E.ON International Finance B.V. Interim Report January June Rotterdam, the Netherlands

Transcription

1 Interim Report January June 2010 Rotterdam, the Netherlands

2 Contents 2 Company Board and Management 3 Report of the Board of Management 3 Statement from the Board of Management 5 Condensed Interim Financial Statements of 6 Condensed Balance Sheet (before profit appropriation) 6 Condensed Income Statement 7 Condensed Cash flow Statement 8 Notes to the condensed interim financial statements 9 Review report 15

3 Board of Management 3 Report of the Board of Management General information As of June 30, 2010, the composition of the Board of Management as well as the objectives of are unchanged compared to the financial year ended December 31, continues to be a wholly owned and fully consolidated subsidiary of E.ON AG, Düsseldorf, Germany. Internal organisation The statutory seat of is Capelseweg 400 in Rotterdam. The offices are located at Capelseweg 400 in Rotterdam and at Parlevinkerweg 1-5 in Venlo. At June 30, 2010 had no own employees (2009: 0). All personnel is either seconded from other E.ON group companies or employed by E.ON Benelux N.V. under a service level agreement. Market review In the first half of 2010 the international capital markets could not extend the overall positive tone with which they had finished the previous year. Especially the second quarter was characterised by a high degree of volatility and uncertainty caused by unfavourable developments of certain sovereign debt issuers with Greece being the most prominent case. Moreover, with Greece being a member of the Euro zone this also resulted in strong movements of Euro exchange rates. With regard to the debt markets this lead to an increase of risk spreads for a wide range of sovereign issuers, but also for many corporate issuers, albeit to a much lesser extent. Generally especially on the Corporate Bond side funding activities and new issuance volumes were substantially below prior year levels. Business review Following completion of the E.ON funding programme in 2009 and due to the comfortable liquidity situation of the E.ON group no new notes were issued during the first six months of the financial year As such the market developments did not have a direct effect on any funding activity of With regard to the outstanding bonds the market developments only had a limited impact. E.ON spreads widened only marginally showing the continued confidence of investors in the E.ON credit. The foreign exchange fluctuations did have an effect on the Euro value of non Euro denominated bonds on the Balance Sheet, however, due to the risk management policy of E.ON International Finance B.V., this did not have any material impact on profitability. Despite a total of 0.3 billion bonds maturing in the first half of 2010, the total amount of notes outstanding as of June 30, 2010 increased to 28.4 billion due to the weakening of the Euro. At year end 2009 had 27.5 billion outstanding. In terms of the intra-group financing business, in the first half of 2010 E.ON International Finance B.V. further expanded its activities by continuing to take up new intra-group loans or E.ON AG guaranteed short term deposits to fund additional lending activities to other E.ON group companies. As of June 30, 2010 loans totalling 3.8 billion were granted on a short term basis, up from 3.4 billion as of year end As a result of the above, total lending volume as of June 30, 2010 increased slightly to over 33 billion compared to approximately 32 billion as of December 31, Despite only slightly higher lending volumes compared to year-end 2009, E.ON International Finance B.V. s net profit increased substantially from 8.0 million in the first half of 2009 to 13.9 million in the first half of This is mainly due to the fact that intra-group financing activities were intensified in the second half of 2009 and volumes during the first half of 2010 were far higher than those during the comparable previous year period.

4 Board of Management 4 During the first half of 2010 no drawings were made on behalf of under both the 10 Billion Multi Currency Commercial Paper Programme and the 9 Billion Syndicated Multi Currency Revolving Credit Facility. 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 2010 has followed the same principles of recognizing and measuring as have been used for the preparation of the Financial Report Financial performance closed the first six months of 2010 with a profit from ordinary activities before taxes of approximately 18.6 million, compared to 10.8 million in the first half of The increase is mainly due to the expansion of the intra-group financing business. Risk Information 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 did not materially change compared to the end of The overall risk management programme of focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on E.ON International Finance B.V. s financial performance. manages it s 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

5 Board of Management 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 2010 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 the, together with a description of the principal risks and uncertainties that it faces. Rotterdam, 30 August, 2010 Board of Management, J.C.P. Schoenmakers Director J. Trapman Director J. Otto Director

6 Condensed Interim Financial Statements 6 Balance Sheet (before profit appropriation) in thousands Note Jun 30, 2010 Dec 31, 2009 Financial fixed assets Loans to shareholder 22,269,524 21,608,968 Loans to group entities 3,959,315 3,848, ,228,839 25,457,350 Current assets Amounts due from shareholder 2,748,696 2,840,691 Amounts due from group entities 4,048,221 3,622,739 6,796,917 6,463,430 Cash 4 43,559 16,755 Total assets 33,069,315 31,937,535 Shareholders equity Issued share capital Share premium reserve 36,992 36,992 Other reserves 98,238 81,474 Undistributed profit 13,923 16, , ,430 Provisions Provision for loss making contracts 96, ,298 Provision for deferred taxes , ,943 Borrowings Bonds 6 26,352,511 25,997,273 Current liabilities Amounts due to shareholder 86, ,126 Amounts due to group entities 2,165,392 1,948,005 Amounts due to associated companies 1,596,872 1,453,653 Amounts due to others 2,615,359 2,184,211 Amounts due to tax authorities 6,111 2,894 6,470,595 5,701,889 Total equity and liabilities 33,069,315 31,937,535

7 Condensed Interim Financial Statements 7 Income Statement in thousands Note Six months ended June 30, Operating expenses (691) (641) Total operating expenses (691) (641) Interest and similar income 9 863, ,022 Exchange rate difference gains 1,350, ,252 Financial income 2,214,716 1,292,274 Interest and similar expenses 10 (843,003) (893,243) Exchange rate difference losses (1,352,380) (387,625) Financial expenses (2,195,383) (1,280,868) Total financial result 19,333 11,406 Result of ordinary activities before corporate income tax 18,642 10,765 Corporate income taxes (4,719) (2,745) Net Profit 13,923 8,020

8 Condensed Interim Financial Statements 8 Cash flow Statement in thousands Six months ended June 30, Interest paid (900,149) (828,301) Interest received 930, ,079 Expenses paid (341) (364) Income tax paid (1,518) (1,866) Cash flows from operating activities 28,812 (85,452) Loans granted to related parties (8,080,987) (8,629,339) Loan repayments received from related parties 7,979,655 4,803,627 Cash flows from investing activities (101,332) (3,825,712) Proceeds from borrowings 11,346,875 10,236,956 Repayments of borrowings (11,247,551) (6,310,444) Cash flows from financing activities 99,324 3,926,512 Net increase (decrease) in cash 26,804 15,348 Cash at January 1 16,755 25,412 Cash at June 30 43,559 40,760

9 Condensed Interim Financial Statements 9 Notes to the Condensed Interim Financial Statements (1) General information The activities of mainly comprise the financing of E.ON group companies., a corporation with limited liability, having its statutory seat in Rotterdam, the Netherlands, considers E.ON AG, Düsseldorf, Germany to be its ultimate parent company. The financial information of is included in the consolidated financial statements of E.ON AG, Germany. Copies of the consolidated financial statements of E.ON AG can be obtained from E.ON AG in Düsseldorf. The statutory seat of is Capelseweg 400 in Rotterdam. The offices are located at Capelseweg 400 in Rotterdam and at Parlevinkerweg 1-5 in Venlo. These financial statements were authorized for issue by the Board of Management on 30 August (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 2009 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 2009 Annual Report. Comparison with prior year The basis used for the valuation and result definition has remained unchanged with respect to the previous year. 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 banking account with E.ON AG. Cash flows in foreign currencies have been translated at the exchange rates existing on the day of settlement. Critical accounting estimates and judgments The preparation of the Condensed Interim Financial Statements requires management to make estimates and assumptions. It also requires management to exercise its judgment in the process of applying 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. 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 Annual Report 2009.

10 Condensed Interim Financial Statements 10 Related parties In conducting its activities, has several transactions with its shareholder E.ON AG, 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. 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, 2010 Dec 31, 2009 Jun 30, 2009 British Pound EUR/GBP U.S. Dollar EUR/USD Swiss Franc EUR/CHF Japanese Yen EUR/JPY Swedish Krona EUR/SEK Czech Koruna EUR/CZK 25, Norwegian Krone EUR/NOK Hong Kong Dollar EUR/HKD Danish Krone EUR/DKK

11 Condensed Interim Financial Statements 11 (3) Financial fixed assets Movement schedule financial fixed assets Jun 30, 2010 in thousands Total Loans to Shareholder Total Loans to Group Entities Total Financial Fixed assets At January 1, ,608,968 3,848,382 25,457,350 - New loans Amortization 8, ,462 - Exchange differences 583, , ,946 - Current maturity 68,550 (115,469) (46,919) At June 30, ,269,524 3,959,315 26,228,839 During the first six months of 2010, did not issue any new longterm loans. However, the amount of long term loans outstanding did increase by 0.8 billion. This is mainly due to the higher values of Non-Euro denominated loans which are caused by the weakening of the Euro. The following table shows a detailed breakdown of these developments: Carrying amounts of loans in currencies to shareholder Jun 30 Dec 31 in thousands EUR 18,903,963 19,162,683 GBP 2,530,312 2,327,805 USD 2,428,386 2,065,353 Other 185, ,028 Total loans to shareholder 24,048,616 23,721,869 Reclassification to current assets 1,779,092 2,112,901 Total long term loans in currencies to shareholder 22,269,524 21,608,968 At the end of the reporting period the vast majority of loans to shareholder continue to be denominated in Euro, with the reduction of 0.3 billion being mainly loan repayments which in turn have been used to repay maturing bonds. With respect to the Non-Euro denominated loans, the effect of the weakening of the Euro resulted in a somewhat considerable increase on an individual currency level, however, the structure of the loan portfolio has not shifted significantly. Carrying amounts of loans in currencies to group entities Jun 30 Dec 31 in thousands EUR 1,194,193 1,194,186 GBP 2,671,168 2,456,694 Other 261, ,252 Total loans to group entities 4,127,251 3,897,132 Reclassification to current assets 167,936 48,750 Total long term loans in currencies to group entities 3,959,315 3,848,382 The currency split of loans to group entities is also roughly unchanged compared to year end with most of the amounts being denominated in British Pounds and Euro. Again, the weakening of the Euro did have an effect on the individual currency level; however the overall structure of the loan portfolio remained fairly unchanged with the share of British Pounds increasing slightly.

12 Condensed Interim Financial Statements 12 (4) Cash Specification of cash Cash in thousands Jun 30, 2010 Dec 31, 2009 Cash and cash equivalents Inhouse banking account at shareholder 43,467 16,689 Cash 43,559 16,755 Total cash mainly includes the inhouse banking account at E.ON AG. Having such an inhouse banking account at E.ON AG is common practice within the E.ON group. The total cash is at free disposal of and is to a large degree denominated in Euro. (5) Shareholders equity The total authorized number of ordinary shares is 9,000 (2009: 9,000) with a par value of 100 per share. The number of issued shares is 2,000 (2009: 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, ,992 74,974 6, ,666 Appropriation of undistributed profit - - 6,500 (6,500) - Profit for the year ended Dec 31, ,764 16,764 At December 31, ,992 81,474 16, ,430 Appropriation of undistributed profit ,764 (16,764) - Profit for the half-year ended June 30, ,923 13,923 At June 30, ,992 98,238 13, ,353 Total equity of E.ON International B.V. increased to 149 million due to the Net Profit of 13.9 million achieved in the first six months of (6) Borrowings Movement schedule bonds in thousands Jun 30, 2010 At January 1 25,997,273 - New bonds - - Amortization 8,428 - Exchange differences 1,131,994 - Current maturity (785,185) At Balance sheet date 26,352,511 In the first six months of 2010 no new bonds were issued due to the comfortable liquidity situation of the E.ON group. However, the amounts of bonds outstanding did increase solely due to the exchange rate fluctuations in the first half year. The effects of such fluctuations are shown in more detail in the following table:

13 Condensed Interim Financial Statements 13 The carrying amounts of the bonds are denominated in the following currencies: Carrying amounts of bonds in currencies in thousands Jun 30, 2010 Dec 31, 2009 EUR 17,665,090 17,823,473 GBP 5,197,556 4,780,834 USD 2,672,406 2,272,967 CHF 1,692,126 1,514,492 JPY 692, ,719 Other currencies 448, ,385 Total bonds 28,368,251 27,499,870 Reclassification current liabilities 2,015,740 1,502,597 Total long term bonds 26,352,511 25,997,273 At the end of the reporting period s outstanding bonds continue to be mainly denominated in Euro, followed by British Pounds, US Dollar and Swiss Francs. The change in Euro denominated bonds outstanding is mainly due to the maturity and repayment of two Euro bonds. For the Non-Euro denominated bonds, the increase in the carrying amounts is solely due to the weakening of the Euro. In addition to such currency effects, the value of Japanese Yen bonds outstanding was also affected by the maturity and repayment of one Yen denominated bond during the reporting period. In total 0.3 billion of bonds were repaid in the first half year The fair values of the bonds per June 30, 2010 is 32.8 billion (Dec 31, 2009: 30.7 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. At June 30, 2010, had existing interest rate swaps with E.ON AG with a total nominal volume of 126 million (Dec 31, 2009: 190 million). The decrease is solely due to the settlement of a swap during the reporting period. The fair value as at 30 June, 2010, of the interest rate swaps can be estimated at approx million (Dec 31, 2009: -2.9 million). At June 30, 2010, had existing currency swaps with E.ON AG with a total nominal volume of 2,223 million (Dec 31, 2009: 2,323 million). The decrease is solely due to the settlement of a swap during the reporting period. The fair value as at 30 June, 2010, of the currency swaps can be estimated at approx million (Dec 31, 2009: 49.6 million). The increase of the fair value is due to the weakening of the Euro in the first half year 2010.

14 Condensed Interim Financial Statements 14 (8) Credit facility agreements As of June 30, 2010 the following facilities are available: 35 Billion Debt Issuance Programme 10 Billion Multi Currency Commercial Paper Programme 9 Billion Syndicated Multi Currency Revolving Credit Facility Agreement The terms and conditions of these facilities are unchanged compared to year-end (9) Interest and similar income Specification interest and similar income Six months ended June 30, in thousands interest and similar income from shareholder 699, ,240 - interest and similar income from group entities 154, ,380 - interest and similar income from others 9,849 53,402 Total interest and similar income 863, ,022 Interest income decreased slightly in the first six months of 2010 mainly due to a lower amount of provision releases for loss making contracts which is included in the interest and similar income from others. The decrease in the provision is in line with the final repayment of 4.3 billion loan maturities of group entities in May Moreover, the 2010 interest and similar income from group entities is slightly lower than the prior year number because the increase in the intra-group lending activities does not fully compensate the interest income that ceased to exist in May 2009 following the repayment of 4.3 billion loan maturities. (10) Interest and similar expenses Specification interest and similar expenses Six months ended June 30, in thousands interest expense to shareholder 84, ,457 - interest expense to group entities 4,816 5,306 - interest expense to associated companies 6, interest expense to others 747, ,480 Total interest and similar expense 843, ,243 Interest expenses also decreased slightly in the first half of 2010 partially as a result of reduced expenses to others which is mainly due to the prior year number still including the interest expense for the 4.3 billion bond maturing in May Furthermore, also the interest addition to the provision for loss making contracts declined in line with the final repayment of the 4.3 billion loan to group entities in May Furthermore interest expense to shareholder decreased due to a substantially higher swap volume in These reductions are partially offset by increased interest expenses to associated companies due to the expansion of intra-group funding activities.

15 Other Information 15 Review report