Rwe Ag · XETR:RWE
Rwe — H1 2008 Earnings Presentation
44 slides from Rwe's earnings presentation, Aug 14, 2008
Slide 1: Investor and Analyst Conference Call H1 2008
Investor and Analyst Conference Call H1 2008 Essen, August 14, 2008 Jürgen Großmann Chief Executive Officer RWE AG Rolf Pohlig Chief Financial Officer RWE AG 1
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 f
Slide 3: Today's Agenda
Today’s Agenda A Jürgen Großmann Highlights of H1 2008, Update on Group topics B Rolf Pohlig Group results H1 2008 and divisional performance, Outlook 2008 RWE AG | Conference Call H1 2008 | August 14, 2008 3
Slide 4: 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 value of ex
Slide 5: RWE Power: forward selling in the German market
Generation RWE Power: ca. €30/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 >>1% 1%sold sold >>10% 10%sold sold >>45% 45%sold sold >>60% 60%sold sold >>85% 85%sold sold >>90% 90%sold sold >>90% 90%so
Slide 6: High power prices needed to attract investments in new build
Generation Germany - High power prices are needed to attract investments in new build EEX baseload forwards & generation full cost of new build 100 92 €/MWh1 82 €/MWh1 80 [€/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 o
Slide 7: Rising fuel cost offers price shield for lignite and nuclear
Generation 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
Slide 8: Scarce generation capacity increases value of existing and future asset base
Generation 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 Questio
Slide 9: RWE npower has headstart with CCGT new build
Generation 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 £/MWh1 80 75 £/MWh1 under construction with further
Slide 10: Our new build projects are on track and increasingly attractive
Generation Our new build projects are on track – and increasingly attractive Capacity Capex Project name (MW) (€ bn) 2005 2006 2007 2008 2009 2010 2011 2012 2013 Lingen CCGT 875 0.5 Staythorpe CCGT 1,650 0.9 Blocks 1 – 4 BoA Neurath Lignite 2,100 2.3 Block G F3) Pembroke1) CCGT 2,000 1.2 Blocks 1 –
Slide 11: Evaluating new opportunities in Central / South Eastern Europe
Generation We are evaluating new opportunities to expand our position in Central / South Eastern Europe Poland 800 MW hard coal fired power plant JV with coal producer Kompania Węglowa (25%) Start of operation scheduled for 2015 Final investment decision in 2009 Cernavoda/Romania 1.4 GW nuclear powe
Slide 12: Expanding footprint in renewable energy
Generation Expanding footprint in renewable energy Dynamic when it comes to growth: RWE Innogy – Development of project portfolio – 1.5 GWel assets in operation or 11 9.0 under construction Electricity generation capacity (GWel) 10 – Pipeline expanded to 9.0 GWel 9 Disciplined when it comes 8 to inv
Slide 13: Grid constraints add to scarce German generation capacity
Networks Grid constraints will add to the problem of scarce German generation capacity Increasing need for new Regional supply-demand Regional supply-demand investment in the balance 2008 balance 2030 transmission network But: The extension of the Offshore electricity transmission wind network is no
Slide 14: German electricity transmission business is of strategic and economic value
Networks German electricity transmission business is of strategic and economic value to RWE Improved regulatory framework underpins economic feasibility of network investments RWE has an interest in further expansion of the transmission grids in Germany and Europe, in line with both German and EU po
Slide 15: German networks: improved conditions for incentive based regulation
Networks German networks: Improved conditions for upcoming incentive based regulation Improved returns on equity Incentive based regulation – 7.56% for existing electricity and gas assets and Improved return on equity [RoE] 9.29% for new investments Special treatment of investment in growth and rest
Slide 16: German Retail: Net loss of electricity customers stopped
Supply German Retail: Net loss of electricity customers stopped Electricity Gas RWE has stopped customers loss Competition increasingly dynamic On a net basis, RWE lost 200,000 On a net basis, RWE lost approx. 30,000 residential customers in H1 2008 residential customers from January to (300,000 in
Slide 17: Regaining market share: product and service offensive
Supply Regaining market share: Our product and service offensive Increase customer retention Gain new clients CO2-free tariff (mix nuclear and Growth strategy for new sales channel eprimo Loyalty products electricity and renewable energy) (internet based): gas (fixed tariffs) Collecting over 750,000
Slide 18: Efficiency enhancement stepped up to €1.2 billion by 2012
Strategy 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
Slide 19: Two main levers to enhance efficiency
Strategy 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 -
Slide 20: Update on current political topics
Politics Update on current political topics Nuclear lifetime extension “Do you think that the lifetime of nuclear power Hottest political and public debate on plants in Germany should be extended?” the future of nuclear power since 2000 54% 53% Change of current regime before next election in Septem
Slide 21: Today's Agenda
Today’s Agenda A Jürgen Großmann Highlights of H1 2008, Update on Group topics B Rolf Pohlig Group results H1 2008 and divisional performance, Outlook 2008 RWE AG | Conference Call H1 2008 | August 14, 2008 21
Slide 22: RWE Group key performance indicators
RWE Group key performance indicators January – June change € million 2008 20071 in % External revenue 24,721 21,841 +13.2 Cash flows from operating activities 1,383 2,551 -45.8 EBITDA 4,628 4,884 -5.2 Operating result 3,933 4,276 -8.0 Non-operating result -471 -78 -503.8 Financial result -618 -480 -
Slide 23: Performance of RWE Power
Performance of RWE Power Operating Result EBITDA January – June Change Change € million 2008 20071 in % 2008 20071 in % 1,769 1,538 +15.0 1,961 1,713 +14.5 Higher realised electricity prices and higher volumes (+€1.0 bn) Increased costs due to higher fuel prices (-€190 million) Higher costs for CO2
Slide 24: Performance of RWE Dea
Performance of RWE Dea Operating Result EBITDA January – June Change Change € million 2008 2007 in % 2008 2007 in % 325 290 +12.1 448 384 +16.7 Significant increase in crude oil prices not fully reflected due to the dollar’s weakness and our hedge policy. Oil production declining. Increased gas volu
Slide 25: Performance of RWE Supply & Trading
Performance of RWE Supply & Trading Operating Result EBITDA January – June Change Change € million 2008 20071 in % 2008 20071 in % 68 604 -88.7 73 604 -87.9 Extraordinarily high earnings contribution from energy trading in 2007 could not be repeated IFRS relevant trading performance much more geared
Slide 26: Performance of RWE Energy
Performance of RWE Energy Operating Result EBITDA January – June Change Change € million 2008 20071 in % 2008 20071 in % 1,441 1,516 -4.9 1,688 1,756 -3.9 German regions 834 780 +6.9 1,011 954 +6.0 International regions 386 335 +15.2 417 366 +13.9 Supraregional operations 274 456 -39.9 319 496 -35.7
Slide 27: Performance of RWE npower
Performance of RWE npower Operating Result EBITDA January – June Change Change € million 2008 2007 in % 2008 2007 in % 334 395 -15.4 416 463 -10.2 Negative impact from currency exchange rate changes (-€51 million) Power generation: - Higher generation margins - Growing costs of CO2 (-€36 million to
Slide 28: Non-operating result
Non-operating result January – June Change € million 2008 20071 (absolute) Capital gains 45 260 -215 Impairment losses - - - Restructuring / other -516 -338 -178 Total -471 -78 -393 Capital gains: disposal of a further 8% stake in rhenag. H1 2007 dominated by the disposal of the Dutch gas grid asset
Slide 29: Financial result
Financial result January – June Change € million 2008 20071 in % Net interest -32 -239 +86.6 Interest accretion to non-current provisions -375 -463 +19.0 Other financial result -211 +222 -195.0 Total -618 -480 -28.8 Net interest: Among other reasons better due to improved net financial position Inte
Slide 30: Cash flow statement
Cash flow statement January – June Change € million 20081 20071 (absolute) Income 1,326 2,755 -1,429 Depreciation, amortization, 1,090 1,152 -62 impairment losses and write-backs Changes in provisions -289 -342 +53 Changes in deferred taxes, disposal gains 1,174 -79 +1,253 and other non cash items F
Slide 31: Outlook for 2008
Outlook for 2008 20071 20081 € million forecast External revenue 42,507 Above previous year EBITDA 7,915 At least matching previous year Operating result 6,533 At least matching previous year RWE Power 2,617 Up by more than 10% RWE Dea 492 Up by more than 10% RWE Supply & Trading 532 Below previous
Slide 32: Back-up Charts
Back-up Charts RWE AG | Conference Call H1 2008 | August 14, 2008 32
Slide 33: Latest market survey of fossil fuel power plant projects in Germany
Latest market survey of fossil fuel power plant projects in Germany (August 2008) Power plant projects in Germany in MW secured capacity 25.000 6.054 22.500 Secure capacity (in MW) 20.000 4.558 17.500 15.000 903 7.654 12.500 10.000 2.440 7.500 3.292 5.000 1.389 2.881 1.739 607 2.530 2.500 1.420 0 Mo
Slide 34: Mark to market versus hedge accounting under IFRS at RWE Supply & Trading
illu st ra Mark to market versus hedge accounting tiv e ex under IFRS at RWE Supply & Trading 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 35: Impact of oil hedges for our gas supply business on non-operating result
illu st ra Impact of oil hedges for our gas supply tiv e ex business on the non-operating result 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 stora
Slide 36: 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 RWE Power delivers the electricity to RWE The EEX price rises to €85/MWh 3 pric e dr S&T at €66/MWh over the course of 2009. ¼ MtM - underlying transaction = 85 - 66 = +19 by th to €74
Slide 37: 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 38: RWE Group electricity production
RWE Group electricity production January – June Other Total Total in TWh Germany UK Internat. 2008 2007 Lignite 34.1 2.7 36.8 38.0 Nuclear 24.7 24.7 15.9 Hard coal 24.2 8.9 0.2 33.3 33.5 thereof contracts 15.7 15.7 16.4 Gas 6.5 9.8 16.3 13.2 Renewable energies 2.0 0.5 0.2 2.7 2.6 thereof contracts 0
Slide 39: RWE Group electricity sales volume
RWE Group electricity sales volume January – June Total Total in TWh Germany UK Poland Hungary Other 2008 2007 Private and commercial 14.2 11.3 1.7 2.9 0.4 30.5 30.7 customers Industrial and corporate 29.2 15.2 1.6 3.4 0.3 49.7 48.4 customers Distributors 42.1 0.2 2.6 0.4 45.3 43.4 Electricity tradi
Slide 40: RWE Group gas sales volume
RWE Group gas sales volume January – June Ger- Czech Total Total in TWh many Rep. UK Other 2008 2007 Private and commercial 14.1 19.1 27.8 4.5 65.5 58.6 customers Industrial and corporate 22.7 17.3 5.6 12.2 57.8 59.3 customers Distributors 51.6 8.5 60.1 58.7 Total 88.4 44.9 33.4 16.7 183.4 176.6 RWE
Slide 41: RWE's current Kyoto credit portfolio for 2008 – 2012
RWE’s current Kyoto credit portfolio for 2008 – 2012 Projects by June 2008 Contract volume by technology Hydro 100 N2O 90 HFC23 80 90 Energy Efficiency Wind 70 LoI/ Biogas mill. certificates 60 ERPA1 Biomass 50 In 40 Validation LoI/ ERPA1 Contract volume by region 30 China In Validation South Korea
Slide 42: RWE AG: Flexible funding structure
RWE AG: Flexible funding structure Fully committed for liquidity syndicated loan €4.0 billion back-up and (€2.0bn 364 days refinancing €2.0bn 4 years) €0.0 billion Commercial paper (up to 1 year) $5.0 billion $0.382 billion MTN programme (up to 30 years) €20 billion € 9.2 billion Amounts used as of
Slide 43: Financial assets and liabilities
Financial assets and liabilities (as of 06/30/2008) €13.5 billion2 €11.4 billion1 3.0 3.0 0.3 other financial assets 0.8 other 12.1 10.5 other loans bonds (incl. other cash & cash equivalents notes payable) and bank loans 6.9 securities held as current assets securities held as non-current assets 0.
Slide 44: Gross financial debt currency and interest exposure
Gross financial debt currency and interest exposure1 € / Others 43% $ 10% Floating 12% £ 47% Fixed 88% Long term financed (> 1 Year): 95% of gross financial debt Short term financed (< 1 Year): 5% of gross financial debt With debt in foreign currencies we hedge the translation risk of our internatio