E.ON SE · XETR:EOAN
E.ON — 6th German Corporate Conference 2007
49 slides from E.ON's conference presentation, Jan 15, 2007
Slide 1: Delivering Profitable Growth and Performance
“Delivering Profitable Growth and Performance“ 6th German Corporate Conference 2007 Credit Agricole Cheuvreux January 15, 2007
Slide 2: Successful development since E.ON's creation
Successful development since E.ON’s creation 2000-2003 2003-2005 since 2005 Transformation into a Integration Growth in the Focused Energy Company and Performance Energy Business 7,333 Adjusted EBIT1 in million € 6,787 6,064 5,707 4,258 3,352 2001 2002 2003 2004 2005 9M 2006 1. Non-GAAP financial me
Slide 3: Operational improvement in the energy business
Operational improvement in the energy business – A continuing group-wide process to create further value in million € 132 • Operational improvement of 1,025 1,000 €1 1bn€1 through: 302 - Operational excellence (e.g. best practice transfer in generation, trading and retail, interface optimization in
Slide 4: Value creation through focus on performance improvement
Value creation through focus on performance improvement 12.1% 12% 11.5% 9.6% 9.9% 10% 9.2% 8% ROCE1 6% Cost of Capital 4% 2% 0% 2001 2002 2003 2004 2005 1. Non-GAAP financial measure; for derivation see Annual Report 2005, p. 38-39, and prior annual reports as far as available. 4
Slide 5: The drivers of value-enhancing growth
The drivers of value-enhancing growth y Power generation y Delopment of gas infrastructure: y Pipelines and gas storage y Upstream & LNG y Entry and growth in new markets y Eastern Europe y Turkey y Russia y Public offer for Endesa 5
Slide 6: Summary of 2007-09 investment plan
Summary of 2007-09 investment plan in billion € Fixed assets € 22.4 bn Financial U.S. Midwest investments 2.1 Power generation € 11.4 bn 2.9 y Maintenance & replacement € 5.9 bn Nordic Other 1.3 y Growth € 5.5 bn 2.7 Gas storage, upstream Electricity & gas networks € 7.3 bn & LNG 2.4 U.K. Growth 4.3
Slide 7: Strategic and financial investment criteria for external growth
All external growth opportunities are subject to E.ON’s strict strategic and financial investment criteria Strategic criteria Financial criteria • Market attractiveness • Earnings enhancing in the first full year (returns, growth, regulation, after acquisition country risk) • Returns exceeding cost
Slide 8: Major planned investments in power plants over 2007-09
Major planned investments in power plants over 2007-091 Trimble County 2 Oskarshamn (upgrade) U.S. Midwest Coal 750 MW Nuclear 430 MW Start 2010 Start 2008/12 Malmö Maasvlakte 3 Gas CHP 440 MW Coal 1100 MW Start 2009 Start 2012 Grain Datteln 4 CCGT 1200 MW Coal 1100 MW Start 2009 Start 2011 Kingsnor
Slide 9: Gas demand in Western Europe is growing while production declines
Gas demand in Western Europe1 is growing while domestic production is declining 675-730 E.ON’s response to Europe’s in bcm 635-685 increasing reliance on gas 570-610 9% 22% Supply gap imports2 535 8% 11% 7% 12% 11% 10% Advanced projects3 y Long-term gas import 11% 9% 11% 11% Other non-EU imports con
Slide 10: E.ON's gas upstream strategy: Strengthen and diversify supply
E.ON’s gas upstream strategy: Strengthen and diversify supply Long term targets: y Build gas upstream position of up to ~ 15 - 20% of the E.ON Ruhrgas supply portfolio y Target regions: North Sea (UK, Norway), Russia. Africa & Middle East under evaluation in combination with LNG Implementation statu
Slide 11: Framework agreement between E.ON and Gazprom on asset swap
Framework agreement between E.ON and Gazprom on upstream/downstream asset swap E.ON and Gazprom agree on the joint development Gas field Se a a r a of the Russian gas field Yushno Russkoje – Existing transit pipeline sS e Ka e nt Yamal Gazprom receives participations in E.ON’s Proposed or a r Stockm
Slide 12: E.ON contributes to development of Europe's gas import infrastructure
E.ON contributes to the necessary development of Europe’s gas import infrastructure Nord Stream (Northern European Gas Pipeline) Gas field Se a ea r a Construction of two parallel pipelines with a Existing transit pipeline n ts S Ka Yamal e capacity of 27.51 bcm each (551 bcm in total). Proposed or
Slide 13: First German LNG project in Wilhelmshaven and LNG terminal on Krk
E.ON is planning its first German LNG project in Wilhelmshaven as well as the construction of an LNG terminal on Krk Wilhelmshaven Existing LNG terminal (some with expansion planned /ongoing) • Technical design study initiated after positive LNG terminal under construction conclusion of feasibility
Slide 14: Turkey – First privatizations in 2007
Turkey – First privatizations in 2007 Bulgary Market size 3 Black Sea 600 Greece 1 2 Georgia TWh 2005 13 Armenia 2025 Istanbul 400 Ankara Iran 200 Ägäis Iraq 0 Syria D F I E TR PL CZ RO HU Mediterranean Sea 1st Privatisation round Potential sale of private stake New build requirements 100 GW 80 Gene
Slide 15: Russia – Growth opportunities in power generation
Russia – Growth opportunities in power generation Potential regions: Urals/ Characteristics for the regions: North West Central Volga Western Siberia y Privatization of generation planned 2007/08 y Strong industrialization and profound growth perspectives in power demand y Lack of generation and agi
Slide 16: E.ON and Endesa combination will create leading power and gas company
The combination of E.ON and Endesa will create the world’s leading power and gas company Global scale Diversified earnings3 Europe1 UK y 327 TWh power generation Iberia Nordic 9% Italy / 20% 7% y 515 TWh power sales 5% France y 931 TWh gas sales EBITDA 12% European Gas y 41 million customers2 32% 11
Slide 17: Combined Pan-European presence creates new value opportunities
The combined Pan-European presence will provide new value creation opportunities and is in line with EU vision European markets emerging EU Vision: One European market Priority Axes identified by the EC TENS Program for power transmission strengthening Regional power markets Nordic market European g
Slide 18: E.ON gains access to significant new growth potential
E.ON gains access to significant new growth potential Developed & moderate growing Complemented by faster growing markets with E.ON presence markets with Endesa presence 6% 6% Average annual 4% 4% growth rate of power 2% 2% generation 2001-04 0% 0% 1 2 3 USA CEE GER UK SWE ESP LatAm ITA FRA S&P BB+
Slide 19: E.ON's offer for Endesa: main next steps
E.ON’s offer for Endesa: main next steps Outcome of appeal to the Ministry of Industry regarding CNE decision 3 3 Nov 2006 CNMV Approval 3 16 Nov 2006 Withdrawal of court injunctions Withdrawal of against Gas Natural's offer Gas Natural's offer Offer(s) put to Shareholders – Start of acceptance peri
Slide 20: Returning value to E.ON shareholders
Returning value to E.ON shareholders +17% € 4.6 bn of dividends paid out in 2006 2.75 € +17.5% y The 2005 ordinary dividend of +14.3% 2.35 € € 2.75 per share (€ 1.8 bn) +9.4% 2.00 € corresponds to a payout ratio of +18.5% 1.75 € 49%. 1.60 € 1.35 € y Special dividend of € 4.25 per share (€ 2.8 bn) pa
Slide 21: E.ON's proven management philosophy
E.ON’s proven management philosophy y Continued drive for better performance across all markets Performance y Integration of the acquired business a priority & Integration y Standardized processes across businesses, maximizing efficiency y Strengthen the integrated power and gas business in existing
Slide 22: Our vision: the world's leading power and gas company
Our vision: “E.ON - the world´s leading power and gas company“
Slide 23: Back-up Charts
Back-up Charts
Slide 24: E.ON Group – Transformation into a pure energy group almost completed
E.ON Group – Transformation into a pure energy group almost completed1) in billion € Acquisitions Transaction Closing Date Divestments Transaction Closing Date Volume Volume Powergen/LG&E 15.3 07/02 E-Plus 4.3 02/00 Ruhrgas (100%) 11.2 01/03 Cablecom 1.0 03/00 TXU retail business 2.5 10/02 Gerreshei
Slide 25: Significant growth steps since 2003
Significant growth steps since 2003 Small and medium size investments of more than € 7 bn Upstream-Projects in the North Sea, including Caledonia, Njord Construction of off-shore Acquisition of wind power Graninge Enfield gas-fired power station Consolidation of Czech downstream Acquisition of Midla
Slide 26: Development of electricity prices in selected markets
Development of electricity prices in selected markets EEX, UK, Nord Pool, French and US Forward prices Cal 2007 Key drivers Last 12 Months December 2006 y UK forward prices appear to be driven mainly 90 by the UK natural gas and CO2 prices. 80 y Nordic forward prices appear to be driven mainly by th
Slide 27: Europe – Coal- and CO2-Prices
Europe – Coal- and CO2-Prices Coal, ARA – Last 12 months December 2006 Key Messages 90 • Coal – Coal prices slightly decreased in December 80 due to lower demand as a result of the mild weather USD/t and an improved hydrological situation across 70 Europe. Some support came from the Australian marke
Slide 28: Coal, CO2 and German power prices
Coal, CO2 and German power prices 70 35 65 30 EUR/t (coal), EUR/MWh (power EUR/t (CO2) 60 25 55 20 50 15 45 10 1.4.06 15.4.06 29.4.06 13.5.06 27.5.06 10.6.06 24.6.06 8.7.06 22.7.06 5.8.06 19.8.06 2.9.06 16.9.06 Coal API#2 Yr 2007 EEX Base Yr 2007 CO2 (current year) 28
Slide 29: Regulation of network charges in Germany
Regulation of network charges in Germany E.ON Hanse y Differing interpretations of new rules, with E.ON edis BNetzA unduly disadvantaging network E.ON Avacon operators. E.ON Westfalen Weser y Main points of contention with BNetzA: E.ON Mitte E.ON Thüringer Energie y Calculation of the equity portion
Slide 30: Substantial negative impact on Group adjusted EBIT from network charge reductions
Regulation in Germany - Substantial negative impact on Group adjusted EBIT due to reductions in network charges Nine Months in million € 700 700 600 600 537 537 519 519 4 500 4 500 60 46 400 400 300 Power 300 Provisions for retroactive application 477 473 Gas 533 515 200 Lower network charges 200 10
Slide 31: Regulation-induced impairments on gas distribution activities
Regulation-induced impairments on gas distribution activities Nine Months in million € 600 547 500 € 227m on own networks and € 24m on other Other shareholdings shareholdings at Pan-European Gas 400 359 296 300 251 108 Thüga shareholdings in municipal distribution 200 network operators 251 100 188 1
Slide 32: Germany – Regulation of network fees
Germany – Regulation of network fees • Gas transmission: exemption from cost regulation accepted if grid-to-grid competition in transmission can be proved. • Gas distribution and electricity: calculation of allowed costs largely identical. • Cost of Capital: Return on equity 6.5% real (electricity)
Slide 33: BNetzA concept for incentive regulation in Germany
BNetzA concept for incentive regulation in Germany y Start expected in 2008 y Regulatory cost review for setting of initially allowed revenues y Complete reduction of any inefficiencies within 6-8 years through a revenue cap adjusted on an annual basis, especially with regard to: - inflation - gener
Slide 34: Germany – Development of household power prices
Germany – Development of household power prices in Ct/kWh 2006 (assumed consumption for a household: 3,500 kWh/a) European comparison German development Greece 7 Czech Republic 9.9 Great Britain 10.2 Spain 11.5 18.99 19.46 18.31 17.96 France 12 17.49 17.49 17.11 16.11 5.2 5.58 7.55 Austria 13.4 5.11
Slide 35: Germany – Breakdown of household energy prices
Germany – Breakdown of household energy prices Average electricity price for households1 Average gas price for households2 19.46 ct/kWh 5.08 ct/kWh Import, production, CHP & Renewables Act transportation & distribution 1.03 ct/kWh Grid access fees 3.80 ct/kWh 6.18 ct/kWh Eco taxes 5% 2.05 ct/kWh 75%
Slide 36: Gas price adjustment
Gas price adjustment Oil indexation • Main competitors of natural gas are gas oil and fuel oil. • Long-term contracts need an automatic indexation. • Oil indexation secures competitive gas prices. • Example for oil indexation : - Price adjustment every 3 months; 1.1./1.4./1.7./1.10. - Reference peri
Slide 37: CO2 allowances for the 2005-2007 trading period
For the 2005-2007 trading period, E.ON has received CO2 allowances of about 77.4 million tonnes CO2 per year UK Germany Sweden Reduction Overall 0.2% Overall: 0.4 % Overall: no reduction Energy sector: 21.5% no sector specific allocation, but Energy sector: 20% (main Industry: increase (allocation 0
Slide 38: Status of the 2008-2012 NAPs
The current status of the 2008-2012 NAPs will not lead to significant changes in the system UK Germany Sweden Reduction Overall: 12.3% Overall: 5.7% Overall: 2.6% Energy sector: 18.6% Energy sector: 29% Energy sector: 20% Industry: no reduction Industry: 1.25% Industry: no reduction Incumbent Based
Slide 39: E.ON solidifies its integrated position in Eastern Europe
E.ON continues to solidify its integrated position in Eastern Europe E.ON involvements in power E.ON involvements in gas Czech Rep. Czech Rep. PP VCP SMP ECR ECD JCP* ECE JMP Slovakia Slovakia ZSE SPP ETI E.ON Földgaz Trade EED Moldova E.ON Foldgaz Storage EDE Hungary KÖGÁZ Hungary E.ON Gaz Romania
Slide 40: E.ON's share in plateau production of Yushno Russkoje
E.ON’s share in plateau production of Yushno Russkoje: 6.25 bcm, ~10% of current E.ON Ruhrgas supply1 • One of the largest Russian gas fields Yushno- Russkoje located in Western Siberia • Gas reserves2: > ~ 700 bcm • Long-life asset: > 25 years production • Projected start of production: 2007 • Plat
Slide 41: Financial highlights – First nine months 2006
Financial highlights – First nine months 2006 in million € 2006 20051 +/- % Sales 49,451 39,520 +25 Adjusted EBITDA2 8,441 7,629 +11 Adjusted EBIT3 6,064 5,504 +10 Consolidated net income 2,629 6,399 -59 Adjusted net income4 3,386 2,688 +26 Cash provided by operating activities 4,492 4,742 -5 Free c
Slide 42: Adjusted EBIT by market unit – First nine months 2006
Adjusted EBIT by market unit – First nine months 2006 in million € 2006 20051 +/- % Central Europe 3,243 2,945 +10 Pan-European Gas 1,596 1,125 +42 U.K. 710 715 -1 Nordic 437 581 -25 U.S. Midwest 285 277 +3 Corporate Center -260 -260 - Core Energy Business 6,011 5,383 +12 Other Activities2 53 121 -5
Slide 43: Financial highlights 2005
Financial highlights 2005 in million € 2005 20041 +/- % Sales 56,399 46,742 +21 Adjusted EBITDA2 10,272 9,741 +5 Adjusted EBIT2 7,333 6,787 +8 Consolidated net income 7,407 4,339 +71 Capital employed 60,398 59,063 +2 ROCE (in %)3 12.1 11.5 +0.64 Cost of capital (in %) 9.0 9.0 - Cash provided by oper
Slide 44: Market units – Key financial figures 2005
Market units – Key financial figures1 2005 in million € Oper. Sales Adjusted Adjusted Capital ROCE Pre-tax Cash- Value EBITDA EBIT Employed (%) CoC (%) flow Added Central Europe 24,295 5,284 3,930 17,969 21.9 9.0 3,020 2,318 Pan-European Gas 17,914 1,939 1,536 13,355 11.5 8.2 1,999 441 U.K. 10,176 1
Slide 45: E.ON Group - Split of gross external debt
E.ON Group - Split of gross external debt1 as of December 31, 2005, in billion € Pan- Central Corporate European U.K. Nordic U.S. Midwest E.ON Group Europe Center Gas Bonds 0.0 0.0 0.5 0.7 1.0 7.3 9.5 Commercial Paper 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Bank Loans / others 1.3 0.8 0.1 0.6 0.0 0.1 2.9 Gross
Slide 46: E.ON's past communication regarding financial targets
E.ON‘s past communication regarding financial targets Ratios communicated as being „compatible Actual with an A+ Rating“ Ratios 2005 Definition Targets y Gearing y 80-100% y 37% (Net financial position + Pensions and Nuclear Provisions)/ Shareholders‘ Equity + Minority Interest y EBITDA/ Net Interes
Slide 47: E.ON's ratings compared to its peer group
E.ON‘s ratings compared to its peer group As of October 26, 2006 • Moody‘s (Aa3/ P-1, „review for possible downgrade“) Standard & Poor's Moody's y On February 22, 2006, Moody’s has placed its Aa3 credit EdF AA- negative Aa1 stable rating of E.ON AG on review for a possible downgrade, GdF AA- watch n
Slide 48: Market unit ratings within the E.ON Group
Market unit ratings within the E.ON Group as of September 30, 2006 E.ON AG E.ON International Finance B.V. E.ON UK Finance plc Aa3 rev. down. / AA- watch neg. E.ON Energie AG E.ON Nordic Holding E.ON Ruhrgas AG E.ON UK plc E.ON US Invest- A3 rev. down. / A- stable ment Corp. E.ON Sverige AB Powergen
Slide 49: Disclaimer regarding offer and Endesa investors
This presentation does not constitute an invitation to sell or an offer to buy any securities or a solicitation of any vote or approval. Endesa investors and security holders are urged to read the Spanish prospectus from E.ON regarding the Spanish tender offer for Endesa because it contains importan