RWE Company Presentation. As of March 2018

Transcription

1 RWE Company Presentation As of March 208

2 Disclaimer This document contains forward-looking statements. These statements are based on the current views, expectations, assumptions and information of the management, and are based on information currently available to the management. Forward-looking statements shall not be construed as a promise for the materialisation of future results and developments and involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those described in such statements due to, among other things, changes in the general economic and competitive environment, risks associated with capital markets, currency exchange rate fluctuations, changes in international and national laws and regulations, in particular with respect to tax laws and regulations, affecting the Company, and other factors. Neither the Company nor any of its affiliates assumes any obligations to update any forward-looking statements. Page 2

3 Investment Highlights: Transforming RWE into a leading European renewables and conventional power generator Provider of secure energy supply underlined with highly complementary renewable and conventional power generation portfolio Creation of Europe s #3 renewables player with significant offshore capabilities and U.S. footprint Opportunity to extract value from combined generation portfolio via leading commercial asset optimisation and trading platform Substantial increase in operational earnings and sustainable cash flows providing foundation for attractive dividend development Strengthened capital structure with the ability to support future growth Page 3

4 Strategic highlight: RWE continues to reshape its future Page 4

5 RWE is reshaping its operating business and financial portfolio Operating business Financial portfolio New Lignite & Nuclear European Power Renewables Supply & Trading Financial portfolio E.ON 25% Gundremmingen innogy RES Gas storage 6.7% E.ON 37.9% Kelag E.ON 2.5% Emsland E.ON RES 25.% Amprion ~90% ~0% Strengthening and future proofing of the core operating business Optimised financial portfolio with stable and attractive dividends % Expected future EBITDA share. Additions to RWE Portfolio (from transaction). Page 5

6 Key transaction parameters > E.ON to acquire RWE s 76.8% stake in innogy for a total consideration of 7.bn, including fiscal 207 and 208 dividend E.ON acquisition of innogy RWE asset purchases (economic effect as of Jan 208) RWE stake in E.ON Innogy dividend Cash payment > E.ON to launch a voluntary public takeover offer for innogy minorities at 40 per share (adjusted for dividend payments until closing) > Offer value of 40 per share represents a premium of 28% to the unaffected innogy share price and implied EV/EBITDA 208E of 0.5x 2 > E.ON Renewables business 3 > innogy Renewables business > innogy s German and Czech Gas Storage business > E.ON minority stakes in RWE s nuclear plants Gundremmingen (25.0%) and Emsland (2.5%) > innogy s 37.9% stake in Kelag > E.ON to issue 440m shares to RWE implying a post money stake of 6.7% in E.ON > RWE to receive fiscal 207 and 208 innogy dividend > E.ON to receive ~.5 bn from RWE As of 22 February Based on implied enterprise value of 43 bn and mid-point of guided innogy EBITDA 208 of 4. bn and 4.2 bn. 3 Excluding German and Polish onshore wind assets belonging to e.dis (5 MW) and 20% stake in Rampion offshore wind farm (80 MW). Page 6

7 Highly complementary renewables and conventional generation portfolio Pro forma combined electricity generation capacity (as at 3 December 207) Low CO 2 generation capacity >60% GW Firm and flexible capacity >80% > Leading European generator with diversified and balanced generation technologies > De-risking of portfolio with >60% of low CO 2 generation capacity > Leading provider of reliable and flexible generation capacity to balance intermittent production of renewables Gas Renewables Other Lignite Hard coal Nuclear > Opportunity to extract value from enlarged portfolio through leading commercial asset optimisation platform RWE stand-alone (excluding Mátra) plus E.ON s and innogy s renewables businesses. Page 7

8 Leading renewables player with attractive growth platform Installed renewable capacity in Europe Pro forma combined renewables capacity 2 U.S. RoW 8% 20% Germany 33% 8.0 GW 24% Pro forma combined Poland 5% 6% 4% Netherlands Spain UK > No. 3 renewables player in Europe with well-balanced portfolio and strong position in U.S. onshore wind market > Leading European offshore wind platform with.9 GW in operation and.3 GW in construction and advanced development > Strong development pipeline in attractive growth markets and scope for efficiencies Bloomberg New Energy Finance, March As at 3 December 207. Accounting view. Excludes RWE s own renewable capacity. Page 8

9 Step-change in operating business with doubling of EBITDA post transaction > Significant earnings accretion with more than 90% of EBITDA from operating businesses RWE stand-alone EBITDA ( bn) ~25% Pro forma EBITDA 2 ~0% ~30% > Diversification of earnings mix ~40%.4.7 > ~60% contribution from renewables to pro forma EBITDA > ~50% of operating EBITDA coming from contracted 3 operations with visible and stable earnings profile ~5% Lignite & Nuclear ~20% ~60% European Power Supply & Trading Renewables Dividends EBITDA split based on mid-point 208 EBITDA guidance for RWE stand alone. 2 Split based on estimated numbers post closing. 3 Contracted operations include earnings from capacity payments for conventional generation, ROCs, CfDs, feed-in tariffs and PPAs. Page 9

10 Strong financial position post transaction provides ability to support future growth Transactional debt effects Financing Nuclear provisions Provisions for wind asset dismantling Pension provisions Tax equity liabilities Total debt increase ~ 0.8bn ~ 0.9bn ~ 0.5bn ~ 0.6bn ~ 2.8bn > Limited cash requirements from transaction financed through own liquidity and funds > No assumption of capital market debt or plans to issue senior bonds Rating strategy > Strong commitment to investment grade rating > Leverage supported by strong operational cash flows and financial portfolio > Pro forma net debt / EBITDA post transaction of 2.5x <3.0x Page 0

11 Major transaction and legal milestones until closing 208 E.ON public tender offer (PTO) for innogy minorities Announcement of transaction (2 March 208) Merger control and regulatory reviews and approvals 209 Implementation of full control under corporate law Closing I > RWE sale of 76.8% innogy stake > E.ON issuance of 440m shares to RWE > RWE purchase of E.ON minority stakes in nuclear plants Gundremmingen (25.0%) and Emsland (2.5%) > RWE cash payment of ~.5bn to E.ON Closing II > RWE purchase of innogy Renewables > RWE purchase of E.ON Renewables > RWE purchase of innogy Gas Storage and 37.9% in Kelag Excluding German and Polish onshore wind assets belonging to e.dis (5 MW) and 20% stake in Rampion offshore wind farm (80 MW). Page

12 Strategic developments in current operations Page 2

13 Strategic focus on evolution of existing business portfolio Optimise existing operations Lignite & Nuclear/ European Power > Manage cost base > Apply capital allocation discipline > Actively manage portfolio Supply & Trading > Maintain profitability Enhance portfolio European Power > Develop portfolio for future market requirements, e.g. gas turbine projects, biomass conversion > Participate in opportunistic asset consolidation (core markets) Supply & Trading > Expand organically, e.g. LNG portfolio Tap into evolving opportunities > Explore technologies suitable to provide security of supply > Invest selectively into new technologies (e.g. batteries) Page 3

14 TSOs expect significant tightening of secure generation capacity (GW) > TSOs forecast potential for negative supply/demand balance by 2020 > Reduction of reliable capacity driven by nuclear phase-out and hard coal plant closures > Growing need for TSOs to secure capacity via reserve mechanisms > Analysis points to increasing reliability on imports at times of low contribution from renewables Analysis of the German Transmission System Operators (TSO) of supply/demand balance Leistungsbilanz from Oct 207. Page 4

15 RWE s significant CO 2 reductions in line with European and national climate goals RWE s CO 2 emissions in core markets (million tonnes) 7-27% 4 7% 25 Reduction target : million tonnes vs > Significant CO 2 reduction since 202 > More than 0% emissions reduction in 207 > Target to reduce CO 2 emissions by 55 to 65 million tonnes by 2030 compared to 205 > Continuous decline to coal exposure Biomass co-firing at Dutch hard coal plants Transfer of.5 GW of lignite to stand-by reserve and final shut-down after 4 years Closure of Weisweiler power plant site (.8 GW) at end of Inden mine by 2030 Reduction in load factors of lignite and hard coal plants Referring to RWE stand-alone portfolio, excluding Mátra in Hungary and Denizli in Turkey. Page 5

16 Future growth options are developed and next steps considered Gundremmingen Tilbury Energy Centre Global LNG portfolio (m tons) > Development of open gas turbine project for grid stability reserve > Use of existing nuclear site > Auction by TSOs expected to start in 208 > Development of various new build options > Attractive location with existing grid connection and direct water cooling > Growth of supply contracts portfolio, among others Angola LNG Woodside Energy Qatargas Page 6

17 Financial highlights Page 7

18 Successful delivery of 207 management targets RWE stand-alone ( million) 207 adj. EBITDA,600,900 2,066 Earnings development above expectations Return to clear dividend policy with minimum dividend of 0.50/share and future upside Guidance Actuals Reimbursement of nuclear fuel tax and participation of shareholders via /share extraordinary dividend 207 adj. net income 700, Conclusion of restructuring of responsibilities for nuclear waste disposal Optimisation of capital structure and stabilisation of investment grade rating Guidance Actuals Page 8

19 Development of adjusted EBITDA dominated by recovery of earnings at Supply & Trading Group RWE stand-alone ( million) 5,403 FY 206,928 > Lignite & Nuclear: Declining generation margins Lower non-recurring items compared to Lignite & Nuclear -408 European Power +86 > European Power: Strong contribution from commercial asset optimisation Higher non-recurring items compared to Supply & Trading innogy Other, consolidation > Supply & Trading: Strong earnings contribution after losses in 206 > innogy as part of RWE stand-alone: dividend inflow of 683 million in 207. Previous year pro forma appropriation of profits of innogy subsidiaries of 730 million 5,756 FY 207 2,066 Page 9

20 Hedging Improved average hedge prices due to favourable development of spreads Expected positions and hedge status as of 3 December 207 Outright (Lignite & Nuclear) ~3 ~28 ~28 ~3 98 TWh TWh TWh TWh >90% >90% >70% E 209E 2020E Open position Fully hedged position Implicit fuel hedge Average hedge price ( /MWh) Change to reported average hedge price as of 30 Sept 207 Spread (European Power) 78 TWh TWh TWh TWh >90% >40% <0% E 209E 2020E Open position Hedged position (%) Total in-the-money spread. Page 20

21 /MWh Significant improvement of fuel spreads in 207 Development of German fuel spreads Months to Delivery Cal6 Cal7 Cal8 Cal9 Cal20 Fuel spread defined as: Power price (pass-through-factor carbon EUA price + pass-through-factor coal coal price + pass-through-factor gas gas price). Source: Bloomberg; data until 3 December 207. Page 2

22 Adjusted net income FY 207 reaches 973 million Group RWE stand-alone ( million) > RWE stand-alone adj. EBITDA includes 5,756 Adj. EBITDA 2,066 operating income from Lignite & Nuclear, European Power and Supply & Trading and dividend from innogy -2,0 Adj. depreciation -592 > All effects related to the reimbursement of the nuclear fuel tax are adjusted 3,646 -, Adj. EBIT Adj. financial result Adj. tax Adj. minorities & hybrids, > Financial result adjusted for effects from changes in discount rates for other long-term provisions, interest on nuclear fuel tax, one-off costs from hybrid bond buy back and interest income from tax audit for previous years > Limited adjusted taxable earnings at RWE stand-alone > Hybrid bond partly classified as equity pursuant to IFRS,232 Adjusted net income 973 Page 22

23 High FY 207 distributable cash flow despite negative effects in working capital 206 RWE stand-alone 207 ( million), Adj. EBITDA Change in provisions & other non-cash items 2, > innogy dividend of 683 million fully reflected in Adj. EBITDA > Changes in provisions refer mainly to legacy provisions, nuclear provisions and restructuring provisions Capex Cash contribution Change in operating working capital Cash interests/taxes -404, > Change in operating working capital 207 mainly impacted by phasing out of working capital optimisation measures from previous years and slightly higher gas inventories > Strong improvement in cash interest/taxes compared to FY 206 is another main driver for higher distributable cash flow -78 Minorities + hybrids Distributable cash flow 533 Page 23

24 Solid capital structure with high financial flexibility RWE stand-alone net debt (as of 3 Dec 207) ( bn) Financial assets and receivables > Financial receivables against innogy > Financial assets Financial liabilities (incl. hybrid adjustments) > Bonds and bank debt, CP > Other financial liabilities > Hybrid adjustments Net financial assets (incl. hybrid adjustments) Long-term liabilities > Nuclear provisions > Mining provisions > Pension provisions Total net debt > Net financial asset position > Majority of debt characterised by long-term provisions > Financial position commensurate with RWE s target to maintain investment grade ratings > Upside potential from rising interest rates (+0 bps change in real discount rates): Pension provisions: c billion Nuclear provisions: c million Mining provisions: c million > Outstanding hybrid capital of 2.0 billion, of which 0.9 billion classified as equity under IFRS and. billion classified as debt > Financial holdings (innogy, Amprion, Urenco) not included in net debt Rounding differences may occur. Page 24

25 RWE stand-alone Outlook for 208 FY 207 FY 208e 2. bn Adjusted EBITDA.4 bn.7 bn bn Adj. depreciation > Stable development expected bn Adj. net financial result > Significant improvement from call and buy back of hybrids in 207 and settlement of nuclear energy fund in July bn Adj. taxes > Stable development expected - 0.bn Adj. minorities & hybrid > Stable development expected.0 bn Adjusted Net Income Dividend (per share) 0.5 bn 0.8 bn > Normal dividend 0.70 > Management target > Special dividend Dividend proposal of.50 for RWE AG s 207 fiscal year, subject to the passing of a resolution by the 26 April 208 Annual General Meeting. Page 25

26 Clear perspective of growing dividend Elements of dividend policy for next two years > Dividends driven by distributable cash flow of RWE stand-alone > Target to fully pay out entire distributable cash flow over planning horizon Smooth short-term volatility of trading business > Objective of sustainable dividend payout No pay out of substance Anticipate known power price developments Operational dividend Special dividend Management incentive scheme aligned with focus on total shareholder return Dividend proposal for RWE AG s 207 fiscal year, subject to the passing of a resolution by the 26 April 208 Annual General Meeting. 2 Envisaged by management board. Page 26

27 Appendix Page 27

28 Generation: Leading and diversified provider of reliable energy Core generation markets (%) Production volumes 2 (%) GW Netherlands/ Belgium GW UK Germany GW TWh TWh Spread 3 Outright 3 Germany Netherlands/ Belgium UK Other 4 Highly relevant position in all core markets Efficient and flexible portfolio across technologies 65 3 Sophisticated commercial management of operations Lignite Hard coal Nuclear Gas Hydro Biomass Other Well positioned to provide security of supply 207 net capacity. Excluding Mátra in Hungary (0.8 GW) and Denizli in Turkey (0.8 GW) production volumes (including Mátra and Denizli) 3 Spread: Hard coal, gas, hydro, biomass. Outright: Lignite, nuclear 4 Including Mátra and Denizli Page 28

29 Commcercial Asset Optimisation: High value contribution from all activities Commercial Asset Optimisation (CAO) value contribution Deviation from Reference Hedge Path ~5% Option management > Within defined limits > Based on fundamental market views Fuel procurement & logistics > Physical procurement of fuel and substitutes > Commercialisation of by-products Reserve & ancillary services > Reserve, voltage support/ reactive power > Frequency response, black start ~5% ~40% ~5% 2 3 per MWh ~35% > Re-optimisation of power station option > Shape management > Trading around hedge positions Short-term optimisation > Short-term trading > Balancing markets > Dispatch/intra-day trading On top of realised forward hedges as per Reference Hedge Path. Reported within results of Lignite & Nuclear and European Power Page 29

30 Supply & Trading: Important earnings contributor to RWE results EBITDA development and gross margin split Business segments Average return and margin split Adj. EBITDA excl. nonrecurring items 3 ( m) Return on risk capital ~50% Trading 60% Gross margin Supply 40% 27 Trading Trading > Physical and financial products on screen in liquid markets > Negotiated contracts (Origination) Principal Investments > Private equity style investment in energy assets Gas & LNG Supply (46) Nonrecurring 594 (60) (05) 6 -- items 3 > Management of gas supply and infrastructure contracts Commodity Solutions > B2B business for large industrial customers and municipalities 5 year average 2 Adj. EBITDA (excluding non-recurring items) / risk capital employed; includes risk capital for Trading and Origination, invested capital for Principal Investments, Gas & LNG and Commodity Solutions 3 Non-recurring items: predominantly legacy gas midstream contracts Page 30

31 RWE stand-alone figures relevant for cash and value management RWE Group RWE stand-alone Lignite & Nuclear European Power Supply & Trading innogy Lignite & Nuclear European Power Supply & Trading Operating business Consolidated net debt innogy stake and dividends Provisions Financial portfolio Key financials 207 Adj. EBITDA 5.8 bn Adj. EBITDA 2. bn Net debt 20.2 bn Net debt 4.5 bn innogy stake 4.0 bn Market value as of 3 December 207 Page 3

32 Lignite & Nuclear Driven by lower realised generation margins Key financials FY 207 versus FY 206: million Adj. EBITDA t/o non-recurring items FY FY 206 change, Lower realised generation margins Lower income at Mátra and classification as asset held for sale as of Q2 207; i.e. earnings contribution from Q2 207 onwards in non-operating result Lower non-recurring items Phase out of nuclear fuel tax in 206 Depreciation Operating cost improvements Adj. EBIT t/o non-recurring items Capex 2 Cash contribution EBITDA outlook for 208: between 350 and 450 million Lower realised generation margins (hedged outright price: ~ 28/MWh vs. 3/MWh in 207) Closure of Gundremmingen B nuclear unit Operating cost improvements Non-recurring items (not included in non-operating result). 2 Cash contribution = adj. EBITDA minus capex with effect on cash (before changes in provisions), excl. investments from assets held for sale. Page 32

33 European Power Higher earnings mainly due to favourable CAO result and higher non-recurring items Key financials FY 207 versus FY 206: million FY 207 FY 206 change Significantly higher income from commercial asset optimisation (CAO) UK Continental Europe Higher positive non-recurring items Operating cost improvements Higher realised gas generation margins Adj. EBITDA Lower realised hard coal generation margins t/o non-recurring items Depreciation Adj. EBIT t/o non-recurring items 2 Capex EBITDA outlook for 208: between 300 and 400 million Lower realised generation margins Return of commercial asset optimisation to normalised level Absence of positive one-offs from 207 Cash contribution Higher earnings contribution from UK capacity market Total adjusted EBITDA includes further income from other subsidiaries. 2 Non-recurring items (not included in non-operating result). 3 Cash contribution = adj. EBITDA minus capex with effect on cash (before changes in provisions). Page 33

34 Supply & Trading Strong earnings contribution after losses in previous year Key financials FY 207 versus FY 206: million FY 207 FY 206 change Normalised trading result after losses in 206 Strong earnings contribution of Gas & LNG Adj. EBITDA Absence of income from disposal of Lynemouth power plant in Q 206 t/o non-recurring items Depreciation Adj. EBIT t/o non-recurring items Capex 2 Cash contribution EBITDA outlook for 208: between 00 and 300 million > Expected longer-term average earnings contribution of approx. 200 million Non-recurring items (not included in non-operating result). 2 Cash contribution = adj. EBITDA minus capex with effect on cash (before changes in provisions). Page 34

35 Power prices and commodities Base load power prices Germany, NL ( year forward) 45 /MWh NL Base load power prices UK ( year forward) /MWh Germany 60 UK Jan'6 Jan'7 Jan'8 40 Jan'6 Jan'7 Jan'8 Coal prices API2 Cal-ahead $/t Jan'6 Jan'7 Jan'8 Gas prices TTF Cal-ahead /MWh Jan'6 Jan'7 Jan'8 Source: Bloomberg Data through to st of March 208. Carbon prices - EU ETS /t Jan'6 Jan'7 Jan'8 Page 35

36 Clean Dark (CDS) and Spark Spreads (CSS) forwards for Germany, UK and NL Germany UK 2 Netherlands Cal6 Cal7 Cal8 Cal9 Cal6 Cal7 Cal8 Cal9 Cal6 Cal7 Cal8 Cal9 /MWh 5 /MWh 5 0 Ø0.52 Ø Ø4.83 Ø-4.33 Ø3.0 Ø0.56 Ø4.6 Ø2.37 Ø5.88 Ø.52 CDS Cal 8 base load (assumed thermal efficiency: 37%) Ø5.80 Ø7.3 Ø5.59 Ø7.02 Ø5.24 Ø5.35 Ø0.99 CDS Cal 8 base load (assumed thermal efficiency: 35%) Ø3.92 Ø-2.98 Ø-5.43 Ø-.86 Ø-0.0 Ø3.43 Ø0.49 CDS Cal 8 base load (assumed thermal efficiency: 37%) CSS Cal 8 peak load (assumed thermal efficiency: 50%) CSS Cal 8 base load (assumed thermal efficiency: 49%) CSS Cal 8 base load (assumed thermal efficiency: 50%) Settlement one year ahead (Cal+) 2 Including UK carbon tax Source: RWE Supply & Trading, prices through to st of March 208 Page 36

37 RWE Investor Relations - contacts Important Links Contacts for Institutional Investors & Financial Analysts Annual and Interim Reports Investor and Analyst Conferences IR presentations & further factbooks IR videos Consensus of analysts estimates Financial Calendar 26 April 208 Annual General Meeting 2 May 208 Dividend payment 5 May 208 Interim statement on the first quarter of 208 Gunhild Grieve Head of Investor Relations Tel gunhild.grieve@rwe.com Martin Vahlbrock Tel.: martin.vahlbrock@rwe.com Dr. Burkhard Pahnke Tel.: burkhard.pahnke@rwe.com Contact for Private Shareholders Sabine Gathmann Tel.: sabine.gathmann@rwe.com Lenka Zikmundova Tel.: lenka.zikmundova@rwe.com Jérôme Hördemann Tel.: jerome.hoerdemann@rwe.com Susanne Lange Tel.: susanne.lange@rwe.com 4 August 208 Interim statement on the first half of November 208 Interim statement on the first three quarters of 208 Page 37

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