Rwe Ag · XETR:RWE
Rwe — Investor Day (March 2017)
105 slides from Rwe's investor day presentation, Mar 28, 2017
Slide 1: RWE Capital Market Day
RWE Capital Market Day London, 28 March 2017
Slide 2: Disclaimer
Disclaimer This document contains forward-looking statements. These statements are based on the current views, expectations, assumptions and information of the management, and are based on infor- mation currently available to the management. Forward-looking statements shall not be construed as a pro
Slide 3: Management team attending today
Management team attending today RWE AG Rolf Martin Schmitz Markus Krebber CEO CFO Power Generation Supply & Trading Frank Weigand Roger Miesen Tom Glover Andree CFO CTO CCO Stracke Hard Coal, Commercial CCO Gas, Biomass, Asset Origination & Nuclear Optimisation Gas Supply Lars Kulik Peter Krembel Mi
Slide 4: Today's agenda
Today’s agenda I. Strategic outlook Rolf Martin Schmitz II. Financial highlights Markus Krebber III. Lignite & Nuclear Frank Weigand IV. European Power Roger Miesen V. Commercial Asset Optimisation Tom Glover VI. Supply & Trading Andree Stracke RWE AG | Capital Market Day | London, 28 March 2017 4
Slide 5: Investment highlights
Investment highlights ✔ Leading integrated European generation and trading business ✔ Strong track record of operational excellence and commercial optimisation ✔ Well placed to benefit from fundamental changes in energy markets ✔ Solid financial position and focus on cash flow generation ✔ Committed
Slide 6: Strategic outlook
Strategic outlook Leading provider of security of supply with attractive positioning for future market developments Rolf Martin Schmitz Chief Executive Officer RWE AG
Slide 7: Continuing to actively shape our future
Continuing to actively shape our future Operating business Portfolio management Lignite & European Supply & innogy Nuclear Power Trading Operational focus Financial investment RWE AG | Capital Market Day | London, 28 March 2017 7
Slide 8: Leading and diversified provider of reliable energy
Leading and diversified provider of reliable energy Core generation markets1 (%) Production volumes2 (%) 1 3 4 18 21 8.5 UK 49 205 205 TWh 51 TWh GW 11 63 10 78 Germany 17 39 26.3 GW Spread3 Outright3 Germany Netherlands/ 3 Belgium 15 UK Other4 19 Netherlands/ Belgium 38 Highly relevant position i
Slide 9: Attractive value contribution from Supply & Trading
Attractive value contribution from Supply & Trading Global footprint Strong track record 8 ~50% ~1,100 Trading Return on Employees offices risk capital employed1 Prague Essen Average of last 5 years London & Swindon ~€400 m Risk capital New York Den Bosch Beijing employed2 Mexico City Istanbul Singa
Slide 10: Integrated platform extracts maximum value from assets
Integrated platform extracts maximum value from assets Business interaction Commercial Asset Optimisation Commercial asset management Customers Hedging Short-term Supply Generation CAO optimisation Physical & Trading Commodity assets markets Capacity markets, reserve & ancillary services Fuel procur
Slide 11: Strategy designed to benefit from market requirements
Strategy designed to benefit from market requirements Traditional energy markets Renewables expansion Future energy markets > Established merit order > Decreasing conventional > Increasing use > Focus on volume and fuel volumes of electricity efficiency > Intermittent production > Emerging technolog
Slide 12: Expected tightening due to decline of firm capacity
Expected tightening due to decline of firm capacity Demand-supply balance at peak load in Germany1 (GW) 120 > Conventional capacity expected to shrink Expected 100 tightening > Reduction driven by nuclear phase-out and recently 80 announced hard coal closures > No corresponding amount 60 of capacity
Slide 13: Increasing reliance on intermittent renewables and interconnectors risks security of supply
Increasing reliance on intermittent renewables and interconnectors risks security of supply German renewables production (at peak load) Loss of load expectation1 in Europe 2025 (GW) 16% 21% 19% 2% 11% 2% 24% 100 80 60 To be covered 40 by firm capacity 20 0 (Winter 2009/10 2010/11 2011/12 2012/13 201
Slide 14: Capacity tightness already seen in certain situations
Capacity tightness already seen in certain situations German generation capacity on 24 January 2017 (GW) Resulting High (€/MWh) > Low contribution from capacity gap1 contribution renewables 80 from nuclear 250 – Wind: common high 70 225 pressure situation in 200 winter 60 175 – PV: shorter daytime 5
Slide 15: Strategic focus on evolution of existing business portfolio
Strategic focus on evolution of existing business portfolio Optimise Enhance Tap into evolving existing operations portfolio opportunities Lignite & Nuclear/ European Power > Explore technologies European Power suitable to provide > Develop portfolio security of supply > Manage cost base for future
Slide 16: Well positioned to optimise cash flows from operations
Well positioned to optimise cash flows from operations RWE’s competitive success factors Asset base Operational and Technological and sites commercial excellence expertise and know-how > Modern and restructured > Efficient and flexible operations > Existing portfolio across asset base > Strong track
Slide 17: Asset base set up to benefit from market opportunities
Asset base set up to benefit from market opportunities Balanced capacity split Lignite & Nuclear European Power > Fixed fuel price > Highly flexible generation portfolio generation portfolio > Focus on cost 9.7% > Largely variable cost base efficiencies 26.3% > Structural market upside > Significant
Slide 18: Ongoing cost reduction and active portfolio measures
Ongoing cost reduction and active portfolio measures Operational cash cost development1 Active portfolio measures (€ bn) Conventional power generation Since 2012 (GW) 1.4 11.5 4.3 4.0 3.0 3.8 3.7 3.4 3.1 3.9 3.2 2012 2013 2014 2015 2016 Target Shut- Moth- Contract Lignite Total 2019 down balled term
Slide 19: Powering. Reliable. Future.
Powering. Reliable. Future. Evolution of technologies for firm capacity Conventional plants Flexible plants Storage Sector coupling > Operational > Proprietary > Sizeable pumped > Strong R&D track excellence across engineering storage facilities record all technologies know-how > Operational battery
Slide 20: Cash flow-focused and value-maximising strategy
Cash flow-focused and value-maximising strategy ✔ Leading provider of firm capacity in core markets ✔ Continued efficiency improvements and active management of assets ✔ Well positioned to benefit from tightening markets ✔ Attractive returns and organic growth options in Supply & Trading ✔ Value-max
Slide 21: Financial highlights
Financial highlights Long-term value creation through strict focus on cash flows and active portfolio management Markus Krebber Chief Financial Officer RWE AG
Slide 22: Clear financial management principles
Clear financial management principles Strict focus on cash flows and transparent financial disclosure Disciplined capital allocation and active portfolio management Sustainable dividend policy with upside potential RWE AG | Capital Market Day | London, 28 March 2017 22
Slide 23: RWE stand-alone figures relevant for cash and value management
RWE stand-alone figures relevant for cash and value management RWE Group RWE stand-alone Lignite & Nuclear Lignite & Nuclear European Power Operating European Power business Supply & Trading Supply & Trading innogy innogy stake and dividends Financial Consolidated net debt portfolio Provisions Key f
Slide 24: Improved transparency from new business segments
Improved transparency from new business segments Operating business Financial portfolio Lignite & Nuclear European Power Supply & Trading innogy/Provisions > Lignite operations > Hard coal, gas, hydro > Trading/origination > Asset dedicated to in Germany and biomass power cover provisions > Principa
Slide 25: Lignite & Nuclear – Driven by power price developments
Lignite & Nuclear – Driven by power price developments Key financials Historical financials > Lower realised power prices (2014: €48/MWh, €m 2014PF 2015PF 2016PF 2015: €41/MWh, 2016: €35/MWh) > €0.5 bn improvement in operational cash costs Adj. EBITDA1 2,105 1,261 1,087 since 2012 > Non-recurring it
Slide 26: European Power – Benefitting from improving UK spreads
European Power – Benefitting from improving UK spreads Key financials Historical financials > UK: improving spreads and income from €m 2014PF 2015PF 2016PF short-term optimisation UK 90 190 270 > Continental Europe: declining spreads and lower income from balancing and reserve services Continental E
Slide 27: Supply & Trading – Impacted by commodity market developments
Supply & Trading – Impacted by commodity market developments Key financials Historical financials > Negative EBITDA in 2016 primarily driven by €m 2014PF 2015PF 2016PF trading losses in Q2 > Non-recurring items predominantly consisting of Adj. EBITDA1 286 164 -139 legacy contracts in gas midstream b
Slide 28: Reduction of changes in provisions expected by 2019
Reduction of changes in provisions expected by 2019 Outlook for changes in provisions Outlook for changes in provisions1 (€ m) Nuclear 656 > Stable use of provisions over next 3 to 4 years > Peak expected after shut-down of last nuclear power plant in 2022 Legacy contracts > Loss-making power purcha
Slide 29: Income statement 2016 still impacted by higher depreciation and financial result
Income statement 2016 still impacted by higher depreciation and financial result Group RWE stand-alone1 (2016) (€ bn) > RWE stand-alone EBITDA includes innogy dividend (2016: €730 m)2 and 5.4 Adj. EBITDA 1.9 Other/Consolidation of -€119 m > Financial result impacted by (2.3) Depreciation (0.9) – Los
Slide 30: 2016 distributable cash flow affected by working capital and cash interests/taxes
2016 distributable cash flow affected by phasing out of working capital measures and higher cash interests/taxes Group RWE stand-alone1 (2016) (€ bn) > RWE stand-alone EBITDA includes innogy dividend (2016: €730 m)2 and 5.4 Adj. EBITDA 1.9 Other/Consolidation of -€119 m Change in provisions & > Chan
Slide 31: Solid capital structure with increased financial flexibility
Solid capital structure with increased financial flexibility RWE stand-alone net economic debt (as of 31 December 2016) RWE RWEstand-alone stand-alonenet debt (as liquidity of 31 December position (as of 31 2016) December 2016) (€ bn) Limited relevance of traditional leverage ratios > Net financial
Slide 32: Funding strategy reflects strong liquidity position
Funding strategy reflects strong liquidity position RWE RWEstand-alone stand-aloneliquidity liquidityposition position(as (asofof3131 December 2016) December 2016) (€ bn) > Solid liquidity position to cover short-term financial 11.8 ~2.0 and operational business requirements > Nuclear energy fund co
Slide 33: RWE stand alone – Outlook 2017
RWE stand alone – Outlook 2017 2016 2017 €1.6 bn – €1.9 bn Adjusted EBITDA €1.9 bn -€0.9 bn Depreciation > Reduction by ~€0.3 bn from impairments > Reduction in interest accretion to provision (€0.4 – 0.5 bn) -€1.0 bn Net financial result > Absence of losses from sale of securities and impact from l
Slide 34: Strict focus on disciplined capital allocation
Strict focus on disciplined capital allocation Elements of capital allocation Operating business Portfolio management Lignite & Nuclear Minimum financial portfolio requirement > Cash-optimised maintenance capex > Minimum coverage of provision utilisation by innogy/fungible asset > Target coverage: 1
Slide 35: Sustainable dividend with upside potential
Sustainable dividend with upside potential Elements of dividend policy > Target dividend driven by > Potential upsides distributable cash flows of Commodity price RWE stand-alone developments/outright power > Objective of sustainable €0.50 per share for price recovery dividend payout fiscal year 2
Slide 36: Financial highlights – key messages
Financial highlights – key messages ✔ Full transparency on operating business and financial portfolio ✔ Operating business managed for cash and positioned for market recovery ✔ Solid capital structure and financial flexibility ✔ Strong financial discipline and sustainable dividend with upside potent
Slide 37: Lignite & Nuclear
Lignite & Nuclear Rigorously managed asset base with significant outright exposure Frank Weigand Chief Financial Officer RWE Generation
Slide 38: Strong outright position
Strong outright position Main operational sites in Germany and production volumes1 (2016) Generation capacity1 (2016) Other OCGT 1% 5% Nuclear Lignite CCGT Lignite 30 31% 26% 104 11 41.9 TWh Outright GW Emsland 74 4 Frimmersdorf Hydro Neurath 6% Nuclear Hard 10% Garzweiler Niederaußem Coal Weisweile
Slide 39: Track record of significant cost reductions in Lignite & Nuclear
Track record of significant cost reductions in Lignite & Nuclear Operational cash cost development1 Employee/headcount development (€ bn) (Full time equivalent) 2.8 12,500 2.6 11,900 2.5 11,300 2.4 2.3 10,600 10,200 2.1 9,200 2012 2013 2014 2015 2016 Target 2012 2013 2014 2015 2016 Target 2019 2019
Slide 40: Lignite
Lignite RWE AG | Capital Market Day | London, 28 March 2017 40
Slide 41: Integrated system including mining, refining and power plants
Integrated system including mining, refining and power plants Major sites in Germany (2016) Integrated system Frimmersdorf Neurath 2 x 300 MW 3 x 300 MW > 3 lignite open cast mines 2 x 600 MW North- 2 x 1,050 MW (BoA) > ~10 GW installed power South- generation capacity in Germany, Niederaußem Railwa
Slide 42: Regulatory framework clarified by state ruling providing planning security for mining
Regulatory framework clarified by state ruling providing planning security for mining Clear regulatory framework Sufficient reserves until mid-century2 > State ruling on Rhenish lignite mining1 – Confirmation of lignite mining necessity to ensure electricity supply Open cast Extraction3 Reserves Est
Slide 43: Significant CO2 reduction in line with broader European and national roadmap
Significant CO2 reduction in line with broader European and national roadmap 2020 2030 Planned Stand-by reserve End of Inden mine capacity de- 2 x 300 MW Weisweiler1 ~2030 crease 2017 2 x 300 MW Frimmersdorf 2021 2 x 600 MW Weisweiler1 2018 2 x 300 MW Niederaußem 2022 2019 1 x 300 MW Neurath 2023 By
Slide 44: Further cost reductions to maintain positive cash contribution from operations
Further cost reductions to maintain positive cash contribution from operations Generation output in Germany (TWh)1 Cash contribution2 Transfer of 5 blocks to stand-by reserve > Rule-of-thumb: Breakeven at power prices minus CO2 costs of ~74 69-71 ~€22/MWh including additional planned efficiency 69 6
Slide 45: Longstanding experience in lignite operations
Longstanding experience in lignite operations Overview Overviewofofmining miningactivities activities 3 2 Recultivation (ongoing) 3 Operations 2 4 1 4 1 Recultivation (after shutdown) Surface preparation (relocation) RWE AG | Capital Market Day | London, 28 March 2017 45
Slide 46: Majority of mining obligations due to recultivation
Majority of mining obligations due to recultivation RWE’s lignite mining provisions in Germany (as of 31 Dec 2016) Mining damage Surface preparation (relocation) > Reimbursement for subsidence > Resettlement of villages damages > Set up of infrastructure > Substitute water supply at resettlement sit
Slide 47: Stable utilisation of provisions expected for the foreseeable future
Stable utilisation of provisions expected for the foreseeable future Example: cash flow profile (one mine) Utilisation of all mining provisions ILLUSTRATIVE Until ~2030 > Stable utilisation of provisions, 10 20 30 40 50 60 mainly for relocation, mining Year damage and recultivation > Annual utilisat
Slide 48: Lignite – key messages
Lignite – key messages ✔ Experienced operator of well-managed and integrated system ✔ CO2 reduction in line with broader political roadmap ✔ Efficiency improvements to keep system cash positive RWE AG | Capital Market Day | London, 28 March 2017 48
Slide 49: Nuclear
Nuclear RWE AG | Capital Market Day | London, 28 March 2017 49
Slide 50: Experience across entire nuclear plant lifecycle
Experience across entire nuclear plant lifecycle Status Nuclear units Net capa- End of Spent fuel Decomm. Decomm. in Germany city (GW) operations removal licence progress 1 Emsland1 1.3 2022 2027E Pending - Operat- 2 Gundremmingen C2 1.3 2021 2025E Pending - ional (3.9 GW) 3 Gundremmingen B2 1.3 201
Slide 51: Positive cash contribution from plants in operation
Positive cash contribution from plants in operation Generation output (TWh)1 Cash contribution2 > Breakeven at base load prices of above ~€20/MWh, 25 ~24 including additional planned efficiency measures > Although cost base already largely optimised, 16-18 16-18 16-18 16-18 further efficiency measur
Slide 52: Clear separation of responsibilities between nuclear operators and state
Clear separation of responsibilities between nuclear operators and state RWE’s responsibility State’s responsibility RWE’s remaining nuclear provisions RWE’s contribution to state fund1 (31 Dec 2016) (1 July 2017) €7.0 bn €5.7 bn 1.8 Risk surcharge Materials 30 – 40% and waste treatment Nuclear ener
Slide 53: Decommissioning steps well established
Decommissioning steps well established Basic site management Periodic inspection, ongoing supervision and maintenance of systems and buildings Downsizing/replace- Final shutdown of ment of infrastructure systems Dismantling Dismantling of systems Decontamination Release of buildings and components o
Slide 54: Relevant decommissioning experience in-house
Relevant decommissioning experience in-house Basic site management Dismantling Materials & waste treatment Example: Emergency power supply Under water thermal cutting Under water packaging (during plant operations) (reactor pressure vessel internals) (reactor pressure vessel internals) Downsized/rep
Slide 55: Key success factors for decommissioning in place
Key success factors for decommissioning in place Key success factors RWE’s approach and experience Decommissioning > Timely receipt of licences > Early licencing process planning & > Clear blueprint for planning > Project management track record management > Avoidance of delays/cost overruns > Fleet
Slide 56: Cash flow profile of provisions driven by timing of individual shutdowns
Cash flow profile of provisions driven by timing of individual shutdowns Example: Decommissioning cash flow profile (one unit) Utilisation of all nuclear provisions ILLUSTRATIVE Until ~2020 Stable utilisation of provisions Year (€200 m – €300 m p.a.) 1 4–7 15 – 20 From 2021 onwards Spent Declining r
Slide 57: Nuclear – key messages
Nuclear – key messages ✔ Strong expertise, both in operations and decommissioning ✔ Positive cash contribution until decommissioning ✔ Significantly improved planning certainty due to new nuclear law RWE AG | Capital Market Day | London, 28 March 2017 57
Slide 58: European Power
European Power Efficient operator of modern and flexible generation fleet Roger Miesen Chief Technical Officer RWE Generation
Slide 59: Well positioned portfolio across regions and technologies
Well positioned portfolio across regions and technologies Major power plants and production volumes1 (2016) Generation capacity (2016) Other OCGT Other 5% 1% 3% Netherlands 22% Germany CCGT Lignite 32% 31% 13 26% 41.9 100 Spread GW TWh 3 Hydro 9 Nuclear 6% 10% UK Hard Coal 43% 21% > Leading market p
Slide 60: Rigorous cash flow-based portfolio decisions
Rigorous cash flow-based portfolio decisions Corporate cash contribution1 Cumulative portfolio measures since 2012 Power plant units and contracts (MW) Watch list 3,930 9,975 2 960 2,000 1,085 Continue Decom- Planned Contract Mothballed Total Mothball / missioned decommis- termination Decommission /
Slide 61: Significant cash improvements while maintaining full optionality
Significant cash improvements while maintaining full optionality Management of cost base Operational cash cost development1 Additional efficiency measures (€ bn) > Further fleet synergies (more efficient operations, 1.6 reduced operational cost) 1.4 1.3 1.3 1.1 > Ongoing technical improvements 1.0 (
Slide 62: UK generation portfolio – excellent competitive position and upside from capacity market
UK generation portfolio – excellent competitive position and upside from capacity market Highly efficient fossil fuel portfolio Revenue from capacity market1 (£m) Total 8.1 GW 4.0 ~165 ~165 2.6 1.5 ~85 >58% 55 – 57% <50% Thermal efficiency ~15 2017 2018 2019 2020 Gas Hard Coal Other Assets well posi
Slide 63: Continental European hard coal – cash positive operations
Continental European hard coal – cash positive operations with upside from biomass co-firing Restructured power plant portfolio Efficient convoy management Total 5.0 GW1 800 MW class 2.3 2.6 Eemshaven Westfalen 3 identical units (commissioned 2014/15) <5 yrs >5 yrs High efficiency (>46%) Age of
Slide 64: Continental European gas – modern fleet, well positioned for tighter markets
Continental European gas – modern fleet, well positioned for tighter markets Underutilised power plant portfolio Significant utilisation improvements Lingen plant Total 6.8 GW1 (100 GWh) 3.9 8 2.9 6 4 balled rating Moth- Ope- 2 0 Currently out of mothballing Jan 2014 Jan 2015 Jan 2016 Dec 2016 State
Slide 65: Pumped storage – attractive portfolio optimisation opportunities
Pumped storage – attractive portfolio optimisation opportunities Major hydro plants Optimisation of RWE generation portfolio Pumped storage portfolio dispatch (25 Jan 2017) Total 2.3 GW (MW) 0.2 21,000 1.0 0.9 19,000 2.1 2.1 17,000 1.3 1.5 15,000 2013 2014 2015 2016 13,000 “Pump” “Generate” Exempt f
Slide 66: Initiatives focused on security of supply
Initiatives focused on security of supply Combined battery storage Temporary generation Embedded generation > 6 MW battery storage project > Mutually beneficial partnership > Long track record with gas engines (Herdecke, Germany) with Aggreko in UK since (derived from German coal mine – Shared infra
Slide 67: European Power – key messages
European Power – key messages ✔ Highly flexible and efficient power plant portfolio across core regions ✔ Meticulous management approach to maximise value ✔ Fleet well positioned for tightening energy markets in Europe ✔ Attractive opportunities to further develop business operations RWE AG | Capita
Slide 68: Commercial Asset Optimisation (CAO)
Commercial Asset Optimisation (CAO) Extraction and monetisation of value from generation assets Tom Glover Chief Commercial Officer CAO RWE Supply & Trading
Slide 69: Significant value contribution from CAO activities
Significant value contribution from CAO activities CAO value contribution Deviation from Reference Hedge Path ~5% Option management > Within defined limits > Re-optimisation of power ~15% > Based on fundamental market views station option ~5% > Shape management Fuel procurement & logistics > Trading
Slide 70: Treatment of power plants as real options
Treatment of power plants as real options Power Plant used to convert price fuel into energy Production is in the money SELL Production is Existing delivery out of the money obligations fulfilled BUY BACK by external energy purchases Electricity price Production costs Time Intrinsic value Extrinsic
Slide 71: Hedging strategy focuses on risk mitigation and value creation
Hedging strategy focuses on risk mitigation and value creation Outright position Spread position 2016 generation output 2016 generation output 29% 54% 104 97 TWh TWh Lignite 71% Hard coal 46% Nuclear Gas Power only Gas to power/coal to power > Focus on risk mitigation from any potential negative > F
Slide 72: Hedge path based on risk appetite and market views
Hedge path based on risk appetite and market views Reference Hedge Path example ILLUSTRATIVE > Factors driving forward hedging – Risk appetite Total power generation – Available market liquidity – Market view – Hedging costs > Accelerating/decelerating hedging within defined limits encouraged where
Slide 73: Optimised hedging to reflect fundamental market view
Optimised hedging to reflect fundamental market view Production and hedged position Simple linear technology-based hedge Rationale 100% > Liquidity in national power markets can constrain 80% (Open position) hedging volumes 60% > Liquidity in fuel markets generally much higher, allowing for faster h
Slide 74: Significant exposure to power and generation spreads retained
Significant exposure to power and generation spreads retained Expected positions and hedge status as of 31 December 2016 Outright ~31 ~27 ~25 ~28 (Lignite & ~100 TWh 85 – 90 TWh 80 – 85 TWh 80 – 85 TWh Nuclear) >90% >90% >70% >50% 2017E 2018E 2019E 2020E Open position Fully hedged position Implicit
Slide 75: Changes in hedging rates can add significant value
Changes in hedging rates can add significant value Development of German base load prices Development of German fuel spreads1 (€/MWh) (€/MWh) 40 5.0 4.0 35 3.0 2017 Ø hedged price 2.0 30 2018 Ø 1.0 hedged price 0.0 25 2019 Ø (1.0) 20 hedged price (2.0) (3.0) 15 35 33 31 29 27 25 23 21 19 17 15 13 11
Slide 76: Extracting the extrinsic value of the real option
Extracting the extrinsic value of the real option Example: Immediate commercial and operational response to tight UK system margin Price and available production increase during September 2016 (MW) £/MWh 1 ~ £4.7 m 5,000 200 4,500 Aberthaw coal station changed Max closing price base load 150 strateg
Slide 77: CAO – key messages
CAO – key messages ✔ Application of trading mind-set to commercial management of assets ✔ Flexible and market driven execution of hedging strategies ✔ Proven track record of value extraction from existing asset base ✔ Well positioned to capture upside from increasingly volatile power markets RWE AG
Slide 78: Supply & Trading
Supply & Trading Value creation through fundamental understanding of markets Andree Stracke Chief Commercial Officer Origination & Gas Supply RWE Supply & Trading
Slide 79: Strong commercial platform for Supply & Trading activities
Strong commercial platform for Supply & Trading activities CAO Trading Supply > Real asset > Trading/ > Gas & LNG options origination > Commodity > Commercial > Principal solutions asset Investments management Skills and capabilities Market Commercial Market Physical know-how mind set access Markets
Slide 80: Global presence and broadly diversified commodity exposure
Global presence and broadly diversified commodity exposure Global footprint RWE trading volumes (2016) Power 8 ~1,100 1,972 TWh Trading Employees offices Gas/LNG Prague Essen 361 bcm Carbon CO2 London & 650 m certificates Swindon Coal New York Den Bosch Beijing 548 m metric tons Mexico City Istanbul
Slide 81: Important earnings contributor to RWE results
Important earnings contributor to RWE results EBITDA development and gross margin split Business segments Average Return on risk capital2 Gross margin Trading return and margin Trading Trading Supply split1 ~50% 75% 25% > Physical and financial products on screen in liquid markets (€ m) 346 > Negoti
Slide 82: Trading: Track record of attractive risk adjusted returns
Trading: Track record of attractive risk adjusted returns Gross margin versus VaR (€ m) > Strong track record of achieving 1,200 attractive returns while staying 12.3 12.1 15.4 11.2 13.9 15.8 17.1 below risk limits 8.0 10.9 1,000 6.3 > Historically, average portfolio VaR has been significantly below
Slide 83: Trading: Understanding of fundamentals drives trading approach
Trading: Understanding of fundamentals drives trading approach Fundamental analysis (examples) Diversified trading exposure > Power: demand, Deep understanding Trading strategies conventional power plants, of physical assets renewable feed-in, cross Fundamental: assessment Fundamental modellin
Slide 84: Trading: Diversified global platform with better market insights
Trading: Diversified global platform with better market insights Energy markets are global and interlinked Global steam coal market1 Global gas market2 Domestic Imports (in billion tons) Export (in MTPA) Import (in MTPA) 0.1 78 86 0.2 29 25 33 20 3.0 0.4 0.6 0.2 China India Other Asia Europe Qatar A
Slide 85: Principal Investments: Successful track record of energy related investments
Principal Investments: Successful track record of energy related investments Strategic approach Case studies of investments > Established to invest across the commodity spectrum Lynemouth Power (UK) > Focus on private equity-like investments where RWE Supply & Trading can extract value from strong t
Slide 86: Gas & LNG: Leading European gas portfolio player
Gas & LNG: Leading European gas portfolio player Long-term contracted volumes Overview (bcm) > Integrated diversified portfolio of supply, transport, 15 storage and sales contracts 10 > Primarily merchant positions (no operation of pipelines, terminals or storage assets) 5 > Global LNG sourcing and
Slide 87: Commodity Solutions: Leading supplier in large customer segments
Commodity Solutions: Leading supplier in large customer segments Supplied volumes 2016 (TWh) Overview ~35 > Focus on customers with energy consumption of more than 100 GWh/a ~25 > Large industrials, municipalities, mid market oil/fuel hedging counterparts (e.g. airlines) > Market leader in the Germa
Slide 88: Comprehensive risk management and limit system
Comprehensive risk management and limit system Elements of risk management Quantitative Qualitative Value-at-Risk (VaR) HR Trading VaR limit: €40m Internal development of senior traders and minimal external hires at senior level Delta Risk culture Limits for individual commodities Zero tolerance pol
Slide 89: Organic growth initiatives: Leveraging skill set and know-how
Organic growth initiatives: Leveraging skill set and know-how Global expansion of trading business Growth in gas supply/commodity solutions Solid fuels Asia Pacific European gas portfolio > Grow Asia-Pacific business footprint > Expand and leverage pan-European gas portfolio > Develop physical and f
Slide 90: Supply & Trading – key messages
Supply & Trading – key messages ✔ Leading platform providing competitive advantage through market insights ✔ Strong track record of attractive returns and earnings contribution ✔ Comprehensive risk control and management system ✔ Organic expansion leveraging existing skills and know-how RWE AG | Cap
Slide 91: Closing remarks
Closing remarks
Slide 92: Investment highlights
Investment highlights ✔ Leading integrated European generation and trading business ✔ Strong track record of operational excellence and commercial optimisation ✔ Well placed to benefit from fundamental changes in energy markets ✔ Solid financial position and focus on cash flow generation ✔ Committed
Slide 93: Appendix
Appendix
Slide 94: Income statement 2016
Income statement 2016 (€ million) RWE stand-alone RWE Group Revenue (including natural gas tax/electricity tax) 19,574 45,833 Natural gas tax/electricity tax -180 -2,243 Revenue 19,394 43,590 Other operating income 1,161 1,435 Cost of materials -16,829 -33,397 Staff costs -1,921 -4,777 Depreciation,
Slide 95: Balance sheet 2016
Balance sheet 2016 (€ million) RWE stand-alone RWE Group Assets Intangible assets 1,040 12,749 Property, plant and equipment 6,571 24,455 Investment property 45 63 Investments accounted for using the equity method 665 2,908 Other financial assets1 14,561 1,055 Inventories 1,577 1,968 Financial recei
Slide 96: Net debt 2016
Net debt 2016 (€ million) RWE stand-alone RWE Group Cash and cash equivalents 3,197 4,576 Marketable securities 7,343 10,065 Other financial assets 1,278 1,621 Financial receivables against innogy 4,302 - Financial assets 16,120 16,261 Bonds, other notes payable, bank debt, commercial paper 5,191 15
Slide 97: Reconciliation to 2016 adjusted net income
Reconciliation to 2016 adjusted net income (€ million) RWE stand-alone RWE Group Reported Adjustments Adjusted Reported Adjustments Adjusted Adjusted EBIT 1,077 0 1,077 3,082 0 3,082 Non-operating result -5,496 5,496 0 -6,661 6,661 0 Financial result -1,375 410 -965 -2,228 410 -1,818 Taxes on income
Slide 98: Power prices and commodities
Power prices and commodities Baseload power prices – Germany, NL (1 Year Forward) Baseload power prices – UK (1 Year Forward) 45 €/MWh 100 €/MWh 40 90 NL 35 80 30 70 Germany 60 25 UK 20 50 15 40 Jan'15 Apr'15 Jul'15 Oct'15 Jan'16 Apr'16 Jul'16 Oct'16 Jan'17 Jan'15Apr'15 Jul'15 Oct'15Jan'16Apr'16 Jul
Slide 99: Clean Dark and Spark Spreads – 2015-2018 forwards
Clean Dark (CDS) and Spark Spreads (CSS) – 2015 - 2018 forwards for Germany, UK and NL1 Germany UK2 Netherlands Cal15 Cal16 Cal17 Cal18 Cal15 Cal16 Cal17 Cal18 Cal15 Cal16 Cal17 Cal18 €/MWh €/MWh 20 20 Ø16.97 15 15 Ø10.52 Ø11.21 10 10 Ø6.63 Ø7.13 Ø9.18 Ø7.02 Ø5.80 5 Ø4.83 Ø5.05 5 Ø5.59 Ø3.96 Ø3.10 Ø
Slide 100: RWE power plant portfolio
RWE power plant portfolio Power plant Country Commissioned Net RWE's legal RWE's Partner Stake capacity consolidation economic in stake stake MW % MW % MW % Lignite Frimmersdorf Germany 1966,1970 562 100.0 562 100.0 562 Neurath Germany 1972–1976 2,091 100.0 2,091 100.0 2,091 Neurath (BoA 2&3) German
Slide 101: RWE power plant portfolio (continued)
RWE power plant portfolio (continued) Power plant Country Commissioned Net RWE's legal RWE's Partner Stake capacity consolidation economic in stake stake MW % MW % MW % Gas Emsland B, C, D Germany 1973/74, 2010/12 1,837 100.0 1,837 100.0 1,837 Gersteinwerk F – I Germany 1973 1,285 100.0 1,285 100.0
Slide 102: RWE power plant portfolio (continued)
RWE power plant portfolio (continued) Power plant Country Commissioned Net RWE's legal RWE's Partner Stake capacity consolidation economic in stake stake MW % MW % MW % Oil OCGTs (gas oil, various sites) UK 264 100.0 264 100.0 264 Grimsby (gas oil) UK 18 100.0 18 50.0 9 Aggreko Total oil 282 282 273
Slide 103: RWE power plant portfolio (continued)
RWE power plant portfolio (continued) Power plant Country Commissioned Net RWE's legal RWE's Partner Stake capacity consolidation economic in stake stake MW % MW % MW % Contractually secured plants1 Voerde A+B (hard coal) Germany 1,390 100.0 1,390 100.0 1,390 Other hard coal Germany 1,958 40.0 783 3
Slide 104: Overview of capacity measures
Overview of capacity measures Measure Plant MW1 Fuel Location Date Decom- Goldenbergwerk 110 Lignite DE Q3-2015 missioning Amer 8 610 Hard coal NL Q1-2016 Westfalen C 285 Hard coal DE Q1-2016 Mid-size units 190 Gas NL Q4-2016 Voerde A/B 1,390 Hard coal DE Q1-2017 Gersteinwerk K2 610 Hard coal DE Q1-
Slide 105: POWERING. RELIABLE. FUTURE.
POWERING. RELIABLE. FUTURE. ED” AK =