Rwe Ag · XETR:RWE
Rwe — Investor Day (June 2010)
61 slides from Rwe's investor day presentation, Jun 2, 2010
Slide 1: Essent Capital Market Day
Essent Capital Market Day Geertruidenberg, 2 June 2010
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: Table of Contents
Table of Contents 1. New Essent: An integral part of RWE’s growth strategy Page 4 Peter Terium, Chief Executive Officer of Essent N.V. 2. Capturing the value Page 15 Arjan Blok, Chief Financial Officer of Essent N.V. 3. Opportunities in the Dutch generation market Page 30 Nina Skorupska, Chief Techn
Slide 4: New Essent: An integral part of RWE's growth strategy
New Essent: An integral part of RWE’s growth strategy Peter Terium Geertruidenberg, 2 June 2010
Slide 5: From small Dutch asset company to key part of RWE Group growth story
From small Dutch asset company to key part of RWE Group growth story ~1909 2010 From Through To Dutch Asset North Western European Pan-European Manager Asset-Backed Merchant Energy Leader Pan-European > Create leading energy company Partnerships > Part of RWE Group > Leverage Essent capabilities wit
Slide 6: Essent is RWE's dedicated operating company for the Dutch and Belgium energy markets
Essent is RWE’s dedicated operating company for the Dutch and Belgium energy markets Key characteristics NL market Key developments in Dutch market > Inhabitants (2009): 16.6 million > Unbundling of grid companies Groningen > Gas consumption (2009): 46.3 bcm (TSO and DSO) by year-end 2010 > Power co
Slide 7: Perfect fit: Essent complements RWE's asset portfolio
Perfect fit: Essent complements RWE’s asset portfolio Platform for growth > Largest energy company in the > Strong customer base in Europe Netherlands with two strong sales > Growing position in the Netherlands and Strong Customer brands (Essent and Energie:direct) Belgium and strong position in Dut
Slide 8: New Essent structure enabling us to maximise value
Our well prepared integration led to a New Essent structure enabling us to maximise value Essent Upstream Essent Downstream RWE Innogy Production B2C, B2B, SME RWE Technology RWE Business Sales Portfolio Supply development Management & Trading Projects New Energy B2B Flex, ELES1 Developments to New
Slide 9: New Essent is well on track
New Essent is well on track New Essent organisation including the Management Board now fully in place with nomination of Arjan Blok (CFO) and Nina Skorupska (CTO) Post-merger integration successful with now handing over responsibility to operating companies and individual business units Financials a
Slide 10: Synergies are materialising and adding value
Synergies are materialising and adding value Biomass co-firing > Recent RWE investment in a US Re-use expertise biomass production facility will EPE pipeline secure the biomass sourcing of Essent plants > Maintenance facility of RWE gives Essent an alternative and a reference for the big suppliers l
Slide 11: New Essent: Organisation and key figures
New Essent: Organisation and key figures Essent NV Essent key figures 20091 Peter Terium Arjan Blok Erwin Nina > EBITDA: € 760 m van Laethem Skorupska > Operating Result: € 500 m CEO CFO CCO CTO > Installed capacity: 3,634 MW Human Resources Finance & Controlling Marketing Production > FTEs2: 4,288
Slide 12: Essent's long-term vision
Essent’s long-term vision is highly ambitious and covers the areas of customers, technology, environment and company Customers Technology Be the undisputed market Double generation capacity leader with the most valuable customer portfolio Best performing utility Become the most successful Halve CO2
Slide 13: Essent business priorities for 2010
Essent has determined 8 business priorities for 2010 to set first important steps to reach these strategic goals Priorities Description of priorities 1 Realising plan 2010 business Achieving our ambitious business plan 2010 including RWE Energy Nederland integration 2 Positioning / customer focus In
Slide 14: Essent will support RWE ambitions
Essent will support RWE ambitions to be … … more sustainable > High CO2 awareness > Develop and improve the biomass value chain > Innovative greener market approaches like ELES … more international > Adding Essent’s know how to knowledge of other RWE operating companies > Strengthening business in N
Slide 15: Capturing the value
Capturing the value Arjan Blok Geertruidenberg, 2 June 2010
Slide 16: The journey to an integral part of RWE
The journey to an integral part of RWE Capturing the value Prepare for the Future Transformation Integration CAPEX Costs > Fundamental trans- > Introduction of new > Integration > Execution of formation from a operational and the management growth strategy fully integrated utility subsequent reporti
Slide 17: A fundamental transformation from integrated utility into commercial energy business
A fundamental transformation from a fully integrated utility company into a commercial energy business Capturing the value Prepare for the Future Transformation Integration CAPEX Costs Sustainable organic growth Results In € m > Realisation of sustainable organic growth > Meeting of ongoing – Operat
Slide 18: Impact of operational transformation into a RWE OpCo
Impact of operational transformation into a RWE OpCo Capturing the value Prepare for the Future Transformation Integration CAPEX Costs Essent Upstream Essent Downstream RWE Innogy Production B2C, B2B, SME RWE Technology RWE Business Sales Portfolio Supply development Management & Trading Projects Ne
Slide 19: Well-managed integration risks to capture the value
Well-managed integration risks to capture the value Capturing the value Prepare for the Future Transformation Integration CAPEX Costs > Damage to Essent and/or RWE (corporate) image Identified > Potential disruption of operational processes after Day-1 risks > Loss of skilled and experienced personn
Slide 20: 2009 full year pro-forma results
2009 full year pro-forma results Capturing the value Prepare for the Future Transformation Integration CAPEX Costs Pro-forma €m 2009 Comments EBITDA 760 > No audit on the earnings split for 2009 > Simulation of arms length internal pricing to Operating result1 500 restate earnings of generation and
Slide 21: Outlook for 2010
Outlook for 2010 Capturing the value Prepare for the Future Transformation Integration CAPEX Costs Pro-forma 2009 2010 €m outlook EBITDA 760 In line with previous year Operating result1 500 Below previous year > New Essent 350 Below previous year > Essent Wind 60 Below previous year > Essent Trading
Slide 22: Organic growth and efficiency drive 10% CAGR
Organic growth and efficiency enhancements are the main drivers for realising the ambitious 10% CAGR Capturing the value Prepare for the Future Transformation Integration CAPEX Costs Pro-forma 2009 2012 €m guidance EBITDA 760 CAGR + ca. 10% Operating result1 500 CAGR + ca. 10% Capex on fixed assets
Slide 23: Prudent hedging provides visibility of future earnings
Prudent hedging provides visibility of future earnings Capturing the value Prepare for the Future Transformation Integration CAPEX Costs Sustainable organic growth Comments Clean dark and spark spread hedge positions 40 > Essent follows hedging similar hedging policy similar policy to RWE’s RWE 2010
Slide 24: Foundation for future organic growth (capex)
The foundation for future organic growth was laid in the past and continues in 2010 Capturing the value Prepare for the Future Transformation Integration CAPEX Costs Day to day investments 117 Comments Maintenance 117 > Capex plan for 10% CAGR target: Growth and overhaul projects 972 – Includes inve
Slide 25: Organic growth driven by efficient and flexible generation and gas storage
Organic growth driven by highly efficient and flexible generation and gas storage Capturing the value Prepare for the Future Transformation Integration CAPEX Costs Current status of major organic growth projects1 Technology Capex (€ bn) 2009 2010 2011 2012 2013 Moerdijk 2 CCGT, 426 MW 0.4 Claus C CC
Slide 26: Proven track record outperforming cost control programmes
Essent has a proven track record outperforming its cost control programmes Capturing the value Prepare for the Future Transformation Integration CAPEX Costs “Stroomlijnen” started to achieve its ambition to be part of the leading energy companies in NW Europe > “Stroomlijnen” started in 2004 as an o
Slide 27: Efficiency enhancement by lowering cost to serve
Efficiency enhancement by lowering cost to serve as second driver for organic growth until 2012 Capturing the value Prepare for the Future Transformation Integration CAPEX Costs Cost to serve per customer Comments > Essent is above industry average 120 > Energie:direct is far below industry average
Slide 28: Targeted synergies of €100m
In addition to the efficiency enhancement, Essent is on its way to realise the targeted synergies of €100 m already in 2013 Capturing the value Prepare for the Future Transformation Integration CAPEX Costs Gross synergies (€ m recurring synergies) Synergies explained > Integration of trading activit
Slide 29: Highlights
Highlights 10% CAGR of EBITDA and operating result until 2012 €135 million of synergies by 2014 9.5% ROCE by 2012 Essent CMD | Arjan Blok | 2 June 2010 29
Slide 30: Opportunities in the Dutch generation market
Opportunities in the Dutch generation market Nina Skorupska Geertruidenberg, 2 June 2010
Slide 31: Dutch generation market is dominated by gas
Dutch generation market is dominated by gas Installed capacity (2009) Generation output (2008) 1 Total: 22.5 GW Total: 108.2 TWh Renewables 11% Other 6% Renewables 9% Other 6% Coal 18% Coal 21% Nuclear 2% Nuclear 4% Gas 63% Gas 60% Installed capacity shares in NL (2009) > Nearly two thirds of instal
Slide 32: Dutch merit order and must-run capacity
The Dutch merit order is characterised by a significant share of must-run capacity Winter merit order 2009 Summer merit order 2009 €/MWh €/MWh 100 100 90 90 80 Average demand Average demand 80 70 70 60 60 50 50 40 40 30 30 20 20 10 Must run 10 Must run 0 0 Annual average available capacity ~19 GW An
Slide 33: Dutch government sets ambitious renewable energy targets
Dutch government sets ambitious targets for renewable energy Overall share of renewable energy in NL Dutch renewable targets for 2020 are ambitious Share of renewables in primary 60 energy consumption Renewable power (TWh/year) 54.4 TWh 55 1.4 6.0% 50 3.0 45 6.7 40 20.0% 10.4 35.0 TWh 10.6% 35 1.5 1
Slide 34: More wind results in higher volatility; flexible ramp capacity needed
More wind results in higher volatility: The Dutch market needs additional flexible ramp capacity Intraday hourly spot prices (€/MWh) Daily load curve in 2020 for highest load day and lowest load day (MW) 160 25,000 Daily maximum price Max demand 24 GW 140 Daily minimum price 20,000 120 100 15,000 80
Slide 35: Increasing interconnection capacity
Increasing interconnection capacity enables further integration of the Netherlands into NW European power market Interconnection capacity > The Netherlands currently have the highest ratio interconnector capacity / total domestic demand Net transfer capacities in GW in Europe (30% vs 15% average) >
Slide 36: Market coupling leads to strong price convergence
Market coupling leads to strong price convergence enabling the Netherlands to become a swing market for NW Europe Price convergence between NL and GER > Trilateral coupling (FR-BEL-NL) has already led to price convergence through implicit auctioning2 Price differential1 of average daily spot prices
Slide 37: Implications for future market design
Implications for future market design Achievement of national renewable target would require ca. 12 GW of onshore and offshore wind With currently only 6 GW wind capacity by 20201 regarded as being realistic, biomass co-firing represents a crucial factor to achieve the national targets Massive expan
Slide 38: Strong existing wind portfolio and commitment to expansion
Strong existing wind portfolio and commitment to further expansion – but only if the system provides necessary return Dutch/Belgian on- and offshore Onshore wind assets in operation wind pipeline (consolidated) Groningen Offshore Wind 1.0 1.5 1. Westereems 156.0 MW 2. Spijk/Pieterburen 1.0 MW Onshor
Slide 39: Long track-record and expertise in co-firing of biomass
Essent has long track-record and unique expertise in co-firing of biomass 2nd biomass mill Amer 9 TWh 2005 Capacity: 83 MW 2.5 Bio-oil Claus A (test 2002) Capacity: 92 MW 2.0 Installation hammer mills Amer 8 1.5 2004 Capacity: 96 MW Logistical system 1.0 Type: silo’s, conveyors 0.5 Unloading facilit
Slide 40: Ambitious targets to expand co-firing capabilities
We have ambitious targets to expand our co-firing capabilities Essent’s co-firing target of 5.0 TWh in 2020 > Biomass co-firing represents a crucial factor to achieve the national Dutch renewable targets 5.0 TWh > Essent’s three coal plants offer opportunities to co-firing increase co-firing percent
Slide 41: Co-firing is attractive but needs support mechanism
Co-firing is attractive – but a reasonable support mechanism needs to remain in place Co-firing merit order in the Netherlands – 2014 Power price + co-firing premium Allowance for recovery of capex investment Additional cost for biomass Marginal Costs (EUR/MWh) less CO2 cost savings Power price €/MW
Slide 42: RWE's presence in the entire value chain for co-firing
RWE’s presence in the entire value chain is key to successfully execute co-firing strategy Forestry Pelletisation Pre-treatment Logistics Power Plant > Optimised plan- > Micro chipping > Industrial scale > Special pellet > Boiler behaviour tation manage- Æ homogenous continuous vessels reduce with c
Slide 43: Growth projects enhance flexibility and CO2 mitigation
Attractive growth projects enhance flexibility and contribute to RWE’s CO2 mitigation strategy New-build projects further diversify portfolio… …and reduce RWE’s CO2 intensity CCGT Moerdijk 2 > Capacity: 426 MW Specific CO2 emissions (t/MWh) > Efficiency ~58% 0.80 > Min. capacity: 205 MW 0.75 > Max.
Slide 44: Becoming the undisputed commercial leader
Becoming the undisputed commercial leader Erwin van Laethem Geertruidenberg, 2 June 2010
Slide 45: Dutch energy market: Market and regulatory characteristics
Dutch energy market: Market and regulatory characteristics Main regulatory characteristics Main market characteristics > The development and operation of power plants in > Nuon, Essent and Eneco remain the largest players in the Netherlands have been deregulated since 1999, the market with a combine
Slide 46: Dutch energy customer market: Outlook 2010–2015
Dutch energy costumer market: Outlook 2010 – 2015 “More for Less” “Increased Competition” > Customers finding their way through intransparent > High-value customers become future target offerings & pricing of all players, increasing cost to acquire > Channel landscape drastically changing to online
Slide 47: Commercial leadership & unlocking value
Essent: Commercial leadership & unlocking value Committed to: Description of initiatives > The undisputed > Customer life cycle Customer > Brand positioning commercial management centricity > Customer value proposition leader (focus on value) (unique – relevant – credible) > Driving sustainable grow
Slide 48: Focus on strategic market segments through business lines
Focus on strategic market segments through business lines B2C SME B2B B2B Flex Energy Solutions Promise The Energy Partner Personal and reliable Energy supply to Full Flex direct Lowest energy costs energy with innovative medium and large access to energy by shared innovative sustainable solutions e
Slide 49: B2C: Dual branding strategy
B2C: Dual branding strategy – Essent & Energie:direct Target segments Product > Offers total package > Smart tariff structure characteristics > Good value for price > Lowest price (of “attractive price”) > Offers green electricity > Affordable energy > Clear product offerings > Sharp price > Transpa
Slide 50: B2C: The Energy Partner
B2C: The Energy Partner Gas market shares households in NL (2009) Market position 100% = 6.966 million households Greenchoice 3.0% > Essent continues to lead in gas E.ON 2.6% Others 5.4% > Essent churn rates are lower than market average Delta 2.3% Oxxio 2.5% > Changing channel landscape (online, te
Slide 51: SME: Personal & reliable energy
SME: Personal & reliable energy with innovative sustainable solutions Gas market shares SME in NL (2009) Market position Others 11% Nuon 32% > Margins in SME are higher than in the household segment > Competition has intensified over the past few years and will Electrabel 4% continue to do so, mainl
Slide 52: B2C & SME: Customer value and cost to serve
B2C & SME: Customer value and cost to serve Customer lifecycle value Cost to serve > Consumer market can be segmented by archetypes > Essent currently above industry average (new customer, customer for 10 years, long term > Operational excellence and new IT platform will customers) deliver 25% reduc
Slide 53: B2B: Channels and value proposition
B2B: Channels and value proposition Large-sized customer Medium-sized customer New product development Channel > High volumes > Medium volumes > Slightly higher margins > Low margins > Slightly higher margins > Multi-channel approach > Key account management > Account management > Telesales service
Slide 54: B2B: Energy supply to medium and large enterprises
B2B: Energy supply to medium and large enterprises Power market shares B2B in NL (2009) Market position Others 12% Nuon 30% > Market leader in gas Delta 3% > Commodity and price-driven products Oxxio 5% > Main competitors: Nuon, Eneco, and Electrabel > Key account management is value driver Electrab
Slide 55: B2B Flex: Markets, customers, business model, value drivers
B2B Flex: Markets – customers – business model – value drivers Characteristics horticultural market External value drivers (horticultural market) > 3 GW installed capacity (= 13% of total Dutch capacity) > Advanced, integrated trading platform > CHP installation for flexible energy consumption and g
Slide 56: B2B Flex: Competitive field outlook 2011–2014
B2B Flex: Competitive field – outlook 2011 – 2014 Horticultural market B2B market Competitors > AgroEnergy (part of ENECO, full portfolio) > NUON (part of Vattenfall, semi flexible portfolio) > Endon (independent, electricity redelivery only) > ENECO (state owned, semi flexible portfolio) > DVEP (in
Slide 57: Essent Local Energy Solutions (ELES): Market position and strategy
Essent Local Energy Solutions (ELES): Market position and strategy B2C SME B2B B2B Flex Energy Solutions Promise The Energy Partner Personal and reliable Energy supply to Full Flex direct access Lowest energy costs energy with innovative medium and large to energy markets by shared innovative sustai
Slide 58: ELES: Examples of solutions
ELES: Examples of solutions Biogas production from cow dung Council heating from plant waste > Combined heat and power installation > Bio energy power plant using locally collected fuelled by biogas biomass waste > Heat delivery to 3,000 houses > Heat delivery to 1,100 houses, school and health (und
Slide 59: Conclusions
Conclusions Essent is committed to be the undisputed commercial leader by 2012: > #1 in all relevant market sectors > Unlock customer value >€100 million additional customer life time value > On its way to reduce cost to serve by 25% > Sustainable growth initiatives resulting in additional >€50 mill
Slide 60: Closing remarks
Closing remarks Rolf Pohlig Geertruidenberg, 2 June 2010
Slide 61: Highlights
Highlights More international: > > Increase in share of non-German operating result Diversification of regulatory and political risk 3 More sustainable: > > 616 MW of additional operating wind assets Leverage on enlarged renewables pipeline to achieve 4,500 MW in operation or under construction by 2