E.on Se · XETR:EOAN
E.on — BNP Paribas Utilities Conference 2007
31 slides from E.on's conference presentation, Jun 1, 2007
Slide 1: E.ON Presentation
E.ON Presentation Dr. Verena Volpert, Senior Vice President Finance BNP Paribas Utilities Conference, London, 01 June 2007
Slide 2: E.ON specified strategic direction for short- and long-term value-enhancing development
On May 31, 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 pote
Slide 3: E.ON's competition initiative: Promotion of competition and EU market integration
E.ON’s “competition initiative” : Promotion of competition and EU market integration Active promotion y Market coupling between German and neighboring of EU energy agenda power markets y Power and gas interconnection projects, e.g. new gas Optimized group transmission route through the Alps to Italy
Slide 4: Implement cross-regional integration measures latest by January 2008
Implement cross-regional integration measures latest by January 2008 Active promotion of EU energy agenda y Unified Trading Unit Optimized group set-up y Unified Fossil Generation New Build Unit y Unified Renewables & Climate Protection Unit1,2 Updated investment & growth program Ambitious operation
Slide 5: Deploy €60 bn investment including €42 bn growth program by 2010
Successfully deploy € 60 bn investment including € 42 bn growth investment program by 2010 Active promotion of EU energy agenda Optimized group y Acquisition of Endesa Assets/Viesgo set-up y Comprehensive generation new build program with Updated investment superior value proposition (100 bp above W
Slide 6: 70% of E.ON's €60 bn investment program are value enhancing
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 Acquisition Investments New Mainten./ Tot
Slide 7: Organic investments into generation technologies and renewables are key growth areas
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 Growth w/o renewables maintenance/ €
Slide 8: Acquisition of Endesa assets/Viesgo gives generation positions in new European markets
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 be extended through new (whereof at least 70% E.ON) CCGT and wind b
Slide 9: E.ON's operational objectives and commitments
E.ON’s operational objectives and commitments 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 Re
Slide 10: E.ON will grow its generation position across Europe by ~50% until 2010
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 Endesa assets/Viesgo and 10.5 12.5 strengthen acquired positions CE W
Slide 11: E.ON's ambitious financial targets
E.ON’s ambitious financial targets 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 targeted debt
Slide 12: E.ON Group – Financial highlights
E.ON Group – Financial highlights according to IFRS; € in million Q1 2007 FY 2006 Sales 21,070 64,091 Adjusted EBITDA 4,096 11,789 Adjusted EBIT 3,315 8,356 Net income attrib. to shareholders of E.ON AG 3,067 5,586 Adjusted net income 1,974 4,682 Cash provided by operating activities 2,408 7,161 Fre
Slide 13: E.ON Group – Adjusted EBIT by Market Unit
E.ON Group – Adjusted EBIT by Market Unit according to IFRS; € in million Q1 2007 FY 2006 Central Europe 1,431 4,235 Pan-European Gas 1,126 2,347 U.K. 436 1,239 Nordic 287 512 U.S. Midwest 93 426 Corporate Center -58 -403 Adjusted EBIT 3,315 8,356 12
Slide 14: E.ON Group - Outlook 2007
E.ON Group - Outlook 2007 FY 20061 Expected Adjusted Group EBIT To be above 2006 level 8,356 Expected Adjusted EBIT by Market Units: Central Europe To be above 2006 level 4,235 Pan-European Gas To be slightly below 2006 level 2,347 U.K. To remain at 2006 level 1,239 Nordic To be significantly above
Slide 15: "10 until 10": Increase Adjusted EBIT by 10% p.a. until 2010
“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 investment plan 07 – 09 and net
Slide 16: E.ON will use Economic Net Debt to measure indebtedness
E.ON will use Economic Net Debt in the future to measure indebtedness € 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 Provisions for asset
Slide 17: E.ON's financial situation has considerably improved
E.ON‘s financial situation has considerably improved Net Financial Position1 (in bn €) -14.2 -11.5 CTA donation y Economic Net Debt improved by -9.1 12 bn € from end of 2003 to 2006 -6.4 y However, this positive -1.6 development was accompanied -0.1 by criticism of E.ON‘s capital 3.5 structure which
Slide 18: E.ON confirms new Single A flat / A2 target rating
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 E.ON AA- Aa31 flat rating l
Slide 19: Rating objective will be converted into a financial target
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 debt3 15-20%4 Debt factor (
Slide 20: A Debt factor of 3x is in line with rating agency guidance
A Debt factor of 3x is in line with the current guidance 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
Slide 21: E.ON's capital structure will be managed actively in both directions
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 investment discipline; portf
Slide 22: Growth program will utilize balance sheet and step up cash flow generation
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 investm. to yield > € 4 bn
Slide 23: Target capital structure shall be achieved by end of 2008
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 of 3x by 2008 2004 2005 2006
Slide 24: E.ON's future dividend policy and share buybacks
E.ON’s future dividend policy and share buybacks 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 share buybacks or temporary ch
Slide 25: E.ON's financial indebtedness will increase heavily
E.ON‘s financial indebtedness will increase heavily Gross financial debt – schematic graph y Major increase in indebtedness until 2010 y Financing becomes an important and ongoing issue for E.ON 13.5 bn € 2006 2007 2008 2009 2010 24
Slide 26: E.ON's refinancing plans
E.ON‘s refinancing plans • E.ON has access to virtually all segments of the debt capital markets • Significant fund raisings will take place in several markets in a well coordinated and planned manner during the next years • E.ON will issue sizable benchmark debt transactions in all major currencies
Slide 27: Financial instruments of E.ON AG and finance subsidiaries in March 2007
Financial instruments of E.ON AG and finance subsidiaries in March 2007 Financial instrument Volume Utilization Medium Term Note Programme € 20 bn € 7.4 bn EURO Commercial Paper Programme € 10 bn € 2.3 bn Syndicated Multi-Currency Revolving € 10 bn 0 Credit Facility Agreement 26
Slide 28: Financial instruments of E.ON AG and finance subsidiaries in the future
Financial instruments of E.ON AG and finance subsidiaries in the future (current expectation, not finally decided) Financial instrument Volume Medium Term Note Programme € 50 bn USD bonds tbd EURO Commercial Paper Programme € 10 bn USD Commercial Paper Programme $ 10 bn Syndicated Multi-Currency Rev
Slide 29: E.ON Group – maturity profile of bonds
E.ON Group – maturity profile of bonds1 4,8 4,6 y Total bonds outstanding: € 9.1 bn 4,4 Not our preferred y Currency Mix: 4,2 4,0 structure for the 3,8 future Volume Equivalent Share in billion EUR 3,6 2,0 3,4 1,8 (in bn) in € (in bn) 3,2 1,6 3,0 EUR 5.4 5.4 59% 1,4 2007 2008 2009 2010 2011 2012 201
Slide 30: We hope to see you again soon…
C-or We hope to see you again soon...
Slide 31: 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