UniCredit European Energy & Utilities Credit Conference 2018

Transcription

1 UniCredit European Energy & Utilities Credit Conference th November 2018 Henryk Wuppermann, Head of Corporate Finance, E.ON SE

2 Strong 9M 2018 results On track to achieve upper half of guidance range Highlights Key Financials 1 m bn Strong EBIT development: +11% 9M 2018 vs. 9M 2017 partly on the back of phasing effects that will reverse in Q ,117 2, Adj. Net Income up +25% YoY FY 2018 guidance confirmed: EBIT bn, Adj. Net Income bn 965 1, Well on track to achieve upper half of 2018 guidance range Economic Net Debt reduced to 15.4bn (vs. 19.2bn in FY 2017) 1. Adjusted for non operating effects EBIT 9M M 2018 Adj. Net Income Economic Net Debt 2

3 Transaction & operations update Antitrust approval on track Regular contact with EU Case Team on draft document Integration project gaining traction Initial phase completed, more than 20 workstreams now up and running Target of m net synergies by 2022 reiterated Germany: regulatory review ongoing Cost audit finalized, awaiting benchmarking results Sweden: positive court decision on carry-over Court confirmed E.ON view; appealed by regulator UK: SVT 1 price cap level confirmed by Ofgem Full effect of cap on market participants still to be seen Sizeable EBIT impact in 2019 Mid-term upside from efficiency program SWAT Capacity growth delivery continued Arkona turbine installation completed in record time Repowering in the US starting with 258 MW project 1. Standard Variable Tariff (SVT) 3

4 Acquisition of innogy

5 Creating the future of energy Focus: Europe s first energy player with exclusive downstream focus Unique downstream footprint: RAB and customer numbers rise >60% 1 Earnings quality: network EBIT share rises to ~80% 1 Strong synergies: fading nuclear earnings overcompensated by m synergies Attractive dividends: aiming to deliver absolute annual dividend growth EPS accretion: from second year after closing Solid capital structure: high commitment to strong BBB rating Limited cash impact: acquisition of RWE s 76.8% in innogy via asset exchange; attractive offer to minority shareholders 1. Future E.ON pro-forma EBIT 2017 (innogy data based on public information), 2. Bloomberg Data, 3. RABs from different regulatory regimes are not directly comparable due to significant methodical differences. Enel 2 ~37 1, 3 Future E.ON ~50 1 Future E.ON ~5 1 Future E.ON Regulated Asset Base (RAB bn) Nat. Grid Enel Iberdrola Engie Customer Numbers (m) Enel EBIT ( bn) Engie 2 Nat. Grid 2 Iberdrola 2 Engie Iberdrola 5

6 Creating two focused energy companies via innovative asset swap Structure today E.ON ~77% innogy RWE Target structure Future E.ON 16.67% RWE 6

7 Credit-friendly transaction structure minimizes transaction risk and additional leverage Deal Structure Asset swap with RWE incl. cash payment to E.ON PTO for 23.2% remaining free float Acceptance rate of 9.4% achieved Deal certainty Economic risk allocation Capital structure RWE stake of 76.8% plus 9.4% tendered shares enough to conclude DPLTA Total 86.2% stake provides security for legal integration transaction is a done deal Transaction economics fixed as per Jan. 1, 2018 Purchase price and cash component fixed Locked-box approach Risks and chances of assets transferred 20% capital increase in kind already implemented Full use of capital authorizations supports capital structure 7

8 Credit highlights post transaction: Stability and predictability High share of regulated network EBITDA predominantly in jurisdictions with strong regulatory frameworks Quasi-regulated Non-regulated ~70% 1 Regulated Customer Solutions and Network businesses diversified across strong European countries Leading European energy company with substantial size and market position Group EBITDA ~ 8 billion 1 ~50 million customers 1 ~ 37 billion regulated asset base 1,2 1. Future E.ON pro-forma 2017 (innogy data based on public information) 2. RABs from different regulatory regimes are not directly comparable due to significant methodical differences. 8

9 Integration of innogy provides for strong synergy potential Estimated synergies ( m) 2 Synergy focus 1, m ~100% Corporate Functions & IT Energy Sales & Customer Solutions Energy Networks ~55% ~5% ~25% Strong synergy potential of m 10-15% of controllable costs ~5000 FTEs affected (~7% of employee base) Synergy split ( million), 2. Future E.ON pro-forma 2017 (innogy data based on public information). 9

10 Capital Structure and Rating

11 Pro-forma economic net debt based on FYE 2017 (pre Uniper disposal) E.ON 1 innogy 1 Transaction effects Future E.ON 2 in bn ~15.6 ~35 ~19.2 ~5.0 ~3.6 ~10.6 ~12.3 ~3.0 ~0.3 ~ 2.8bn debt transferred to RWE Nuclear provisions: ~ 0.9bn AROs (Renewables): ~ 0.9bn Tax equity liabilities (Renewables): ~ 0.6bn Pension provisions (Renewables): ~ 0.4bn innogy minority shares (23.2%) 1.5bn cash payment from RWE Economic Net Debt 2017 Economic Net Debt 2017 Net financial position Provisions for pensions Asset-retirement obligations 1. E.ON 2017 reported / Innogy 2017 reported, 2. Future E.ON pro-forma 2017 (innogy data based on public information), 11

12 Structural subordination E.ON SE E.ON Int. Finance B.V. innogy SE innogy Finance B.V. Bonds Bonds Guaranteed by E.ON SE Bonds Bonds Guaranteed by innogy SE Structural subordination may become a topic post closing To the extent necessary, E.ON has the choice among several mitigants for structural subordination: moving innogybonds to E.ON level and replacing innogy guarantee with E.ON guarantee upstream guarantee from innogy to E.ON liability management at market E.ON will address structural subordination post closing of the innogy acquisition 12

13 Rating commitment is a cornerstone of our financial policy Capital Structure: Strong BBB / Baa Transaction structure proven adequate in light of recent rating confirmations S&P and Moody s have affirmed E.ON s BBB (stable) and Baa2 (stable) rating, respectively Rating and capital structure are a crucial part of E.ON s financial policy Commitment underpinned by all necessary means as proven in previous years Public commitment reiterated multiple times 13

14 Strong liquidity and balanced maturity profile Liquidity Sources (as of end 9M 2018) bn Liquid funds ~6.5 Non-current securities ~2.0 Total ~8.5 Maturity profile (as of end 9M 2018) 1 bn 4.8 Syndicated loan (undrawn) 2.75 / $ Commercial Paper programs (undrawn) Acquisition facility (undrawn) 10 / EUR GBP USD JPY Other Bonds and promissory notes issued by E.ON SE and E.ON International Finance B.V. (fully guaranteed by E.ON SE) 14

15 Appendix Financial Details Transaction Details Contacts, Calendar & Disclaimer

16 1 Outlook 2018 confirmed On track to achieve upper half of guidance range Outlook 2018 EBIT 1 Adj. Net Income bn bn Effects for Q Energy Networks Customer Solutions Renewables Non-Core Germany: reversal of reg. effects, new reg. period gas, disposal gas netw. HH Sweden: adverse FX, divest gas grid Turkey: one-off effect in Q Germany: negative one-off in Q Germany & UK: restructuring charges UK: reversal of timing effects 3 rd party charges, price cap 2 +/ Offshore & Onshore: capacity additions (Bruenning s Breeze, Radford s Run, Rampion), normalizing wind yields Onshore: support scheme expiries PreussenElektra: lower hedged prices, higher depreciation Turkey: adverse FX development 1. Adjusted for non operating effects, 2. Price cap on vulnerable customers 16

17 1 Financial Highlights m 9M M 2018 % YoY Sales 27,937 24, EBITDA 1 3,540 3, EBIT 1 2,117 2, Adjusted net income , OCF bit -3,091 3,494 Investments 2,222 2, Economic net debt ² -19,248-15, Adjusted for non operating effects, 2. Economic net debt as per 31 Dec 2017 and 30 Sep 2018; Economic net debt definition takes into account the decommissioning provisions calculated with a real discount rate of 0.0% as opposed to IFRS AROs 17

18 1 EBIT development in line with expectations EBIT 1 9M 2018 vs. 9M 2017 Key 9M Effects m 9M 2017 Energy Networks Customer Solutions Renewables Corp. Functions & Other, Consolidation , Energy Networks Customer Solutions Renewables +/ +/ + Germany: positive one-off effects in Q2 & Q3 2018, reversal of regulatory effects, disposal gas network HH, new regulatory period gas Sweden: tariff increase, adverse FX dev. Germany & UK: price increases in Q UK: seasonality of 3 rd party charges Germany & UK: competitive dynamics, restructuring charges, price caps in the UK + Onshore & Offshore: capacity additions (Bruenning sbreeze, Radford s Run, Rampion) Onshore: support scheme expiries Non-Core 9M Adjusted for non operating effects 50 2,352 Non-Core +/ PreussenElektra: one-off effects in 2017, lower achieved prices, higher volumes due to plant outages in 2017, lower depreciation Turkey: omission of book loss, adverse FX dev. + 18

19 1 Adj. Net Income profiting from lower interest expenses and stable tax rate 9M 2018 m Group EBIT 1 2,352 Interest on fin. assets/ liabilities 2 Other interest expenses Profit before Taxes , ~ 90m improvement yoy mainly due to refinancing benefits, partly compensated by lower interest income from asset portfolio Income Taxes -463 Tax rate of 25% (stable yoy) Minorities -181 Adjusted Net Income 1 1, Adjusted for non operating effects, 2. Without interest accretion of nuclear provisions EPS ( per share) 19

20 1 END lowered mainly due to sale of Uniper stake END 1 9M 2018 vs. FY 2017 bn Net financial position END FY 2017 AROs Pension provisions 2.6 OCF Sale of Uniper stake -2.3 Investments -0.8 Dividend Divestments Liquidation of pension scheme in Q results in reduction of pension provisions limited effect on END AROs 0.9 Pensions Other (CTA 2 Funding) Other END 9M Economic net debt definition takes into account the decommissioning provisions calculated with a real discount rate of 0.0% as opposed to IFRS AROs, 2. Contractual Trust Arrangement 20

21 1 Segments: Energy Networks Energy Networks Highlights EBIT 1 m Germany Sweden CEE & Turkey -2% 1,503 1, M M 2018 Germany + One-off effects in Q2 & Q Reversal of regulatory effects Disposal of gas network Hamburg, new regulatory period gas Sweden + Power tariff increase Adverse FX development CEE & Turkey Turkey: Adverse FX development, 10% lower stake after IPO Romania: Lower regulatory returns Details m Germany Sweden CEE & Turkey Total 9M M 2018 % YoY 9M M 2018 % YoY 9M M 2018 % YoY 9M M 2018 % YoY Revenue 10,797 7, ,239 1, ,867 9, EBITDA 1 1,210 1, ,221 2,187-2 EBIT ,503 1,472-2 thereof Equity-method earnings OCFbIT 2,099 1, ,966 2, Investments Adjusted for non operating effects 21

22 1 Segments: Customer Solutions Customer Solutions Germany Sales Details EBIT 1 m UK Other % M M 2018 Highlights Germany Sales + Price increases in 2017 Restructuring charges UK + Seasonality of 3rd party charges (Q3 2018) Restructuring charges, competitive dynamics Price caps (PPM 2, vulnerable customers) + Price increases in 2017 Other Romania: Higher gas procurement costs B2B solutions: Unavailability of co-generation unit m Germany Sales UK Other Total 9M M 2018 % YoY 9M M 2018 % YoY 9M M 2018 % YoY 9M M 2018 % YoY Revenue 5,122 4, ,083 5, ,280 5, ,485 15, EBITDA EBIT thereof Equity-method earnings OCFbIT Investments Adjusted for non operating effects, 2. Prepayment Meter 22

23 1 Segments: Renewables Renewables Highlights EBIT 1 m Offshore/Other % Offshore/Other + UK: Capacity additions (Rampion) Onshore/Solar + US: Capacity additions (Bruenning s Breeze, Radford s Run) Support scheme expiries Onshore/Solar M M 2018 Details m Onshore Wind / Solar Offshore Wind / Others Total 9M M 2018 % YoY 9M M 2018 % YoY 9M M 2018 % YoY Revenue ,130 1, EBITDA EBIT thereof Equity-method earnings OCFbit Investments Adjusted for non operating effects 23

24 1 Non-Core business Non-Core EBIT 1 m Preussen Elektra Generation Turkey +19% M M 2018 Highlights PreussenElektra One-off effects +/ Lower achieved power prices + Higher volumes due to plant outages in Lower depreciation Generation Turkey + Book loss from asset sale in Q1 2017, operational improvements Adverse FX developments PreussenElektra: Hedged Prices ( /MWh) as of 30 September 2018 Details m PreussenElektra Generation Turkey Total 9M M 2018 % YoY 9M M 2018 % YoY 9M M 2018 % YoY Revenue 1, , EBITDA EBIT thereof Equity-method earnings OCFbIT -7, , Investments % 100% 80% 25% Adjusted for non operating effects 24

25 1 Adjusted Net Income m 9M M 2018 % YoY EBITDA 1 3,540 3, Depreciation/amortization -1,423-1, EBIT 1 2,117 2, Economic interest expense (net) EBT 1 1,542 1, Income Taxes on EBT % of EBT 1-25% -25% - Non-controlling interests Adjusted net income , Adjusted for non operating effects 25

26 1 Reconciliation of EBIT to IFRS Net Income m 9M M 2018 % YoY EBITDA 1 3,540 3, Depreciation/Amortization/Impairments -1,423-1, EBIT 1 2,117 2, Reclassified businesses of Renewables Interest result Net book gains Restructuring Mark-to-market valuation of derivatives Impairments (net) Other non-operating earnings 2, Income/Loss from continuing operations before income taxes 4,293 3, Income taxes Income/loss from continuing operations 3,753 2, Income/loss from discontinued operations, net Net income/loss 3,903 3, Adjusted for non operating effects 26

27 1 Cash effective investments by unit m 9M M 2018 % YoY Energy Networks Customer Solutions Renewables Corporate Functions & Other Consolidation Non-Core Investments 2,222 2, Adjusted for non operating effects 27

28 1 Economic Net Debt 1 m 31 Dec Sep 2018 Liquid funds 5,160 6,489 Non-current securities 2,749 1,997 Financial liabilities -13,021-10,710 Adjustment FX hedging ² Net financial position -4,998-2,232 Provisions for pensions -3,620-2,715 Asset retirement obligations -10,630-10,411 Economic net debt -19,248-15, Economic net debt definition takes into account the decommissioning provisions calculated with a real discount rate of 0.0% as opposed to IFRS AROs, 2. Net figure; does not include transactions relating to our operating business or asset management 28

29 1 Economic interest expense (net) m 9M M 2018 Difference (in m) Interest from financial assets/liabilities Interest cost from provisions for pensions and similar provisions Accretion of provisions for retirement obligation and similar provisions Construction period interests¹ Others Net interest result Borrowing cost that are directly attributable to the acquisition, construction or production of a qualified asset. Borrowing cost are interest costs incurred by an entity in connection with the borrowing of funds. (Interest rate: 5.47%) 29

30 2 Acquisition of innogy via innovative asset exchange 16.67% Stake in Future E.ON (~ 3.7bn) RWE to receive 16.67% in new E.ON via 20% capital increase against contribution in kind (authorized capital) Asset Swap 76.8% stake in innogy (from RWE) E.ON & innogy Renewables & Other Assets (~ 13.5bn) 1 RWE to receive the following assets: E.ON s and innogy s renewables businesses 4 Additional assets: E.ON s minority stakes in two RWE operated nuclear power plants 2, innogy s gas storage business and minority participation in Kelag E.ON receives 1.5bn cash Innogy dividends (~ 1.4bn) RWE receives innogy dividends for 2017 and 2018 Cash payment from RWE to E.ON of 1.5bn 3 Acquisition financing 23.2% (Min. shareholders) Offer price and secured innogy dividend for 2018 Attractive cash offer to minority shareholder in innogy with total offer value (= pre 2017 dividend of 1.60 paid in April 2018) 1. Equity value for transfer perimeter 2. Gundremmingen (25% stake) and Emsland (12.5% stake), 3. Payment to balance asset valuation. 4. Excludes 20% in Rampion and certain onshore capacity indirectly held by E.ON and innogy. 30

31 2 Size of Future E.ON will substantially increase Improving business risk: Group EBITDA 2017 E.ON today Future E.ON 1.Increased size 2.Improved diversification ~ 5bn +60% ~ 8bn 1 3.Higher share of regulated earnings Future E.ON: Customer Solutions Future E.ON: Networks ~31m Customers ~50m Customers 1 ~ 23bn RAB 2 ~ 37bn RAB 1,2 1. Future E.ON pro-forma 2017 (innogy data based on public information), 2. RABs from different regulatory regimes are not directly comparable due to significant methodical differences. 31

32 2 Improved diversification across Europe Improving business risk: Unique downstream position across Europe 1.Increased size 2.Improved diversification 3.Higher share of regulated earnings 1. E.ON 2017 reported, 2. innogy 2017 reported, 3. Future E.ON pro-forma 2017 (innogy data based on public information), 4. RABs from different regulatory regimes are not directly comparable due to significant methodical differences. 32

33 2 Increasing share of high-quality regulated earnings Improving business risk: Future E.ON: Share of regulated network EBITDA Increased size 2.Improved diversification 3.Higher share of regulated earnings ~55% 1 ~70% 2 Predominantly in jurisdictions with strong regulatory frameworks Regulated Quasi-regulated Non-regulated 1. E.ON 2017 reported, 2. Future E.ON pro-forma 2017 (innogy data based on public information) 33

34 2 Rating agencies acknowledge improved business risk profile and confirm ratings with stable outlook S&P S&P sees improving business risk profile from higher share of fully regulated earnings BBB / A-2 (stable) ratings confirmed after announcement of transaction FFO/Debt threshold expected to be lowered Moody s Transaction transforms E.ON s business profile with some 70% of group EBITDA coming from the greatly enlarged electricity and gas distribution segment Following an initial Review for Downgrade, Baa2 / P-2 ratings with stable outlook confirmed FFO/Debt threshold lowered from mid teens to comfortably low teens 34

35 3 E.ON Debt Investor Relations contacts Rouven Fleischer T +49 (201) Manager Corporate Finance creditorrelations@eon.com Simon Kowal T +49 (201) Manager Corporate Finance creditorrelations@eon.com 35

36 3 Financial calendar & important links Financial calendar March 13, 2019 Annual Report 2018 May 13, 2019 Quarterly Statement: January March 2019 May 14, Annual Shareholders Meeting August 7, 2019 Half-Year Financial Report: January June 2019 November 13, 2019 Quarterly Statement: January September 2019 Important links Presentations Facts & Figures 2018 Annual Reports Interim Reports Shareholder Meeting Bonds / Creditor Relations

37 3 Disclaimer This presentation contains information relating to E.ON Group ("E.ON") that must not be relied upon for any purpose and may not be redistributed, reproduced, published, or passed on to any other person or used in whole or in part for any other purpose. By accessing this document you agree to abide by the limitations set out in this document as well as any limitations set out on the webpage of E.ON SE on which this presentation has been made available. This document is being presented solely for informational purposes. It should not be treated as giving investment advice, nor is it intended to provide the basis for any evaluation or any securities and should not be considered as a recommendation that any person should purchase, hold or dispose of any shares or other securities. The information contained in this presentation may comprise financial and similar information which is neither audited nor reviewed and should be considered preliminary and subject to change. Some of the information presented herein is based on statements by third parties. No representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of this information or any other information or opinions contained herein, for any purpose whatsoever. This presentation may contain forward-looking statements based on current assumptions and forecasts made by E.ON management and other information currently available to E.ON. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of the company and the estimates given here. E.ON does not intend, and does not assume any liability whatsoever, to update theseforward-looking statementsor to conform them to future events or developments. Neither E.ON nor any respective agents of E.ON undertake any obligation to provide the recipient with access to any additional information or to update this presentation or any information or to correct any inaccuracies in any such information. Certain numerical data, financial information and market data (including percentages) in this presentation have been rounded according to established commercial standards. As a result, the aggregate amounts (sum totals or interim totals or differences or if numbers are put in relation) in this presentation may not correspond in all cases to the amounts contained in the underlying (unrounded) figures appearing in the consolidated financial statements. Furthermore, in tables and charts, these rounded figures may not add up exactly to the totals contained in the respective tables and charts.