Transforming RWE and securing a sound financial base
(as of April 2016)
Transforming RWE and securing a sound financial base (as of April - - PowerPoint PPT Presentation
Transforming RWE and securing a sound financial base (as of April 2016) Forward Looking Statement This presentation contains certain forward-looking statements within the meaning of the US federal securities laws. Especially all of the
(as of April 2016)
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> Projections of revenues, income, earnings per share, capital expenditures, dividends, capital structure or other financial items > Statements of plans or objectives for future operations or of future competitive position > Expectations of future economic performance; and > Statements of assumptions underlying several of the foregoing types of statements are forward-looking statements. Also words such as “anticipate”, “believe”, “estimate”, “intend”, “may”, “will”, “expect”, “plan”, “project”, “should” and similar expressions are intended to identify forward-looking statements. The forward-looking statements reflect the judgment of RWE’s management based on factors currently known to it. No assurances can be given that these forward-looking statements will prove accurate and correct, or that anticipated, projected future results will be achieved. All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Such risks and uncertainties include, but are not limited to, changes in general economic and social environment, business, political and legal conditions, fluctuating currency exchange rates and interest rates, price and sales risks associated with a market environment in the throes of deregulation and subject to intense competition, changes in the price and availability of raw materials, risks associated with energy trading (e.g. risks of loss in the case of unexpected, extreme market price fluctuations and credit risks resulting in the event that trading partners do not meet their contractual obligations), actions by competitors, application of new or changed accounting standards or other government agency regulations, changes in, or the failure to comply with, laws or regulations, particularly those affecting the environment and water quality (e.g. introduction of a price regulation system for the use of power grid, creating a regulation agency for electricity and gas or introduction of trading in greenhouse gas emissions), changing governmental policies and regulatory actions with respect to the acquisition, disposal, depreciation and amortisation of assets and facilities, operation and construction of plant facilities, production disruption or interruption due to accidents
regulatory approvals regarding future transactions, the inability to integrate successfully new companies within the RWE Group to realise synergies from such integration and finally potential liability for remedial actions under existing or future environmental regulations and potential liability resulting from pending or future litigation. Any forward-looking statement speaks only as of the date
information regarding risks, investors are referred to RWE’s latest annual report and to other most recent reports filed with Frankfurt Stock Exchange and to all additional information published on RWE’s Internet web site.
This presentation contains certain forward-looking statements within the meaning
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> Listing of a unique and leading European utility comprising grid, retail and renewables businesses > ~10% capital increase at NewCo envisaged to fund future growth investments > Step up of efficiency programme by another €500 million > Additional measures largely stemming from conventional power generation > Dividend policy reflects the general business situation and market conditions > Fiscal 2015: suspension of payment for common shares and €0.13 per preferred share
NewCo Efficiencies Dividend
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> RWE to establish a new leading European utility comprising the grid, retail and renewables businesses > Conventional power generation and trading businesses retained as separate functional units with RWE AG > Key milestones: – December 2015: Supervisory Board approval – March 2016: Nomination of management team – 1 April 2016: Operational start planned – 30 June 2016: Full implementation of new structure planned – Listing of ~10% of NewCo via primary offering envisaged for late 2016 > IPO proceeds mainly used to finance growth investments in NewCo > Placing of further stakes of NewCo by RWE AG via secondary offer possible at the same or later point in time > RWE AG plans to remain majority shareholder in NewCo RWE AG shareholders NewCo shareholders RWE AG Conventional power generation Supply & Trading NewCo Grid Retail Renewables ~90% ~10% 100%
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Peter Terium > Chief Executive Officer > 13 years sector experience Bernhard Günther > Chief Financial Officer > 18 years sector experience Uwe Tigges > Chief HR Officer > 32 years sector experience Hildegard Müller > COO – Grid > 7 years sector experience Martin Herrmann > COO – Retail > 14 years sector experience Hans Bünting > COO – Renewables > 20 years sector experience
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Grid Supply Renewables
> RWE operates 550,000 km of grid assets in five European markets (GER, PL, CZ, HU, SK) > Leading positions in core markets (e.g., largest electricity DSO in GER1, largest gas DSO in CZ1) > Excellent distribution grid management for electricity and gas supply > Operating result of ~€2.0bn (2015 Division Grids/Participa- tions/Other) > Strong retail organisation with 23m customers in 12 European markets > RWE is No. 3 in terms of electricity sales and No. 4 in terms of gas sales in Europe > Well positioned in various B2C markets in terms of profitability, customer growth and satisfaction (e.g., GER, NL) > Operating result of ~€0.8bn (2015) > Renewables portfolio of more than 3.5 GW capacity mainly in six European markets (GER, UK, SPA, NL, PL, ITA) > RWE belongs to the top 5 in
~1 GW of capacity > Focus on operational excellence and value-adding growth across entire fleet > Operating profit of ~€0.5bn (2015)
1 Measured by transported volumes in Germany and by grid length in CZ. Assumption: NewCo based on current RWE AG divisions Renewables, Grids/Participations/Others and Supply.
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> Unique new utility stock with exposure mainly to stable European markets > A leading distribution grid company in Europe > Amongst top 5 retailers by sales in 8 markets with prominent smart product offerings > Attractive renewables platform with >3.5 GW capacity installed > Strong on- and offshore wind project pipeline > Strong and stable cash flow generation > Currently ~65% EBITDA derived from regulated activities > Strong balance sheet > Profitable organic growth potential > Commitment to shareholder returns and attractive dividend
Unique new utility stock Attractive financial profile
Assumption: NewCo based on current RWE AG divisions Renewables, Grids/Participations/Others and Supply.
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Supply & Trading
> Highly efficient and modernised power plant portfolio > Financially manageable phase-out of nuclear > Reduction of lignite generation in line with national CO2 targets > Extraction of option value from spread assets > Maintain positive free cash flow > Benefit from potential wholesale price recovery or new market design
Conventional Power Generation
> Commercial asset optimisation of generation fleet – full exploitation of
> Expansion of trading and origination business into new markets and commodities > Growth of Principal Investments activities > Commodity solutions for industrial customers > Management of long term gas supply, storage and transport contracts
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> Accumulated cost savings and efficiency improvements of approximately €1 billion realised between 2012 and 2015 > In total decisions taken for approx. 9 GW capacity measures: 3.7 GW of capacity (partially) mothballed; 2.5 GW
> Headcount reduction of 3,600 FTEs since 2012 German 1 year base load forward (lhs) RWE average realised power price (lhs) €/MWh € million Net benefit to operating result from efficiency measures at GenCo (rhs)
400 800 1200
10 20 30 40 50 60 €51 €48 €41 €60 2012 2013 2014 2015
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positive neutral negative > Further optimisation of maintenance strategy including reduction of day-to-day capex and opex in order to take calculated risk vs. lower market prices/spreads (e.g. reduce overhauls, within overhaul spend less, and shortening the overhaul) > Renegotiations and further standardisations to reduce external spend > Optimisation of personnel costs > Increase margins via optimisation of technical plant parameters
1 Calculated as revenues - cash costs before financing and tax. Based on market parameters as of January 2016
Coal NL Gas UK Coal Ger Nuclear
(excl. use of provisions)
Gas Ger Gas NL Coal UK PPAs CE Lignite Nuclear
(incl. use of provisions)
Indicative Free Cash Flow Situation1 Measures to improve cash flow situation
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Clear strategic focus
> Unlock value through enhanced transparency via separate listing
> Improved access to funds for dedicated growth investments in NewCo > Ability to set independent financial targets and dividend policies in line with companies’ specific operational performance > Creation of homogenous business portfolios with clear strategic focus > Increased management attention to address specific challenges and opportunities of different businesses > Increased flexibility to cope with future funding needs; NewCo shareholding as liquid asset if needed > No dilution of asset base backing liabilities > Broad political acceptance as RWE will continue to take full responsibility for liabilities
Value enhancement Increased financial flexibility
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RWE AG
> Legacy provisions of generation business > Pension provisions and other RWE AG related provisions > Majority of cash and financial assets to remain with RWE AG to back provisions and provide liquidity for Supply & Trading business
NewCo
> Conservative leverage target of ~3.0x – 3.5x net debt / EBITDA post IPO > Transfer of financial debt to NewCo, e.g. economically via intercompany loans > Sufficient liquidity allocated in form of cash and cash equivalents in the context, and as at the time of, the carve-out > Funds from IPO proceeds mainly for growth investments
RWE AG (ex NewCo)
Conventional power generation Supply & Trading
NewCo
Grid Retail Renewables Nuclear and mining provisions Pension and
Pension and
Intercompany loans Other financial debt Senior bonds and hybrid capital
Aspiration to maintain investment grade rating
Economic transfer
Assumption: NewCo based on current RWE AG divisions Renewables, Grids/Participations/Others and Supply.
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1,400 200 400 500 € million ~10% Trading/Gas Midstream ~10% Grids/Participations/ Other ~60% Conventional Power Generation ~10% Holding and other ~ €2.5bn by 2018
~10% Supply Outstanding from old programme: Additional programme: 2012-2014 2015 2016-2018e
Net benefit to operating result Net benefit by division
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> Total capex for 2016 expected to be between €2 – 2.5bn, depending on NewCo IPO > D-t-d investments planned of
>
intended for regulated grid business >
intended for renewables Day-to-day/maintenance capex of €1.8 billion complemented with up to €700 million in potential growth investments
~ 0.4 Conventional Power Generation ~ 0.1 Other ~ 1.2 Grids/ Participations/ Other ~ 0.1 Supply
Day-to-day investments in € billion for 2016
~ 1.8
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€7.0bn
RWE AG NewCo
Full Consolidation of NewCo in RWE AG 2015 pro forma EBITDA Dividend policy Leverage target Capex outlook Reflective of general business situation Investment grade rating Mainly maintenance Reflective of regulated business mix 3.0x – 3.5x net debt / EBITDA ~1.5x depreciation
Grid Retail Renewables
Two companies with solid financial outlook, stable capital structures and strong financial liquidity
NewCo Generation & Trading
€4.7bn
Assumption: NewCo based on current RWE AG divisions Renewables, Grids/Participations/Others and Supply.
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Strong decrease of net financial debt
Significant reduction of net financial debt
Achievements Pension, mining and nuclear provisions Net financial debt incl. 50% of hybrids
2011 13.0 16.9 2012 13.1 19.9 2013 11.1 19.6 2014 9.3 20.6 2015
Dea sale
Financial assets earmarked to cover >20% of provisions
Net debt € billion
Net financial debt (incl. 50% hybrids)/ EBITDA < 1x (2015) Ample liquidity after Dea sale Financial policy Access to the capital market at all times through… > keeping solid investment grade rating > first funding of provisions > targeting ongoing positive cash balance 1 Including €1.1bn net debt from discontinued operations (= RWE Dea). Rounding differences may occur.
18.8 6.3 29.9 33.0 30.7 31.01 25.1
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2015 reported
1 New term: formerly ‘recurrent net income‘. 2 The outlook considers the current status of the nuclear fuel tax law. In case the nuclear fuel tax is declared finally illegal and fully in
3 Suspension of the dividend payment to holders of common shares for fiscal 2015. For owners of preferred shares, dividend corresponds to the preferred share of profits of €0.13 per share stipulated by the Articles of Association.
Dividend3
Common shares:
€0.13
EBITDA Operating result Adjusted net income1 5,200 – 5,500 500 – 700 2,800 – 3,100
Oriented towards growth opportunities, indebtedness and earnings situation.
2016e2
€ million
7,017 3,837 1,125
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Today Capital increase/ NewCo IPO
GenCo + trading
RWE AG’s assets
100% stake in grid, supply & renewables GenCo+ trading 90% RWE stake in NewCo 10% stake new investors Capital increase 10% IPO
illustrative
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Business highlights
Key facts, 2015
Position > Leading positions in core markets (e.g., largest electricity DSO in Germany, largest gas DSO in Czech Republic) > Strong track record in grid business especially in Germany with high operational efficiency allowing solid returns Market > Stable and regulated business with reliable returns > Increasing RAB driven by “Energiewende”, e.g., via strong penetration of renewables, smart grids Capex programme > Planned investments of €1.2bn for 2016, of which €1.1bn for regulated grid business > Out of this €0.8bn in Germany, of which €0.7bn for regulated grid business > Operated grid length (thousand km) > Electricity 440 > Gas 110 > Geographical presence in Germany, Czech Republic, Hungary, Poland and Slovakia > Financials > Operating result ~€2.0bn > Group RAB >€10bn
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> Customers (million) > Electricity, of which 16.4 > Germany 6.8 > UK 3.2 > NL 2.2 > Hungary 2.1 > Other 2.1 > Gas, of which 7.0 > UK 2.0 > NL 2.0 > Czech Republic 1.3 > Germany 1.3 > Other1 0.4 > Geographical presence in 12 European markets2 > Financials > Operating result ~€0.8bn Position (by volumes sold/customer numbers) > Largest electricity retailer in Germany and the Netherlands and amongst top 3 in UK, Hungary, Slovakia and Croatia > Largest gas retailer in Czech Republic and Netherlands, amongst top 3 in Germany and Slovakia Market > Attractive and stable margins and development in B2C, more competitive in B2B > Additional growth via energy services Growth prospects > Based on strong position additional growth via energy services; doubling of energy+ result to EUR >100 million by 2018 planned > Issues in UK addressed with mid-term recover potential > Upside potential in B2B business
Business highlights Key facts, 2015
1 Including Belgium and remaining Central Eastern European countries. 2 Including Austria via a substantial minority shareholding in regional utility Kelag.
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Current position > Amongst top 5 players by installed capacity in offshore wind globally; Gwynt y Môr and Nordsee Ost recently finished > Well-positioned in selected European onshore wind markets (e.g., amongst top 5 in Germany by installed capacity ) Market > Renewables key growth area within utilities business > Especially wind with expected strong growth path (e.g., >20 GW offshore wind in Europe by 2020) Growth prospects > Several growth options short- to mid-term based on current pipeline in On- & Offshore Wind (e.g., Nordsee One, Galloper) > Mid-term opportunities to further build on offshore wind pipeline (e.g., Triton Knoll, Kaskasi, Nordsee 2/3, Dogger Bank) > Installed capacity (GW) > Renewables, of which >3.5 > Offshore wind ~1.0 > Onshore wind >2.0 > Hydro >0.5 > Geographical focus
UK, Germany, NL, Poland, Spain and Italy > Financials > 2015 operating result ~€0.5bn
Business highlights Key facts, 2015
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Offshore wind construction: > Galloper (UK, 20171) – 336 MW with Macquarie, GIB & Siemens > Nordsee One (GER, 20171) – 332 MW with Northland Power Offshore wind development: > Kaskasi II (GER, 20211) – 265 MW > Borsselle I & II (NL, 20211) – 700 MW with EDPR and Macquarie > Nordsee II & III (GER, open) – 664 MW (tbc) > Triton Knoll (UK, 20211) – 750-900 MW with Statkraft > Dogger Bank (UK, 20231) – up to 4,800 MW with SSE, Statoil and Statkraft Onshore wind construction: > Batsworthy Cross (UK, 20161) – 18 MW > Goole 2 (UK, 20171) – 35 MW > Kattenberg (NL, 20161) – 10MW > Zuidwester (NL, 20171) – 90 MW Onshore wind development: > Eschweiler (D, 20171) – 37 MW > Brechfa West (UK, 20171) – 57 MW > Dolice, stage 1 (PL, 20171) – 48 MW > Clocaenog Forest (UK, 20181) – 96 MW > Mynydd y Gwair (UK, 20181) – 40 MW Hydro: > RADAG retrofit project (GER, 2019) – 84 MW and various small scale hydro growth opportunities in Scotland and Wales
Offshore wind Onshore wind Hydro
1 Expected commissioning.
Overview of key projects Projects in development
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Measure Plant MW1 Fuel Location Date Decom- missioning Amer 8 610 Hard coal NL Q1-2016 Goldenbergwerk 110 Lignite DE Q3-2015 Westfalen C2 285 Hard coal DE Q1-2016 Gersteinwerk K2 610 Hard coal DE Q1-2019 Long-term mothballing3 Claus C 1,300 Gas NL Q3-2014 Gersteinwerk F 355 Gas – steam turbine DE Q3-2013 Gersteinwerk G 355 Gas – steam turbine DE Q2-2014 Weisweiler H 270 Topping gas turbine DE Q3-2013 Weisweiler G 270 Topping gas turbine DE Q3-2013 Mid-size units 35 Gas NL Q1-2013 Summer mothballing Emsland B4 360 Gas – steam turbine DE Q2-2014 Emsland C4 360 Gas – steam turbine DE Q2-2014 Termination
Confidential 2,960 Hard coal DE Q4-2013 – Q2-2015 Stand-by reserve5 Frimmersdorf P & Q 560 Lignite DE Q4-2017 Niederaußem E & F 590 Lignite DE Q4-2018 Neurath C 290 Lignite DE Q4-2019 Total 9,320 MW
1 Net nominal capacity, rounded. 2 Summer mothballing between April and September 2015. 3 In times of market tightness mothballed plants might return temporarily to the system. 4 Continuous operation decided for 2016. 5 Capacity will be decommissioned after 4 years in the reserve.
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As of 31 December 2015 >30% >20%
Months before delivery of forward contract
>40% >10% >40% >10% >60% >10% >30% <10% >60% >20%
31 Dec. 2013 31 Dec. 2014 31 March 2014 30 June 2014 30 Sep. 2014 31 Dec. 2014
Outright, electricity hedged incl. CO2 (GER nuclear and lignite based power generation) Spread, electricity and underlying commodity hedged incl. CO2 (GER, UK and NL/B hard coal and gas based power generation) >80% >40%
31 March 2015
>50% <10%
31 March 2015
>90% >60%
30 June 2015
>70% <10%
30 June 2015
>90% >80%
30 Sep. 2015 30 Sep. 2015
>80% <10% >40% <10%
31 Dec. 2015 31 Dec. 2015
>90% >90%
31 Dec. 2015
>80% <10%
2018 forward 2017 forward 2016 forward
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5 10 15 20
5 10 15 20
CDS Cal 17 base load (assumed thermal efficiency: 37%) 1 Settlement one year ahead (Cal+1). 2 Including UK carbon tax. Source: RWE Supply & Trading, prices through to 1 March 2016.
Ø -1.44 Ø 3.98 Ø5.32 Ø4.71 Ø-3.76
CSS Cal 17 peak load (assumed thermal efficiency: 50%) CDS Cal 17 base load (assumed thermal efficiency: 35%) CSS Cal 17 base load (assumed thermal efficiency: 49%) CDS Cal 17 base load (assumed thermal efficiency: 37%) CSS Cal 17 base load (assumed thermal efficiency: 50%) €/MWh €/MWh Cal15 Ø6.63
Ø7.62
Cal17 Cal16 Ø-6.84 Cal15 Cal17 Cal16 Ø16.97 Ø3.65 Cal15 Ø9.18 Cal17 Cal16 Ø-7.52 Ø10.52 Ø5.80 Ø-5.43 Ø11.21 Ø4.83 Ø-4.34
Germany UK2 Netherlands
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€ billion
Maturities of debt issued Hybrid (first call date) Accumulated outstanding debt (incl. hybrid) Syndicated loan facility (until March 2020) Commercial papers (up to 1 year) $0.1bn out of $5.0bn Senior bonds (up to 30 years) €12.4bn out
1 RWE AG, RWE Finance B.V. and RWE Finance II B.V. as of 31 December 2015.
Hybrid bonds (60 years and more) €4.0bn €0.0bn out of €4.0bn (Back up liquidity) 0,0 4,5 9,0 13,5 18,0 0,0 0,5 1,0 1,5 2,0 2016 2019 2022 2025 2028 2031 2034 2037 2040 2043 2046 4.5 2.0 1.5 1.0 0.5 0.0 0.0 9.0 13.5 18.0
Capital market debt maturities1 Sources of funding1
Balanced profile with limited maturities up to end of 2016 (~€0.85 billion)
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Fixed interest payments Floating interest payments (fixing expiry ≤ 1 year) € £
1 1 Capital market debt (senior bonds and hybrids) including cross-currency swaps. 2 Capital market debt (senior bonds and hybrids) including cross-currency and interest rate swaps. .
(as of 31st December 2015)
61% 39% 92% 8%
Currency exposure1 Interest exposure2
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2015 pro forma1 2016 forecast2 € million Conventional Power Generation3 596 Significantly below 2015 Renewables 488 Significantly below 2015 Trading/Gas Midstream 156 Significantly above 2015 Grids/Participations/Other 1,955 Significantly below 2015 Supply 830 Moderately below 2015
1 Pro-forma due to the change in the reporting structure. 2 Qualifiers such as ‘moderately’, and ‘significantly’ indicate percentage deviations from the previous year’s figures. 3 The outlook considers the current status of the nuclear fuel tax law.
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Consensus of analysts’ estimates http://www.rwe.com/ir/consensus-estimates Follow us on twitter.com/RWE_IR and have a look at www.rwe.com/ir Annual and Interim Reports http://www.rwe.com/ir/reports/ Investor and Analyst Conferences http://www.rwe.com/ir/investor-and-analyst-conferences/ Facts & Figures – the Guide to RWE and the Utility Sector http://www.rwe.com/ir/facts-figures/ IR presentations & further factbooks http://www.rwe.com/ir/presentations/ IR videos http://www.rwe.com/ir/videos/ Financial Calendar 12 May 2016 Results release on the first quarter of 2016 20 April 2016 Annual General Meeting Important links 11 August 2016 Interim report on the first half of 2016 14 November 2016 Results release on the first three quarters of 2016
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Vice President Investor Relations
stephan.lowis@rwe.com
Contacts for Institutional Investors & Financial Analysts Martin Vahlbrock
Tel.: +49 201 12-15055 martin.vahlbrock@rwe.com
Tel.: +49 201 12-15182 burkhard.pahnke@rwe.com
Marcel Rohrbach
Tel.: +49 201 12-15043 marcel.rohrbach@rwe.com
Gunhild Grieve
Tel.: +44 207 015-5459 gunhild.grieve@rwe.com
Tel.: +49 201 12-15141 holger.perlwitz@rwe.com
Martin Jäger
Tel.: +49 201 12 -15106 martin.jaeger@rwe.com
Contact for Private Shareholders Marisa Weiskirch
Tel.: +49 201 12-44915 marisa.weiskirch@rwe.com