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

Transcription

1 E.ON International Finance B.V. Interim Report January June 2017 Amsterdam, The Netherlands

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

3 Condensed Interim Financial Statements 3 Report of the Board of Management General information As of June 30, 2017 the Board of Managers comprises the following members: Mr. J. Otto Mrs. M. Springintveld Mr. J. Groesbeek During the first half of 2017, the composition of the Board of Management did not change compared to the financial year ending December 31, The objectives of E.ON International Finance B.V. are unchanged compared to the financial year ending December 31, E.ON International Finance B.V. continues to be a wholly owned and fully consolidated subsidiary of E.ON SE, Essen, Germany. Internal organisation The statutory seat and the office of E.ON International Finance B.V. is Kabelweg 37, 1014 BA Amsterdam, The Netherlands. As of June 30, 2017 E.ON International Finance B.V. had no own employees (2016: 0). All personnel is either seconded from other E.ON Group companies or engaged from external service providers. Market review The international capital markets experienced in general a positive first half 2017 influenced by improving global growth expectations. Major stock markets in the US, Europe and China increased substantially with some such as the Dow Jones Industrial Average in the U.S. reaching all-time highs. These developments were supported by the continued low interest rate environment in the first six months as well as further decreasing oil prices. On foreign exchange markets the Euro strengthened in the first half of 2017 against nearly all major currencies such as U.S. Dollar, British Pound and Japanese Yen fueled amongst other factors by decreasing political concerns in the Euro zone after the elections in France and in the Netherlands, positive economic news as well as speculations that the ECB could start the exit from its expansionary monetary policy. Most notably the U.S. Dollar significantly weakened against the EURO by 9% due partially to disappointed expectations in the new US administration e.g. with regard to fiscal measures potentially dampening future growth prospects. The British Pound depreciated by 3% versus the Euro and continued to be influenced to a large degree by uncertainties with regard to the BREXIT process. On interest rates, the continued actions of the ECB resulted in short-term interest rates remaining in negative territory at record lows with limited volatility in the first half of Long term interest rates continued to remain at low levels however experiencing an upward trend towards the end of the first half year 2017 also as a result of expectations that the ECB could potentially start exiting from its expansionary monetary policy. Credit spreads in the first six months 2017 tightened for Euro Investment Grade, British Pound Investment Grade and Euro High Yield and total return was positive across all markets. Utility spreads continued an industry wide tightening. As to issuance volumes, the Euro Corporate Bond market issuance volumes again slightly increased compared to the first half of last year. Business review In the first half of 2017 E.ON SE executed two major capital market transactions a share capital increase with proceeds of 1.35 billion in order to strengthen the capital and liquidity base as well as the issuance of three Euro-denominated bonds totalling 2 billion serving, among others, to fund the payment E.ON made at mid-year in conjunction with the transfer of nuclear-storage

4 Condensed Interim Financial Statements 4 obligations to the German government. As these transactions were executed by E.ON SE they did not affect E.ON International Finance B.V s balance sheet. E.ON International Finance B.V. itself did not issue any new notes into the debt capital markets. The total amounts of bonds outstanding however changed compared to year-end 2016 by scheduled maturities and the resulting repayments of 0.9 billion. In addition to these repayments, the foreign exchange effects of 0.3 billion on the non-euro denominated bonds resulted in a further decrease of the Euro amount of bonds outstanding. The total amount of notes outstanding as of June 30, 2017 decreased to 10.6 billion compared to 11.9 billion of bonds outstanding at year end Besides the above pictured foreign exchange effects on the Euro value of Non-Euro denominated bonds, the market developments only had a limited impact on E.ON International Finance B.V. s bond business. E.ON continues to have credit ratings assigned from both Standard & Poor s ( S&P ) and Moody s. S&P and Moody s assess E.ON with long-term ratings of BBB and Baa2, respectively. In March 2017 both S&P and Moody s downgraded E.ON s rating from BBB+ and Baa1 with a negative outlook to BBB and Baa2 respectively. The outlook on both ratings is now stable. The new ratings reflect both agencies anticipation that in the near to medium term E.ON will be able to maintain a leverage ratio as required for these ratings. E.ON s short-term ratings have been unchanged with A-2 (S&P) and P-2 (Moody s). As all bonds issued are guaranteed by E.ON SE, the ratings continue to be a significant support of the bond business of E.ON International Finance B.V. As there was no short-term intra-group financing business in 2017 the total asset base declined to 11.4 billion as of June 30, 2017 compared to 12.7 billion at year end Furthermore, E.ON International Finance B.V. s net profit decreased from million to a net loss of -0.4 million. The main reason for this significant decrease was the lack of prior year s one-time gain on the sale of the 700 million British Pound denominated loan. During the first half of 2017 no drawings were made on behalf of E.ON International Finance B.V. under both the 3.5 Billion Syndicated Credit Facility and the 10 Billion Multi-Currency Commercial Paper Programme. Financial information Preparation of Financial Statements The financial statements were prepared in accordance with the statutory provisions of Part 9, Book 2, of the Netherlands Civil Code and the firm pronouncements in the Guidelines for Annual Reporting in the Netherlands as issued by the Dutch Accounting Standards Board. The Interim Report 2017 has followed the same principles of recognizing and measuring as have been used for the preparation of the Financial Report The Interim Report 2017 has not been audited nor has it been reviewed by an audit firm. Financial performance E.ON International Finance B.V. closed the first six months of 2017 with a loss from ordinary activities before taxes of approximately 0.6 million, compared to a profit of million in the first half of Risk Information E.ON International Finance B.V. s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The risk profile of E.ON International Finance B.V. did not materially change compared to the end of 2016.

5 Condensed Interim Financial Statements 5 The overall risk management programme of E.ON International Finance B.V. focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on E.ON International Finance B.V. s financial performance. E.ON International Finance B.V. manages its risks with the procedures and systems used within the E.ON group. The Board is of the opinion that these procedures and systems provide an adequate risk management for E.ON International Finance B.V. Statement from the Board of Management The Board of Management state that to the best of their knowledge, the condensed interim financial statements of 2017 is prepared in accordance with the statutory provisions of Part 9, Book 2, of the Netherlands Civil Code and the firm pronouncements in the Guidelines for Annual Reporting in the Netherlands as issued by the Dutch Accounting Standards Board, give a true and fair view of the assets, liabilities, financial position and profit or loss of E.ON International Finance B.V. and that the management report includes a fair review of the development and performance of the business and the position of E.ON International Finance B.V., together with a description of the principal risks and uncertainties that it faces. The Interim Report 2017 has not been audited nor has it been reviewed by an audit firm. Amsterdam, August 09, 2017 Board of Management, E.ON International Finance B.V. Mr. J. Otto Mrs. M. Springintveld Mr. J.Groesbeek

6 Condensed Interim Financial Statements 6 Unaudited Balance Sheet (before profit appropriation) Jun 30, 2017 Dec 31, 2016 in thousands Note Unaudited Audited Financial fixed assets Loans to shareholder 3 6,092,462 8,152,754 Loans to group entities 3 1,301,025 1,336,432 7,393,487 9,489,186 Current assets Amounts due from shareholder 3,757,707 2,035,373 Amounts due from group entities 53,986 1,156,767 3,811,693 3,192,140 Cash 4 224,371 32,218 Total assets 11,429,551 12,713,544 Shareholders equity Issued share capital Share premium reserve 36,992 36,992 Other reserves 531, ,832 Undistributed profit (435) 275, , ,381 Provisions Provision for loss making contracts - 5,328 Provision for deferred taxes ,363 Borrowings Bonds 6 7,083,171 9,176,485 Current liabilities Amounts due to shareholder 23,123 16,282 Amounts due to group entities Amounts due to others 3,755,000 2,946,444 3,778,434 2,963,315 Total equity and liabilities 11,429,551 12,713,544

7 Condensed Interim Financial Statements 7 Unaudited Income Statement in thousands Note Six months ended June 30, Unaudited Unaudited Interest and similar income 9 357, ,131 Exchange rate difference gains 304, ,724 Financial income 662,604 1,202,855 Interest and similar expenses 10 (358,124) (373,044) Exchange rate difference losses (304,905) (464,081) Financial expenses (663,029) (837,125) Total financial result (425) 365,730 Operating expenses (190) (227) Total operating expenses (190) (227) Result of ordinary activities before corporate income tax (615) 365,503 Corporate income taxes 180 (91,359) Net Profit (435) 274,144

8 Condensed Interim Financial Statements 8 Unaudited Cash Flow Statement Six months ended June 30, in thousands Unaudited Unaudited Interest paid (385,282) (468,514) Interest received 353, ,600 Expenses paid (159) (243) Income tax paid - (16,274) Cash flows from operating activities (31,513) 364,569 Loans granted to related parties - (1,313,879) Loan repayments received from related parties 1,123,666 2,118,552 Cash flows from investing activities 1,123, ,673 Proceeds from borrowings - - Repayments of borrowings (900,000) (1,238,215) Cash flows from financing activities (900,000) (1,238,215) Net increase (decrease) in cash 192,153 (68,973) Cash at January 1 32, ,660 Cash at June , ,687

9 Condensed Interim Financial Statements 9 Notes to the Condensed Interim Financial Statements (1) General information The activities of E.ON International Finance B.V. mainly comprise the financing of E.ON group companies. E.ON International Finance B.V., a corporation with limited liability, having its statutory seat in Amsterdam, the Netherlands, considers E.ON SE, Essen, Germany to be its ultimate parent company. The financial information of E.ON International Finance B.V. is included in the consolidated financial statements of E.ON SE, Germany. Copies of the consolidated financial statements of E.ON SE can be obtained from E.ON SE in Essen. The statutory seat and the office of E.ON International Finance B.V. is Kabelweg BA Amsterdam, The Netherlands. E.ON International Finance B.V. is registered with the Dutch Trade register under number These financial statements were authorized for issue by the Board of Management on August 8, (2) Summary of significant accounting policies Basis of preparation The Condensed Interim Financial Statements have been prepared in accordance with the statutory provisions of Part 9, Book 2, of the Netherlands Civil Code and the firm pronouncements in the Guidelines for Annual Reporting in the Netherlands as issued by the Dutch Accounting Standards Board. This interim report does not contain all information required for a full year financial report and needs to be read in conjunction with the E.ON International Finance B.V Annual Report, which has been prepared in accordance with the statutory provisions of Part 9, Book 2, of the Netherlands Civil Code and the firm pronouncements in the Guidelines for Annual Reporting in the Netherlands as issued by the Dutch Accounting Standards Board. The principles applied in preparing the Condensed Interim Financial Statement of E.ON International Finance B.V. are similar to those applied in the E.ON International Finance B.V Annual Report. Comparison with prior period The basis used for the valuation and result definition has remained unchanged with respect to the year-end Cash Flow Statement The Cash Flow Statement was prepared according to the direct method. The funds included in the Cash Flow Statement consist of cash at banks and the inhouse bank accounts with E.ON SE. Cash flows in foreign currencies have been translated at the exchange rates existing on the day of settlement. Related parties In conducting its activities, E.ON International Finance B.V. has several transactions with its shareholder E.ON SE, E.ON group companies and non-consolidated E.ON companies. The types and the content of the transactions with related parties remain unchanged compared to the E.ON International Finance B.V Annual Report.

10 Condensed Interim Financial Statements 10 Foreign currency translation The functional currency as well as the reporting currency of E.ON International Finance B.V, is the Euro ( ). The financial statements are presented in Euro. Transactions denominated in foreign currencies are translated at the exchange rate at the date of the transaction. Monetary foreign currency items are adjusted to the exchange rate at each balance sheet date; any gains or losses resulting from fluctuations in the relevant currencies are included in the financial income and expenses, respectively. Settled transactions in foreign currencies during the reporting period have been incorporated in the financial statements at the rate of settlement. The following table shows the movements in exchange rates of the relevant foreign currencies for the periods indicated: ISO code Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 British Pound EUR/GBP U.S. Dollar EUR/USD Japanese Yen EUR/JPY Norwegian Krone EUR/NOK Hong Kong Dollar EUR/HKD Critical accounting estimates and judgments The preparation of the financial statements requires management to make estimates and assumptions. It also requires management to exercise its judgment in the process of applying E.ON International Finance B.V. s accounting policies. Estimates and judgments are based on past experience and on additional knowledge obtained on transactions to be reported and are reviewed on an ongoing basis. E.ON International Finance B.V. makes estimates and assumptions concerning future events. Actual events may differ from expectations and actual results will, by definition, seldom equal the accounting estimates. Unless explained otherwise, the estimates made by the management in preparing the Condensed Interim Financial Statement are similar to those used in the E.ON International Finance B.V Annual Report. (3) Financial fixed assets Movement schedule financial fixed assets Jun 30, 2017 in thousands Total Loans to Shareholder Total Loans to Group Entities Total Financial Fixed assets At January 1, ,152,754 1,336,432 9,489,186 - Amortization 2,374 (45) 2,329 - Exchange differences (301,810) (35,362) (337,172) - Current maturity (1,760,856) - (1,760,856) At June 30, ,092,462 1,301,025 7,393,487 During the first six months of 2017, E.ON International Finance B.V. did not grant any new long term loans. The amount of total financial fixed assets reduced due to the reclassification of long term loans into the current maturity. This reduction even increased due to the reduced Euro value of Non-Euro denominated loans mainly due to the strengthening of the Euro against the U.S. Dollar and the British Pound.

11 Condensed Interim Financial Statements 11 The following table shows a detailed breakdown of these developments: Carrying amounts of loans in currencies to shareholder Jun 30 Dec 31 EUR 4,077,264 4,076,606 USD 2,622,336 2,838,844 GBP 2,923,016 3,007,395 Total loans to shareholder 9,622,616 9,922,845 Reclassification to current assets 3,530,154 1,770,091 Total long term loans in currencies to shareholder 6,092,462 8,152,754 The amount of Euro denominated loans to shareholders did not change during the reporting period. The decrease in the Euro amount of U.S. Dollar and British Pound denominated loans is solely due to the strengthening of the Euro against both currencies. Overall the structure of the loan portfolio remained fairly balanced. Carrying amounts of loans in currencies to group entities Jun 30 Dec 31 EUR - 1,110,000 GBP 1,301,025 1,336,432 Total loans to group entities 1,301,025 2,446,432 Reclassification to current assets - 1,110,000 Total long term loans in currencies to group entities 1,301,025 1,336,432 On the loans to group entities the reduction in the Euro denominated loans reflects the scheduled maturity and repayment of one loan. The reduction in the Euro value of British Pound denominated loans is solely caused by the strengthening of the Euro against the British Pound. (4) Cash Specification of Cash Jun 30 Dec 31 Cash and cash equivalents - 1 Inhouse banking account at shareholder 224,371 32,217 Cash 224,371 32,218 Total cash mainly includes the inhouse bank accounts at E.ON SE. Having such inhouse bank accounts at E.ON SE is common practice within the E.ON group. The total cash is at free disposal of E.ON International Finance B.V. and is almost entirely denominated in Euro.

12 Condensed Interim Financial Statements 12 (5) Shareholders equity The total authorized number of ordinary shares is 9,000 (2016: 9,000) with a par value of 100 per share. The number of issued shares is 2,000 (2016: 2,000). All issued shares are fully paid in. The share premium results exclusively from additional paid in capital. Movement schedule equity in thousands Issued capital Share premium reserve Other reserves Undistributed profit Total At January 1, , , , ,381 Appropriation of undistributed profit ,357 (275,357) - Loss for the period ended June 30, (435) (435) At June 30, , ,189 (435) 567,946 Total equity of E.ON International B.V. decreased slightly to million due to the Net Loss of -0.4 million achieved in the first six months of (6) Bonds Movement schedule bonds Jun 30 Dec 31 At January 1 9,176,485 12,397,411 - Amortization 2,486 3,886 - Exchange differences (344,188) (554,939) - Current maturity (1,751,612) (2,669,873) At Balance sheet date 7,083,171 9,176,485 In the first six months of 2017 no new bonds were issued by E.ON International Finance B.V. The reduction in the long term bond amounts outstanding mainly resulted from the reclassification of bonds maturing in the next 12 months into the current maturity item. However, also the strengthening of the Euro mainly against the British Pound and the U.S. Dollar resulted in a reduction of the carrying Euro amount of such bonds, with the nominal denominated amounts of bonds outstanding remaining unchanged. The carrying amounts of the bonds are denominated in the following currencies: Carrying amounts of bonds in currencies Jun 30 Dec 31 EUR 3,713,177 4,612,421 GBP 3,872,947 3,977,684 USD 2,622,462 2,838,981 JPY 202, ,452 Other currencies 193, ,820 Total bonds 10,604,241 11,846,358 Reclassification current liabilities 3,521,070 2,669,873 Total long term bonds 7,083,171 9,176,485 During the first six months of 2017 the scheduled repayment of a Euro denominated bond lowered the amount of still outstanding Euro bonds of E.ON International Finance B.V. All other changes of the Euro amounts of Non-Euro denominated bonds are solely driven by the fluctuations of foreign exchange rates, most importantly the strengthening of the Euro against the British Pound and the

13 Condensed Interim Financial Statements 13 U.S. Dollar reducing the carrying Euro amounts of such still outstanding bonds. The overall structure of the bonds outstanding shifted again towards the Non-Euro denominated bonds. The market value of bonds per June 30, 2017 is 13.4 billion (December 31, 2016: 15.0 billion). (7) Contingent liability In addition to the liabilities carried on the balance sheet there are other (mostly long term) commitments arising from contracts entered into with third parties on the basis of legal requirements. Specification notional amounts financial instruments Jun 30 Dec 31 Interest swaps 35,503 35,503 Currency swaps 365, ,576 Total amounts due to others 401, ,079 The change in currency swaps is a result of a new swap entered into by E.ON International Finance B.V. Specification fair values financial instruments Jun 30 Dec 31 Interest swaps (2,019) (2,939) Currency swaps (19,807) (38,905) Total amounts due to others (21,826) (41,844) The changes in the fair value amount of currency swaps corresponds to the changes in the foreign exchanges rates of currencies hedged by such instruments. (8) Credit facility agreements As of June 30, 2017 the following facilities are available: 10 Billion Multi-Currency Commercial Paper Programme 3.5 Billion Dual Currency Syndicated Credit Facility Agreement. The terms and conditions of the two facilities are unchanged compared to year end (9) Interest and similar income Specification interest and similar income Six months ended June 30, - interest and similar income from shareholder 289, ,132 - interest and similar income from group entities 62,296 81,537 - interest and similar income from others 6,669 9,462 Total interest and similar income 357, ,131 Interest and similar income decreased in the first six months of This is mainly the result of the reduction in interest income from shareholder due to the the lack of prior year s one-time gain on the sale of the 700 million British Pound denominated loan. Interest and similar income from group entities also decreased following reduced lending volumes due to scheduled repayments in

14 Condensed Interim Financial Statements and also because the prior year numbers still include interest income on the 700 million British Pound denominated loan that was sold in June Interest income from others mainly reflects the release of the provision for loss making contracts, which ended in May 2017 due to the final repayment of the underlying instruments. (10) Interest and similar expenses Specification interest and similar expenses Six months ended June 30, - interest expense to shareholder 18,872 23,181 - interest expense to others 339, ,863 Total interest and similar expense 358, ,044 Interest expenses again decreased in the first half of 2017 mainly as a result of the reduced bond related interest expenses following the repayment of maturing bonds. Accordingly interest expense to others decreased. Interest expense to shareholder decreased due to reduced interest payments under existing swap contracts. Amsterdam, August 09, 2017 Board of Management, E.ON International Finance B.V. Mr. J. Otto Mrs. M. Springintveld Mr. J.Groesbeek