Sweating the Assets Analyst and Investor Conference Report on First Six Months of Fiscal 2003

Transcription

1 Sweating the Assets Analyst and Investor Conference Report on First Six Months of Fiscal 2003 London, August 12, 2003 Klaus Sturany Chief Financial Officer RWE AG 1

2 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 financial items; Statements of plans or objectives for future operations or of future competitive position; Expectations of future economic performance; and Statements of assumptions underlying several of the foregoing types of statements are forward-looking statements. Also words such as anticipate, believe, estimate, intend, may, will, expect, plan, project should and similar expressions are intended to identify forward-looking statements. The forwardlooking statements reflect the judgement of RWE s management based on factors currently known to it. No assurances can be given that these forward-looking statements will prove accurate and correct, or that anticipated, projected future results will be achieved. All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Such risks and uncertainties include, but are not limited to, changes in general economic and social environment, business, political and legal conditions, fluctuating currency exchange rates and interest rates, price and sales risks associated with a market environment in the throes of deregulation and subject to intense competition, changes in the price and availability of raw materials, risks associated with energy trading (e.g. risks of loss in the case of unexpected, extreme market price fluctuations and credit risks resulting in the event that trading partners do not meet their contractual obligations), actions by competitors, application of new or changed accounting standards or other government agency regulations, changes in, or the failure to comply with, laws or regulations, particularly those affecting the environment and water quality (e.g. introduction of a price regulation system for the use of power grid, creating a regulation agency for electricity and gas or introduction of trading in greenhouse gas emissions), changing governmental policies and regulatory actions with respect to the acquisition, disposal, depreciation and amortisation of assets and facilities, operation and construction of plant facilities, production disruption or interruption due to accidents or other unforeseen events, delays in the construction of facilities, the inability to obtain or to obtain on acceptable terms necessary regulatory approvals regarding future transactions, the inability to integrate successfully new companies within the RWE Group to realise synergies from such integration and finally potential liability for remedial actions under existing or future environmental regulations and potential liability resulting from pending or future litigation. Any forward-looking statement speaks only as of the date on which it is made. RWE neither intends to nor assumes any obligation to update these forward-looking statements. For additional information regarding risks, investors are referred to RWE s latest annual report and to other most recent reports filed with Frankfurt Stock Exchange or SWX Swiss Exchange and to the material furnished to the US Securities and Exchange Commission by RWE. 12

3 Operating Result / EBITDA by Business Areas January - June Operating Result EBITDA million Electricity 1,708 1,162 2,331 1,737 Core Gas Water Non-core Environmental Services Core business 3,120 2,141 4,338 3,125 RWE Dea Downstream Heidelberg HOCHTIEF Others/Holding/Consolidation Total 2,935 2,169 4,376 3,329 23

4 Non-Operating Result January - June million Gains on disposals Goodwill Other Total

5 Financial Result January - June million Net interest Interest contained in allocations to long term provisions Other financial result Total -1,471-1,155 45

6 RWE Group Results H January - June PY million million in % Operating result 2,935 2, Non-operating result Financial result -1,471-1, Profit before tax 1,540 1, Tax Profit after tax 724 1, Minorities Net profit Average No. of shares (million) EPS before goodwill ( ) EPS after goodwill ( )

7 Currency Effects in H January - June H to thereof million H currency EBITDA 1) 3) 4,376 1, Operating result 1) 3) 2, Net profit after goodwill 1) 3) Net debt 2) 22,300 6,800-1,200 1) Average H1 2) Compared with year end ) Consol and Thames Water, excluding American Water and Innogy 67

8 Business Area Performance: Electricity January - June change million in% Electricity generation m kwh 159, , Electricity supply m kwh 148, , External net sales 13,180 10, EBITDA 2,331 1, Operating result 1,708 1, Capital expenditure on fixed assets Investment in financial assets Work force (equivalents) vs ,718 69,

9 Business Area Performance: Electricity - Key Figures by Division January - June EBITDA Operating result million Power Generation Lignite-Fired Power Gen. and Mining Trading Net Sales Industrial Services UK Energy Other / electricity consolidation of which Harpen Total 2,331 1,737 1,708 1,162 89

10 Reorganization Adds 300 Million to Existing Cost Cutting Program million p.a. 1, achieved in H ,855 achieved (7/ ) 2003 target 2004 new target 2005 new target 2006 new target 2006 new target Already achieved To come New cost cutting program due to Group reorganization m from synergies Czech Gas, RWE Thames Water / RWE Innogy 10 9

11 Electricity Price Development Forward 2003 Forward RWE- prices in cent/kwh *) Wholesale Peak Distributing utilities reduced by grid fees Industrial customers: Chemicals reduced by grid fees Wholesale Base Dec. Apr. Aug * ) At the relevant month-end. Dec. 02 Apr. 03 Aug. 03 Dec

12 RWE Net has Competitive Grid Fees Low-voltage Medium-voltage High-voltage ct/kwh 9,0 ct/kwh 4,5 ct/kwh 1,6 8,0 7,0 4,0 3,5 1,4 1,2 1,22 6,0 5,0 4,0 3,0 2,0 1,0 RWE Net 5,00 3,0 2,5 2,0 1,5 1,0 0,5 2,37 RWE Net 1,0 0,8 0,6 0,4 0,2 RWE Net 0,0 > 500 network operators in Germany 0,0 < 50 network operators in Germany 0,0 < 50 network operators in Germany Basis: VVII-plus loading cases, grid fees by VDN 12 11

13 Business Area Performance: Electricity - UK Energy (RWE Innogy) January - June 2003 Electricity generation m kwh 19,450 Electricity supply m kwh 29,937 Gas supply m kwh 28,776 External net sales m 2,802 of which electricity m 1,947 of which gas m 611 EBITDA m 461 Operating result m 389 Capital expenditure incl. acquisitions m 90 Work force (equivalents)

14 Business Area Performance: Gas January - June Mid-/Downstream Upstream million Oil production thsd. m ,864 2,588 Gas production* m m ,231 1,201 Gas supply m kwh 157,153 88, External net sales 3,590 2, EBITDA Operating result Capital expenditure on fixed assets Investment in financial assets 121 4, Work force (equivalents) 8,018 8, vs

15 Business Area Performance: Gas - Czech Gas Business January - June 2003 million Gas supply m kwh 56,750 External net sales 1,034 EBITDA 287 Operating result 231 Capital expenditure on fixed assets 47 Work force (equivalents) ,

16 Business Area Performance: Water I January - June change million in % External net sales 2,070 1, EBITDA Operating result Capital expenditure on fixed assets Investment in financial assets 4, Work force (equivalents) vs ,183 11,

17 Business Area Performance: Water II January - June External EBITDA Operating net sales result million UK & Ireland of which UK regulated Americas Europe/Middle East/Africa Asia/Pacific Total 2,070 1,

18 Business Area Performance: Water: American Water January - June 2003 million External net sales 735 Regulated 622 Non-regulated 113 EBITDA 273 Regulated 268 Non-regulated 5 Other/Parent - Operating result 160 Capital expenditure on fixed assets 158 Work force (equivalents) ,

19 Business Area Performance: Environmental Services January - June change million in% External net sales 973 1, EBITDA Operating result Capital expenditure on fixed assets Investment in financial assets Work force (equivalents) vs ,709 14,

20 Non-Core Business Performance January - June external EBITDA Operating net sales result million RWE Dea Downstream - 7, Heidelberger Druck 1,924 2, HOCHTIEF* *) RWE share of net profit (at equity) 19 20

21 RWE Cash Flow Statement I January - June change million in % Profit after tax 724 1, Depreciation, amortization and writebacks 2,144 1, Increase / decrease in provisions Change in deferred taxes Disposal gains and other non-cash items Change in net working capital / other items Net cash from operating activities 2,712 2, (operating cash flow) 20 21

22 RWE Cash Flow Statement II January - June change million in % Operating cash flow 2,712 2, Net cash used in investing activities (incl. divest.) -5,056-12, Net cash provided by financing activities 2,090 8, Exchange rate changes / others / consolidation Net change in cash and cash equivalents , Operating cash flow 2,712 2, Capital expenditure on fixed assets 1,815 1, Free cash flow

23 Development of Net Debt Position billion (debt with positive prefix, cash with negative prefix) Net debt Net cash from operating activities American Water effect (as of ) Smaller acquisitions/ disposals -0.2 Capex +1.8 Dividends/ Others +0.4 Currency translation effect -1.2 Net debt Market value of netdebtrelated financial derivatives , Consolidation effect Equity value New net debt target 2005 based on June 30 exchange rates*): < 20 bn *) GBP: 0.69, US $:

24 Strong Net Interest Coverage Outlook 2003 improved EBITDA / net interest consolidation of Czech Gas and Innogy for 8 resp. 7 months 11.2x full inclusion of American Water, Czech Gas and Innogy 8 8.4* > 6.5 x e *) Including realised gains/losses from sale of securities EBITDA/net interest ratio would be 7.4 x

25 Further Optimization of Financial Structure Exchange offer for Innogy bonds highly accepted - Supportive to RWE s rating as structural subordination is reduced - Lower interest cost for RWE - Underlining RWE s policy to use RWE AG / RWE Finance B.V. as principal capital markets issuer Successful placement of 1.2 bn bond issue on July 23 - Oversubscription demonstrates RWE s strong credit quality - Bond replaced commercial papers which were used to finance the acquisition of American Water - No further significant issuance planned for

26 New Reporting Structure (I) ROCE EVA Turnover EBITDA OR Capex RWE Power thereof RWE Dea Harpen Consol RWE Energy thereof Northern REC Mid REC Western REC (VSE) Southwestern REC (Süwag) Eastern REC (enviam) Southern REC (LEW) RWE Solutions RECs Abroad Electricity/Gas Transport Czech Gas separately once a year with ROCE, EVA, Turnover, EBITDA, operating result and capex

27 New Reporting Structure (II) ROCE EVA Turnover EBITDA OR Capex RWE Trading n.a. n.a. RWE Innogy RWE Thames Water thereof Europe / other markets thereof UK regulated Americas (AW, E town, Chile) RWE Umwelt

28 Outlook for 2003 January - December 2002 forecast for 2003 million External net sales core business 34,449 double digit growth non-core business 11,997 2/3 down EBITDA core business 7,123 double digit growth non-core business 466 lower Operating result core business 4,706 double digit growth non-core business 180 lower Net profit (before goodwill) 1,830 flat Net profit (after goodwill) 1,050 25%-30% down

29 Back-up-Charts I

30 Financial Assets and Liabilities H bn other commercial paper 7.4 bank loans 11.6 bn other financial assets other loans cash & cash equivalents 20.7 bonds 7.6 securities held as current assets 0.5 financial assets securities held as fixed assets financial liabilities II

31 RWE AG: Flexible Funding Structure Fully committed syndicated Loan ( 2.5 bn 364 days 2.5 bn 5 years) 0.0 bn 5 bn for liquidity back-up and refinancing Commercial Paper (up to 1 year) $ 3.2 bn $ 5.0 bn 18.5 bn MTN-program (up to 30 years) 15 bn 5 bn 20 bn amounts used as of extended in March III

32 Gross Financial Debt Currency Exposure* Total debt as of : 33.9 bn $ 32% 16% /others 52% With debt in foreign currencies we hedge the translation risk of our international activities. * including cross-currency swaps 31 IV

33 RWE s Indebtedness is Based on Solid Grounds 5.3% average cost of gross debt (vs. 5.5% previous year) More than 80% of debt at fixed interest rates, no rating triggers, no financial covenants Central funding policy for the RWE-Group; RWE AG has domination and profit and loss pooling agreements with all of its important German subsidiaries. Assumed debt of acquired companies will be refinanced at the holding company level in an orderly manner. Refinancing of acquired regulated utility activities sometimes subject to regulatory restraints (Thames Water, American Water) Clear cross default principles covering all principal subsidiaries (Innogy, Thames Water et al). 32 V

34 Maturity Profile of Capital Market Debt* 3,0 Total: 20,56 bn** 2,5 2,0 1,5 1,0 0,5 0,0 22,00 17,00 33 VI EUR bn EUR bn (Capital Market Debt Total) 12,00 7,00 2,00-3, RWE Thames Water Innogy AW Financial debt * Public debt excluding commercial paper program as per 31 July 2003 and excluding Consol bonds of EUR 0.3 bn **Excluding further EUR 1.6bn of AW debt at subsidiary level

35 Structural Subordination in the RWE Group RWE AG (A+ / A 1) / RWE Finance B.V. / Consolidated German Subsidiaries* 75% Innogy Holdings Plc Thames Water Aqua Holdings GmbH Thames Water Plc (A+ / A2) 11% Innogy Plc (A- / Baa1) 6% Thames Water Finance B.V. (A2) Thames Water Utilities Ltd Thames Water Utilities Finance Plc (A1) American Water 7% E town Corp. (A+ ) As of July 31, 2003 Pennsylvania Am. Water (A3) Indiana American Water Co. Am. Water Capital Co. (Baa1 / A-) * associated by profit & loss sharing agreement Note: Structure simplified; percentages indicate quantity of group financial debt held at entity / group of entities (highlighted in grey) including bonds, bank loans, leases. Chart excluding debt of CONSOL and Heidelberger Druckmaschinen Elizabethtown Water Co. (A+ / A2) 1% 34 VII