RWE AG · XETR:RWE
RWE — FY2005 Earnings Presentation
50 slides from RWE's earnings presentation, Feb 23, 2006
Slide 1: Commodity Trends Keep Driving Performance
Commodity Trends Keep Driving Performance Analyst and Investor Conference Fiscal Year 2005 Essen, February 23, 2006 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: Today's agenda
Today’s agenda A Harry Roels Highlights of 2005, Update on strategy B Klaus Sturany Divisional performance and Group results 2005 C Harry Roels Outlook for 2006 3 Harry Roels | Klaus Sturany | Analyst and Investor Conference, Fiscal Year 2005 | February 23, 2006
Slide 4: Highlights
Highlights Performance Operating result + 4%; adjusted for deconsolidation 2005 and f/x effects + 8% Net profit + 4% Dividend + 17% to € 1.75/share Cost reduction programme: € 210 m secured in 2005 Financial Position Net financial debt reduced to € 11.4 bn Strong “A” ratings confirmed
Slide 5: RWE remains an attractive dividend payer
Performance RWE remains an attractive dividend payer Dividend per share (€) Fourth double digit dividend increase 1.75* in a row 1.50 15% average annual dividend increase since 2002 1.25 Payout increase of 59% from € 619 m 1.10 in 2002 to € 984 m*) Over the same period equity increased from
Slide 6: RWE Group results 2005
Performance RWE Group results 2005 January – December change € million 2005 2004 in % External revenue 41,819 42,137 -0.8 EBITDA 8,324 8,400 -0.9 Operating result 6,201 5,976 +3.8 Net income 2,231 2,137 +4.4 Recurrent net income 2,257 1,794 +25.8 Cash flow from operating activities 5,304 4,928 +7.6
Slide 7: 2005 ROCE ahead of target
Performance 2005 ROCE ahead of target 15% 14.7 Target 13.5 14% ROCE 2005 at 14.7% clearly above Weighted Average Cost of Capital of 9% pre tax 10.4 ROCE target of 14% for 2006 10% already exceeded Absolute value added reached € 2,408 m (+21%) 5% 0% 2003 2004 2005 2006 7 Harry Roels | Klaus Stu
Slide 8: Cost reduction: Another milestone reached
Performance Cost reduction: Another milestone reached Annual savings in € million 230 680 40 Synergies 180 190 Cost reduction 210 due to Oct. 2003 reorganization 50 160 180 500 30 150 60 2003 2004 2005 2006 Total Target € 450 m of cost savings and synergies secured from 2003 to 2005 Synergies lo
Slide 9: Positive development of net financial debt
Financial Position Positive development of net financial debt (€ bn) 25 23.2 20 17.8 Old cap: € 17 bn 15 12.4 11.4 10 New cap: €10-12 bn (after planned water 5 disposals) 0 1/2003 12/2003 12/2004 12/2005 Net financial debt more than halved since January 2003, at similar EBITDA New cap set at € 1
Slide 10: Update on planned disposal of RWE Thames Water and American Water
Strategy Update on planned disposal of RWE Thames Water and American Water American Water Evaluation of divestment alternatives for American Water well on track - Options include an IPO or a sale to a group of long-term financial investors Management separation of American Water and Thames Water
Slide 11: Multiple trends are shaping a more competitive European power and gas market
Strategy Multiple trends are shaping a more competitive, integrated, and concentrated European power and gas market Regulatory / political intervention Convergence of power and gas – Regulation puts pressure on – Increasing supply concentration returns – Increasing gas demand – Ownership unbundl
Slide 12: RWE is among the leading integrated power and gas companies in Europe
Strategy RWE is among the leading integrated power and gas companies in Europe Upstream Energy Supraregional Electricity trading and regional and gas Power Gas and electricity and supply generation oil production gas grids Continental RWE RWE RWE RWE Europe Power Dea Trading Energy UK RWE RWE npower
Slide 13: We aim to grow our European energy business along the value chain
Strategy We aim to grow our European energy business along the value chain Opportunities Risks Aspiration Upstream Good returns Overheated oil and gas market Organic growth Kick-off LNG Leverage core Overbuilding Generation strength CO2 Privatizations Advanced asset Margin reductio
Slide 14: Monetization of asset optionalities in the power market (I)
Strategy We aim to further leverage our core strength: The monetization of asset optionalities in the power market (I) Remaining power generation Market environment enables us to capacity in Europe* apply RWE’s core skills as asset operator, asset optimizer and GW power trader in further markets 8
Slide 15: Monetization of asset optionalities in the power market (II)
Strategy We aim to further leverage our core strength: The monetization of asset optionalities in the power market (II) Breakdown of generation capex Examples of initiatives 2006 - 2010 Growth initiatives Great Yarmouth (420 MW CCGT) 2 Pembroke/Staythorpe (up to 2,000 MW CCGT) ? Growth Renewab
Slide 16: Coal will play a key role in our power generation strategy
Strategy Coal will play a key role in our power generation strategy Gas prices are expected to stay high or to rise even further As a result of this, hard coal and lignite fired power plants will increase their competitiveness – Increasing coal demand can be met at slowly rising marginal explora
Slide 17: Upstream oil & gas – competitive advantage in high price markets (I)
Strategy Upstream oil & gas – competitive advantage in high price commodity markets (I) Overview of RWE Dea activities Highest ROCE within RWE Group Financial hedge against Norway fuel price volatility in power generation business and gas supply Great Britain especially in UK Germany Poland Kaza
Slide 18: Upstream oil & gas – competitive advantage in high price markets (II)
Strategy Upstream oil & gas – competitive advantage in high price commodity markets (II) RWE Dea - Reserves / Resources RWE Dea - Gas and Oil Production in million bbl oil equivalent - end of year status in thousand bbl oil equivalent/day 1,200 1200 1,139 100 83 1000 81 79 943 80 80 371 71 800 800 7
Slide 19: Diversification of gas supply: entering the LNG market
Strategy Diversification of gas supply: We aim to enter into the Liquefied Natural Gas (LNG) market Global LNG Demand Outlook (Atlantic area) The regional gas markets in Asia (million tons per year) and particularly Europe and North 150 America will converge into a more global marketplace with LNG
Slide 20: Our geographic focus is Europe
Our geographic focus is Europe Germany: Strengthen gas position to com- plement power UK: Eastern Europe: Strengthen Expand existing position as top CEE1 positions (and tier power and selectively occupy gas player positions in SEE2) U.K. NL Poland Germany Luxemb. Czech Netherlands: Republic European
Slide 21: Mid-term capex programme: More leeway for value enhancing energy projects
Strategy Mid-term capex programme: More leeway for value enhancing energy projects Average annual capex € 4 bn +/- 10% € 3.5 bn +/- 15% RWE RWE npower Thames € 600 m p.a. (+/-15%) Water € 2.4 bn RWE Energy € 1,100 m p.a. (+/-10%) RWE Dea Energy € 600 m p.a. (+/-15%) RWE Power € 1,200 m p.a. (+/-25%)
Slide 22: Update: Emissions Trading
Energy Policy Update: Emissions Trading German Emissions Trading Act for 2008 to 2012 (ZuG 2012) will likely be based on existing legislation and is to be filed with the EU commission by June 2006. Already agreed number of certificates (e.g. CO2 certificates for 495 mil t p.a. from 2008 - 2012 c
Slide 23: Today's agenda
Today’s agenda A Harry Roels Highlights of 2005, Update on strategy B Klaus Sturany Divisional performance and Group results 2005 C Harry Roels Outlook for 2006 23 Harry Roels | Klaus Sturany | Analyst and Investor Conference, Fiscal Year 2005 | February 23, 2006
Slide 24: RWE group results FY 2005
RWE group results FY 2005 January – December change € million 2005 2004 in % EBITDA 8,324 8,400 -0.9 Operating result 6,201 5,976 +3.8 Non-operating result -688 444 -255.0 Financial result -1,685 -2,485 +32.2 Income from continuing operations before tax 3,828 3,935 -2.7 Taxes on income -1,221 -1,521
Slide 25: Performance of RWE Power
Performance of RWE Power Operating Result EBITDA January – December Change Change € million 2005 2004 in % 2005 2004 in % 2,112 1,846 +14.4 2,800 2,571 +8.9 Power Generation 1,667 1,489 +12.0 2,158 2,013 +7.2 RWE Dea 445 357 +24.6 642 558 +15.1 Power Generation – Benefited from strong German whole
Slide 26: Forward selling of RWE Power in the German market
Forward selling of RWE Power in the German market (baseload forwards) 56 52 48 Forward 44 40 2006 36 32 28 >10% sold >25% sold >50% sold >80% sold >95% sold 24 60 56 52 48 Forward 44 2007 40 36 32 >55% sold 28 >1% sold >10% sold >35% sold 24 >60% sold 56 52 48 Forward 44 40 2008 36 32 >10% sold >1%
Slide 27: Performance of RWE Energy
Performance of RWE Energy Operating Result EBITDA January – December Change Change € million 2005 2004 in % 2005 2004 in % 2,507 2,192 +14.4 3,142 2,927 +7.3 German regions 1,609 1,483 +8.5 1,954 1,886 +3.6 International regions 381 322 +18.3 476 418 +13.9 Electr. + gas transm. 452 571 -20.8 621 713
Slide 28: Performance of RWE npower
Performance of RWE npower Operating Result EBITDA January – December Change Change € million 2005 2004 in % 2005 2004 in % 437 604 -27.6 561 698 -19.6 Power generation: legacy contracts, not reflecting increased fuel prices and the shortfall in CO2 certificates (€ -129 m). Supply: successful cus
Slide 29: Performance of RWE Thames Water
Performance of RWE Thames Water Operating Result EBITDA January – December Change Change € million 2005 2004 in % 2005 2004 in % 1,416 1,389 +1.9 2,045 1,979 +3.3 Regulated UK business 687 612 +12.3 1,102 989 +11.4 North America 491 466 +5.4 744 707 +5.2 Other markets 238 311 -23.5 199 283 -29.7 O
Slide 30: Non-operating result
Non-operating result January – December change € million 2005 2004 (absolute) Capital gains 326 678 -352 Impairment losses -814 -492 -322 Restructuring / others -200 258 -458 Total -688 444 -1.132 Capital gains: disposal of Stadtwerke Düsseldorf, real estate from RWE Systems and water participatio
Slide 31: Financial result
Financial result January – December change € million 2005 2004 in % Net interest result -985 -1,130 +12.8 Interest accretion to long-term provisions -1,238 -1,327 +6.7 Other financial result 538 -28 - Total -1,685 -2,485 +32.2 Net interest result: improvement due to reduction of net financial debt
Slide 32: RWE cash flow statement
RWE cash flow statement January – December change € million 2005 2004 (absolute) Income from continuing operations after tax 2,607 2,414 +193 Depreciation, amortization, impairment losses 3,795 3,780 +15 and write-backs Changes in provisions -279 -307 +28 Changes in deferred taxes 148 482 -334 Dispo
Slide 33: Today's agenda
Today’s agenda A Harry Roels Highlights of 2005, Update on strategy B Klaus Sturany Divisional performance and Group results 2005 C Harry Roels Outlook for 2006 33 Harry Roels | Klaus Sturany | Analyst and Investor Conference, Fiscal Year 2005 | February 23, 2006
Slide 34: RWE targets
RWE targets Cost reduction Net financial Dividend Operating result ROCE + Synergies debt cap For 2006/07: max. proposal of at least € 10-12 bn extraordinary € 680 m 5% CAGR 14% (after closing of payout ratio by year-end 70-80%* from organic in 2006 planned sale of UK 2006 growth and US water as of 2
Slide 35: Outlook for 2006
Outlook for 2006 Operating result 20051 2006 € million forecast2 EBITDA 8,324 Operating result 6,201 +5% - 10% RWE Power (incl. RWE Trading) 2,112 RWE Energy 2,507 RWE npower 437 RWE Thames Water 1,416 1 Exchange rates of (€1 =) USD 1.24; GBP 0.68 2 Based on exchange rates of (€1 =) USD 1.20; GBP 0.
Slide 36: Outlook for 2006
Outlook for 2006 20051 2006 € million forecast2 External revenue 41,819 Operating result 6,201 +5% - 10% Net income 2,231 +10% - 20% Recurrent net income 2,257 +10% - 20% ROCE 14.7% >14% Capex on fixed assets 3,667 ca. € 4.5 bn 1 Exchange rates of (€1 =) USD 1.24; GBP 0.68 2 Based on exchange rates
Slide 37: Back-ups
Back-ups RWE
Slide 38: Currency effects 2005 versus 2004
Currency effects 2005 versus 2004 € million ∆ to thereof ∆ January - December 2005 2004 currency External revenue 41,819 -318 -42 EBITDA 8,324 -76 -10 Operating result 6,201 +225 -7 Net income 2,231 +94 +1 ∆ to thereof ∆ € billion 12/31/2005 12/31/2004 currency Net financial debt 11.4 -1.0 +0.7 Curr
Slide 39: Electricity Price in Germany and UK
Electricity Price in Germany and UK Forward 2005 Forward 2006 Forward 2007 € / MWh £ / MWh 75 75 70 70 65 65 60 60 55 55 50 50 45 45 40 40 35 35 30 30 25 25 20 20 15 15 10 10 Dec 03 Feb 04 Apr 04 Jun 04 Aug 04 Oct 04 Dec 04 Feb 05 Apr 05 Jun 05 Aug 05 Oct 05 Dec 05 Wholesale Peak Germany in €/MWh* W
Slide 40: Coal price development
Coal price development €/tCE 85 80 75 Ø CIF-NWE 2004 70 67.44 €/t ce Ø BAFA2 2005 64.84 €/t ce3 65 60 55 Ø CIF-NWE 2005 Ø BAFA2 2004 57.28 €/t ce 50 Ø BAFA2 2002 55.36 €/t ce 44.57 €/t ce Ø CIF-NWE 2003 43.74 €/t ce 45 40 Ø CIF-NWE 2002 Ø BAFA2 2003 35 39.40 €/t ce 39.87 €/t ce 30 Jan 02 Jun 02 Nov
Slide 41: European Emissions Trading
European Emissions Trading 30 60.000.000 monthly Trading volume EUA 05 EUA 06 25 50.000.000 EUA 07 20 40.000.000 EUA million* € / EUA* 15 30.000.000 10 20.000.000 5 10.000.000 0 0 Mar-03 Jun-03 Sep-03 Mar-04 Aug-04 Jan-05 Jun-05 Oct-05 Feb 20-06 * EUA = European Emission Allowance (Certificate for 1
Slide 42: Development of net financial debt
Development of net finanical debt Cash flows Fair value from of debt acquisitions/ operating related financial € billion Currency Capex Dividends disposals activities others derivatives translation effect +0.7 -1.1 18 +1.1 -5.3 +3.7 16 14 12.4 11.4 12 -0.1 -1.3 10 8 0 Net financial debt Net financia
Slide 43: RWE Group electricity production
RWE Group electricity production January – December Other Total Total in TWh Germany UK Internat. 2005 2004 Lignite 70.9 5.1 76.0 78.0 Nuclear 45.1 45.1 48.2 Hard coal 46.2 17.8 64.0 72.5 thereof contracts 29.5 29.5 38.8 Gas 12.5 14.8 27.3 32.3 Water and others 5.8 0.8 0.5 7.1 6.5 thereof contracts
Slide 44: RWE Group electricity sales volume
RWE Group electricity sales volume January – December Ger- Po- Hun- Total Total in TWh many UK land gary Others 2005 2004 Private and commercial 30.8 22.3 3.1 5.4 0.3 61.9 62.0 Business customers & 58.5 32.6 2.7 6.4 0.1 100.3 109.2 key industrial accounts Distributors / power utilities 59.7 0.4 0.4
Slide 45: RWE Gas sales volume
RWE Gas sales volume January – December Ger- Czech UK Others Total Total in TWh many Rep. 2005 2004 Private and commercial 28.4 38.8 39.6 6.4 113.2 113.9 Business customers & 45.8 44.6 9.0 16.6 116.0 122.0 key industrial accounts Distributors / power utilities 110.4 16.8 0.4 0.0 127.6 124.6 Total 18
Slide 46: RWE AG: flexible funding structure
RWE AG: flexible funding structure Fully committed for liquidity syndicated loan € 4.0 billion back-up and (€ 2.0 bn 364 days refinancing € 2.0 bn 5 years) €0.0 billion Commercial papers (up to 1 year) $ 5.0 billion $ 3.8 billion MTN programme (up to 30 years) € 20 billion € 15,2 billion Amounts use
Slide 47: Financial assets and liabilities
Financial assets and liabilities (as at 12/31/2005) €27.8 billion2 2.8 other 3.2 commercial paper €16.4 2.6 bank loans billion1 bonds (incl. other 3.3 notes payable) other financial assets 0.4 1.4 other loans 19.2 cash & cash equivalents 10.3 securities held as current assets securities held as 1.0
Slide 48: Gross financial debt currency and interest exposure
Gross financial debt currency and interest exposure1 Gross financial debt as of December, 2005: € 27.8 billion € / Others 5% Indexed 1% Floating 12% $2 33% Fixed 87% £ 62% Long term financed (>1 year): 78% of gross financial debt Short term financed (<1 year): 22% of gross financial debt With debt i
Slide 49: Structural subordination in the RWE Group
Structural subordination in the RWE Group RWE AG (A+ / A1) / RWE Finance B.V. / Consolidated German Subsidiaries1 79% RWE Npower Thames Water Aqua Holdings GmbH Holdings Plc Thames Water Plc (A / A3)2 12% RWE Npower Thames Water Thames Water American E’town Corp.2 Plc Utilities Ltd Utilities Finance
Slide 50: Reminder…
Reminder… To be always updated, please have a look at our webpage. Navigation around www.rwe.com Calendar Investor Relations > Calendar Annual Report Investor Relations > Financial Reports > Annual Report Interim Report Investor Relations > Financial Reports > Interim Reports Factbook (300 p