Rwe Ag · XETR:RWE
Rwe — FY2012 Earnings Presentation
50 slides from Rwe's earnings presentation, Mar 5, 2013
Slide 1: 3 Steps to long-term value
3 Steps to long-term value Fiscal year 2012 analyst and investor conference call Essen, 5 March 2013 Peter Terium Bernhard Günther Stephan Lowis Chief Executive Chief Financial Vice President Officer Officer Investor Relations
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: Agenda
Agenda A Peter Terium FY 2012 highlights, strategy update & outlook B Bernhard Günther FY 2012 group results and divisional performance & outlook RWE AG | FY 2012 Conference Call | 5 March 2013 33
Slide 4: Milestones of 2012
Milestones of 2012 Financial performance in line with upgraded guidance from November 2012: EBITDA +10%, operating result +10%, recurrent net income in line with 2011 Disposal of assets for a combined value of €2.1 bn Successful renegotiation of all but one long-term oil-indexed gas supply contracts
Slide 5: Changes in the energy market are structural and future regulatory framework remains uncertain
Changes in the energy market are structural and future regulatory framework remains uncertain German power price development Average utilisation of typical German (€/MWh) power plants 70 67 63 60 60 50 40 2010 2011 2012 2009 2010 2011 2012 RWE avg. realised price 2014 base load forward (EEX) New lig
Slide 6: Generation earnings are coming under severe pressure
Generation earnings are coming under severe pressure Operating result in € bn 6.4 Conventional generation 3.3 > Lower outright power prices > Full auctioning of CO2 certificates > Pressure on spreads and load factors Other businesses > Expanding renewables > Growing upstream business 3.1 > Stable to
Slide 7: Strategic cornerstones remain, but targets adjusted to changing market conditions
Strategic cornerstones remain, but targets adjusted to changing market conditions Sustainable > Streamlined investments in renewables > Development of innovative products for energy market transformation (e.g. distributed energy solutions) Robust > Focus on cost efficiency, especially in conventiona
Slide 8: Implementation of strategy based on 3 steps to create long-term value
Implementation of strategy based on 3 steps to create long-term value Sweat the assets Selective capex Strategic repositioning RWE AG | FY 2012 Conference Call | 5 March 2013 88
Slide 9: Portfolio considerations
Strategic repositioning Portfolio considerations > Sale of NET4GAS envisaged for 2013 Disposals > Further disposals will be opportunistic with focus on portfolio optimisation and value enhancement > Value enhancing growth over volume expansion, Focused especially in renewables growth > Concentration
Slide 10: Excellent access to debt capital market is key
Strategic repositioning Excellent access to debt capital market is key Leverage factor mid-term target: ≤ 3.0x Net debt in € bn 2.8x 3.5x 3.5x ‘In the order of 2012’ 29.0 29.9 33.0 ‘In the order of 2012’ 16.9 19.9 16.2 12.8 13.0 13.1 2010 2011 2012 2013e Leverage factor (Net debt/EBITDA) Net financi
Slide 11: Positive cash balance provides ability to drive down debt
Strategic repositioning Positive cash balance provides ability to drive down debt Cash flows from operating activities to cover investments and dividends by 2015 € bn Further reductions 9.3 in capex levels 8.8 7.1 Additional efficiency enhancements post 5.5 5.5 2014 initiated 4.4 Pay-out ratio of 50
Slide 12: Financial discipline and flexibility at forefront in new investment plan
Selective capex Financial discipline and flexibility at forefront in new investment plan € bn Approx. €13 bn capex programme for 2013 – 2015 ~ 6.7 Day-to-day of which 3.1 for electricity and gas grids ~ 2.3 Renewable projects Completion of conventional power generation programme ~ 1.9 Upstream gas &
Slide 13: Moderate and disciplined growth in German and CEE/SEE downstream markets
Selective capex Moderate and disciplined growth in German and CEE/SEE downstream markets Germany (examples) CEE/SEE (examples) Build on current downstream market Energy services capex (€ million) positions and expand in new markets, 60 regions, and commodities 40 Continue to build electricity down-
Slide 14: Deteriorating conventional power generation
Sweat the assets Deteriorating conventional power generation Profitability of RWE’s conventional generation portfolio1 > Current market situation leads to severe earnings pressure despite significant OR2 > WACC c. > 50% – 60% efficiency improvements > At current market conditions, approx. 1/3 of our
Slide 15: Measures to mitigate market pressure on conventional power generation
Sweat the assets Measures to mitigate market pressure on conventional power generation Focus on cash to improve the situation of the generation business. > gross margin More from better > International fleet dispatch management “cash asset optimi- > Improve gross margin, in particular through furthe
Slide 16: €1 bn efficiency enhancement programme: All measures identified and implementation on track
Sweat the assets €1 bn efficiency enhancement programme: All measures identified and implementation on track €1 bn programme backed bottom- In € million up by operational measures Several hundred individual 1,000 measures across the whole 250 RWE Group ~250 €200 million achieved earlier 550 Reduced
Slide 17: Efficiency enhancements by divisions
Sweat the assets Efficiency enhancements by divisions € bn Supply/Distribution Networks Germany > Reduction of overhead functions in the ~ 0.2 Holding and cross ~ 0.3 Supply/Distribution grid and sales business divisional effects Networks Germany > Development of new products > Optimising grid opera
Slide 18: Outlook for 2013
Outlook for 2013 In € million 9,314 In the order of 9,000 EBITDA 6,416 In the order of 5,900 Operating result Recurrent 2,457 In the order of 2,400 net income 2012 2013e1 Dividend €2.00/share2 Pay out ratio of 50% – 60% of recurrent net income 1 The outlook is after assumed disposals. In 2013 we exp
Slide 19: Summary
Summary Prime target: RWE’s “3 Steps” Budget Outlook to react to tough discipline for 2013 environment and return to confirmed leverage target of 3.0x RWE AG | FY 2012 Conference Call | 5 March 2013 19 19
Slide 20: Agenda
Agenda A Peter Terium FY 2012 highlights, strategy update & outlook B Bernhard Günther FY 2012 group results and divisional performance & outlook RWE AG | FY 2012 Conference Call | 5 March 2013 20 20
Slide 21: Development of operating result
Development of operating result … … by division (+602 million; +10.4%) … by major value drivers1 € million € bn FY 2011 5,814 FY 2011 5.8 Germany – Efficiencies +344 +0.4 Power Generation (old programme) Efficiencies Germany – Sales/ +0.2 +73 (new programme) Distribution networks Depreciation -0.3 N
Slide 22: Reconciliation of (recurrent) net income
Reconciliation of (recurrent) net income € million Depreciation increases as a result of our huge investment programme of recent years EBITDA 9,314 Non-operating result dominated Depreciation -2,898 by value adjustment of Dutch power plant portfolio Operating result 6,416 Non-operating Financial res
Slide 23: RWE's forward hedging of conventional electricity production
RWE’s forward hedging of conventional electricity production (German, Dutch and UK portfolio, excl. RWE Innogy) >20% <10% >30% >10% >40% >10% >60% >20% >70% >30% >70% >40% >70% >70% >90% >80% >90% >90% 2013 forward >30% >10% >40% >10% >50% >20% >50% >30% >60% >40% 2014 forward >30% >10% 2015 forward
Slide 24: Development of net debt influenced by increase in provisions due to low interest environment
Development of net debt influenced by increase in provisions due to low interest environment € billion Capex Dividends Acquisitions/ Cash flows Others Change Hybrid divestiture/ from including in pension, disposals/ operating f/x effects nuclear, (de)consoli- activities mining dation provisions +1.6
Slide 25: Divisional outlook for the operating result
Divisional outlook for the operating result € million 20121 2013 forecast versus 20122 Conventional Power Generation 3,268 Significantly below last year Supply/Distribution Networks Germany 1,578 In the order of last year’s level Supply Netherlands/Belgium 190 In the order of last year’s level Suppl
Slide 26: Operating result outlook for fiscal year 2013
Operating result outlook for fiscal year 2013 … … by major value drivers FY 2012 €6.4 bn Efficiency programme c. €550 million envisaged for 2013 Higher depreciation Increase in the order of €0.2 bn in 2013 Additional burdens of c. €1.2 bn; In FY 2012 still c. 121 million certificates Full auctio
Slide 27: Back-up Charts
Back-up Charts RWE AG | FY 2012 Conference Call | 5 March 2013 27
Slide 28: Performance of the Germany Division (I): Power Generation
Performance of the Germany Division (I) Power Generation Business Area (RWE Power) January – December: operating result: +12.7% (+€344 million) € million + Absence of 2011 one-off burdens from new German energy policy 3,044 + Lower realised electricity prices offset by higher volumes 2,700 (includin
Slide 29: Germany: Clean Dark and Spark Spreads
Germany: Clean Dark (CDS) and Spark Spreads (CSS) 2012 forward 2013 forward 2014 forward Ø 9.96 Ø 7.74 Ø 7.88 Ø 4.93 Ø -2.37 Ø -8.89 Trading year 2011 Trading year 2012 Trading year 2013 CDS Cal 2012–14 Base load (€/MWh) Average CDS CSS Cal 2012 – 14 Peak load (€/MWh) Average CSS (assumed thermal ef
Slide 30: Performance of the Germany Division (II): Sales/Distribution Networks
Performance of the Germany Division (II) Sales/Distribution Networks Business Area January – December: operating result: +4.9% (+€73 million) € million + Efficiency enhancements 1,505 1,578 - Absence of positive one-off items compared to 2011 Distribution networks + Income from sale of distribution
Slide 31: Performance of the Netherlands/Belgium Division (Essent)
Performance of the Netherlands/Belgium Division (Essent) January – December: operating result: -6.9% (-€17 million) € million - Lower electricity generation spreads - Higher depreciation 245 228 + Higher margins in the sales business due to improvement programmes and gas sourcing optimisation 2011 2
Slide 32: NL: Clean Dark and Spark Spreads
NL: Clean Dark (CDS) and Spark Spreads (CSS) 2012 forward 2013 forward1 2014 forward1 Ø 8.59 Ø 7.63 Ø 7.96 Ø -4.55 Ø -1.24 Ø -7.89 Trading year 2011 Trading year 2012 Trading year 2013 CDS Cal 2012 – 14 Base load (€/MWh) Average CDS CSS Cal 2012 – 14 Base load (€/MWh) Average CSS (assumed thermal ef
Slide 33: Performance of the United Kingdom Division (RWE npower)
Performance of the United Kingdom Division (RWE npower) January – December: operating result: +34.5% (+€123 million) € million + Positive f/x effects and successful completion of 2012 efficiency programme 480 Power generation 357 + Lower margins more than offset by commercial operation of Pembroke p
Slide 34: UK: Clean Dark and Spark Spreads
UK: Clean Dark (CDS) and Spark Spreads (CSS) 2012 forward 2013 forward1 2014 forward1 Ø 19.87 Ø 13.78 Ø 19.51 Ø 3.55 Ø 3.12 Ø 2.79 Trading year 2011 Trading year 2012 Trading year 2013 CDS Cal 2012 – 14 Base load (€/MWh) Average CDS CSS Cal 2012 – 14 Base load (€/MWh) Average CSS (assumed thermal ef
Slide 35: Performance of the Central Eastern and South Eastern Europe Division
Performance of the Central Eastern and South Eastern Europe Division January – December: operating result: -5.8% (-€64 million) € million - Negative f/x-effects 1,109 Czech Republic 1,045 - Lower distribution margins + Improved sales business + Improved earnings contribution from NET4GAS Hungary - L
Slide 36: Performance of the Renewables Division (RWE Innogy)
Performance of the Renewables Division (RWE Innogy) January – December: operating result: +1.1% (+€2 million) € million + Increased earnings contribution from growth investments 181 183 - Lower income from disposal of projects - Absence of positive one-off relating to liquidated damages in 2011 2011
Slide 37: Performance of the Upstream Gas & Oil Division (RWE Dea)
Performance of the Upstream Gas & Oil Division (RWE Dea) January – December: operating result: +22.8% (+€127 million) € million + Higher realised oil and gas prices 685 558 - Lower oil and gas production volumes + Positive f/x effects + Lower exploration costs 2011 2012 Guidance for fiscal year 2013
Slide 38: Performance of the Trading/Gas Midstream Division
Performance of the Trading/Gas Midstream Division (RWE Supply & Trading) January – December: operating result: +25.3% (+€202 million) € million Trading + Improved performance in the energy trading business Supply - Burdens from long-term oil-indexed gas contracts -598 + Compensation from commercial
Slide 39: Outlook for the new Conventional Power Generation Division
Outlook for the new “Conventional Power Generation Division” Guidance for fiscal year 2013: Significantly below pro forma 2012 € million - Full auctioning of CO2 certificates 3,268 - UK: “carbon floor” - NL: hard coal tax - Lower realised electricity prices - Closure of 1.8 GW old 150 MW lignite b
Slide 40: Reconciliation to recurrent net income
Reconciliation to recurrent net income January – December 2012 2012 2012 2011 Change € million reported non-rec. recurrent recurrent (absolute) Operating result 6,416 – 6,416 5,814 +602 Non-operating result -2,094 +2,094 0 0 0 Financial result -2,092 – -2,092 -1,633 -459 Income from continuing opera
Slide 41: Cash flow statement
Cash flow statement January – December Change € million 2012 2011 (absolute) Funds from operations (FFO) 5,446 5,946 -500 Change in working capital -1,051 -436 -615 of which: variation margins 831 -1,173 +2,004 Cash flows from operating activities 4,395 5,510 -1,115 Minus capex on fixed assets -5,08
Slide 42: RWE Group electricity production (by geographic region)
RWE Group electricity production (by geographic region) January – December Other Total Total in TWh Germany UK NL/BE Internat. 2012 2011 Lignite 75.6 5.4 81.0 74.1 Nuclear 30.7 30.7 34.3 Hard coal 36.0 16.8 7.3 0.5 60.6 47.8 thereof contracts 22.4 22.4 20.8 Gas 8.4 25.0 6.1 0.1 39.6 38.5 Renewables
Slide 43: RWE Group electricity sales volume (by geographic region)
RWE Group electricity sales volume (by geographic region) January – December Ger- Hun- Total Total in TWh many UK NL/BE Poland gary Other 2012 2011 Residential and commercial 24.4 18.0 11.2 2.4 5.3 0.4 61.7 62.6 customers Industrial and corporate 57.0 31.5 15.3 3.4 4.6 0.9 112.7 113.1 customers Dist
Slide 44: RWE Group gas sales volume (by geographic region)
RWE Group gas sales volume (by geographic region) January – December Ger- Czech Total Total in TWh many Rep. NL UK Other 2012 2011 Residential and commercial 29.0 19.1 35.2 44.2 3.7 131.2 129.4 customers Industrial and corporate 29.8 16.5 45.7 3.0 11.9 106.9 129.2 customers Distributors1 52.4 16.0 0
Slide 45: Development of TTF gas price and brent oil price
Development of TTF gas price and brent oil price Forward for delivery Forward for delivery Forward for delivery Forward for delivery in 2010 in 2011 in 2012 in 2013 €/MWh €/MWh 50 80 40 60 30 40 20 20 10 0 0 -20 Trading year 2009 Trading year 2010 Trading year 2011 Trading year 2012 Spread (right ax
Slide 46: Financial liabilities and assets
Financial liabilities and assets (excluding hybrid capital, as of 31 December 2012) Financial liabilities Financial assets Split of in billion euros in billion euros securities 25 10 19.9 19.1% 20 8 7.6 2.8 6.9 15.4 1.3 1.1 1.0 0.8 15 0.3 6 0.9 2.7 2.7 10 4 15.5 0.8 13.5 0.8 4.5 5 2 1.8 2.6 0.7 3.0
Slide 47: Capital market debt maturities and sources of financing
Capital market debt maturities and sources of financing Capital market debt maturities1 Strong sources of financing in € bn Fully committed syndicated loan For liquidity (€4.0 bn up back-up to Nov 2017) €0.0 bn Commercial paper $0.4 bn ($5.0 bn) (up to 1 year) €0.3 bn (28 Feb 2013) MTN programme €30
Slide 48: Capital market debt currency and interest exposure
Capital market debt currency and interest exposure (as of 28 Feb 2013) 10% 33% €18.6 bn11 €18.5 bn2 67% 90% € Interest rate fixing expiry > 1 year £ Interest rate fixing expiry < 1 year 1 Capital market debt = bonds of €14.8 bn and hybrids of €3.7 bn; split into currencies includes cross-currency sw
Slide 49: RWE's major investment projects
RWE‘s major investment projects RWE Capex share (€ bn) 2013 2014 2015 2016 2017 2018 Conventional power plant new build programme (Capex at 100% share) Hamm (Hard coal, 1,528 MW) 77% 2.4 Units D E Eemshaven (Hard coal/biomass, 1,560 MW) 100% 2.9 Units A B Denizli (Gas, 775 MW) 70% 0.5 RWE Dea‘s larg
Slide 50: Always be informed about RWE
Always be informed about RWE … Follow us on twitter@RWE_IR and have a look at www.rwe.com/ir Calendar http://www.rwe.com/web/cms/en/110614/rwe/investor-relations/events/calendar/ Annual and Interim Reports http://www.rwe.com/web/cms/en/110822/rwe/investor-relations/reports/ Investor and Analyst Conf