E.on Se · XETR:EOAN
E.on — Non-Deal Roadshow (October 2008)
59 slides from E.on's roadshow presentation, October 2008
Slide 1: E.ON Non-Deal Roadshow
E.ON Non-Deal Roadshow October 2008
Slide 2: Investment and Growth Program; Financial Strategy & Funding Program
1. Investment and Growth Program – fully on track 2. Financial Strategy & Funding Program 1
Slide 3: E.ON's clear strategic direction and financial targets
E.ON’s clear strategic direction and financial targets y Integrate core functions of what is Europe’s broadest power and gas platform with a strong presence in almost 30 European countries y € 50 bn investment program for 2008-2010 with increasing focus on organic growth y Main expansion areas: y Po
Slide 4: Strategic package presented in May 2007 fully on track
Strategic package presented in May 2007 fully on track May 2007 promises Status Reorganization of business to capture cross-regional benefits (Trading, EC&R) Invest € 60 bn in 2007-2010 with >70% into growth Optimize the capital structure (Debt factor ~ 3x) Share buy back of € 7 bn Dividend growth 1
Slide 5: Facts on our delivery
Facts on our delivery Reorganisation Share buy back Dividend growth Capital structure y EC&R established y € 3.5 bn of shares y 22% year on year y Debt factor of around bought back in 2007 growth delivered for 3x almost reached mid y Trading unit created, and cancelled 2007 2008 on an LTM basis yiel
Slide 6: E.ON Group – Financial highlights
E.ON Group – Financial highlights € in million H1 2008 H1 2007 +/- % FY 2007 Sales 41,218 35,559 +16 68,731 Adjusted EBITDA 7,363 6,956 +6 12,450 Adjusted EBIT 5,760 5,426 +6 9,208 Adjusted net income 3,331 3,087 +8 5,115 Cash provided by operating activities 4,830 4,759 +1 8,726 Economic investment
Slide 7: E.ON Group – Adjusted EBIT by market unit
E.ON Group – Adjusted EBIT by market unit € in million H1 2008 H1 2007 +/- % FY 2007 Central Europe 2,713 2,544 +7 4,670 Pan-European Gas 1,679 1,631 +3 2,576 U.K. 563 741 -24 1,136 Nordic 517 475 +9 670 U.S. Midwest 150 176 -15 388 Energy Trading 99 - - - Corporate Center / New Markets 39 -141 - -2
Slide 8: Short term profitability: Solid performance expected
Short term profitability: Solid performance expected 2008 on track 2010 target y H1 2008 adjusted EBIT +6% over prior y Adjusted EBIT of € 12.4 bn to be year despite negative impact from achieved in 2010 based on current nuclear outages in Germany (-€ 224 m asset portfolio vs. H1 2007) and the stron
Slide 9: Long term yield: Several investments with earnings contribution post 2010
Long term yield: Several investments with earnings contribution post 2010 Renewables y Investments 2007 – 06/2008 in total ca. € 3 bn1 ; EBIT contribution in H1 08 of € 27 m y By 2010 € 6 bn will be invested yielding at least € 300 m in Adjusted EBIT in 2010 y All projects with visibility of beating
Slide 10: Investment plan: Right on track to deliver
Investment plan: Right on track to deliver (all figures in € bn) 63 13 ~15 4 Asset swaps (closing end 2008) 2 Russian generation (construction started) ~3 Other (mainly power networks)1 ~€ 13 bn ~5 Gas conventional ~5 Growth generation (several projects started) power- ~3 Renewables (high visibility
Slide 11: Geographically and technologically balanced pipeline of new-build projects
Geographically and technologically balanced pipeline of new-build projects with majority under construction Name Type Capacity (MW) Start-up date For all conventional power generation projects 1 Irsching 4 CCGT 540 2011 under construction worldwide, plus Staudinger 6: Irsching 5 CCGT 860 2009 2 Datt
Slide 12: Four conventional 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 426 MW CCGT 800 MW Coal Commissioning 2011 Commissioning 2010 Trimble County 2 Coal 809 MW Commissioning 2010 Shaturskaya Surgutskaya 409 MW CCGT 803 MW CCGT under construction Co
Slide 13: Power generation: Is the market delivering the right signals?
Power generation: Is the market delivering the right signals? Component prices1 and E.ON sourcing2 Long run marginal cost now too high? y Component prices entered a zone where there is a certain risk of them not being adequately reflected by market prices y However, in certain very capacity constrai
Slide 14: Power generation: Structural upward shift in costs
Power generation: Structural upward shift in costs Generic cost of investment (nominal) Main points: y Investment cost curve has been shifted upwards during last 24 months (shift to Cost of investment sellers market but also by structurally higher raw material cost) y This increased market investmen
Slide 15: Financial Strategy & Funding Program
Investment and Growth Program – fully on track Financial Strategy & Funding Program 14
Slide 16: E.ON uses the debt factor as its core capital structure steering measure
E.ON uses the debt factor as its core capital structure steering measure € in billion H1 2008 FY 2007 Liquid funds 5.7 7.1 Non-current securities 5.2 6.9 Total liquid funds and non-current securities 10.9 14.0 Total financial liabilities -34.5 -21.5 Net financial position -23.6 -7.5 Provisions for p
Slide 17: Financial instruments of E.ON AG and finance subsidiaries
Financial instruments of E.ON AG and finance subsidiaries Utilization Financial instrument Volume as of 30 June 2008 Debt Issuance Program € 30 bn € 18.3 bn 144A/Reg S USD bond issue $ 3 bn EURO Commercial Paper Program € 10 bn € 4.3 bn USD Commercial Paper & Extendible Note Program $ 10 bn 0 Syndic
Slide 18: Our funding principles target funding certainty and cost minimization
Our funding principles target at funding certainty and cost minimization y Centralization of funding at group level continues to be pursued - funding primarily via E.ON International Finance B.V. guaranteed by E.ON AG y Instrument and market mix to diversify our investor base and ensure demand y Bal
Slide 19: Since September 2007, nearly 17 billion € funded via bond transactions
Since the start of our funding program in September 2007, nearly 17 billion € has been funded via bond transactions Date Funding Source Maturity [years] Sep 07 EUR 3.5 bn benchmark bonds 5 & 10 Oct 07 GBP 1.5 bn benchmark bonds 12 & 30 Dec 07 CHF 0.425 bn benchmark bonds 3&7 Mar 08 EUR 0.625 bn ~9,5
Slide 20: E.ON Group – Debt Profile
E.ON Group – Debt Profile as of June 30, 2008, € in billion Financial liabilities to banks and third parties E.ON AG & Market Units E.ON Group E.ON Int. Finance B.V. Bonds 19.8 1.4 21.2 Commercial Paper 4.3 0.4 4.7 Bank Loans / others 1.4 5.0 6.4 Total 25.5 6.8 32.3 Bonds of E.ON AG & E.ON Internati
Slide 21: Back-up Charts
Back-up Charts
Slide 22: E.ON is one of the world's leading energy companies
Back-up 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 suppl
Slide 23: New markets and businesses complement existing Market Unit structure
Back-up 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 22
Slide 24: 2008-10 investment plan focuses on growth in generation, renewables and gas
Back-up 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/Viesgo1 ~6 Growth ~4 Asset swap with Statkraft ~ € 36 bn or 72% ~8 ~4 Others (mainly power networks) ~2 New markets (mainly Russia)
Slide 25: External growth opportunities subject to strict investment criteria
Back-up 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 count
Slide 26: Current focus: integration and active portfolio management
Back-up E.ON's current focus: integration and active portfolio management Integration of recent Review of E.ON's portfolio of acquisitions assets and businesses y OGK-4 y Whole portfolio to be reviewed y Energi E2 Renovables Ibéricas, until 2010 Airtricity North America y Strategic fit y Endesa asse
Slide 27: E.ON entered the Russian power market through acquisition of OGK-4
Back-up 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 y Equity investment Purchase price: € 4.4 bn for 72.7% Mandatory offer:2 € 0.2 bn for 3.4% OGK-4 Generation assets y Shareholder structure Key f
Slide 28: OGK-4 - Strong presence on attractive local markets in Russia
Back-up OGK-4 - Strong presence on attractive local markets in Russia Shaturskaya GRES Yajvinskaya GRES Surgutskaya GRES-2 Moscow region, IES Center Perm region, IES Urals Tyumen region, IES Urals Capacity: 1,100 MW Capacity: 600 MW Capacity: 4,800 MW Production: 4.91 TWh Production: 4.30 TWh Produc
Slide 29: Russian power industry needs large-scale capital investments
Back-up Russian power industry is experiencing need in large-scale capital investments Obsolete and aging Declining reserve margins generating fleet in all regional energy systems 60 31.8% 1971-1980 40 23.8% 1961-1970 1981-1990 25.4% 20 1991-2000 6.5% 8.7% 1951-1960 1.4% before 1950 from 2001 2.4% S
Slide 30: Stepwise liberalization set by the Russian government
Back-up Stepwise liberalization is set by the Russian government Liberalization scenario Current stage y Liberalization ratios are applied to the electricity and capacity volumes included in the FTS balance for 2007 (excl. volumes sold to the households) y Capacity and electricity sold to the househ
Slide 31: Russian fuel markets development
Back-up Russian fuel markets development Assumed change in fuel mix of Approved increase of regulated Russian thermal generation tariffs for gas for all consumers +40.0% +28.0% +19.9% +28.6% Tariff 2007 2008 2009 2010 2011 Source: Russian government Resolution N 215-p dated February 22, 2008 Source:
Slide 32: Western Europe will increasingly rely on gas imports
Back-up Western Europe1 will increasingly rely on gas imports in bcm 650-700 620-645 E.ON’s response to Europe’s 16% Supply gap increasing reliance on gas 7% 530 6% imports2 6% Advanced projects3 11% 12% 11% Other non-EU imports y Long-term gas import 10% 9% contracts remain backbone 8% Algeria of s
Slide 33: Growing gas imports provide opportunities across the gas value chain
Back-up Growing imports of natural gas provide opportunities in many parts of the gas value chain Gas pipeline Skarv-Idun y Investments in upstream to reach own Gas storage gas production of ~ 10 bcm p.a. LNG terminal Gas field y Development of gas storage capacity in Germany, the UK, Austria and No
Slide 34: Gas storage on track towards 2015 target with Etzel III
Back-up 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 af
Slide 35: E.ON's approach to renewables: scaling up the business
Back-up 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 – ener
Slide 36: E.ON Climate & Renewables: significant progress since May 2007
Back-up E.ON Climate & Renewables: significant progress since May 31st, 2007 Installed capacity (GW) y New market unit E.ON Climate & Renewables ~ 10 up and running: E.ON now the 7th largest wind generator worldwide y Acquisitions of Energi E2 Renovables Ibéricas ~4 and Airtricity North America succ
Slide 37: Well positioned to take advantage of tomorrow's opportunities
Back-up 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 continui
Slide 38: More than 50% of Europe's generation has to be replaced by 2030
Back-up 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 2026 2012 2014 2010 2018 2022 2024 202
Slide 39: German capacity margin already below 10%
Back-up 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 unavailabilitie
Slide 40: How much of E.ON's economic generation is now hedged
Back-up How much on E.ON‘s economic generation is now 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
Slide 41: Europe – Coal and CO2 Prices
Back-up Europe – Coal and CO2 Prices ARA (Coal) – Last 12 months August 2008 Key Messages 210 y Coal market 190 Coal prices rose slightly due to 170 China’s introduction of a tax on USD/t 150 thermal coal exports, Russian railcar 130 shortage and political tension in 110 Indonesia. 90 70 y Freight r
Slide 42: Germany and United Kingdom – Dark and Spark Spreads
Back-up Germany and United Kingdom – Dark and Spark Spreads German Dark Spreads – Last 12 months August 2008 Key Messages 50 y Germany 40 The clean dark spread has EUR/MWh 30 increased since much stronger base power quotations have over- 20 compensated higher coal and 10 carbon costs. 0 22.8.08 29.8
Slide 43: Russian power prices have picked up since liberalization
Back-up Power prices have picked up since the start of the liberaliza- tion, mainly driven by soaring fuel prices and demand growth Electricity spot price development January 2007 – July 2008 (RUB/MWh) 1000 y Increase of domestic gas 800 prices approved by the € 19.1/MWh2 Government pushes power 600
Slide 44: E.ON allocated around 55 mt of CO2 allowances for 2008-12
Back-up E.ON will be allocated around 55 mt1,2 of CO2 emissions allowances for the 2008-12 trading period in mn tons CO2 89.8 In 2007, E.ON emitted 90 mn tons of CO2 in the EU 29.8 CO2 allocation for the 2008-12 ~ 55 trading period estimated 22.7 16 at 55 mn tons 15 LT capacity contracts transfer 36
Slide 45: Carbon target of 360 g CO2/kWh by 2030
Back-up 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% (ga
Slide 46: E.ON develops the world's most efficient fossil-fired power plants
Back-up E.ON develops the world's most efficient fossil-fired power plants Hard coal: efficiency > 50 % Gas CCGT: efficiency > 60 % y Location: Wilhelmshaven (Germany) y Location: Irsching (Germany) y Gross capacity: 550 MW y Gross capacity: 530 MW y Commissioning: 2014 y Commissioning : 2011 45
Slide 47: Different load ranges require different technologies
Back-up 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 Co
Slide 48: Strong operational performance sustains nuclear development activities
Back-up Strong operational performance of its plants sustains E.ON's development activities in nuclear power Average availability percentage1 UK 100 Pre-licensing activities, sites assessment and participation in government-led 80 consultation 60 Finland 91.9 88.5 40 Competing as part of one of the
Slide 49: Recent proposal to EU Commission diversifies geographical presence
Back-up 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
Slide 50: Generation assets proposed to the EU Commission (1)
Back-up Generation assets proposed to the EU Commission (1) Capacity @ Interest Interest to be Capacity to be 100% (MW) (%) Divested (%) divested (MW) Nuclear Gundremmingen B 1,284 25.0 25.0 321 Gundremmingen C 1,288 25.0 25.0 322 Krümmel 1,346 50.0 50.0 673 Unterweser 1,345 100.0 14.0 184 Run-of-ri
Slide 51: Generation assets proposed to the EU Commission (2)
Back-up Generation assets proposed to the EU Commission (2) Capacity @ Interest Interest to be Capacity to be 100% (MW) (%) divested (%) divested (MW) Coal Zolling 449 100.0 100.0 449 Farge 350 100.0 100.0 350 Mehrum C 690 50.0 50.0 345 Rostock 508 50.4 50.4 256 Veltheim 2/3 395 67.0 67.0 265 Bexbac
Slide 52: Update on network regulation in Germany
Back-up Update on network regulation in Germany 2006 2008 2009 2014 Setting of network Setting of network Start of first 5-year Start of second 5-year charges until Dec 2007 charges until start of regulatory period of regulatory period of for electricity and incentive regulation incentive regulation
Slide 53: E.ON commits to a Single A flat / A2 target rating
Back-up E.ON commits itself to a Single A flat / A2 target rating (based on current rating agencies’ methodology) Reasoning Ratings of E.ON‘s Peers1 y For a leading power and gas Standard & Poor's Moody's company a solid rating is a “must” EdF AA- stable Aa1 stable y Increased leverage at a single A
Slide 54: Target capital structure to be achieved by end of 2008
Back-up Target capital structure to be achieved by end of 2008 Investment program Cash returns to shareholders ~28 bn € investments planned Regular dividend is during 2008 supplemented by share buyback of 7 bn € E.ON’s Debt factor 3.0x 1.9x 1.9x Target: 1.5x Debt factor of 3x by end of 2008 2004 200
Slide 55: E.ON Group – Development of economic net debt
Back-up E.ON Group – Development of economic net debt First Half 2008 in € billion -24.1 -39.7 -15.8 +0.2 -2.9 -0.5 +4.8 -1.4 Economic net Economic net debt as of Economic Cash debt as of Dividends Share buyback provided by Divestments Others Dec. 31, 2007 Investments June 30, 2008 operating activit
Slide 56: E.ON's balance sheet
Back-up E.ON‘s balance sheet according to IFRS; € in billion June 30, 2008 Goodwill and intangible assets 29 y Pension provisions relating Property, plant and equipment 55 to partly unfunded defined Companies accounted for under the equity method 9 benefit obligations Share investments 14 amounted t
Slide 57: E.ON continues to provide attractive cash returns to shareholders
Back-up E.ON continues to provide attractive cash returns to shareholders 1.42 1.37 1.12 y Dividend to grow y 2007 proposed 0.92 by 10-20% between dividend up 22% to 0.78 2007 and 2010 € 1.367 per share 0.67 47 49 47 51 y Payout ratio of 50- y 2007 proposed 60% of adjusted payout ratio of 51% net in
Slide 58: Market units – Key financial figures 2007
Back-up 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 3,0
Slide 59: Forward-looking statements disclaimer
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