Rwe Ag · XETR:RWE
Rwe — Investor Presentation (October 2008)
35 slides from Rwe's investor presentation, Oct 31, 2008
Slide 1: Positioning for More Growth and Less CO2
Positioning for More Growth and Less CO2 Autumn 2008 31.10.2008
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: Key messages
Key messages Performance Solid performance, on track to deliver full year forecast H1 2008 Operating result -8% due to significantly lower reported IFRS-trading result despite strong trading performance Recurrent net income -4% for the same reason Strategy Increase in power prices drives val
Slide 4: More growth, less CO2 - Our strategic roadmap for 2012
More growth, less CO2 - Our strategic roadmap for 2012 What we aim to do Target for 2012 Defend and expand existing margins in GER: defend/grow margins on current volumes RWE key markets Germany and UK UK: defend/grow volumes and profitability Share of non-German operating result grows from Increase
Slide 5: Our focus remains Europe – but with a far wider remit
Our focus remains Europe – but with a far wider remit In core and bridgehead markets RWE sells more than 300 TWh electricity and attains a market share in excess of 20%. In gas it is more than 330 TWh and a market share in 0.6 excess of 10%. 1.4 1.5 1.5 In growth markets under strategic monitori
Slide 6: Main strategic steps in European electricity
Main strategic steps in European electricity Germany UK Generation: maintain market Generation: build more than share (output) of > 30% 3 GW CCGT to lay foundation Supply: defend 16% market share (direct for future market share growth sales), improve margin to average EU level Supply: drive
Slide 7: Forward selling of RWE Power in the German market
RWE Power: ca. €20/MWh1) to catch up with current market price Forward selling of RWE Power in the German market (base load forwards in €/MWh) 100 90 Forward 2008 80 >>10% 10%sold sold >>45% 45%sold sold >>60% 60%sold sold >>85% 85%sold sold >>90% 90%sold sold >>90% 90%sold sold 70 60 50 40 100 90 F
Slide 8: Germany - High power prices are needed to attract investments in new build
Germany - High power prices are needed to attract investments in new build EEX baseload forwards & generation full cost of new build 100 78 €/MWh1 80 68 €/MWh1 [€/MWhel] 60 40 20 0 2006 2007 2008 2010 – 2013 Hard coal new build CCGT new build EEX Cal 09 Forward EEX Cal 10-13 Forwards as of October 2
Slide 9: Rising fuel cost for marginal plant offers attractive price shield
Rising fuel cost for marginal plant offers attractive price shield for lignite and nuclear Price shield Cal 09 at year end 2007 Price shield Cal 09 at significantly cost for hard coal and CO2 increased fuel prices mid 2008 Generation cost / Power price Baseload Baseload Avg. German power generation
Slide 10: Scarce generation capacity increases value of existing and future asset base
Scarce generation capacity increases value of existing and future asset base Significant reliable new build needed1 … … but current projects are insufficient to fill gap 100 90 Required secure capacity1 Cancelled/stopped Secure capacity (in GW) 80 Unlikely 15.81 Postponed 11.71 70 Questionable New b
Slide 11: RWE npower has headstart with CCGT new build
RWE npower has headstart with CCGT new build in a compelling environment The UK requires in total 20 – 40 GW Baseload forwards & generation cost of new build of firm new generation capacity by 100 2020 Currently >5 GW of new plant is 80 under construction with further 68 £/MWh1 64 £/MWh1 project
Slide 12: The new RWE Innogy – one of the leading European renewables players
The new RWE Innogy – on the way to becoming one of the leading European players in renewables With approx. 1,500 MW of renewable energy assets in operation or under construction we have a good starting position, especially in UK wind Target 2012: installed capacity of 4.5 GW Target 2020: more
Slide 13: Our nuclear strategy - more growth, less CO2
Our nuclear strategy - more growth, less CO2 and a regionally diversified portfolio Goal Keep nuclear option in Germany Expansion of nuclear energy-based generation portfolio in other markets, especially UK and CSEE Reduce CO2 exposure and grow more internationally Key Keep German nuclear fl
Slide 14: Main strategic steps in European gas
Main strategic steps in European gas Upstream Double hydrocarbon production by 2012/2013 to 12 bcm p.a. Bring development projects onstream on time and on budget Grow resource base and upgrade identified resources to proven reserves Gain resources in new markets (e.g. Caspian region, Black S
Slide 15: The new RWE Supply & Trading
The new RWE Supply & Trading – moving into a leading role in the European gas industry Merger of RWE Gas Midstream and RWE Trading in April 2008 RWE has a supply portfolio of approximately 40 bcm/a (8% of European demand) RWE Trading is the leading European energy trader in electricity, gas, c
Slide 16: RWE now part of the Nabucco consortium
RWE now part of the Nabucco consortium 3,300 km pipeline link to large gas resources in the Caspian Norway Russia and Middle East 2,900 47,700 Construction of first phase expected to be finished in 2013; approx. € 8 bn EU investment; final phase 3,000 finished by 2018 with 31 bcm/a Caspian regio
Slide 17: Excelerate – our asset light entry into the global LNG market
Excelerate – our asset light entry into the attractive global LNG market Excelerate Deepwater Ports Excelerate GasPorts Ship to ship transfer (STS) Gulf Gateway (USA) Teesside GasPort Transfer between (since March 2005) (since February 2007) conventional and Northeast Gateway (USA) Third p
Slide 18: Less CO2: Our vision for RWE's fuel mix 2020
Less CO2: Our vision for RWE‘s fuel mix 2020 Fuel mix 2007 (capacity in %) Vision fuel mix 2020 (capacity in %)* Total generation capacity 2007: 45 GW Total generation capacity 2020e: ca. 60 - 70 GW Pumped storage, oil other Pumped storage, other Lignite & Renewable hard coal energies (including CCS
Slide 19: Less CO2: Our strategy to reduce our exposure physically and financially
Less CO2: Our strategy to reduce our exposure physically and financially CO2-mitigation in RWE Group: Physical and financial measures and potential (m t/a)1) -7 2) of which additional -9 m t from to -7 3) up -7 -18 4) RWE Innogy renewable projects 178 RWE Extension 5) 2) planned up to -6 -6 -8 3) of
Slide 20: Optimizing the balance sheet
Optimizing the balance sheet We aim to actively manage our balance sheet via a new leverage target. This target is based on a new definition of net debt (including all major long-term provisions) and a leverage factor (net debt/EBITDA). This methodology will probably become sector standard. Th
Slide 21: Average debt maturity of European utilities
Average debt maturity of European utilities The average maturity of RWE‘s capital market debt is among the longest in the European Utility sector. No urgent and constantly revolving refinancing pressure. Years Source: Deutsche Bank, Exposure to Liquidity & Refinancing (08.10.08) 21
Slide 22: Refinancing needs of European utilities for 2009
Refinancing needs of European utilities for 2009 RWE has very low refinancing needs until the end of 2009 (ca. 500 million € in bonds). Due to competitive situation, windows for raising funds must be utilised efficiently. Source: Deutsche Bank, Exposure to Liquidity & Refinancing (08.10.08) 22
Slide 23: Bond Maturities
Bond Maturities (in billion €) 0.0 0.5 1.0 1.5 2.0 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 next 3 years (~1 billion €) 20 19 20 20 20 21 20 22 20 23 20 24 Maturities RWE AG/RWE Finance b.v. 20 25 20 26 20 27 20 28 20 29 20 30 20 31 20 32 20 Balanced bond maturity profile wi
Slide 24: Mid-term capex programme significantly stepped up
Mid-term capex programme significantly stepped up: Growth takes centre stage €6.5 bn German versus international p.a. capex +/-10% RWE npower €1,000 m p.a. (+/-40%) International German €5 bn p.a. RWE Energy €1,600 m p.a. (+/-20%) ~80% grid (incl. storages) ~20% others More than half of capex will b
Slide 25: How growth and efficiency capex will impact underlying earnings
How growth and efficiency enhancement capex will impact our underlying earnings performance (€ bn) 33 Maintenance 9 Mandatory (grid) 2 Efficiency enhancement Replacement 7 17 approx. 20% 2 Operating result*: 100% + €1,600 m p.a. Growth 15 15 EBITDA: + €2,000 m p.a. Total capex Growth/efficiency Aver
Slide 26: We aim to spend €15-20 bn on capex and acquisitions by 2012
We aim to spend €15 - 20 bn on capex and acquisitions by 2012 to grow outside Germany Russia: up to €1 bn UK: approx. €5 bn BeNeLux: approx. €2 bn CEE: approx. €2 – 3 bn SEE: approx. €2 – 3 bn Turkey: up to €3 bn Upstream/Midstream gas and LNG: approx. €2 bn 26
Slide 27: Efficiency enhancement: Stepped up from €600 million to €1.2 billion by 2012
Efficiency enhancement: Stepped up from €600 million by 2010 to €1.2 billion by 2012 Annual earnings contribution of current Cumulative volume of efficiency programme (€ million) programme (€ million) 1,200 new programme €1,200 million old programme annual 200 600 earnings contribution 200 in total
Slide 28: Two main levers to enhance efficiency
Two main levers to enhance efficiency A Cost reduction measures, especially from benchmarking processes mainly focusing on: Reduction of overhead functions and general streamlining of personnel and material costs thereby reallocating up to 700 staff members to other, more efficient tasks - Benchma
Slide 29: Mid-term financial targets
Mid-term financial targets Operating Result 5% CAGR from organic growth to 2012 Recurrent net 5 - 10% CAGR to 2012 income Dividend Payout ratio of 70 - 80% for fiscal 2008 Regular payout ratio of 50 - 60% Capital structure Optimal capital structure (leverage factor of 2.8 - 3.4 x EBITDA) b
Slide 30: Back-ups
Back-ups 30
Slide 31: Leveraging up the balance sheet: Leverage target for 2010
Leveraging up the balance sheet: Leverage target for 2010 implemented Leverage will be measured by ratio of Net Debt/EBITDA (= leverage factor): New definition of net debt* Leverage Factor Net financial debt RWE’s targeted range for the leverage factor: + provisions for pension 2.8x – 3.4x by 20
Slide 32: Development of net debt
Development of net debt € billion Capex Share Dividends Cash flows Acquisitions/ Others Change in buy back from disposals/ including pension, operating (de)consoli- f/x effects nuclear, activities dations mining provisions 25 +2.0 -1.4 -0.2 -0.6 +2.5 -0.1 20.3 20 +1.6 Including DCO*: 3.4 16.5 15 Inc
Slide 33: Mark to market versus hedge accounting under IFRS
illu st ra Mark to market versus hedge accounting tiv e under IFRS at RWE Supply & Trading ex am pl e 2008 2009 90 April May June December Th EEX price rises to €85/MWh 3 ep RWE Power delivers the electricity to to € rice RWE S&T at €66/MWh over the ¼ MtM - underlying transaction = 85 - 66 = +19 74/
Slide 34: Impact of oil hedges for our gas supply business
illu st ra Impact of oil hedges for our gas supply tiv e business on the non-operating result ex am pl e Assumptions: Gas purchases and sales are oil-indexed (here without time offset)* The price of gas depends on the price of oil at every point in time Gas is stored in summer and removed from
Slide 35: Effect of variation margins on our cash flow
illu st ra Effect of “variation margins” on our cash flow tiv e ex am pl e 2008 2009 90 April May June December The The EEX price rises to €85/MWh 3 pric e dr RWE Power delivers the electricity to RWE S&T at €66/MWh over the course of 2009. ¼ MtM - underlying transaction = 85 - 66 = +19 by th to €74