Issuer & Investor Bond Forum

Transcription

1 Issuer & Investor Bond Forum June 2017 Henryk Wuppermann, Head of Corporate Finance, E.ON SE

2 Three attractive core businesses Adjusted EBIT of 3.1 bn Energy Networks Customer Solutions Renewables Key financials Adjusted EBITDA bn bn 0.8 bn 0.4 bn Adjusted EBIT bn 3.1 Non-core Business (PreussenElektra) 0.6 bn Corporate Functions/ Other bn Adjusted Net Income bn Adjusted for non-operating effects, 2. Including group consolidation effects

3 Attractive combination of businesses Energy Networks Customer Solutions Renewables ~ 19 bn Regulated Asset Base 1 Germany 10.7 bn Sweden 3.9 bn CEE 4.4 bn >99 % Efficiency Efficiency leader in Germany and Sweden >10% Adj. EBIT 2 from additional earnings pools Based on efficiency, investments and non-regulated activities 390,000 RES 3 connections >22 m Customers across Europe Germany 6.1 m UK 7.0 m Other EU 9.2 m ~15% 400,000 of Adj. EBIT 2 from Heat & New Solutions Resilience from long-term customer relations built on satisfaction and trust Customers purchasing value added services >6 GW Renewables capacities delivered 10 year track record of renewables development, construction & operations 11.6 TWh Green electricity produced in 2016 Four Wind projects under construction Offshore: Rampion (400 MW, COD ), Arkona (385 MW, COD 2019) Onshore : Radford s Run (278 MW, COD Dec 2017), Bruenning s Breeze (228 MW, COD Dec 2017) > 10 bn Investments in renewables 1. In general, RABs from different regulatory regimes are not directly comparable due to significant methodical differences. These include for example different regulatory asset lifetimes, asset valuation methods, or treatment of customer contributions for network connections., 2. Adjusted for non-operating effects, 3. Renewables, 4. Commercial operation date 3

4 E.ON is committed to fully exit Uniper Spin-off Other shareholders 46.65% 53.35% Uniper shares listed on 12 th September 2016 Existing E.ON shareholders 1 have received Uniper shares (allotment ratio 10:1) Shareholding structure Minority participation accounted for under the equity method Dividends received from Uniper contribute to E.ON s free cashflow Clearly communicated plan to monetize remaining Uniper stake from onwards Current market value of around 2.9bn Uniper: Share price performance since IPO ( /sh) % Excluding treasury shares 2. Due to compliance with minimum holding periods for tax reasons 3. As of June 15, Sep Okt Nov Dez Jan Feb Mrz Apr Mai Jun 4

5 E.ON continues to benefit from a very stable business profile Business profile post spin EBITDA High share of regulated earnings Operations in Energy Networks under stable, well established frameworks in low risk markets with strong regulatory track record Predominantly quasi-regulated or contracted earnings in Renewables Long-term contracted earnings from heat operations Remaining merchant exposure in Renewables and PreussenElektra largely hedged 12% 15% 21% 4.9bn 51% Energy Networks Customer Solutions PreussenElektra Renewables ~2/3 from regulated/long-term contracted businesses 2 1. Adjusted for non operating effects, representation in pie charts excluding Corporate Functions/ Other; total figures including Corporate Functions/ Other, 2. Including Energy Networks and a portion of Renewables and Heat 5

6 E.ON fully on track for FY 2017 Highlights EBIT 1 below prior year mainly due to expected developments in commodity retail and non-core Q m + Q1 not representative for FY 2017 performance + Lower interest accretion and tax rate compensate for operational drivers at Adj. Net Income 1 line + Full year guidance for 2017 confirmed + Economic net debt improved by 1.6bn due to high cash flow and capital increase EBITDA 1 EBIT Adj. Net Income 1 1. Adjusted for non operating effects 6

7 KFK implementation in final stages Total payment amount for E.ON confirmed Status / Next steps bn German legislative process completed Law approved by Bundestag and Bundesrat in December 16 State aid approval by the EU Commission expected in Q2 17 Additional contract finalized Nuclear operators are dropping storage-related legal claims and moratorium court cases Signing of contract expected closely after law enters into force Payment planned around 1 st July 2017 Financing of premium via capital measures Financing of base amount via liquidity on balance sheet and bond issues (up to 3 bn) as well as Commercial Paper (CP) Provisions Premium 1 Provision for interest costs Payment amount 1 1. Excluding 0.2 bn for minority shareholders 7

8 Clear deleveraging plan defined Economic net debt bn 26.3 ~-6.3 ~ 20.0 (~4x EBITDA) Debt reduction measures Capital measures (options incl. ABB 1, hybrid) Monetization of Uniper shares Transfer of Nord Stream 1 into CTA Nuc. decommissioning cost savings 3 Additional measures (non-core disposals, scrip dividend) bn ~2.0 ~2.4 ~1.0 ~1.0 ~1.0 2 Operational measures Savings from efficiency program Phoenix Reduced capex budget 2016 (new definition) Medium-term 1. Accelerated book build: capital increase of up to 10% of shares outstanding, 2. Based on Uniper share price of as of March 10, 2017, 3. Cost savings have been identified technical expert opinions required before savings can be included in ARO calculation 8

9 Efficiency program Phoenix: Securing sustainable competitiveness Principles Scope Targets, status, and next steps 1 2 Business empowerment Lean management holding Controllable cost 1 baseline bn Phoenix target: 400 m EBIT contribution p.a. from 2018 onwards About 300 m from central overhead & support functions Restructuring of pension plans & other measures deliver ~ 100 m 1.2 Status/ Next steps 3 Divisional steering 100% of target measures identified First measures being implemented 4 Competitive services Total E.ON Costs in scope of Phoenix Negotiations with workers council in Q Controllable Costs include operational costs that management can meaningfully influence, such as material expenses, consultancy and personnel expenses. Margineffective components such as fuel costs as well as cost item that are largely uncontrollable by the management are not included. 9

10 Disciplined capital allocation Medium-term Gross capex bn ~ % ~8.0 Strict focus on capital discipline across all business units Three year capex budget decreased by ~20% Reduced investments in renewables projects, notably starting in 2018 given committed project pipeline Gross capex 1.4 Energy Networks 0.7 Customer Solutions Renewables Group 2019 bn Energy Networks investments of 1.6x regulatory depreciation driven by new renewables connections, grid maintenance and digitization Customer Solutions investments in heat and new solutions (i.e. contracted onsite generation) and IT upgrades in UK/Germany Renewables investments : European offshore (~800 MW) and US onshore (~500 MW) 10

11 Sound liquidity profile to support upcoming maturities and KFK solution Liquidity Sources (as of end Q1 2017) bn Liquid Funds Non-current securities 4.3 Total Maturity profile (as of end Q1 2017) 1 bn 4.2 Syndicated loan (undrawn) / $ CP 2 programs (undrawn) / repaid in May EUR GBP USD YEN Other Bonds issued in May 2017: 750 mn (4,25y) / 500 mn (7y) / 750 mn (12y) 1. Bonds and promissory notes issued by E.ON SE, E.ON International Finance B.V. and E.ON Beteiligungen GmbH (fully guaranteed by E.ON SE) 11

12 Outlook 2017 Outlook 2017 EBIT 1 Adj. Net Income bn bn Effects for remainder of 2017 Energy Networks Customer Solutions + Regulatory effects (e.g. NeMoG, pensions), lower maintenance costs + Tariff increase in Sweden + Positive development in CZ, HU/ normalization in Turkey + Price increases in Germany & UK + Focus on sales and customer retention in UK + UK efficiency program Renewables + Normalizing wind yields Arkona book gain in Q Omission of nuclear fuel tax payments + Operational improvements Lower hedging prices Asset retirement cost (ARC) effect 1. Adjusted for non operating effects 12

13 Update of E.ON Focus Our basis for steering the company E.ON FOCUS medium-term framework Capital structure Strong BBB / Baa Profit Group EBIT 1 & EPS 4 Cash Cash conversion rate 2 80 % Return ROCE % Growth DPS Dividend payout FY 2017: 30ct (fixed) Post 2017: % 4 Executive compensation closely linked to EPS target achievement and relative TSR 5 (in addition: Share ownership obligations) E.ON KPIs without Uniper contribution, 1. Adjusted for extraordinary effects and divested operations, FY 2017 guidance range as basis for medium-term outlook, 2. OCFbIT divided by EBITDA, 3. Based on EBIT (= pre-tax), 4. Based on Adjusted Net Income, 5. Total Shareholder Return 13

14 Appendix

15 EBIT below prior year EBIT 1 Q vs. Q m Q Divested Operations Q w/o div. operations Energy Networks Customer Solutions Renewables Corp. Functions & Other, Consolidation Preussen Elektra Q Adjusted for non operating effects 15

16 Adjusted Net Income supported by lower accretion and taxes Q m Group EBIT Interest on fin. assets/ liabilities Other interest expenses Profit before Taxes 1-20 Income Taxes ~ 20m improvement YoY ~ 200m improvement due to significant lower accretion of nuclear provisions Tax rate of 25% (vs. 33% in Q1 2016) Minorities -108 Unchanged to previous year Adjusted Net Income Adjusted net income is supported by lower nuclear accretion charges and taxes EPS ( per share) 1. Adjusted for non operating effects, 2. Without accretion of nuclear provisions 16

17 Segments: Energy Networks Energy Networks EBIT 1 m Germany Sweden CEE & Turkey % Q Q Highlights Germany: + Regulatory benefits + Lower maintenance costs Sweden: + Tariff increases CEE: + Positive effects in Czech Republic, Hungary One-off effect (book loss on hydro power plant divestment), low hydro flows and FX in Turkey m Germany Sweden CEE & Turkey Total Q Q % YoY Q Q % YoY Q Q % YoY Q Q % YoY Revenue 3,458 3, ,181 4, EBITDA EBIT thereof Equity-method earnings OCFbIT , Investments Adjusted for non operating effects 17

18 Segments: Customer Solutions Customer Solutions EBIT 1 m Germany UK Other Q % Q Highlights Germany: Higher costs due to increased TSO fees Lower gas margin due to price decrease in Nov 2016 UK: Higher customer churn rates combined with higher cost of sales FX weakening following Brexit decision Other: Energy procurement crisis in Romania Higher gas procurement costs in Eastern Europe m Germany UK Other Total Q Q % YoY Q Q % YoY Q Q % YoY Q Q % YoY Revenue 2,414 2, ,635 2, ,050 2, ,099 6,546-8 EBITDA EBIT thereof Equity-method earnings OCFbIT Investments Adjusted for non operating effects 18

19 Segments: Renewables Renewables EBIT 1 m Offshore/Other Onshore/Solar -2% Highlights Offshore: Low wind yields Adverse FX development following Brexit decision Onshore: + COD of Colbeck s Corner in May Higher Production of US wind farms Q Q m Onshore Wind / Solar Offshore Wind / Others Total Q Q % YoY Q Q % YoY Q Q % YoY Revenue EBITDA EBIT thereof Equity-method earnings OCFbit Investments Adjusted for non operating effects 19

20 Segments: PreussenElektra PreussenElektra EBIT 1 m % Highlights Lower achieved power prices Lower volumes due to outages ARC Depreciation m Q Q PreussenElektra Q Q % YoY Revenue EBITDA EBIT thereof Equity-method earnings OCFbIT Investments Hedged Prices Germany ( /MWh) as of 31 March % % % 30% Adjusted for non operating effects 20

21 END improves 1.6 bn due to high cash flow and capital increase END 1 Q vs. FY 2016 bn AROs Pension provisions Net financial position END FY 2016 OCF Investments Capital Measures Build & Sell/ Divestment Change in AROs END Q Economic net debt definition takes into account the decommissioning provisions calculated with a real discount rate of 0.0% as opposed to IFRS ARO s. 21

22 Cash conversion at 68% due to seasonal effects in Customer Solutions business Q bn CCR 2 : 68% EBITDA 1 Cash Adjustments Changes in WC OCF bit Interest Payments Tax Payments OCF Capex FCF 1. Adjusted for non operating effects, 2. Cash Conversion Rate: OCF bit / EBITDA 22

23 KFK solution with positive impact on adjusted net income 1. Nuclear fund (KFK) 2. Discount rates 3. Additional asset retirement cost (ARC) Storage related provisions, bn 10.0 Decommissioning provisions, bn ARC bn Provisions Premium 1 Provision interest cost Payment amount to be transferred to government fund around 1 st July 2017 Payment Amount 1 FY 2015 Net accr. charge 9M 2016 Increase of provisions FY 2016 Remaining provisions with shorter duration Real discount rate of -0.9% (2015: +0.9%) increases provisions to 11.2 bn (new END definition: 10.1 bn 3 with real discount rate of 0.0%) Duration effect increases Asset Retirement Costs (ARC) Additional ARC are capitalized as of Q Annual depreciation over remaining lifetime of nuclear plants Accretion of interest (4.4% p.a.) on 7.8 bn stops as of 1 Jan 2017 Increases net income by ~ m 2 p.a. Reduces accretion charges by ~ 350 m 4 p.a. Accretion charges based on risk free rate 5 Quarterly fluctuations of provisions Reduces non-core EBIT by ~ 185 m p.a. 1. Excluding 0.2 bn for minority shareholders, 2. Net effect, depending on refinancing costs, 3. Current cost value used for FY 2016 END definition, 4. Depending on discount rate to be applied, 5. Risk-free discount rate of ~0.5% 23

24 Discount rates for nuclear provisions Build up of provisions status quo Real discount rate: +0.9% Total costs in t 0 Build up of provisions post KFK 1 Real discount rate: -0.9% Total costs in t 0 t 0 t 0 Accretion t+1 t+2 Storage t+3 t+100 Decommissioning Accretion t 0 t+1 t+2 t+n Decommissioning Duration effect Remaining provisions with shorter duration Real discount rate of -0.9% (2015: +0.9%) increases provisions to 11.2 bn (new END definition: 10.1 bn 2 with real discount rate of 0.0%) 1. Utilization not taken into account, 2. Current cost value used for FY 2016 END definition 24

25 Energy Networks 2017: Regulatory & operational update Germany: preparations for next regulatory period ongoing Enhanced customer focus Digitization in practice Modernized regulation framework with yearly RAB true-up and efficiency bonus Review of RoE for 3 rd period finalized Cost reviews for power & gas ongoing General efficiency factor to be newly determined Sweden Positive court decision on allowed WACC Adjustment of network charges to ensure continuously high investment level and ongoing quality improvements funke : joint project of German network companies with the aim to completely re-design processes strictly from the customers perspective and digitize wherever possible Example: reduction of preparation time for a home connection offer from 19 to 2 days (first pilot, to be rolled out) Traditional approach to protect power lines from falling trees: manual identification of danger trees and logging with heavy equipment New minimally invasive method: Laser screening and analysis based on digitized data Cutting only tree tops (from helicopter) Higher efficiency & customer satisfaction and low impact on environment 25

26 E.ON has a strong European regulated asset base Well diversified footprint Presence in countries with AAA rating/ catch-up potential Regulated asset base ( bn) Sweden Germany 3.9 bn bn EBIT 2016 ( bn) ~ 54% 0.9 AAA ~ 24% 0.4 AAA ~ 23% 0.4 IG ~ 19 bn 1 CEE (CZE, SVK, HUN, ROM) 4.4 bn 3 GER SWE CEE 5 Total % of Total Energy Networks EBIT E.ON operates 858,000 networks km Distributed volumes (TWh) 6 Grid length ( 000 km) 1. Current total 2016 RAB of country/region - In general, RABs from different regulatory regimes are not directly comparable due to significant methodical differences. These include for example different regulatory asset lifetimes, asset valuation methods, or treatment of customer contributions for network connections. 2. Converted at SEK/EUR rate of 9.46, 3. Hungary converted at EUR/HUF of 311.4, Czech Republic converted at EUR/CZK of 27.0, and Romania converted at EUR/RON of 4.5; Including 100% of Slovakia, not including Turkey, 4. IG = Investment Grade; Except of Hungary and Turkey, 5. Including at equity income from Slovakia and Turkey, 6. Volumes including grid losses Power Gas Power Gas GER SWE CEE

27 Predictable earnings generated from RABbased returns Pro-forma allowed WACC as solid base 1 Germany 5.9% 2 Regulatory stability in the near term Start of next regulatory period (Power) % of Total EBIT 2016 Sweden 4.56% 3 CEE 4.7% - 8.0% ~90% 1. Power WACC for latest regulatory period. In general, allowed WACCs from different regulatory regimes are not directly comparable (even if they are adjusted for pre-tax/post-tax of real/nominal) because they are applied on RABs that are derived from different regulatory accounting rules, 2. Pro-forma calculated, nominal WACC, pre corporate tax and pre commercial tax. Instead of using a WACC-approach the German regulator publishes allowed equity returns. WACC figures for existing (Return on equity: 7.14% pre corporate tax and after commercial tax) and new investments (Return on equity: 9.05% pre corporate tax and after commercial tax) are assuming c. 4% cost of debt and a 60/40 debt/equity capital structure. The pro-forma WACC figure of 5.9% is then derived by weighting the share of existing assets (WACC: 5.7%) and new assets (WACC: 6.5%), 3. Pre-tax real WACC for Sweden of 4.56%; Current WACC challenged in court by network operators, 4. Hungary: pre-tax real WACC 4.69%, Czech Republic: pre-tax nominal WACC 7.951%, Romania: pre-tax real WACC 7.7%, Slovakia: pre-tax nominal WACC 6.47% 27

28 Customer Solutions 2017: Introducing new solutions E.ON Aura: PV & storage B2B Large: continuously gaining traction E-mobility: gearing up All-in-one solution including PV, battery, energy management app, service & guarantee package and green electricity tariffs Successful launch and scaling up across Germany Introduction of virtual storage product E.ON SolarCloud 10x increase in unit sales in 2016 Target 2017: 10-15% market share Significant sales growth with tailormade energy solutions (on-site generation, energy efficiency, flexibility, storage, ) Diversified portfolio of customers (auto suppliers, tires, chemical, retail, ) Innovative solutions like e.g. fuel cells & battery storage 2017 ambition: new contracts with several hundred million in total revenues Established dedicated unit to take leading role in developing Europe s charging infrastructure E.ON has extensive experience in e- mobility market leader in Denmark (2,500 charging points) Data-based development of services for further markets Partnerships with car rental company Sixt and e-mobility specialists 28

29 Customer Solutions addresses customer needs across different segments B2C & B2B SME Energy Sales Power & Gas B2B Large & B2M Heat District Heating, Local Heating Foundation New Solutions 29

30 Customer Solutions: Financial highlights Adjusted EBIT 1 by business pillars bn Energy sales ~0.7 1 Energy sales financials bn Gross Margin Heat Total Adj. EBIT OPEX UK Continental Europe 1. Adjusted for non-operating earnings; Slight differences may occur due to rounding, 2. Costs to serve, costs to acquire and all other cost related to running the energy sales business including D&A 30

31 Renewables 2017: Build-out fully on track Europe Offshore Rampion (400 MW in UK) Installations of 116 mono-pile foundations completed On time and within budget for completion in 2018 Arkona (385 MW in Germany) Installation of 60 wind turbine foundations planned for 2017 Expected to be fully operational in 2019 Europe Onshore Repowering projects started in Germany & UK Won 57 MW auction in Italy with 20 years tariff of 66/ MWh US Onshore Radford s Run (278 MW in Illinois) Bruenning s Breeze (228 MW in Texas) Both farms scheduled to be in commercial operation in December 2017 US Storage E.ON actively developing projects in fastgrowing energy storage market Iron Horse (10 MW/2.5 MWh): first gridscale project to support grid stability in Arizona (planned COD in H1 2017) Texas Wave: two further projects (10 MW/5 MWh) in Texas on track to be completed in late

32 E.ONs capabilities in most attractive technologies and markets 1 Geography Technology Business model Wind Onshore Wind Offshore PV Focus on Europe & North America Stable countries / low-risk Still attractive returns achieved Focus on Onshore wind, off-shore wind & utility-scale PV Strong E.ON capabilities and experience Capture trends in line with E.ON s capabilities / markets Integrated renewables player Portfolio optimization strategy, bringing: - Scale advantages - Maintain capabilities - Value creation - Reduce cluster risk 32

33 Renewables portfolio of E.ON 3.2 GW Highlights 5.3 GW Operated capacity GW Owned capacity GW Offshore capacity 3.5 GW Onshore + PV capacity 2.1 GW 1. Operated sites, where E.ON is the operator, regardless the ownership share, 2. Pro rata 33

34 PreussenElektra: Asset overview Geographic presence in Germany Overview nuclear plants Brunsbüttel Brokdorf Stade Unterweser Emsland Krümmel Hannover Grohnde Würgassen Grafenrheinfeld Isar 1/2 Gundremmingen A/B/C Active and operated by PreussenElektra Shut down Active and minority share PreussenElektra Decommissioning 1. Atomgesetz, 2. Start-up year 1971, transfer to Preußische Elektrizitäts-Aktiengesellschaft in

35 Enerjisa: Financial highlights Turkey Revenues (TL m) 1 11,827 12,635 EBITDA (TL m) 1 1,886 2,474 Distribution 877 1,178 Retail Generation 777 1,054 Net Income (TL m) E.ON share of 50% (TL m) E.ON share of 50% ( m) Divestment related impairments (one offs) Acquisition related depreciation charges (run gate) FX hedges and other Contribution to E.ON Adjusted EBITDA/Net Income 3 ( m) Enerjisa net income consolidated at 50% in E.ON Adjusted EBITDA/EBIT/Net Income, FX rates (average) : 2015 TL/EUR 2.79; 2016 TL/EUR 3.40, Adjusted for non-operating effects 35

36 Stringent incentive plan for the Management Board KPI Calculation Cap Long-Term Incentive Relative TSR 1 TSR development relative to STOXX Europe 600 Utilities over 4 years 200% of target value Short-Term Incentive EPS & individual performance EPS individual performance multiplier 200% of target value Share Ownership Guidelines Board members obliged to acquire E.ON shares equaling % of annual base salary 1. Total Shareholder Return 36

37 Financial calendar & important links Financial calendar August 9, 2017 Interim Report II: January June 2017 November 8, 2017 Interim Report III: January September 2017 March 14, 2018 Annual Report 2017 May 8, 2018 Interim Report I: January March 2018 May 9, Annual Shareholders Meeting Important links Presentations Annual Reports Interim Reports Shareholders Meeting Bonds / Creditor Relations

38 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 any shares or other securities. 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 these forward-looking statements or 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. 38