Rwe Ag · XETR:RWE
Rwe — Q3 2003 Earnings Presentation
39 slides from Rwe's earnings presentation, Nov 13, 2003
Slide 1: Report on the First Three Quarters of Fiscal Year 2003
Report on the First Three Quarters of Fiscal Year 2003 Essen, November 13th, 2003 Harry Roels Chief Executive Officer RWE AG Klaus Sturany Chief Financial Officer RWE AG
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: Agreement With RWE Gas' Municipal Shareholders Reached
Agreement With RWE Gas’ Municipal Shareholders Reached n The agreement enables RWE to also fully integrate all German gas activities into the new regional energy companies and generate the full scope of synergies of the reorganisation (€ 300 m). n It settles all related issues fast and provides clar
Slide 4: Agreement vs. Previous Status Quo
Agreement vs. Previous Status Quo New Agreement Previous Status Quo Municipal shareholders of RWE Gas will get: Municipal shareholders of RWE Gas were getting: n 20% stake in regional energy company n 20% stake in RWE Gas’ equity and RWE Westfalen Weser Ems but no blocking 25% of voting rights (bloc
Slide 5: Valuation
Valuation n 2002 valuation of 20% of RWE Gas € 668 m (annual dividend included) n Ability to generate additional synergies and cost cuts in the gas business in the order of € 21 m per annum pre-tax (assuming a WACC of 9%) n Present value of agreement € 900 m 5
Slide 6: Headlines
Headlines n Operating result - group level up by 25% - core business up by 33% due to first time consolidations and strong performance in electricity and gas n Net income - before goodwill amortization up by 1 % - after goodwill amortization down by 19% n Strong reduction of net debt down to € 18.8
Slide 7: Operating Result by Business Area
Operating Result by Business Area January - September 2003 2002 change € million in % Electricity 2 382 1 797 +32.6 Gas 871 650 +34.0 Water 967 701 +37.9 Environmental Services 63 78 -19.2 Total core business 4 283 3 226 +32.8 Heidelberg -101 170 -159.4 Hochtief 6 46 -87.0 Total non-core business -9
Slide 8: EBITDA by Business Area
EBITDA by Business Area January - September 2003 2002 change € million in % Electricity 3 387 2 772 +22.2 Gas 1 165 844 +38.0 Water 1 468 1 078 +36.2 Environmental Services 163 207 -21.3 Total core business 6 183 4 901 +26.2 Heidelberg 82 356 -77.0 Total non-core business 82 408* -79.9 Others/Holdin
Slide 9: Non-Operating Result
Non-Operating Result January - September 2003 2002 change € million (absolute) Gains on disposals 426 1 031 -605 Goodwill amortization -727 -539 -188 Restructuring / others 286 -578 +864 Total -15 -86 +71 9
Slide 10: Financial Result
Financial Result January - September 2003 2002 change € million in% Net interest -775 -435 -78.2 Interest share in long-term provisions -1 209 -1 133 -6.7 Other financial result -108 -254 +57.5 Total -2 092 -1 822 -14.8 10
Slide 11: RWE Group Results Q1-Q3 2003
RWE Group Results Q1-Q3 2003 January - September 2003 2002 change € million in % Operating result 3 965 3 183 +24.6 Non-operating result -15 -86 +82.6 Financial result -2 092 -1 822 -14.8 Income before tax 1 858 1 275 +45.7 Tax -946 -118 -701.7 Income after tax 912 1 157 -21.2 Minorities -180 -251 +
Slide 12: Electricity Business Area
Electricity Business Area January - September 2003 2002 change € million in% Electricity generation m kWh 235 298 202 101 +16.4 Electricity sales volume m kWh 218 393 185 867 +17.5 External revenue 19 132 16 637 +15.0 EBITDA 3 387 2 772 +22.2 Operating result 2 382 1 797 +32.6 Capital expenditure on
Slide 13: Electricity Prices in Germany
Electricity Prices in Germany Forward 2003 Forward 2004 RWE- prices 4.5 in cent/kWh * Wholesale Peak Distributing utilities 4.0 reduced by grid fees Industrial customers: 3.5 Chemicals reduced by grid fees Wholesale Base 3.0 2.5 2.0 1.5 1.0 Dec. Apr. Aug. Dec. Apr. Aug. Dec. 13 01 02 02 02 03 03 03
Slide 14: Extended Cost Cutting Program
Extended Cost Cutting Program 130 2 855 100 370 € million p.a. 70 300 300 1 955 230 achieved Jan – Sept. 2003 achieved 2003 2004 2005 2006 ∑ 2006 (7/00 - 31.12.2002) target new target new target new target new target New cost cutting program Already achieved To come due to Group reorganization + € 1
Slide 15: Electricity Business Area Key Figures by Division
Electricity Business Area Key Figures by Division January - September EBITDA Operating result € million 2003 2002 2003 2002 Power Generation 693 610 569 462 Lignite-Fired Power Gen. and Mining 765 782 378 367 Trading 22 29 20 28 Net 587 555 438 415 Sales 547 499 394 340 Industrial Services 64 49 24
Slide 16: Electricity Business Area UK Energy (Innogy)
Electricity Business Area UK Energy (Innogy) 2003 2002 change Jan.-Sept. June – Sept. in % Electricity generation m kWh 27 307 9 783 +179.1 Electricity sales volume m kWh 43 633 19 669 +121.8 Gas sales volume m kWh 33 255 9 276 +258.5 External revenue €m 3 903 1 844 +111.7 of which electricity €m 2
Slide 17: Gas Business Area
Gas Business Area January - September Mid-/Downstream Upstream € million 2003 2002 2003 2002 Oil production thsd. m3 - - 4 368 3 947 Gas production* m m3 - - 1 847 1 709 Gas sales volume m kWh 190 437 129 023 - - External revenue 4 437 2 997 930 938 EBITDA 684 405 481 439 Operating result 550 332 32
Slide 18: Gas Business Area Czech Gas
Gas Business Area Czech Gas 2003 2002 change € million Jan.-Sept. May-Sept. in % Gas sales volume m kWh 67 579 18 992 +255.8 External revenue 1 289 450 +186.4 EBITDA 356 169 +110.7 Operating result 268 117 +129.1 Capital expenditure on fixed assets 89 76 +17.1 Work force (equivalents) 5 777 6 089 -5
Slide 19: Water Business Area I
Water Business Area I January - September 2003 2002 change € million in % External revenue 3 165 2 081 +52.1 EBITDA 1 468 1 078 +36.2 Operating result 967 701 +37.9 Capital expenditure on fixed assets 1 022 768 +33.1 Investment in financial assets 4 584 930 +392.9 Work force (equivalents) 30.09.03 v
Slide 20: Water Business Area II
Water Business Area II January - September external EBITDA Operating revenue result € million 2003 2002 2003 2002 2003 2002 UK & Ireland 1 346 1 466 761 815 491 527 of which regulated 1 203 1 279 698 762 424 474 Americas 1 437 304 571 106 371 75 Europe/Middle East/Africa 281 224 123 139 103 88 Asia/
Slide 21: Performance of American Water
Performance of American Water January - September 2003 € million External revenue 1 171 Regulated 1 000 Non-regulated 171 EBITDA 477 Regulated 474 Non-regulated 3 Other/Parent - Operating result 305 Capital expenditure on fixed assets 261 Work force (equivalents) 30.09.2003 6 365 21
Slide 22: Environmental Business Area
Environmental Business Area January - September 2003 2002 change € million in% External revenue 1 466 1 598 -8.3 EBITDA 163 207 -21.3 Operating result 63 78 -19.2 Capital expenditure on fixed assets 65 121 -46.3 Investment in financial assets 58 526 -89.0 Work force (equivalents) 30.09.03 vs. 31.12.
Slide 23: Non-Core Business
Non-Core Business January - September External EBITDA Operating revenue result € million 2003 2002 2003 2002 2003 2002 RWE Dea Downstream - 7 682 - 52 - -6 Heidelberger Druck 2 715 3 322 82 356 -101 170 HOCHTIEF* - - - - 6 46 * At equity. 23
Slide 24: RWE Cash Flow Statement I
RWE Cash Flow Statement I January - September 2003 2002 change € million (absolute) Income after tax 912 1 157 -245 Depreciation, amortization and writebacks 3 302 2 747 +555 Increase / decrease in provisions -222 1 088 -1 310 Change in deferred taxes 495 -43 +538 Disposal gains and non-cash items -
Slide 25: RWE Cash Flow Statement II
RWE Cash Flow Statement II January - September 2003 2002 change € million (absolute) Cash flows from operating activities 3 976 4 044 -68 Cash flows from investing activities (incl. divest.) -5 659 -12 873 +7 214 Cash flows from financing activities 2 527 7 793 -5 266 Exchange rate changes / others
Slide 26: Development of Net Debt Position
Development of Net Debt Position € billion (debt with positive prefix, cash with negative prefix) Net debt Cash flows American Smaller Capex Dividends/ Currency Net debt Fair 31.12.2002 from Water acquisitions/ Others translation 30.09.2003 value of operating effect disposals/ effect net debt relate
Slide 27: Operating Result – Outlook for 2003
Operating Result – Outlook for 2003 January - December 2002 2003 € million forecast Electricity 2 760 ca. +15% Gas 885 ca. +20% Water 963 +35% - 40% Environmental Services 98 ca. -20% Total core business 4 706 ca. +20% Heidelberg 158 Hochtief 28 ** Total non core business 180* Others/Holding/Consoli
Slide 28: Outlook for 2003
Outlook for 2003 January - December 2002 forecast for 2003 € million External revenue core business 34 449 double digit growth non-core business 11 997 2/3 down EBITDA core business 7 123 double digit growth non-core business 466 2/3 down Operating result core business 4 706 + ca. 20% non-core busin
Slide 29: Emissions Trading: Our Current View
Emissions Trading: Our Current View n The German government seems to be aware of the importance of a reasonable ET scheme in order to secure long-term power supply. n The German government has repeatedly mentioned that coal will play an important role within the future generation portfolio. n Emissi
Slide 30: German Network Regulation: Our Current View
German Network Regulation: Our Current View Electricity n Monitoring report confirmed functioning grid access in the electricity sector. n Regulation will be based on the learnings from the association agreements. n As one of the most efficient electricity network companies RWE is well positioned. G
Slide 31: Report on the First Three Quarters of Fiscal Year 2003
Report on the First Three Quarters of Fiscal Year 2003 31
Slide 32: Back-up-Charts
RWE Back-up-Charts
Slide 33: Currency Effects Q1 – Q3 2003
Currency Effects Q1 – Q3 2003 January - September 2003 ∆ to thereof ∆ € million 2002 currency EBITDA1) 3) 6 191 1 076 -211 Operating result1) 3) 3 965 782 -129 Net income after goodwill1) 3) 732 -174 0 Net debt2) € billion 18.8 3.3 -1.5 1) Average exchange rates first nine months 2) Compared with ye
Slide 34: Financial Assets and Liabilities
Financial Assets and Liabilities € 33.2 bn 1.9 other 2.6 commercial paper 6.1 bank loans € 14.4 bn 1.2 other financial assets 0.6 other loans 22.6 bonds 3.0 cash & cash equivalents 9.1 securities held as current assets 0.5 securities held as fixed assets financial assets financial liabilities 34 II
Slide 35: Strong Net Interest Coverage
Strong Net Interest Coverage EBITDA / net interest consolidation of Czech Gas and Innogy for 8 resp. 16 7 months full inclusion of American Water, Czech Gas 11.2x and Innogy 12 8.4 8.0* 8 >7 4 31.12.02 30.06.03 30.09.03 31.12.03e 35 III * Including realised gains/losses from sale of securities EBITD
Slide 36: RWE AG: Flexible Funding Structure
RWE AG: Flexible Funding Structure Average cost of gross debt at 5.2% (versus 5.5% previous year) Fully committed syndicated Loan € 4.5 bn for liquidity back-up and refinancing ( € 2.0 bn 364 days € 2.5 bn 5 years)* € 0.0 bn Commercial Paper (up to 1 year) $ 5.0 bn $ 3.0 bn € 18.1 bn MTN-program (up
Slide 37: Gross Financial Debt Currency Exposure
Gross Financial Debt Currency Exposure* Total debt as of 30.09.2003: € 33.2 bn €/others $ 21% 27% 52% £ With debt in foreign currencies we hedge the translation risk of our international activities. * Including cross-currency swaps. 37 V
Slide 38: Maturity Profile of Capital Market Debt
Maturity Profile of Capital Market Debt* 3,0 22,00 Total: € 20,8 bn** 2,5 17,00 EUR bn (Capital Market Debt Total) 2,0 12,00 EUR bn 1,5 7,00 1,0 2,00 0,5 0,0 -3,00 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 20 20 20 20 20 20 20 20 20 20 20 20 20 20 2
Slide 39: Structural Subordination in the RWE Group
Structural Subordination in the RWE Group RWE AG (A+ / A 1) / RWE Finance B.V. / Consolidated German Subsidiaries* 76% Innogy Holdings Plc Thames Water Aqua Holdings GmbH Thames Water Plc (A+ / A2) 11% Innogy Plc Thames Water Thames Water Thames Water American Water E‘town Corp. (A- / Baa1) Finance