E.ON International Finance B.V. Interim Report January June Amsterdam, The Netherlands

Transcription

1 E.ON International Finance B.V. Interim Report January June 2018 Amsterdam, The Netherlands

2 Condensed Interim Financial Statements 2 Content Report of the Board of Management 3 Statement from the Board of Management 5 Balance Sheet (before profit appropriation) 6 Income Statement 7 Cash Flow Statement 8 Notes to the Condensed Interim Financial Statements 9

3 Condensed Interim Financial Statements 3 Report of the Board of Management General information As of June 30, 2018 the Board of Managers comprises the following members: Mr. J. Otto Mr. D. Jacobs Mrs. M. Springintveld Mr. J. Groesbeek During the first half of 2018, the composition of the Board of Management did change. Starting March 23, 2018 Mr. D. Jacobs joined the Board of Management of E.ON International Finance B.V. The objectives of E.ON International Finance B.V. are unchanged compared to the financial year ending December 31, E.ON International Finance B.V. continues to be a wholly owned and fully consolidated subsidiary of E.ON SE, Essen, Germany. Internal organisation The statutory seat and the office of E.ON International Finance B.V. is Kabelweg 37, 1014 BA Amsterdam, The Netherlands. At June 30, 2018 E.ON International Finance B.V. had one employee (2017: 0). All other personnel is either seconded from other E.ON group companies or engaged from external service providers. Market review The international capital markets experienced a mixed first half 2018 influenced by increasing global geopolitical uncertainties. Major stock markets in the US, Europe and Japan decreased slightly in the first six months among worries about escalating trade tensions between the US and the rest of the world having the potential of leading to a substantial slowdown in global growth. On foreign exchange markets the Euro weakened in the first half of 2018 against major currencies such as U.S. Dollar and Japanese Yen and remained roughly stable versus the British Pound. This was fuelled amongst other factors by disappointed expectations regarding the pace of the ECB s exit from its expansionary monetary policy as well as political risks in the Euro zone. The U.S. Dollar strengthened against the Euro by 3% due partially to increasing US interest rate expectations and thus higher interest rate differentials as well as higher US growth driven by fiscal stimulus. The British Pound remained stable compared to the Euro and continued to be influenced to a large degree by the still unclear BREXIT process. On interest rates, the perceived delayed exit from its expansionary policy by the ECB resulted in Euro shortterm interest rates remaining in negative territory at record lows with limited volatility in the first half of Long term Euro interest rates fell further from already low levels however still staying in positive territory. Credit spreads in the first six months 2018 increased across all major currency markets such as US Dollar, Euro and British Pound with Utility spreads following this trend and rising to one year high levels. As to issuance volumes, the Global Corporate Issuance in H was approximately on par compared to the average of the last five years, however declined versus H The major reason for this was the geopolitical instability as well as increasing credit spreads. Business review In the first half of 2018 E.ON International Finance B.V. did not issue any new notes into the debt capital markets. The total amount of bonds outstanding however changed compared to year end 2017 by scheduled maturities and the resulting repayments of 1.7 billion which was slightly offset by foreign exchange effects of 0.04 billion on the non euro denominated bonds which resulted in an increase of the

4 Condensed Interim Financial Statements 4 Euro amount of bonds outstanding. The total amount of notes outstanding as of June 30, 2018 decreased to 7.0 billion compared to 8.7 billion of bonds outstanding at year end Besides the above pictured foreign exchange effects on the Euro value of Non Euro denominated bonds, the market developments only had a limited impact on E.ON International Finance B.V. s bond business. E.ON s creditworthiness has been assessed by Standard & Poor s ("S&P") and Moody s with long term ratings of BBB and Baa2, respectively. As a result of the agreement E.ON concluded with RWE on March 12, 2018, to acquire RWE's 76.8 percent stake in innogy SE and E.ON's voluntary public takeover offer, both S&P and Moody s anticipate an improvement in E.ON's business and risk profile. On March 13, 2018, S&P therefore confirmed its rating with a stable outlook. After Moody's reviewed its rating for a possible downgrade, on May 17 Moody's confirmed its Baa2 rating with a stable outlook. S&P's and Moody's shortterm ratings are unchanged at A 2 and P 2, respectively. As all bonds issued are guaranteed by E.ON SE, the ratings continue to be a significant support of the bond business of E.ON International Finance B.V. The total asset base declined to 7.8 billion as of June 30, 2018 compared to 9.4 billion at year end Furthermore, E.ON International Finance B.V. s net loss increased from 0.4 million to 4.8 million. The main reason for the increased net loss was the anticipated lack of British Pound denominated interest income following the sale of the 700 million British Pound denominated loan in E.ON International Finance B.V. is no longer participating under both the Syndicated Credit Facility and the 10 Billion Multi Currency Commercial Paper Programme of E.ON. Consequently, no drawings were made and no amounts were outstanding during the first half of Financial information Preparation of Financial Statements The financial statements were prepared in accordance with the statutory provisions of Part 9, Book 2, of the Netherlands Civil Code and the firm pronouncements in the Guidelines for Annual Reporting in the Netherlands as issued by the Dutch Accounting Standards Board. The Interim Report 2018 has followed the same principles of recognizing and measuring as have been used for the preparation of the Financial Report The Interim Report 2018 has not been audited nor has it been reviewed by an audit firm. Financial performance E.ON International Finance B.V. closed the first six months of 2018 with a loss from ordinary activities before taxes of approximately 4.8 million, compared to a loss of 0.6 million in the first half of Risk Information E.ON International Finance B.V. s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The risk profile of E.ON International Finance B.V. did not materially change compared to the end of The overall risk management programme of E.ON International Finance B.V. focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on E.ON International Finance B.V. s financial performance. E.ON International Finance B.V. manages its risks with the procedures and systems used within the E.ON group. The Board is of the opinion that these procedures and systems provide an adequate risk management for E.ON International Finance B.V.

5 Condensed Interim Financial Statements 5 Statement from the Board of Management The Board of Management state that to the best of their knowledge, the condensed interim financial statements of 2018 is prepared in accordance with the statutory provisions of Part 9, Book 2, of the Netherlands Civil Code and the firm pronouncements in the Guidelines for Annual Reporting in the Netherlands as issued by the Dutch Accounting Standards Board, give a true and fair view of the assets, liabilities, financial position and profit or loss of E.ON International Finance B.V. and that the management report includes a fair review of the development and performance of the business and the position of E.ON International Finance B.V., together with a description of the principal risks and uncertainties that it faces. The Interim Report 2018 has not been audited nor has it been reviewed by an audit firm. Amsterdam, August 28, 2018 Board of Management, E.ON International Finance B.V. Mr. J. Otto Mrs. M. Springintveld Mr. J. Groesbeek Mr. D. Jacobs

6 Condensed Interim Financial Statements 6 Unaudited Balance Sheet (before profit appropriation) Jun 30, 2018 Dec 31, 2017 in thousands Note Unaudited Audited Financial fixed assets Loans to shareholder 3 3,737,099 3,800,826 Loans to group entities 3 3,483,821 3,481,370 7,220,920 7,282,196 Current assets Amounts due from shareholder 219,005 1,848,375 Amounts due from group entities 91,570 90, ,575 1,938,863 Cash 4 229, ,335 Total assets 7,761,227 9,445,394 Shareholders equity Issued share capital Share premium reserve 36,992 36,992 Other reserves 527, ,189 Undistributed profit (4,757) (3,990) 5 559, ,391 Borrowings Bonds 6 6,908,606 6,944,579 Current liabilities Amounts due to shareholder 20,949 13,809 Amounts due to group entities Amounts due to others 272,023 1,922, ,987 1,936,424 Total equity and liabilities 7,761,227 9,445,394

7 Condensed Interim Financial Statements 7 Unaudited Income Statement in thousands Note Six months ended June 30, Unaudited Unaudited Interest and similar income 9 257, ,965 Exchange rate difference gains 55, ,639 Financial income 312, ,604 Interest and similar expenses 10 (261,224) (358,124) Exchange rate difference losses (56,229) (304,905) Financial expenses (317,453) (663,029) Total financial result (4,549) (425) Operating expenses (208) (190) Total operating expenses (208) (190) Result of ordinary activities before corporate income tax (4,757) (615) Corporate income taxes Net (loss)/profit (4,757) (435)

8 Condensed Interim Financial Statements 8 Unaudited Cash Flow Statement Six months ended June 30, in thousands Unaudited Unaudited Interest paid (259,274) (385,282) Interest received 255, ,928 Expenses paid (211) (159) Cash flows from operating activities (3,859) (31,513) Loan repayments received from related parties 1,665,022 1,123,666 Cash flows from investing activities 1,665,022 1,123,666 Repayments of borrowings (1,655,766) (900,000) Cash flows from financing activities (1,655,766) (900,000) Net increase (decrease) in cash 5, ,153 Cash at January 1 224,335 32,218 Cash at June , ,371

9 Condensed Interim Financial Statements 9 Notes to the Condensed Interim Financial Statements (1) General information The activities of E.ON International Finance B.V. mainly comprise the financing of E.ON group companies. E.ON International Finance B.V., a corporation with limited liability, having its statutory seat in Amsterdam, the Netherlands, considers E.ON SE, Essen, Germany to be its ultimate parent company. The financial information of E.ON International Finance B.V. is included in the consolidated financial statements of E.ON SE, Germany. Copies of the consolidated financial statements of E.ON SE can be obtained from E.ON SE in Essen. The statutory seat and the office of E.ON International Finance B.V. is Kabelweg 37 in 1014 BA Amsterdam, The Netherlands. E.ON International Finance B.V. is registered with the Dutch Trade register under number These financial statements were authorized for issue by the Board of Management on August 28, (2) Summary of significant accounting policies Basis of preparation The Condensed Interim Financial Statements have been prepared in accordance with the statutory provisions of Part 9, Book 2, of the Netherlands Civil Code and the firm pronouncements in the Guidelines for Annual Reporting in the Netherlands as issued by the Dutch Accounting Standards Board. This interim report does not contain all information required for a full year financial report and needs to be read in conjunction with the E.ON International Finance B.V Annual Report, which has been prepared in accordance with the statutory provisions of Part 9, Book 2, of the Netherlands Civil Code and the firm pronouncements in the Guidelines for Annual Reporting in the Netherlands as issued by the Dutch Accounting Standards Board. The principles applied in preparing the Condensed Interim Financial Statement of E.ON International Finance B.V. are similar to those applied in the E.ON International Finance B.V Annual Report. Comparison with prior period The basis used for the valuation and result definition has remained unchanged with respect to the year end Cash Flow Statement The Cash Flow Statement was prepared according to the direct method. The funds included in the Cash Flow Statement consist of cash at banks and the inhouse bank accounts with E.ON SE. Cash flows in foreign currencies have been translated at the exchange rates existing on the day of settlement. Related parties In conducting its activities, E.ON International Finance B.V. has several transactions with its shareholder E.ON SE, E.ON group companies and non consolidated E.ON companies. The types and the content of the transactions with related parties remain unchanged compared to the E.ON International Finance B.V Annual Report.

10 Condensed Interim Financial Statements 10 Foreign currency translation The functional currency as well as the reporting currency of E.ON International Finance B.V, is the Euro ( ). The financial statements are presented in Euro. Transactions denominated in foreign currencies are translated at the exchange rate at the date of the transaction. Monetary foreign currency items are adjusted to the exchange rate at each balance sheet date; any gains or losses resulting from fluctuations in the relevant currencies are included in the financial income and expenses, respectively. Settled transactions in foreign currencies during the reporting period have been incorporated in the financial statements at the rate of settlement. The following table shows the movements in exchange rates of the relevant foreign currencies for the periods indicated: ISO code Jun 30, 2018 Dec 31, 2017 Jun 30, 2017 British Pound EUR/GBP U.S. Dollar EUR/USD Japanese Yen EUR/JPY Norwegian Krone EUR/NOK Hong Kong Dollar EUR/HKD Critical accounting estimates and judgments The preparation of the financial statements requires management to make estimates and assumptions. It also requires management to exercise its judgment in the process of applying E.ON International Finance B.V. s accounting policies. Estimates and judgments are based on past experience and on additional knowledge obtained on transactions to be reported and are reviewed on an ongoing basis. E.ON International Finance B.V. makes estimates and assumptions concerning future events. Actual events may differ from expectations and actual results will, by definition, seldom equal the accounting estimates. Unless explained otherwise, the estimates made by the management in preparing the Condensed Interim Financial Statement are similar to those used in the E.ON International Finance B.V Annual Report. (3) Financial fixed assets Movement schedule financial fixed assets Jun 30, 2018 in thousands Total Loans to Shareholder Total Loans to Group Entities Total Financial Fixed assets At January 1, ,800,826 3,481,370 7,282,196 Amortization ,245 Exchange differences 26,313 1,726 28,039 Current maturity (90,560) (90,560) At June 30, ,737,099 3,483,821 7,220,920 During the first six months of 2018, E.ON International Finance B.V. did not grant any new long term loans. The amount of total financial fixed assets reduced due to the reclassification of long term loans into the current maturity. This increased Euro value of Non Euro denominated loans, which was mainly driven by the weakening if the Euro against the U.S. Dollar, did slightly offset this reduction.

11 Condensed Interim Financial Statements 11 The following table shows a detailed breakdown of these developments: Carrying amounts of loans in currencies to shareholder Jun 30 Dec 31 EUR 81, ,539 GBP 2,894,111 2,914,246 USD 852,512 2,495,693 Total loans to shareholder 3,827,659 5,526,478 Reclassification to current assets 90,560 1,725,652 Total long term loans in currencies to shareholder 3,737,099 3,800,826 The amount of Euro denominated loans to shareholders decreased slightly during the reporting period. The decrease in the Euro amount of U.S. Dollar denominated loans is due to a scheduled repayment of a maturing loan. The Euro amount of British Pound denominated loans declined slightly due to a light weakening of the Euro against the British Pound. Overall, the structure of the loan portfolio became more British Pound denominated. Carrying amounts of loans in currencies to group entities Jun 30 Dec 31 EUR 2,192,806 2,192,036 GBP 1,291,015 1,289,334 Total long term loans in currencies to group entities 3,483,821 3,481,370 The amount of loans to group entities remained almost stable. The changes on the amount of Euro loans outstanding resulted from the amortization of discounts and premiums on such loans. The slight increase on the Euro amount of the British Pound denominated loans resulted from the light weakening of the Euro against the British Pound. (4) Cash Specification of Cash Jun 30 Dec 31 Cash / Inhouse banking account at shareholder 229, ,335 Cash 229, ,335 Total cash mainly comprises the inhouse bank accounts at E.ON SE. Having such inhouse bank accounts at E.ON SE is common practice within the E.ON group. The total cash is at free disposal of E.ON International Finance B.V. and is almost entirely denominated in Euro.

12 Condensed Interim Financial Statements 12 (5) Shareholders equity The total authorized number of ordinary shares is 9,000 (2017: 9,000) with a par value of 100 per share. The number of issued shares is 2,000 (2017: 2,000). All issued shares are fully paid in. The share premium results exclusively from additional paid in capital. Movement schedule equity in thousands Issued capital Share premium reserve Other reserves Undistributed profit Total At January 1, , ,189 (3,990) 564,391 Appropriation of loss (3,990) 3,990 Loss for the period ended June 30, 2018 (4,757) (4,757) At June 30, , ,199 (4,757) 559,634 Total equity of E.ON International B.V. decreased to million due to the Net Loss of 4.8 million generated in the first six months of (6) Bonds Movement schedule bonds Jun 30 Dec 31 At January 1 6,944,579 9,176,485 Amortization 1,586 4,838 Exchange differences 41,281 (525,024) Current maturity (78,840) (1,711,720) At Balance sheet date 6,908,606 6,944,579 In the first six months of 2018 no new bonds were issued by E.ON International Finance B.V. The reduction in the long term bond amounts outstanding mainly resulted from the reclassification of bonds maturing in the next 12 months into the current maturity item. However, the weakening of the Euro mainly against the U.S. Dollar resulted in an increase of the carrying Euro amount of such bonds, with the nominal amounts of bonds outstanding remaining unchanged. The carrying amounts of the bonds are denominated in the following currencies: Carrying amounts of bonds in currencies Jun 30 Dec 31 EUR 1,945,193 1,944,462 GBP 3,844,959 3,839,133 USD 852,619 2,495,808 JPY 153, ,390 Other currencies 190, ,506 Total bonds 6,987,446 8,656,299 Reclassification current liabilities 78,840 1,711,720 Total long term bonds 6,908,606 6,944,579 During the first six months of 2018 the outstanding amount of Euro denominated bonds remained fairly unchanged. The Euro value of the U.S. Dollar and Japanese Yen denominated bonds decreased due to

13 Condensed Interim Financial Statements 13 scheduled maturities. The slight increase in the Euro value of British Pound denominated bonds resulted from the light weakening of the Euro against the British Pound. The overall structure of the bonds outstanding remained overweighed on the Non Euro denominated bonds. The market value of bonds per June 30, 2018 is 9.3 billion (December 31, 2017: 11.3 billion). (7) Contingent liability In addition to the liabilities carried on the balance sheet there are other (mostly long term) commitments arising from contracts entered into with third parties on the basis of legal requirements. Specification notional amounts financial instruments Jun 30 Dec 31 Interest swaps 35,503 35,503 Currency swaps 365, ,576 Total amounts due to others 401, ,079 The amount of swaps transactions entered into by E.ON International Finance B.V. did not change during the first 6 months of 2018 Specification fair values financial instruments Jun 30 Dec 31 Interest swaps (156) (1,095) Currency swaps (32,024) (44,274) Total amounts due to others (32,180) (45,369) The changes in the fair value amount of currency swaps corresponds to the changes in the foreign exchanges rates of currencies hedged by such instruments. (8) Credit facility agreements As of June 30, 2018 E.ON International Finance B.V. did not participate in any facility agreements anymore, which is in line with the business developments as explained in the 2017 Annual Report of E.ON International Finance B.V. (9) Interest and similar income Specification interest and similar income Six months ended June 30, interest and similar income from shareholder 152, ,000 interest and similar income from group entities 104,659 62,296 interest and similar income from others 6,669 Total interest and similar income 257, ,965 Interest and similar income decreased in the first six months of This is mainly the result of the reduction in interest income from shareholder following reduced lending volumes due to scheduled repayments. Also the sale of Euro loans executed by the shareholder in December 2017 reduced the interest income from shareholder, but at the same time also increased the interest income from group

14 Condensed Interim Financial Statements 14 entities as these entities were the buyer of such loans. Interest income from others mainly reflects the release of the provision for loss making contracts, which ended in May 2017 due to the final repayment of the underlying instruments. (10) Interest and similar expenses Specification interest and similar expenses Six months ended June 30, interest expense to shareholder 16,454 18,872 interest expense to others 244, ,252 Total interest and similar expense 261, ,124 Interest expenses again decreased in the first half of 2018 mainly because of the reduced bond related interest expenses following the repayment of maturing bonds. Accordingly, interest expense to others decreased. Interest expense to shareholder decreased due to reduced interest payments under existing swap contracts. Amsterdam, August 28, 2018 Board of Management, E.ON International Finance B.V. Mr. J. Otto Mrs. M. Springintveld Mr. J. Groesbeek Mr. D. Jacobs