Annual Report. Energy for Mannheim and the Region

Transcription

1 Annual Report Energy for Mannheim and the Region

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3 Grosskraftwerk Mannheim Aktiengesellschaft Annual Report 2013

4 The illustrations for this year s Annual Report show the project managers responsible for the building measures implemented by GKM to increase the flexibility and efficiency of the plant in light of the turnaround in energy policy.

5 Contents 4 The Management Board 6 The Supervisory Board 8 Report of the Supervisory Board 10 Management Report Corporate profile Business model Brief summary Economic report Overall economic and industry-specific environment Business trends - Overview - Electricity - District heat - Personnel - Fuel Situation - Sales and profit situation - Financial situation - Net asset position Events after 2013 Forecast, opportunities and risks Forecast - Overall economic situation - Electricity and CO2 market - Investments Opportunities and risks Our responsibility for people, the environment and society Responsibility for our employees - Vocational training and further education - Work-family balance - Commitment and innovative spirit - Work safety and health - Special interest groups and participation Responsibility for our environment - Research and Development Responsibility for our society - Anti-corruption guidelines - UN Global Compact membership Unit 9 Our project for the future 30 Balance Sheet Report, 31 December Profit and Loss Account for the Business Year Notes on the Business Year Independent Auditors Report 45 Editorial Details

6 4 Our contribution to the energy turnaround Through the construction of Unit 9 and the implementation of various optimisation measures, we are gearing our company consistently towards the future. For Mannheim and the Region. The Management Board Dr. Karl-Heinz Czychon Chief Technical Officer Weinheim Dr. Markus Binder Chief Financial Officer Gaiberg

7 5 Dear reader, The German energy industry is currently in a dire economic situation as a result of the politically-initiated turnaround in energy policy. Renewable energies are continually expanding at the expense of conventional power stations and the additional supply of electricity is causing a drop in wholesale prices for electricity. These prevailing circumstances are placing our industry under enormous economic pressure. We view the decision of the new Federal Government to bundle energy responsibilities into a new Federal Ministry for Economic Affairs and Energy as the first positive step in the right direction. The planned basic reform of the Renewable Energies Act (EEG) as well as the agreements to use existing fossil-fuel power stations to build up network reserves, to develop tendering models and create open-technology capacity mechanisms to even out fluctuations in renewable energy supply also indicate that politicians have recognised the vital importance of a safe provision of energy for Germany as an industrial nation. After all, with the massive expansion of solar and wind farms and the subsequent closure of conventional power stations this requires, there is a growing danger that the guaranteed capacity will be insufficient, in other words, the capacity that needs to be available if the sun doesn t shine or the wind doesn t blow. As a result, there is a far greater risk of power cuts. To respond to the challenges of the future, we are currently realigning our company systematically and further Increasing the flexibility and efficiency of our plant by implementing various construction projects and cost-cutting measures. Thus, under the motto Our contribution to the energy turnaround, we have not only built Germany s most powerful district heating accumulator, but also new switchgears, a phase-shifting transformer and a steam generator facility, among other things. In the meantime, Unit 9 is well on its way to completion. This unit will help us to secure our position as the largest energy location in Baden-Württemberg for the coming decades. We will introduce the projects described and the employees responsible for these briefly in this Annual Report. In the long term, only power stations capable of reacting to the fluctuating green electricity production flexibly as well as most cost-effectively will survive in Germany. This is why we are also planning to tap further potential for improving earnings as well as implementing the GKM 2013 PLUS project. For conventional power stations such as GKM to ensure the security of supply in the long term, however, it is important that politicians also recognise the severity of the situation and make the right decisions quickly. The coalition agreement gives us cause to hope that earlier mistakes will be rectified and that it should lead the energy turnaround on the correct course. It is not yet clear when and how the situation for conventional power stations will actually improve. However, one thing is certain it will be some time before we are plain sailing again. Until we have found our new place in the energy turnaround, we will have many obstacles to negotiate together over the coming months and years. We therefore depend more than ever on the willingness of our employees to support us wholeheartedly in the necessary realignment of the company in order to safeguard its future. We are nevertheless confident that together we will overcome the difficult tasks that lie ahead and bring them to a successful conclusion. Best regards The Management Board Dr. Markus Binder Dr. Karl-Heinz Czychon

8 6 The Supervisory Board Gerhard Widder Chairman Former Lord Mayor of the city of Mannheim (retired), Mannheim Dr. Ulrich Hartmann 1st Vice Chairman Member of the Management Board of RWE Generation SE / RWE Power AG, Mülheim / Ruhr (until 8 May 2013) Roger Miesen 1st Vice Chairman Member of the Management Board of RWE Generation SE, Essen (from 8 May 2013) Ümit Lehimci* 2nd Vice Chairman Chairman of the GKM Works Council, Mannheim Stefan Brogle* Work Scheduler, Mannheim Dr. Werner Dub Member of the Management Board of MVV Energie AG, Mannheim Claus Egner* Vice Chairman of the GKM Works Council, Altrip Dirk Ermlich Contractual Management of RWE Supply & Trading GmbH, Dortmund Dr. Michael Fübi Chief Executive Officer of RWE Technology GmbH, Ratingen * elected workers representatives Achim Görtz Project Management Office NEO of RWE Power AG, Cologne Dr. Werner Götz Production and Technical Director of EnBW Erneuerbare und Konventionelle Erzeugung AG, Leonberg Dr. Christoph Helle General Agent of MVV Energie AG, Heidelberg Ulrich Herzog Member of the Management Board and Executive Manager of EnBW Energie Baden-Württemberg AG, Karlsruhe Werner Klein* Electrical Engineering Master Technician, Mannheim Dr. Georg Müller Chairman of MVV Energie AG, Mannheim Georg Rombach* Electrical Engineering Master Technician, Ladenburg Fabian Spalthoff Managing Director Risk & Finance of EnBW Trading GmbH, Kämpfelbach Rolf Stork* Head of Maintenance / Operation, Waghäusel Erwin Winkel Member of the Management Board of RWE Generation SE / RWE Power AG, Niederzier

9 7 Our contribution to the energy turnaround Germany s most powerful district heating accumulator allows us to increase the flexibility and security of supply for the region s district heat network.

10 2 Insert Annual Report

11 3 The Supervisory Board After the election of the new Supervisory Board on 14 May 2014 Gerhard Widder Chairman Former Lord Mayor of the city of Mannheim (retired), Mannheim Roger Miesen 1 st Vice Chairman Member of the Management Board of RWE Generation SE, Essen Ümit Lehimci* 2 nd Vice Chairman Chairman of the GKM Works Council, Mannheim Stefan Brogle* Work Scheduler, Mannheim Dr. Werner Dub Member of the Management Board of MVV Energie AG, Mannheim Claus Egner* Vice Chairman of the GKM Works Council, Altrip Dirk Ermlich Contractual Management of RWE Supply & Trading GmbH, Dortmund Dr. Michael Fübi Chief Executive Officer of RWE Technology GmbH, Ratingen Achim Görtz Project Management Office NEO of RWE Power AG, Cologne Dr. Werner Götz Production and Technical Director of EnBW Erneuerbare und Konventionelle Erzeugung AG, Leonberg Dr. Christoph Helle General Agent of MVV Energie AG, Heidelberg Juan-Antonio Latorre* Control Room Operator, Mannheim Dr. Georg Müller Chairman of MVV Energie AG, Mannheim Thomas Münch* Head of Welding Technology, Plankstadt Dirk Ommeln Head of Group Management of EnBW Energie Baden-Württemberg AG, Wernau Georg Rombach* Electrical Engineering Master Technician, Ladenburg Fabian Spalthoff Managing Director Risk & Finance of EnBW Trading GmbH, Kämpfelbach Erwin Winkel Member of the Management Board of RWE Generation SE / RWE Power AG, Niederzier * elected workers representatives

12 8 Report of the Supervisory Board In the business year 2013, the Supervisory Board of Grosskraftwerk Mannheim Aktiengesellschaft performed all the functions incumbent upon it by law and in the articles of association. It regularly advised the Management Board on the management of the company and supervised the management measures. The Management Board informed the Supervisory Board regularly, in detail and with the minimum time delay about all major aspects of the business developments, corporate policy, risk management and the most important business operations of the company in written and verbal reports. The reports were each the main points of consultation in the meetings of the Supervisory Board and of the committees. A continual exchange of information between the Chairman of the Supervisory Board and the Management Board was also maintained. Meetings and committees The Supervisory Board held five meetings in the reporting period. All measures requiring the Supervisory Board s consent were discussed in detail and agreed upon in these meetings. In preparation for the consultations in the Supervisory Board, the Technical Committee held three meetings, the Personnel Committee two meetings and the Financial Committee four meetings. Main points of consultation The Supervisory Board meetings dealt mainly with the construction of Unit 9 as well as the technical and economic challenges of the energy turnaround. For the construction of Unit 9, the project progress, planning changes, risk management aspects, health and safety management and environmental management topics, as well as financial, contractual and economic issues were discussed intensively, and external experts were also called upon. The activities and measures for refinancing existing financial liabilities were a further main topic of consultation. A further focus of the meetings was on safeguarding jobs at the location in the long term. Due to the extremely difficult energy management framework conditions, the Supervisory Board has been addressing the further optimisation of the cost and revenue structure in a project that was set up specifically for this purpose, which was also supported by an external consulting firm. Besides these topics, the annual and the mid-term planning, the risk management system, personnel management, as well as accounting-related issues were also at the focus of discussions. Audit and approval of the annual accounts The annual accounts, as well as the management report submitted by the Management Board, were audited by the accounting firm KPMG AG Wirtschaftsprüfungsgesellschaft, Mannheim, having been elected by the Annual General Meeting on 8 May 2013 and subsequently appointed by the Supervisory Board. The auditors found that the legal requirements had been complied with and they confirmed their unqualified approval. Following pre-consultation with the Financial Committee, which took place in the presence of the auditor, the Supervisory Board examined the annual accounts and the auditor s report and also discussed these in the presence of the auditor. The Supervisory Board confirmed the auditor s judgement and acknowledged the annual accounts and the management report. It has also given its consent to the Management Board s proposals for the appropriation of profits. Thus, the annual accounts are approved in accordance with Section 172 AktG (German public limited company law). The Supervisory Board wishes to thank the Management Boards, Works Councils and all employees of GKM for their dedicated commitment and successful work in the past financial year. Mannheim, 14 May 2014 The Supervisory Board Gerhard Widder Chairman

13 9 Our contribution to the energy turnaround A new railway power converter allows us to provide an additional 16.7 hertz to Deutsche Bahn.

14 10 Management Report Corporate profile Business model Grosskraftwerk Mannheim Aktiengesellschaft (GKM) has been operating one of Europe s most efficient coal-fired power stations in Mannheim for over 90 years. GKM generates electricity for over 1.5 million people, trade and industry, as well as district heat for around 120,000 households via the environmentally sound and cost-effective principle of combined power and heat (CPH). GKM is also an important supplier of single-phase railway power for the DB Energie GmbH. The installed plant output is 1,675 MW gross or 1,520 MW net, the installed district heat capacity (heating circuit water) approx. 1,000 MWth. 190 MW of the net output are available for the production of single-phase railway power. GKM is a power station jointly owned by its shareholders RWE Generation SE in Essen, EnBW Erneuerbare und Konventionelle Erzeugung AG in Stuttgart and MVV RHE GmbH in Mannheim. In the year under review, the shares held until now by RWE Power AG were transferred to RWE Generation SE. The company s main objectives include the demand-driven provision of electricity and district heat at competitive prices as well as sustainable economic development that benefits our customers. To achieve these objectives, our focus is on occupational safety and environmental protection, open and honest communication with the general public as well as the prevention of corruption and respect for human rights along the entire value chain. We want to be regarded as an attractive and responsible employer by our employees and as a valued neighbour by the people of Mannheim.

15 11 Brief Summary Business figures 2013 Previous year Electricity sales bil. kwh District heat sales bil. kwhth Total sales mil Fuel consumption mil. t of coal equivalent Investments mil Staff as of 31 December Total number Balance sheet total mil. 1,652 1,434 Capital assets Liquid assets Shareholders equity Liabilities mil. mil. mil. mil. 1, ,538 1, ,320 Cash flow* mil * from ordinary business activities in accordance with DRS 2

16 12 Economic report Overall economic and industry-specific environment In 2013, power consumption in Germany once again continued to decline. It was around 7 bil. KWh (1.1%) lower than the previous year. The German Association of Energy and Water Industries (BDEW) considers the relatively weak economic performance and the fact that there was one day fewer in February compared to the previous year to be the reason for this development as well as the effect that the increasingly energy-efficient consumption units have on reducing consumption. Following an increase to 22.8% in the previous year, renewable energies increased by a further 1.1% in 2013 and accounted for 23.9% of the gross electricity production in Germany. Brown coal continued to lead the German electricity mix at 25.6%, followed by black coal whose share rose from 18.5% to 19.6%. Over the past year, German electricity production from brown coal reached its highest level since the reunification. While the share of nuclear energy remained virtually unchanged at 15.4%, the contribution of natural gas to gross electricity production declined once again to just 10.5%, following a sharp drop in the previous year. Despite the downward trend in power consumption, primary energy consumption increased during the reporting period by 2.6% to mil. t of coal equivalent. The Arbeitsgemeinschaft Energiebilanzen (a federation of seven German energy associations) considers the cause of this to be the increased heating requirements as a result of the long winter and the cool Business area spring. It believes that drops in consumption resulting from the increase in energy efficiency have been more than compensated for by the effects of temperature. Alongside economic factors, the electricity market was affected primarily by the further expansion and preferential supply of renewable energies into the German power grid. In light of this, spot market prices for baseload electricity on the EPEX energy exchange, which were already extremely low, fell by a further 5/MWh in Prices averaged at around just 38/MWh compared to 43/MWh in the previous year. The average prices for power plant coal in the ARA (Amsterdam, Rotterdam and Antwerp) region fell from 93 US$ to 82 US$ per ton. The average prices for EU emission rights also fell. They decreased to around 5 per ton of CO2 (in the previous year the average price was around 7 per ton of CO2). Power consumption in Germany declined by 1.1%. Average price for EU emission rights was about 5 per ton of CO2 in Despite the downward trend in power consumption, primary energy consumption increased to 478 mil. t of coal equivalent Previous year Change % Electricity bil. kwh District heat bil. kwhth

17 13 Our contribution to the energy turnaround Our new transformers ensure that power is fed into the grid reliably and flexibly at the highest level.

18 14 Business trends Overview Corporate activities in 2013 were focussed on the construction of Unit 9 and the implementation of various projects to optimise and increase the flexibility of existing production facilities in addition to the safe and reliable provision of energy for our customers. Information on how the construction of Unit 9 is progressing is available on page 28. The positive trend in electricity sales and district heat sales continued in the past business year. Despite the even higher quantities of renewable energies being fed into the German power grid in 2013, electricity sales increased with a rise in sales of 15.2% to a total of 6.7 bil. kwh. The demand for district heat rose again as a result of the relatively cold weather. Deliveries increased by 3.4% to 2.8 bil. kwhth compared to the previous year. The electricity business area is divided into the three-phase and single-phase railway power areas. Three-phase power sales were above the previous year's level during the reporting period, rising by 13.8% to bil. kwh with single-phase railway power rising by 22.3% to bil. kwh. This meant that deliveries in the railway power segment rose again sharply following the previous year s drop on account of damagerelated plant downtimes. As one of Germany s largest producers of railway power, GKM has for many years been responsible for generating around 10% of German railway power one of the most environmentally friendly forms of transport there is. As Deutsche Bahn intends to continue sourcing power from GKM in the future, it has secured a contract for around 100 MW capacity from Unit 9. The frequency converter system needed for this has already been available to Deutsche Bahn since the end of This allows the Three-phase power sales were above the previous year s level, rising by 13.8% to around 5.6 bil. kwh with single-phase railway power rising by 22.3% to around 1.1 bil. kwh. Development of electricity sales Electricity In 2013, GKM electricity sales were 15.2% higher than the previous year. This led to a significant increase in the sales result in an overall difficult environment albeit starting from a low level. Besides the increase in sales on account of the weather, optimised regulations on the utilisation of the power station pool and GKM's ability to provide an extremely flexible service in response to market volatilities were responsible for the increased demand. Three-phase power bil. kwh Single-phase railway power Electricity sales Previous year bil. kwh % bil. kwh % Three-phase power Single-phase railway power Total Change %

19 15 company given the corresponding plant availability to respond even more flexibly within the context of schedule management to the relevant requirement situation, even before the completion of Unit 9. For many people in Germany, the safe and reliable supply of energy 24 hours a day is still a matter of course. In a few years time, however, things may be quite different. By 2022, around two thirds of the guaranteed capacity will be lost as a result of the gradual phasing-out of nuclear power stations. In addition, many power station operators are being forced to take coal or gas power stations off the grid because they are no longer economically viable or have reached the end of their life. Although the share of renewable energies is expected to expand to around 40 to 45% by 2025 or 55 to 60% by 2035, only 30% of this is available as guaranteed capacity. Already today, conventional power stations like GKM are becoming increasingly important. Thus, at the request of the state government of Baden-Württemberg and the Federal Network Agency, GKM has been providing what is known as a cold reserve since the end of 2011 to ensure the stability of the power grid in southern Germany. District heat In the area of district heat, GKM produces heating circuit water for the district heat network of the Rhine-Neckar metropolitan region in addition to a small amount of process steam for neighbouring industrial firms. Covering approx. 800 kilometres and over 120,000 connected households, the district heat network is currently one of the largest in Europe. With the same rate of connection, the sales figures for heating circuit water depend solely on the heat requirements of the households connected and are therefore directly linked to the outside temperatures. Accordingly, demand was 3.3% higher than in 2012 at bil. kwhth, due to the persistent cold weather at the start of the year. The supply of process steam was 7.4% higher than the previous year at bil. kwhth. Weather-related 3.4% increase in district heat sales to around 2.8 bil. kwhth, compared to Development of district heat sales bil. kwhth Heating circuit water Process steam District heat sales bil. kwhth % Previous year Change bil. kwhth % % Heating circuit water Process steam Total

20 16 GKM generates its district heat exclusively using the environmentally sound and climate friendly principle of combined power and heat (CPH). With the cogeneration of electricity and heat, the required fuel is used much more efficiently than when produced in separate facilities. The further expansion of combined power and heat may therefore contribute significantly towards achieving the targets of German climate protection. Since much smaller quantities of fuels are used for the cogeneration of electricity and heat, CO2 emissions are correspondingly lower compared to individual firing stations. To meet the increasingly demanding requirements on conventional power generation in this business area as well, GKM has built Germany s most powerful district heating accumulator on the works premises to optimise its processes. The new facility increases both the flexibility and efficiency in electricity and district heat generation and the security of supply for the households connected to the district heat network. The district heating accumulator can therefore be used to implement active load and generation management. The centrepiece of the facility is a 36 m tall and 43,000 m3 steel tank with a diameter of 40 m. With a usable heat capacity of 1,500 MWh, the accumulator can maintain the supply for several hours. This task previously required two units to be operating all year round. This was the only way of ensuring the uninterrupted generation of district heat even if one of the units was out of operation. In future, single-unit operation is also possible, even in low-load periods, which also means a reduction in the technical minimum load. GKM is responsible for the planning, construction and operation of the facility and the beneficial owner is MVV RHE GmbH. Personnel On 31 December 2013 GKM employed a total of 612 people. The workforce has increased by 4 members of staff. At the end of the year, GKM also employed a total of 76 young people as apprentices. Furthermore, 5 students completed the practical part of their studies at GKM for a Bachelor of Arts in Engineering with a focus on industry, electrical engineering and mechanical engineering in cooperation with the Baden-Württemberg Cooperative State University (DHBW). On 31 December 2013 GKM employed 612 people. Germany s most powerful district heating accumulator increases the flexibility and security of supply for the region s district heat network. Personnel 12/31/2013 Previous year Change % Industrial-technical blue-collar employees White-collar employees Total staff excl. apprentices Industrial-technical apprentices Commercial apprentices Students

21 17 Fuel requirements rose by 12% to 2.5 mil. t of coal equivalent due to production. Fuel Situation Coal consumption increased by 4.1% in Germany as a result of the increased contribution to the gross electricity production. Of the total 60.7 mil. t of coal equivalent, power plant consumption accounted for 68.4% and hence 41.5 mil. t of coal equivalent. Consumption in industry, on the other hand, fell by 1.7% on account of the economic situation. GKM s fuel requirements also rose by around 12% to 2.5 mil. t of coal equivalent compared to the previous year due to production. Sales and profit situation Total sales during the past business year increased to mil. due to the increase in production. The electricity business area constitutes 90.4% of sales volume and district heat 9.1%. In accordance with the contractual power price setting agreements with the shareholders, the net annual surplus was therefore unchanged at mil. (10% of the invested capital). The Management Board recommends to the Shareholders Meeting that this sum be paid in full in the form of a dividend. Coal provides an extremely high security of supply because it is widely available. Accordingly, we procure our fuel from all parts of the world. Due to Germany s gradual phase-out of hard coal mining and the correspondingly low availability, we again did not procure coal from national sources during the reporting period. GKM s required fuel supply is ensured thanks to the excellent infrastructure of GKM, our logistics competence and reliable partners. Due to the allocation structure between GKM and its customers, expenses are of primary concern to us as they determine sales. Total sales during the past business year increased to around 502 mil. due to the increase in production. Development of fuel use mil. t of coal equivalent Sales mil. Previous year mil. Change % Electricity District heat Technical services Total

22 18 Financial situation Net asset position The unchanged shareholders equity (including retained profits) is offset particularly by medium-term liabilities, largely as a result of the increase of mil. in liabilities as part of the financing activities. Taking into account the payment of a dividend for 2013, the shareholders equity ratio is 6.5% (7.5% in the previous year). Fixed assets rose by mil. to 1,484.8 mil. Investments in tangible assets amounted to mil.; of which approx mil. were for Unit 9. Depreciation amounted to a total of 27.0 mil. Shareholders equity ratio amounted to 6.5% in Capital structure in mil. The increase of 45.2 mil. in liquid assets to mil. is mainly attributable to the increase in inventories and liquid funds. The fixed to total assets ratio decreased from 91.5% to 89.9% in the past business year. Total asset structure in mil. 1, , , , ,3 1, , , , Mid-term and long-term liabilities Intangible assets Short-term liabilities Tangible assets Shareholder s equity Financial assets Receivables / other assets Liquid funds Inventories 2012 Investments in tangible assets amounted to 200 mil.

23 19 Cash flow balance 2013 in accordance with DRS mil. Previous year mil. Annual surplus Depreciation and amortisation of capital asset Change in long-term reserves Cash flow per se Change in short-term reserves Change in supplies, trade accounts receivable, other assets Change in trade accounts payable as well as other liabilities Cash flow from operating activities 21.6 Cash outflows for investments in tangible assets Cash outflows for investments in intangible assets Cash inflows from the disposal of financial assets Cash flow from financing activities Payments to shareholders Cash inflow from taking out loans Cash outflow from paying off loans Cash flow from financing activities Payment relevant change in financial resources 1) Financial resources as at 1 January Financial resources as at 31 December ,8 1) Financial resources include liquid resources of the first degree, exclusively. They are equivalent to the balance sheet position Liquid Funds (cheques, cash in hand and assets at other financial institutes).

24 20 Events after 2013 No further events relevant to the Annual Report occurred after the end of the financial year. This management report includes statements that relate to the future development of GKM as well as economic and political developments. These statements are estimates that we have made based on all the information available to us at the current time. Should the assumptions on which they are based prove not to be correct or additional risks arise, the actual results may differ from those expected. We cannot therefore guarantee the accuracy of the statements made. Forecast, opportunities and risks Forecast Overall economic situation Economic researchers are extremely positive in their assessment of the economic outlook for the German economy for A growth rate of around 2% is expected, which is a five-fold increase compared to the previous year. This forecast is based, among other things, on higher domestic demand supporting the economy as well as the economic recovery in the eurozone. Electricity and CO2 market Demand for electricity at GKM is governed mainly by the company-specific offer prices compared to the prices on the energy exchange (wholesale prices). These, in turn, are governed by the market prices for coal and CO2 certificates. However, with the significantly higher and predominantly weather-dependent supply of renewable energies, flexible plant utilisation and market-compliant offer prices are becoming an increasingly important criterion for conventional power stations. Against this background, it is essential that we further increase the flexibility and efficiency of our production facilities. Consequently, another area of focus for GKM is on optimising the cost and revenue structure. The implementation of the GKM 2013 Plus project and the development of other measures to increase earnings will help us to make further improvements over the next few years. Based on the production results during the first few months of this year, we currently anticipate electricity supply to be slightly above last year s level. Compared to the reporting period, we expect expenses for 2014 to remain virtually unchanged. GKM is focusing on the further optimisation of the cost and revenue structure. The annual surplus will also remain constant in accordance with the contractual regulations of the company over the next few years. As one of Germany s most efficient combined power and heat plants, our company receives a quota of free emission rights. With the commissioning of one of the most efficient coal-fired units, the planned closure of old facilities as well as technical improvements to our existing production facilities, we will significantly reduce GKM s specific CO2 emissions in the future. Investments The new Unit 9 building project will again largely determine the investment activities of our company in The refinancing of the borrowing requirements already took place in As things currently stand, the facility will be added to the grid in the middle of Opportunities and risks In the course of our business activities we are subject to a range of risks and opportunities that are intrinsically linked to these activities. A standardised risk management system defines these risks according to existing risks as well as risks related to future development, and evaluates these risks in respect of their potential damage and probability of occurrence. This evaluation allows risks to be divided into different categories, focusing on the main risks (damage higher than 5 mil. p.a. and probability of occurrence greater than 10%) With the commissioning of Unit 9 and the planned closure of old facilities, GKM will significantly reduce the specific CO2 emissions.

25 21 listed in the following. Risk assessments and risk analyses are carried out at regular intervals and reported directly to both the Management Board and the Supervisory Board. The risk management system aims to enable the company management to identify risks early on and take appropriate action if and as required. The controlling and reporting processes also continue to be optimised and coordinated as a result of this important management system. It is currently extremely difficult to estimate the general energy management and political situation for our industry. Risks may therefore arise, which make the required decisions concerning long-term investments much more unpredictable. Risks and opportunities arise for GKM as a coal-fired power station principally from the market price trends for electricity, coal and CO2 certificates. We counteract these risks with an integrated procurement system for allotting coal, CO2 certificates and foreign currency. Opportunities for GKM may arise as a result of changes to the general political and energy management situation, principally from changes to the design of the electricity market through the introduction of capacity markets. In addition to this, currency risks arise from the fact that imported coal is invoiced in US dollars. We regularly hedge currency risk in parallel to the physical fuel procurement. Interest rate risks arise from financing. These are reduced in the long term through the use of interest rate derivatives. In the personnel area, risks may arise from demographic change and the expected competition for qualified staff in the future. We counter these risks through further education and training as well as targeted demographic and health management. Commercial plant availability is of utmost importance for GKM. The risk of unplanned plant closures and plant damage grows with the increasing age of the plants. We counteract the risks of possible disruptions or production downtimes with targeted maintenance strategies and regular maintenance work, the further development of our production methods, detailed work instructions, qualified personnel, and continuous staff training programmes. The appropriate insurance cover limits any possible burdens in the case of damage. Through risk identification and analysis, the company management can detect GKM is currently building a new coal-fired unit with a gross output of 911 MW. Investment projects of this scale, duration and complexity are generally exposed to certain quality, cost, financing and scheduling risks. We combat these risks through consistent project management as well as extensive cost control, quality assurance, schedule control, occupational safety measures and contract management. Various scenarios are being developed and countermeasures evaluated with a view to the effects of possible construction delays. risks early on and take appropriate action. Our responsibility for people, the environment and society Sustainability is at the heart of our business and is an issue that pervades all areas of the company. We assume an active responsibility for people, the environment and society. We review all areas on a regular basis to identify and implement potential for improvement. GKM s corporate philosophy, the corporate guidelines on management and cooperation, safety and health management and environmental protection, as well as the anti-corruption guidelines form the basis of our activities. They provide a common foundation of values for the cooperation with our workforce and our commitment to health and occupational safety and environmental protection, and for combating corruption. For us, economic efficiency is inextricably bound to socially and ecologically responsible behaviour. Compliance with all relevant laws and regulations as well as the best possible conservation of resources are therefore a matter of course for us. Sustainability is a key issue throughout the company.

26 22 Our contribution to the energy turnaround Modern switchgear enables us to ensure a reliable connection to the grid.

27 23 Responsibility for our employees Measures to balance work and family life have significantly increased the proportion of women at GKM. As one of the major employers and an important economic force in the region, GKM takes its social responsibility very seriously. Health management and measures to safeguard jobs in the long term, to ensure sustainable personnel development, to create and preserve equal opportunities as well as an ethical corporate culture form the basis of our company. With the focus on the energy turnaround and the significantly higher requirements this places on our workforce, observing these corporate goals also in the context of safeguarding jobs at the location in the future are of vital importance to us. Vocational training and further education A company s success depends on the skills, motivation and commitment of its employees. We train our staff and promote individual skills and potential by providing a range of specific training and education programmes. Our good working atmosphere and the motivation of our workforce are characterised by fairness and trust as well as by openness in our dealings with one another. The qualified training of young people is a high priority for GKM. GKM also attaches great importance to the qualified vocational training of young people. We are particularly proud of the high quality standard of our training, which is confirmed time and again through the many awards and the high rankings of our apprentices in competitions. Our range of occupations includes industrial business management, electronics engineering for operational technology and industrial mechanical engineering. We place great value on providing up-to-date training content that is also relevant for the future. After all, our goal is to meet future manpower requirements primarily through highly-qualified internal recruits. Thus, at 12%, the proportion of our workforce accounted for by trainees and apprentices is well above the German national average. Besides 64 industrial/technical apprentices and 12 undergoing commercial training, 5 university students on dual degree programmes completed the practical part of their studies at GKM. A total of 74 school children and higher education students were also given the opportunity to gain insight into the different areas of the company through work experience, practical semesters and graduate theses in Through events such as Mannheim Training Night and GKM Education Days, we provided extensive information about the training opportunities in our company. Work-family balance Reconciling work and family life is extremely important to us. We therefore strive to support the needs of our employees in every way possible with raising and looking after children or caring for family members by providing a variety of options such as flexible working hours and part-time jobs or flexitime and annual working time accounts. These measures have made a significant contribution towards increasing the proportion of women in our workforce over the past years. Commitment and innovative spirit Active employee participation is an important factor for the success of optimisation processes. Our workforce demonstrated their commitment in 2013 by submitting 790 suggestions for improvements, which were reviewed and where possible implemented. This continued the positive trend of the previous year. The potential savings from all the ideas evaluated reached 2.3 mil. We are pleased with the active cooperation, creativity and innovative spirit of our employees. The commitment of our workforce also extends beyond the workplace. Employees organise a wide range of sports and leisure activities such as football games, running groups, back training exercises or even diving and fitness courses in their own time. Work safety and health One of the company s top priorities is to ensure the safety and protect the health of our workforce. The occupational safety/ fire prevention organisational units and the Industrial Medical Service are responsible for the implementation of and compliance with these objectives. With the help of regular safety briefings and training, we are increasing awareness of all aspects related to occupational safety. Our occupational safety management system, which is certified in accordance with OHSAS 18001, also ensures that we maintain a consistently high quality standard. The system and the achievement of targets are monitored and evaluated

28 24 Protecting the environment and climate to the greatest extent possible is an important element of our corporate principles and guidelines. internally and externally by regular management reviews. This instrument ensures and steers the continuous improvement process. We also expect our partner companies to maintain a certified occupational safety management system. We ensure compliance with statutory regulations through a register of legal provisions. Site inspections, internal and external audits and the consistent analysis of accidents and near-misses ensure the sustainability of the measures introduced. One way of measuring the performance of the occupational safety management system is the internationally recognised Lost Time Injury Frequency, an indicator of the number of accidents resulting in at least one day of lost time per 1 million hours worked. In 2013, the LTIF at GKM was 2.7. GKM uses the LTIF to compare itself against other firms around the world, which also operate in the energy production sector. Only three accidents requiring compulsory reporting occurred in The low number of accidents requiring compulsory reporting each year reaffirms the high safety awareness of all our workers. In 2013, only three accidents had to be reported to the trade association responsible for our sector ( Energie Textil Elektro Medienerzeugnisse ). Every year our Industrial Medical Service offers a range of services to promote and maintain the health of our staff, including advisory services in all health issues and questions as well as various preventive services including medical check-ups, inoculation advice and provision, and influenza vaccinations. Various campaigns were also conducted in 2013 as part of our permanent health programme, such as Healthy Sleep or Cycle to Work. There are plans to expand this range of services. Special interest groups and participation Besides the Works Council, which represents the interests of our employees vis-àvis the Management Board, GKM also has representatives for severely disabled employees and for youths and apprentices. In accordance with the Works Constitution Act, the Works Council is consulted to discuss economic issues and personnel decisions. Issues such as working times, training and qualification programmes are regulated in the form of company agreements and are accessible to all staff. Cooperation between the Management Board and the Works Council is always characterised by mutual respect and trust, with the common aim of safeguarding jobs at the location in the future. Responsibility for our environment GKM is fully committed to its objectives of environmental and climate protection, which are firmly rooted in its corporate philosophy and guidelines as long-term and sustainable tasks. The inclusion of an integrated management system (IMS) supports both the Management Board and the workforce in implementing and complying with these corporate objectives. The IMS is certified in accordance with the ISO and OHSAS standards. These ensure the planning, control and monitoring of all measures related to environmental protection within the enterprise as well as business and personnel management geared towards environmental protection. Regular internal and external audits help to monitor the implementation of relevant processes within the continuous improvement process. GKM makes a significant contribution to environmental and climate protection with the cleaning of flue gases, which are removed using state-of-the-art technology, and with the generation of district heat using combined power and heat. This saves around 200,000 t of primary energy in Mannheim each year compared to individual firing and, as a result, emissions of up to t of CO2 can be avoided. In addition, by avoiding pollutant emissions that would occur during the generation of heat in private households, the air quality is improving considerably. This is because, unlike private generation, GKM s highly efficient flue-gas cleaning systems remove nitrogenous compounds, dust and sulphur from flue gases before they leave the chimney. The extraction rates we achieve in doing so are sometimes even above the stringent emission limits of the Federal Immission Control Ordinance (BlmSchV). The power plant by-products that are produced during this process are all fully recycled and used in the construction materials industry thereby conserving natural resources. In 2013, this amounted to around 220,000 t of ash, 50,000 t of slag granules and almost 90,000 t of gypsum.

29 25 We avoid waste wherever possible. Unavoidable waste is recycled as wisely as possible. As residents and users of the Rhine, water pollution control is also a key concern at GKM. Our cooling water is extracted and released using particularly environmentally sound methods. The use of process-water treatment plants, retention reservoirs and oil warning devices as well as the unpolluted unloading of ships contribute further to water protection. Our commitment to environmental protection has for many years included our support for the campaign organised by the Regional Administrative Authority of Karlsruhe to replenish the fish stocks in the Rhine. The federal fishery control authorities in Karlsruhe placed almost 60,000 elvers into the river in This regular fish stocking is not only a generally acknowledged and approved method for preserving endangered species of fish by increasing the population of the European eel, but also for maintaining the ecological balance of the Rhine. GKM contributed to this activity once again with around 20,000 fish. 5,000 of these were once again released into a tributary of the Rhine in Mannheim-Neckarau together with primary school pupils of Mannheim. For more than 20 years, GKM has worked closely together with the nature conservation representative of the City of Mannheim to successfully preserve the population of peregrine falcons that are in danger of extinction. Each year, between two and seven eyasses (falcon chicks) leave the nesting boxes, which were installed on the chimneys of Units 6 and 8 in cooperation with the working group for peregrine falcon protection Arbeitsgemeinschaft Wanderfalkenschutz. Almost 70 chicks have been raised in the care of GKM to date. Research and Development GKM s provision of energy is characterised by the use of innovative technologies and continuous optimisation processes, which have helped us to become one of Europe s most efficient coal-fired power stations. We are currently researching materials for next-generation power plants together with many project partners from industry and science as part of the 725 HWT GKM research project. The objective is to lower fuel consumption and thereby reduce power station emissions by increasing plant efficiency. Achieving this objective requires increasing the pressure and temperature operating parameters considerably as well as the resistance of the materials used. To this end, thin-walled, high temperature resistant components were investigated first. The first high temperature material test track has already produced valuable stimulus for product innovations and new areas of application. In the second phase of research, thick-walled components are being tested under realistic operating conditions. The aim is to prove that despite high levels of efficiency of over 50%, it is also possible to start up and shut down the power plant at steep temperature gradients. This would enable modern coalfired power stations to respond better to the highly fluctuating quantities of electricity from wind and photovoltaic power plants that are increasingly being fed into the grid and therefore make an even greater contribution towards the success of the energy turnaround. The Federal Ministry for Economic Affairs and Energy (BMWi) supplies around 50% of the total budget of around 18 mil. The remaining costs are borne by VGB, the European association of power station operators and the 29 national and regional project partners. Together with the TU Darmstadt, we are also researching the limitation of CO2 emissions during fossil fuel combustion. In what is called the carbonate looping process, CO2 is captured using limestone. Compared with similar research approaches, the energy requirements of the carbonate looping principle are reasonably low. As such, this method represents a good retrofitting technology for existing facilities. This project is also receiving public funding and support from the Federal Ministry for Economic Affairs and Energy. In the plans for our building project for the new Unit 9, we have already designated an area for the construction of a CCS (carbon capture and storage) facility to capture CO2. Thus, retrofitting is possible as soon as this technology and the economic, technical and legal framework required for the implementation of this are available. High temperature test track produces valuable stimulus for product innovations and new areas of application. GKM is one of Europe s most efficient coal-fired power stations thanks to the use of state-of-the-art technologies and continuous optimisation processes.

30 26 Our contribution to the energy turnaround The new steam generator enables us to optimise our plant operations while maintaining maximum flexibility and security of supply.

31 27 Responsibility for our society GKM has promoted projects in the fields of social affairs, education and culture for many years. High acceptance of GKM is based on a policy of open and transparent communication. We are aware of our great responsibility for the people of Mannheim and the RhineNeckar metropolitan region and feel closely connected to the location. We thus consider it a matter of course to support various projects from the fields of social affairs, education and culture as well as local clubs within the scope of our possibilities. Furthermore, we have offered work experience to a large number of school children for many years and also given students the opportunity to complete their practical semesters at GKM or write their graduate theses. Our company is available to answer questions from interested parties on any matters related to energy. The high acceptance of GKM by the general public is based, among other things, on a policy of open and transparent communication on equal terms. In light of this, our company has provided extensive information about the planned construction of Unit 9 since the project began and has also set up an information centre that is open to the general public. Citizens can find out about GKM and its new construction project here. Besides offering guided tours to youngsters and adults, which last year welcomed around 5,000 visitors, the GKM information centre offers additional researcher days for children between the ages of 6 and 10 and events on topics related to electricity geared towards primary school classes. To provide the same information opportunities to people with physical disabilities, we introduced a special guided tour of the construction site for wheelchair users for the first time in Due to the positive response, we plan to continue this event in Another major part of GKM s public relations work is its participation in the Mannheimer Maimarkt, Germany s largest regional trade show. Throughout the fair, our employees were on hand to provide information and answer any questions from interested members of the general public about power and district heat generation as well as current projects. The annual GKM Citizens Evenings are also a permanent fixture on the calendar of the people of Mannheim. GKM also offers children s afternoons for the youngsters of Mannheim. All the proceeds from the cultural events are donated to local social institutions. Anti-corruption guidelines GKM s anti-corruption guidelines are an integral part of our corporate activities. They encompass our anti-corruption basic principles, a code of conduct and guidelines for dealing with conflicts of interest. UN Global Compact membership One year after its foundation, we joined the Global Compact, a strategic initiative for businesses that are committed to aligning their operations and strategies with ten principles in the areas of human rights, labour standards, environment and anti-corruption. The Global Compact was founded in 2010 and stands under the patronage of the United Nations. Through our membership we are contributing towards a sustainable and fair global economy by integrating the ten principles of the Global Compact into our corporate strategy, our corporate culture and daily business. We are also taking steps to ensure the continuous improvement and integration of these principles. Within the scope of our business activities, GKM places the greatest importance on making sure that all goods and products it procures and uses are produced or mined in compliance with the standards for occupational health and safety as well as with current environmental legislation and in consideration of all human rights. This applies in particular to black coal, which we source from markets all over the world. GKM has been a member of the UN Global Compact since 2011.

32 28 Unit 9 Our project for the future Unit 9 allows for annual savings of up to 1.3 mil. tons of CO2 GKM is currently building Unit 9, one of the most modern and efficient coal-fired units in the world, on the east side of its site. Using the principle of combined power and heat, the facility will achieve a fuel utilisation of up to 70%. Consequently, CO2 reductions of up to 1.3 mil. tons per year can be achieved, compared to the equivalent production in old facilities. Unit 9 will not only guarantee the safe and environmentally-friendly energy provision for Mannheim and the region in the long term, but will also play an important part in the success of the energy turnaround. The plant also provides the technical basis for the further expansion of the regional district heat network. Latest construction progress Construction work on Unit 9 is moving quickly ahead. The construction project is edging closer and closer towards completion. The turquoise steel skeleton of the 120 m tall steam generator building has now been completely covered by the aluminium coloured cladding. The façade has been designed to enable the facility to blend in harmoniously with the surroundings. Assembly of the 350 m long coal conveyor bridge has already been completed. It connects the steam generator building to the future coal stockpile. This has been spanned by a portal scraper since June The construction, which weighs 250 tons, is 30 m tall and 36 m wide, is used to remove the quantities of coal required for generating power and district heat from the stockpile according to demand and deliver it to the conveyor belts of the coal conveyor bridge. Building of the flue-gas cleaning systems has also been completed. In total, more than 2,000 workers were involved simultaneously at times in the assembly of the various components in 2013, which was a huge logistical challenge given the extremely tight construction area. A further milestone was reached in September 2013: After completion of the welding work on the pipeline system, which is more than 300 km long, the high pressure test of the steam generator was completed successfully and on schedule. Around 54,000 girth welds had to withstand a test pressure of 574 bar. Detailed information about GMK and Detailed information on all aspects of the construction of our new project is available on our website at under the section Unit 9 (German only). Unit 9 is available at Technical data Unit 9 Planned commissioning 2015 Gross output 911 MW Electrical efficiency 46.4% Heat generation with CPH max. 500 MWth Fuel utilisation for CPH max. 70%

33 29 Our contribution to the energy turnaround Unit 9 enables us to guarantee the highlyefficient provision of power and heat 24 hours a day, seven days a week, whatever the weather.

34 30 Balance Sheet Report 31 December 2013 ASSETS Capital assets Intangible assets Tangible assets Financial assets Liquid assets Inventories Receivables and other assets Liquid funds Note No. 12/31/2013 Previous year 2,044 1,481,405 1,382 1,484,831 2,747 1,307,518 1,514 1,311,779 98,990 40,166 27, ,945 72,222 47,769 1, ,768 1,651,776 1,433,547 Note No. 12/31/2013 Previous year (7) (8) 66,468 10,605 30,422 6, ,142 66,468 10,605 30,422 6, ,142 (9) (10) 458,721 1,078, , ,145 1,651,776 1,433,547 (1) (2) (3) (4) (5) (6) Total assets LIABILITIES Shareholders equity Capital stock Capital reserves Retained earnings Annual surplus / Net earnings Reserves Other liabilities Total liabilities

35 31 Profit and Loss Account for the Business Year 2013 Note No Previous year Net sales (11) 502, ,412 Other capitalised internal deliveries Other operating income (12) 5,734 24,621 5,473 55,149 Material costs Personnel costs Depreciation Other operating expenses (13) (14) (15) (16) - 317,788-74,673-27,048-12, , ,631-66,003-35,835-17,289 92,276 Income from financial assets Income from interest Operating result (17) (18) ,928 23, ,583 29,224 Extraordinary result (19) - 7,532-15,063 Taxes (20) - 9,125-7,514 6,647 6,647 Annual surplus / Net earnings

36 32 Notes on the Business Year 2013 Statement of changes in assets in 000 Acquisition and production costs At start 2013 Additional Additions capitalisation Rebookings Disposals At end 2013 Intangible assets Concessions acquired by purchase, industrial property rights, similar rights and valuables, as well as licences for such rights and valuables 10, , , ,574,767 12,880 21,596 3,860 1,605,383 36,854 2, ,344 1,090, ,246-21,759 2,982, , , ,842 Tangible assets Property and buildings Technical facilities and machines Other facilities, production and administration equipment Advance payments made and facilities in construction ,712 1,253,177 4,062 3,178,616 Financial assets Shareholdings in subsidiaries Shareholdings 214 Loans to associated companies , ,994, ,281 0 Other loans , ,242 3,190,840

37 33 Accumulated depreciation At start 2013 Depreciation , , ,880 5,944 1,436,489 18,535 30,787 1,637 1,675,156 26,116 Rebookings 0 0 Disposals Appreciation At end 2013 Book value at 12/31/2013 Book value Previous year 8,798 2,044 2,747 8,798 2,044 2, ,824 66,888 72,483 3,860 1,451, , , ,223 7,121 6,067 1,253,177 1,090,690 1,481,405 1,307, , ,697, ,382 1,514 1,683,022 27, , ,706,009 1,484,831 1,311,779

38 34 General information The annual accounts for Grosskraftwerk Mannheim AG are prepared in accordance with the relevant commercial laws and the regulations of German public limited company law. The structure of the balance sheet report and the profit and loss accounts has not changed since the previous year. The individual positions combined on the balance sheet report and in the profit and loss accounts are listed separately and explained in the Notes. The total cost method was once again used in preparing the P&L accounts. Accounting policies and foreign currency conversion Intangible assets acquired against payments are capitalised at cost and depreciated linearly according to the expected service life. The option to capitalise internally generated intangible fixed assets is not exercised. Any research and development costs are also recognised immediately as expenses. Tangible assets are capitalised at acquisition or production cost minus regular depreciation. In the application of the transitional rule of Section 66 para. 3 sentence 3 EGHGB (Introductory Act on German Commercial Code new version (EGHGB)), production costs for operations that commenced before 2010 still include the directly attributable individual costs plus an appropriate share of general building costs. Production costs for the internally generated assets, whose production commenced in the reporting period, include material costs and direct costs of production plus an appropriate share of the material costs and indirect costs of production and the loss of value due to wear and tear of the assets, if this was caused by production. Subsidies and allowances from public or private sources are deducted from the acquisition or production costs. Regular depreciation of tangible assets is always linear. Extraordinary depreciation is undertaken if the assets need to be capitalised at a lower amount. Low-value assets are depreciated immediately up to an acquisition or production cost of 150. For assets with an acquisition or production cost of 150 to 1,000, a compound item is formed, which is depreciated on a linear basis each year at 20%. Shares in subsidiaries or other shareholdings are recognised at acquisition value or, in the case of an expected fall in value for a long period, at the lower attributable value. Interest-bearing loans are recognised at their nominal value or at the lower attributable value. If the reasons for a long-term fall in value no longer exist, an appreciation is undertaken. Low interest-bearing loans or noninterest bearing loans are recognised at their cash value.

39 35 Inventories are valued at their acquisition costs, taking into account the strict rules of the lowest-value principle, whereby, in general, the average price method is used. Heating oil supplies are one exception. In this case, the LIFO method is applied, after exercising our right to choose the applied tax method. Inventory risks as a result of decreasing market prices, extended length of storage and reduced usability are accounted for with appropriate discounts. Emission rights have been categorised as stock assets. In this context the CO2 emission certificates allocated free of charge have been shown at ad memoriam values. Receivables and other assets are generally valued at their nominal value and taking into account all recognisable risks. If these are noninterest-bearing, they are discounted on the balance sheet date if the remaining terms are more than one year. Reserves for pensions and similar obligations are recognised at the amount of the required settlement value based on sound business judgement. The proportionally declining projected unit credit method (PUCM) was used as the valuation method for active beneficiaries. For pensioners and former employees with nonforfeitable vested pension rights, the cash value of future pension benefits is recognised as the settlement value. The biometric data underlying the measurement of pension provisions is based on the 2005 G reference tables issued by Klaus Heubeck. The average market interest rate published by the Deutsche Bundesbank that results from an assumed remaining term of 15 years is used for discounting. Other reserves are evaluated at the amount of the required settlement value based on sound business judgement. Future price and cost increases at the time of settlement of the obligation are taken into account. Reserves with a remaining term of more than one year are discounted at the interest rate that corresponds to their remaining term and by the average market interest rate published by the Deutsche Bundesbank. Reserves for taxes are determined in accordance with the principles of sound business judgement. Derivative financial instruments are grouped into one valuation unit (cash flow hedge) along with the underlying transaction that is in a direct hedging relationship, according to 254 HGB (German Commercial Code). Financial reporting uses the so-called freezing method. Liabilities are recognised at their settlement values. Business activities in foreign currencies are accounted for at the exchange rate at the time of the initial booking or the exchange rate of the hedging deal. Unsecured assets and foreign currency liabilities are evaluated in accordance with Section 256a HGB (German Commercial Code) on the reference date using the reference mean exchange rate; valuation gains from long-term assets and liabilities are not recognised in income.

40 36 Notes on the balance sheet report 1) Capital assets The split and development of the asset positions in the balance sheet are displayed in the table on pages 32 and 33. 2) Tangible assets Investments in tangible assets amounted to mil. (previous year: mil). 3) Financial assets Our shareholdings in Elektro-Siedlung Baugesellschaft mbh, Mannheim, GKM-Brennstoffversorgungs- und Entsorgungs-GmbH, Mannheim and GKM-Versicherungs-Vermittlungs-GmbH, Mannheim are listed under shareholdings in subsidiaries. We also hold all the shares, representing equity capital of about 25,600 in each case (previous year: 25,600), in Elektro-Siedlung Baugesellschaft mbh, GKM-Brennstoffversorgungs- und Entsorgungs-GmbH and in GKM-Versicherungs-Vermittlungs-GmbH. These companies have ceased almost all business activity; due to the existing control and profit transfer agreements their annual profits are balanced. As they, either single or combined, play an unimportant role in the assets, finances and income situation of GKM, we have decided not to draw up annual accounts for these companies. The list of shareholdings includes, besides the share in Energieagenturbeteiligungs GbR (at 10,400 unchanged at approx. 4% of the company s own assets), our approx. 4.4% shareholding in Neckar AG, Stuttgart, acquired in Other long-term investments relate to building mortgages lent to employees. 4) Inventories Raw materials and supplies CO2 emission certificates 12/31/2013 Previous year 65,870 33,120 65,820 6,402 98,990 72,222 In the case of inventories of CO2 emission certificates, depreciation of 2.3 mil. (previous year: 1.3 mil.) was undertaken in accordance with Section 253 para. 4 sentence 1 HGB (German Commercial Code). The current market value of the CO2 emission rights allocated free of charge amounted at the end of the financial year to 3.0 mil. (previous year: 29.9 mil.).

41 37 5) R eceivables and other assets 12/31/2013 Trade accounts receivables Receivables pertaining to subsidiaries Receivables pertaining to associated companies Other assets Advance payments Previous year 2,681 3, , ,721 41,785 4,813 2,599 40,166 47,769 All receivables have a term of up to one year. Exempt from these are receivables from taxes and contributions included in the other assets at a cash value of 0.1 mil. (previous year: 0.1 mil.) as well as receivables from contractually agreed services at a cash value of 13.6 mil. 6) Liquid funds Liquid funds concern call money and time deposit funds as well as account credits at financial institutions. 7) Subscribed capital Statutory capital stock remains unchanged at DM 130 mil. (approx mil.). It consists of registered shares with restricted transfer rights divided into 130,000 ordinary shares with a nominal value of DM 1,000 and one vote each. The RWE Generation SE, Essen, holds 40%, the EnBW Erneuerbare und Konventionelle Erzeugung AG, Stuttgart, 32% and the MVV RHE GmbH, Mannheim, 28% of the shares. This means that each shareholder holds more than one quarter of the subscribed capital. Statements in accordance with Section 20 AktG (German public limited company law) are available. 8) Retained earnings 12/31/2013 Legally restricted retained earnings Other retained earnings Previous year ,290 30,290 30,422 30,422

42 38 9) Reserves Reserves for pensions Reserves for taxes Other reserves 12/31/2013 Previous year 366,600 1,221 90, ,269 12,492 69, , ,260 The difference in pension provisions that resulted from the introduction of the German Act on Modernisation of Accounting Regulations (BilMoG) still amounted to 82.8 mil. (originally mil.) on 31 December A further 7.5 mil. were allocated in the current business year. The remaining deficit of 75.3 mil. is to be allocated to the pension provisions over the next few years. The settlement value was calculated based on the projected unit credit method. The 2005 G reference tables issued by Klaus Heubeck are used as the basis for determining the probability of mortality, marriage, and invalidity. The valuation was based on a market interest rate of 4.89% (previous year 5.05%) published by the Deutsche Bundesbank, in addition to annual increases in the income level up to which contributions are paid for the statutory pension scheme of 2.0%. Future adjustments of pensions were also taken into account at 4.57% in 2016, as well as at 2.0% in subsequent years, plus the annually expected wage increases (including career trend) of 2.0% for 2014 to 2016, and of 2.5% in subsequent years. Other reserves mainly concern obligations of 30.1 mil. for CO2 emission certificates (previous year: 3.9 mil.), decommissioning work worth 6.0 mil. (previous year: 5.7 mil.), obligations from contractually agreed services to the value of 13.3 mil. (previous year: 22.9 mil.), expenses from a part-time working scheme for those approaching retirement of 14.1 mil. (previous year: 13.8 mil.), and other obligations towards our employees of 18.9 mil. (previous year: 18.4 mil.). The amount exceeding the reserves in accordance with Section 67 para. 1 sentence 4 EGHGB (Introductory Act on German Commercial Code new version (EGHGB)) that results from exercising the option to maintain a higher reserve in accordance with Section 67 para. 1 sentence 2 EGHGB will be retained if the amount to be reversed has to be added back to the reserves by 31 December 2024 at the latest. This amount is currently 0.5 mil. (previous year: 1.1 mil.).

43 39 10) Liabilities 12/31/2013 Liabilities to financial institutes Previous year 998, , ,988 26,438 26,537 Liabilities to subsidiaries 4,400 4,400 Liabilities to associated companies 21,999 45,093 27,124 9,713 (1,293) (1,356) (46) (46) 1,078, ,145 Advances received on orders Trade accounts liable Other liabilities -o f which liabilities for taxes - of which liabilities for social expenses Liabilities pertaining to associated companies mainly concern amounts for electricity and heat deliveries. The above liabilities are unsecured. Liabilities to financial institutes contain liabilities of mil. with a term of more than 5 years as well as liabilities of mil. (previous year mil.) with a term of up to 5 years. All other liabilities are due within a period of one year. Notes on the profit and loss account 11) Net sales Sales from Electricity District heat Technical services 2013 Previous year 453,893 45,821 2, ,200 39, , ,412

44 40 12) O ther operating income Other operating income mainly includes income from the liquidation of reserves of 6.8 mil. (previous year: 0.6 mil.), as well as income from charges to employees and non-employees of 4.9 mil. (previous year: 14.3 mil.). The share of income not related to the period in question is 6.9 mil. (previous year: 23.5 mil.). 13) Material costs 2013 Previous year 283, ,644 34,501 35, , , Previous year Wages and salaries 53,242 63,975 Social contributions and expenses for retirement benefits and support - of which retirement benefits 21,431 2,028 (12,982) (-5,910) 74,673 66,003 Costs for raw materials, supplies and goods purchased for resale Costs for purchased services 14) Personnel costs The increase in expenses on pension provisions in particular has led to an increase in total personnel expenses of 8.7 mil. The total number of staff employed on average during the year (permanent staff): Blue-collar employees White-collar employees 2013 Previous year

45 41 15) Depreciation Depreciation in tangible and intangible assets is shown in the corresponding table. These exclusively include regular depreciation, which is based on the economic useful lives of the tangible assets in the company and on the depreciation period that has been recognised for tax purposes. 16) O ther operating expenses Other operating expenses mainly concern expenses for claims resulting from insurance premiums of 5.3 mil. (previous year: 5.9 mil.) and administrative expenses. 17) I ncome from financial assets 2013 Previous year Income from profit and loss transfer agreements with subsidiaries Income from other securities and loans included in financial assets Previous year Expenses from assumption of losses 18) I nterest income Other interest and similar income Interest and similar expenses -o f which paid to subsidiaries -o f which from discounting reserves ,592-63,793 (- 242) (- 242) (- 19,276) (- 18,395) - 77,928-63,583

46 42 19) E xtraordinary result 2013 Extraordinary expenses Previous year - 7,532-15,063-7,532-15,063 Extraordinary expenses arise from the amount to be allocated in connection with the revaluation of the reserves as a result of the introduction of the German Act on Modernisation of Accounting Regulations (BilMoG). 20) Taxes Taxes from income and earnings Other taxes 2013 Previous year 8,271 6, ,125 7,514 The net asset position that results from offsetting the deferred tax assets and liabilities is not capitalised due to the exercising of the option to capitalise a tax asset in accordance with Section 274 HGB (German Commercial Code). It also results in particular from temporary differences in the accounting of pension provisions and other reserves as well as from tax losses carry-forwards. The underlying valuation of the differences is based on a tax rate of 30.9%. Other information Cross liabilities and other financial liabilities not immediately obvious from the balance sheet The total amount of other financial liabilities (liabilities from investments and long-term rental contracts) amounts to mil. (previous year: mil.) 2010, derivative financial instruments (interest rate swaps) were agreed with a sliding volume of up to 690 mil. for a term of 17 years, which are used exclusively to hedge the risk of changing interest rates from the taking up of loans. The hedging volume on 31 December 2013 amounted to 530 mil. These financial instruments are used for hedging purposes with the underlying original financial transactions (unsecured loans with a volume of around 1,060 mil.; approx. 650 mil. on 31 December 2013) with which they are grouped into one valuation unit (cash

47 43 flow hedge). In the long term it is expected that there is a high probability that the underlying transaction will benefit from transactions from the financing activities. At the start of the hedging relationship and on each successive balance sheet date on which this hedging relationship exists, its effectiveness will be measured. In the case of this micro hedge, all conditions and parameters of the underlying transaction and hedging transaction that are relevant to the valuation are compared with each other (Critical Terms Match). Further information The members of the Management and Supervisory Boards are named on pages 4 and 6. Supervisory Board compensation amounted to 128, (previous year: 137,441.92). Former members of the Management Board and their dependants received payments amounting to 391, (previous year: 371,719.00) during the reporting period. The pension reserves created for former Board members and their dependants amount to 4,581, (previous year: 4,589,839.00). The auditor s total fee for the business year amounted to 142,000 (previous year: 124,000). Audit services accounted for 61,000 of this (previous year: 63,000), tax advisory services for 16,000 (previous year: 31,000), and other services for 65,000 (previous year: 30,000). Mannheim, 20 March 2014 The Management Board Dr. Markus Binder Dr. Karl-Heinz Czychon

48 44 Independent Auditors Report We have audited the annual accounts, consisting of the balance sheet, the profit-and-loss account, and the Notes to the accounts, including the bookkeeping and the annual report of Grosskraftwerk Mannheim Aktiengesellschaft, of Mannheim, for the financial year from 1 January to 31 December In accordance with German commercial regulations, the accounting records and the preparation of the annual accounts and management report are the responsibility of the Management Board of the company. Our responsibility is to express an opinion based on our audit and the annual accounts, taking the accounting records and management statement into consideration. We conducted our audit in accordance with Section 317 HGB (German Commercial Code) based on generally accepted standards as defined by the German Institut der Wirtschaftsprüfer (IDW). Accordingly, the audit is to be planned and performed such that incorrectness and violations affecting the representation of the asset, financial and income situation, as determined from the annual accounts based on generally accepted accounting standards and the management report, can be recognised with reasonable assurance. Knowledge of the business activities and the economic and legal situation of the company and evaluations of possible misstatements are taken into consideration in determining audit procedures. The evidence supporting the internal accounting control system, as well as evidence concerning the statements made upon the accounting records, annual statement and management report, were predominantly examined on a test basis during the audit. The audit includes assessment of the accounting principles used and of significant estimates made by the Management Board as well as evaluation of the overall presentation of the annual report and the management report. We believe that our audit provides a reasonable basis for our opinion. Our audit has not led to any objections. In our assessment, on the basis of the knowledge gained during the audit, the annual accounts are in compliance with the statutory regulations and provide a full and fair picture of the assets, the financial and the profit situation of the Grosskraftwerk Mannheim Aktiengesellschaft, in adherence to the principles of correct and proper bookkeeping. The management report is in harmony with the annual account and provides an accurate representation of the state of the company and accurately represents chances and risks of the future development. Mannheim, 21 March 2014 KPMG AG Auditing Company Krauß Auditor Beyer Auditor

49 Editorial Details Published by: Grosskraftwerk Mannheim Aktiengesellschaft Marguerrestraße Mannheim Phone +49 (0) Fax +49 (0) info@gkm.de Design: RAUM MANNHEIM, Office for visual communication, Mannheim Photography / Credits: Ben van Skyhawk, Mannheim Lithography: Litho Art GmbH & Co. KG, Mannheim Print: Druckerei Läufer GmbH, Mannheim