 2007 Березовская ГРЭС Berezovskaya GRES Spot market price, RUB/MWh, 2007 Average Spot market price, RUB/MWh, 2007 Fuel cost, RUB/MWh, 2007 470 % Heat spark margin, % 51% Сургутская ГРЭС-2 Surgutskaya GRES-2 230 529 Шатурская ГРЭС Shaturskaya GRES 47% 721 282 14%
Slide 33: Russia – Electricity sales in regulated and free market segments
Russia – Electricity sales in regulated and free market segments • Free market segment gives clear incentives to producing more electricity and to developing market strategies GWh 20.2% 13.6% 24.0% 16.1% 22.1% 16.0% 28.1% 17.9% 30.9% 18.6% 18.7% 27.1% Note: percentage indicates share of electricity
Slide 34: E.ON's target is to double working gas capacity to ~10 bcm
E.ON's target is to double its working gas capacity from 5 bcm to ~10 bcm in North West Europe until 2015 Gas storage rationale 500 km radius 2 bcm y Management of higher seasonal 3 bcm 1 bcm demand (winter vs. summer) 5 bcm 2 bcm 20 bcm y Guarantee of supply security 1 bcm 3 bcm 2 bcm 4 bcm y Cover
Slide 35: Gas storage: on track toward 2015 target with Etzel III
In gas storage, E.ON is well on track towards its 2015 target by taking the final investment decision for Etzel III Storage capacity NW Europe1 in bcm > 4.0 y Decision to build Etzel III with 1.5 bcm working gas capacity (2.5 bcm taking 9.5-11.5 1.0-2.0 into account options) 1.5-2.5 taken after May
Slide 36: Gas upstream: Skarv/Idun strengthens North Sea position
In gas upstream, investment in Skarv/ Idun gas fields strengthens E.ON’s position in the North Sea Skarv-Idun area PL 350 PL 436 Skarv/ Idun area: y Estimated average gas production of PL 434 PL 107 ~ 1.4 bcm for E.ON over 10 years PL 347 y Planned production complements the PL 281 PL 348 production
Slide 37: Strict strategic and financial investment criteria for growth
All external growth opportunities are subject to E.ON’s strict strategic and financial investment criteria Strategic criteria Financial criteria • Market attractiveness y Value enhancing over the project lifetime (returns, growth, regulation, y Earnings enhancing in the first full year country risk)
Slide 38: More than 50% of Europe's generation has to be replaced by 2030
More than 50 % of Europe's generation has to be replaced by 2030 Development of generation from existing power plants in Europe1 5000 in TWh/a 4000 Demand growth Nuclear 3000 0.5 and 1.5 % p.a. Hard Coal 2000 Lignite Gas/oil 1000 Renewables 0 Hydro 2016 2012 2014 2026 2010 2018 2022 2024 2020 2028 2
Slide 39: German capacity margin already below 10%
German capacity margin already below 10 % German capacity balance at time of peak demand Total installed capacity (119.4 GW) Not available capacity (22.8 GW) e.g. mothballed fossil stations and limited capacity credit wind and solar Unplanned unavailabilities (4.1 GW) Planned unavailabilities (2.7 G
Slide 40: Different load ranges require different technologies
Different load ranges require different technologies - nuclear economically most attractive for base load Long-term new entry costs in Europe1 100 in €/MWh 80 60 Carbon 40 €/t Carbon 20 €/t 40 Fuel & other variable costs 20 Fixed operating costs 0 Capital costs CCGT Hard Nuclear CCGT Hard Coal Coal
Slide 41: Expected economics of generation technologies under market scenarios
Expected economics of different generation technologies under different market scenarios Coal CCGT Nuclear Renewables Stepwise Auctioning ++ + ++ + Global Gas Markets - ++ o o1 Global Growth ++ -- ++ o1 Green World - -/++2 o ++ ++ 1. In principle “+” but deduction since higher profitability for rene
Slide 42: E.ON's scenarios for the European power generation market
E.ON‘s scenarios for the European power generation market Green world Global growth Highest carbon reduction target and High global economic growth rates; very high share of renewables; high efforts in fuel prices; high growth in electricity demand; saving energy; very high carbon prices; carbon pri
Slide 43: How much of E.ON's economic generation is hedged?
How much of E.ON’s economic generation is hedged? Central Europe United Kingdom 2008 2008 2009 2009 2010 2010 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Nordic United States*) 2008 2008 2009 2009 2010 2010 *) including WKE 0% 10% 20% 30% 40% 50% 60% 70% 8
Slide 44: Development of electricity prices in selected markets
Development of Electricity Prices in selected markets Baseload forward prices calendar year 2009 in €/MWh Key drivers Last 12 Months March 2007 y UK forward prices appear to be driven 90 mainly by the UK natural gas and CO2 prices. 80 y Nordic forward prices appear to be driven mainly by the hydrolo
Slide 45: Europe – Coal and CO2 Prices
Europe – Coal and CO2 Prices ARA (Coal) – Last 12 months Current month Key Messages 140 130 Coal market 120 The production and supply problems 110 in China, Australia and South Africa USD/t 100 during February were resolved, taking 90 out some of the fear and risk premium 80 70 from the market. 60 F
Slide 46: E.ON allocated around 55 mt of CO2 allowances for 2008-12
E.ON will be allocated around 55 mt1 of CO2 emissions allowances for the 2008-12 trading period in mn tons CO2 89.8 y In 2007, E.ON emitted 90 mn tons of CO2 in the EU 29.8 ~ 55 y CO2 allocation for the 2008-12 trading period estimated 22.7 16 at 55 mn tons 15 y LT capacity contracts transfer 36.1 p
Slide 47: Ambitious targets for renewable energies
Ambitious targets for renewable energies EU-level Member-State level Targets y 20% renewables in 2020 (8.5% in y Germany: 18% (2005: 5,8%); UK 15% 2005), whereof 10% biofuels (2005 1,3%); Sweden 49% (2005 39 %) y Burden-sharing among Member states based on 50% flat-rate 50% GDP Target y Non-binding
Slide 48: Emission trading will be more centralized from 2013
Emission trading will be more centralized from 2013 ET-Sector Actual ET-directive Proposal EU-Commission CO2-Cap y National regulation in NAP y EU-wide uniform Cap; - 21% from 2008/12 to 2020 Allocation y National regulation, in Germany: y EU-wide uniform product-oriented benchmarks (BM) y No free a
Slide 49: Update on network regulation in Germany
Update on network regulation in Germany y Second round of network fees approval ongoing y Previous network fees approvals ran out on 31 December 2007 for electricity and 31 March 2008 for gas y New network fees are valid for remainder of 2008 and for the start of incentive regulation in 2009 y One d
Slide 50: Regulation of network charges in Germany – incentive regulation
Regulation of network charges in Germany – Core components of forthcoming incentive regulation y Start 01.01.2009 on basis of 2nd network tariff authorization (cost base 2006) y Revenue adjustment on the basis of individual and sectoral efficiency targets on controllable costs: - Reduction of indivi
Slide 51: Outlook 2008
Outlook 2008 Adjusted EBIT To be 5 – 10 % above 2007 level Adjusted net income To be slightly above 2007 level 50
Slide 52: E.ON Group – Financial highlights
E.ON Group – Financial highlights € in million 2007 2006 +/- % Sales 68,731 64,091 +7 Adjusted EBITDA 12,450 11,724 +6 Adjusted EBIT 9,208 8,356 +10 Adjusted net income 5,115 4,682 +9 Cash provided by operating activities 8,726 7,161 +22 Investments 11,306 5,037 +124 Economic net debt -24,138 -18,23
Slide 53: Market units – Key financial figures 2007
Market units – Key financial figures 2007 € in million Sales Adjusted Adjusted Capital ROCE Cost of Value Operating EBITDA EBIT Employed (%) Capital (%) Added Cash Flow Central Europe 32,029 6,222 4,670 18,943 24.7 9.3 2,917 3,811 Pan-European Gas 22,745 3,176 2,576 17,130 15.0 8.8 1,062 3,041 U.K.
Slide 54: Status share buyback
Status share buyback y To date E.ON has bought back around 34.4 mn shares (27.9 mn in 2007 and 6.5 mn in 2008) with a total value of € 4.3 bn. y 25 mn shares have already been cancelled. y E.ON has also sold 13.5 mn put options to monetize high volatility levels.1 y The remaining € 2.7 bn will be re
Slide 55: E.ON uses the debt factor as its core capital structure measure
E.ON uses the debt factor as its core capital structure steering measure € in billion Dec. 31, 2007 Dec. 31, 2006 Liquid funds 7.1 6.2 Non-current securities 6.9 7.2 Total liquid funds and non-current securities 14.0 13.4 Total financial liabilities -21.5 -13.5 Net financial position -7.5 -0.1 Provi
Slide 56: Funding program successfully started
Funding program successfully started y Since September 2007, E.ON has issued three benchmark bonds in the respective amounts of € 3.5 bn, GBP 1.5 bn and CHF 0.425 bn. Furthermore, E.ON has made use of reverse inquiry opportunities with a total amount of over € 500 mn in 2008. y In November 2007, E.O
Slide 57: E.ON Group – Debt profile
E.ON Group – Debt profile as of December 31, 2007; € in billion Financial liabilities to banks and third parties E.ON AG & Market Units & E.ON Group E.ON Int. Finance B.V. Other Bonds 12.8 1.7 14.5 Commercial Paper 1.8 0.2 2.0 Bank Loans / others 0.4 2.5 2.9 Total 15.0 4.4 19.4 Bonds of E.ON AG & E.
Slide 58: Forward-looking statements
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