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2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
2009 04 27 Roadshow Toronto Montreal
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2009 04 27 Roadshow Toronto Montreal

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  • 1. Performance and streamlining Toronto / Montreal Roadshow Marc Koebernick, Aleksandr Aksenov April 27-28, 2009
  • 2. Successfull expansion achieved during 2007 and 2008 E.ON in May 2007 E.ON today US Midwest - Energy Climate & Kentucky Trading Renewables US Midwest - Kentucky Nordic Nordic Pan-European United Pan-European Gas Kingdom Gas United Kingdom Russia France Central Europe Central Europe incl. Germany incl. Germany Spain Italy New business areas / markets Broad European footprint, global scale in renewables, entry in new markets 1
  • 3. Solid earnings growth and record investments Highlights of the 2008 annual results Adjusted EBIT up 7% to € 9.9 bn CAGR 11.8% 9,878 Adjusted net income +9% to € 5.6 bn 9,208 8,356 Net income attributable to shareholders 7,293 € 1.3 bn due to non-operating earnings 6,747 ROCE 12.9% following €26 bn of 5,645 economic investments 13.8 14.5 12.2 12.9 DPS up 9.5% to € 1.50 per share 11.5 9.9 2009 target and 2010 guidance 2009 adjusted EBIT to reach 2008 level; 2003 2004 2005 2006 2007 2008 adjusted net income to be around 10% below 2008 level New guidance for adjusted EBIT 2010 of € 11.0 bn1 Adjusted EBIT (€ mn) ROCE (%) 1. Adjusted EBIT guidance before portfolio measures 2
  • 4. Economic crisis will not leave E.ON unaffected Collapse of oil and energy prices Currency depreciation Brent - $ per barrel Euro foreign exchange rate 150 100% 100 HUF SEK 80% 50 GBP RUB 0 60% 01.01.08 01.07.08 01.01.09 01.01.08 01.07.08 01.01.09 Widening of credit spreads Contraction of demand iBoxx utilities – 5 year average duration - bps Electricity consumption last months 2008 - % yoy 200 DE 150 UK 100 IT ES 50 RU 0 01.01.2008 01.07.2008 01.01.2009 0% -2% -4% -6% -8% Source: Dresdner Kleinwort, IBoxx Sources: UCTE, BERR - Department for Business, Enterprise & Regulatory Reform, Energy Forecasting Agency 3
  • 5. Adapting our 2010 guidance to the current environment What has changed since May 2007? Main reasons (rough estimates in € million) Commodity Commodity prices +600 prices Achieved prices +8-10€ vs. ‘10 forwards of May 2007 Gas upstream at 2010 oil forward of $59 vs. $80 as of May 2007 12.4 bn Economic Crisis Economic crisis -400 Drop of demand from industrial customers Regulation Downside from increase of bad debts Exchange Stricter regulation -500 rates Cost plus regulation in gas transportation Time delayed cost pass through 11.0 bn New Significant negative FX effects -500 markets Devaluation of several currencies UK Pound; Hungarian Forint; Swedish Krona New markets below expectations -600 € 300 m: not drawing nuclear PPA; A2A carve out € 300 m: deterioration of business conditions New guidance for Adjusted EBIT 2010 of € 11.0 bn before portfolio measures 4
  • 6. Strategic priorities to tackle the economic crisis Redeployment Focus and International expansion, Performance of capital Integration European integration and streamlining Divestment of non-core on⋅top Europe.on Perform-to-Win businesses OneE.ON Climate & renewables Portfolio review Acquisition of Ruhrgas Energy trading Investment & Powergen Italy, Spain, prioritization France, Russia 2000 2003 2005 2008 5
  • 7. Perform-to-Win - To deliver up to € 1.5 bn EBIT by 2011 Breakdown by function Cost savings ~€ 1,100 m Numerous key topics enveloping a far higher number of Gas individual projects identified to achieve ambitious goal Infrastructure Main cost savings in overheads and sales 1,500 Generation Productivity enhancements ~€ 400 m IT Generation – For example higher availability of Nordic Procurement nuclear Gas storage – better use/marketing of flexible reserve Overhead capacities 700 Accelerate and enhance decision making Sales Streamline decision structures 500 Clarify responsibilities 300 Simplify reporting lines 200 2011 Strong focus on operational excellence and execution to support group targets and compensate for challenging external environment 6
  • 8. Portfolio streamlining will generate at least € 10 bn of divestment proceeds in 2009-2010 Transaction Expected Cash closing proceeds Closed Statkraft asset swap Dec 2008 Portfolio review is Swap of 1.7 GW generation Q2 2009 progressing well capacity with Electrabel Pending Disposal of 0.5 GW to EnBW Q2 2009 Focus on executing Yuzhno Russkoje - Gazprom already decided Q4 2009 swap transactions Disposal/swap of of 2.2 GW of 2009 The > € 10 bn of In generation capacity in Germany preparation Disposal of German divestment proceeds 2010 transmission network do not include swap Disposal of Thüga - transactions Under consideration Further disposals - Reduce complexity and extract value from existing operations 7
  • 9. Investment plan 2009–2011 vs. 2007-2010 in € bn Prior investment plan 2007-2010 New investment plan 2009-2011 ~13 68% for growth 32% for maintenance ~36 ~26 ~5 ~30 E&P & LNG ~63 ~12 ~15 Generation/Heat ~5 Renewables ~24 ~6 Power grid ~3 Gas storage and grid ~2 Other 2007-2010 2007 2008 2009-2010 Additional 2009–2011 2009–2011 effects Original as of Revised as of 2009-2011 Dec 2008 Feb 2009 New investment plan strongly focused on organic growth 8
  • 10. E.ON‘s capital structure is managed based on the debt factor Development of E.ON’s Debt factor Financial discipline 3.2x 1 Debt factor of 3x defines our target capital 3x structure 1.9x Debt factor range between 2.8x and 3.3x is 1.6x compatible with Single A target rating (based on current rating methodology) If Debt factor is considerably above 3x, counter-measures include strict investment discipline and portfolio management 31. Dec 2006 31. Dec 2007 31. Dec 2008 E.ON continues to target Debt factor of 3x 1. Pro forma debt factor for 2008. It is including the estimated full year adjusted EBITDA contribution from the assets acquired as part of the agreement 9 with Enel/Acciona.
  • 11. Use of funds - E.ON provides attractive cash returns Stable increase in dividends Transparent policy 1.50 Payout ratio of 50-60% of adjusted net 1.42 CAGR 17.5% 1.37 income 1.12 2008 dividend of € 1.50 per share represents 0.92 0.78 a payout ratio of 51% 0.67 47 49 47 51 51 2003 2004 2005 2006 2007 2008 Special dividend (€ per share) Ordinary dividend (€ per share) Payout ratio (%) 2008 dividend up 10% to € 1.50 per share 10
  • 12. Power generation will remain attractive Development of generation in Europe1 Power demand growth is important, but in TWh/a replacement plant requirements have a 5000 much greater impact on the equilibrium of a 4000 market. Demand growth 0.5 and 1.5 % p.a. Growth rates 2009 - 2020 are reduced but 3000 are expected to remain positive 2000 LCPD will mean up to 50 GW of plant needs 1000 to be replaced 0 New renewables will need 90+% fossil 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 backing Hydro Renewables Gas/oil Lignite Hard Coal Nuclear Source: CERA, EWEA, E.ON 1. EU 27 plus Norway and Switzerland - assumed life time 45 years for fossil and nuclear stations, 20 years for renewables and >80 years for hydro 11
  • 13. Long term organic growth story in power generation is intact Development base load prices at EEX Volatility creates opportunities for strong diversified players Financial crisis Project Up to 50GW of reduces power postponements LCPD2 and nuclear E.ON has the key success factors to demand and puts pressure on lead to market closures tighten capitalize on the financial crisis commodity prices tightening markets further Strong balance sheet 70 Outstanding perception in debt markets 60 Supplier credibility 50 40 New build requirements across Europe will 30 ensure Generation as a business remains 20 10 attractive 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 Many new build projects will fail to get Electricity Price EEX Base (€/MWh)1 financing and have to be postponed or cancelled 1. EEX baseload spot prices 2007-2008; ,bBaseload forwards as of 3 March 2009 for Q2 – Q4 2009 and for CY 2010 – 2012, 2013 – 2015 Potential development 2. LCPD: Large Combustion Plant Directive 12
  • 14. Seeds for earnings growth in 2011 and beyond already being planted Generation Gas Upstream participations in 11 GW of conventional capacity already under Skarv-Idun and Yuzhno construction Russkoye to contribute ca. 7.5 bcm p.a. Majority of earning contribution comes after Significant progress in 2010 development of gas storage capacity All projects with visibility of beating WACC +1% Participation in LNG terminals Renewables & New Markets Perform-to-Win Large part of € 1.5 bn of Renewables to multiply performance improvements capacity by 5x between 2008 come in 2011 and 2015 and reach ~10 GW Further potential to improve Liberalization of Russian operational performance after power market scheduled to 2011 complete in 2011 Challenge remains regarding commodity prices 13
  • 15. Key take-aways: performance and streamlining Strategic steps to tackle the crisis: Perform-to-Win initiative: € 1.5 bn of performance improvements by 2011 Portfolio streamlining: at least € 10 bn of cash-effective disposals in 2009 and 2010 Stringent prioritization of investments: € 30 bn of mostly organic investments over 2009-11 Target of € 11 bn for 2010 Adjusted EBIT Solid financial position and strong financial discipline Attractive dividend policy: payout of 50 to 60% of adjusted net income Seeds for growth for 2011 and beyond already being planted 14
  • 16. Back-up Charts E.ON financial highlights 16-17 Guidance 2009 18-19 Expected effects impacting 2010 20 Hedged economic generation 21 Commodity prices 22-23 German capacity margin 24 New-build generation pipeline 25-26 New entry cost assumptions 27 CO2 position 28 Network regulation in Germany 29 Renewables 30-35 Russia 36-41 Finance strategy 42-44 Key financials 2008 45
  • 17. E.ON Group – Financial highlights in € million 2008 2007 +/- % Sales 86,753 68,731 +26 Adjusted EBITDA 13,385 12,450 +8 Adjusted EBIT 9,878 9,208 +7 Adjusted net income 5,598 5,115 +9 Cash provided by operating activities 6,738 8,726 -23 Economic investments 26,236 12,456 +111 Economic net debt -44,946 -23,432 -21,5141 Pro forma debt factor 3.2 1.9 +1.31 1. Change in absolute terms 16
  • 18. E.ON Group – Adj. EBIT and adj. EBITDA by market unit in € million Adjusted EBIT Adjusted EBITDA 2008 2007 +/-% 2008 2007 +/- % Central Europe 4,720 4,670 +1 6,266 6,222 +1 Pan-European Gas 2,631 2,576 +2 3,113 3,176 -2 U.K. 922 1,136 -19 1,396 1,657 -16 Nordic 770 670 +15 1,112 1,027 +8 U.S. Midwest 395 388 +2 549 543 +1 Energy Trading 645 - - 649 - - New Markets 90 7 - 510 43 - Corporate Center -295 -239 -23 -210 -218 +4 Adjusted EBIT 9,878 9,208 +7 13,385 12,450 +8 17
  • 19. Adj. EBIT 2009 to be on 2008 level Adj. net income 2009 to be around 10 % below 2008 level Market Unit Exp. effect Comments Central Europe Higher achieved wholesale price (~ 4-5 €/MWh) Krümmel assummed to be available in H2 2009 Lower volumes due to economic crisis (bad debt) Cost increases in German grids partially passed on with time delay Pan-European Gas Gas upstream only break-even at today‘s prices Shift towards cost oriented regulation Consolidation of EBIT from Yuzhno Russkoje UK Weak pound Nordic Disposal of assets under Statkraft deal Higher achieved power price (~ 2-3 €/MWh) Weak SEK US Midwest Stable despite economic downturn New Markets F/y consolidation of Spain/Italy w/o one-time CO₂ cost Higher contribution from EC&R asset base Russia suffering from economic downturn / weak Rubel 18
  • 20. Adj. EBIT 2009 - main drivers impacting 2009 vs. 2008 from group perspective Outright power prices New Markets Regulation Exchange Economic Gas rates Crisis upstream Key data Central Europe 2008 CO2 cost Gas transport British Pound Volume € 344 m in 2008 4-5 €/MWh of 250 million with cost Swedish Krona contraction Break even at ~50 Nordic will not repeat oriented Hungarian Forint Potential bad US$ per barrel 2-3 €/MWh ECR will grow regulation Russian Rubel debt Upside from Delayed cost Yuzhno Russkoje pass-through in grid business 2009 Adjusted EBIT to be on 2008 level 19
  • 21. Expected effects impacting 2010 vs. 2009 How to grow by over 1 billion in 2010 Drivers (rough estimates in € million) Cost Other Upside from higher power prices +800 savings Upside from higher power prices for outright power position (+ 5-6 €/MWh) New Full operation of two nuclear power stations in Germany 2010 markets 11.0 bn Commodity New markets +200 prices Additional earnings from EC&R coming through Effect of liberalization and higher capacity kicking in in Russia Perform to win +400 Project has entered validation phase Cost savings and productivity enhancement 2009 Other -300 Continued impact from economic downturn (industrial volumes; bad debt) New guidance for Adjusted EBIT 2010 of € 11.0 bn before portfolio measures 20
  • 22. How much of E.ON‘s economic generation is now hedged as of January 31, 2009 Central Europe United Kingdom 2009 2009 2010 2010 2011 2011 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Nordic United States1 2009 2009 2010 2010 2011 2011 1. including WKE 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% = percentage band of generation hedged 21
  • 23. Europe – Coal and CO2 prices ARA (Coal) – Last 12 months March 2009 Key Messages 220 Coal market 200 The coal prices followed the 180 160 development of the oil price. USD/t 140 Freight rates 120 Higher freight rates in the second 100 half of March were triggered by the 80 surge in oil prices while the demand 60 for iron ore has not changed 22.3.09 29.3.09 8.3.09 15.3.09 1.3.09 1.3.08 1.3.09 1.4.08 1.5.08 1.6.08 1.7.08 1.8.08 1.9.08 1.10.08 1.12.08 1.2.09 1.1.09 1.11.08 significantly. EUA (CO2) – Last 12 months March 2009 CO2 allowances market 35 Carbon prices climbed to a two 30 month’s high until midmonth which 25 seems to be sentiment-driven. Rising EUR/t 20 prices on oil and natural gas 15 weakened the CO2 prices again. 10 5 0 Legend 22.3.09 29.3.09 8.3.09 15.3.09 1.3.09 1.3.08 1.3.09 1.4.08 1.5.08 1.6.08 1.7.08 1.8.08 1.9.08 1.10.08 1.12.08 1.2.09 1.1.09 1.11.08 coal forwards for year+1 (2009/2010) coal forwards for year+2 (2010/2011) CO2 futures for year 2009 (NAP-2 phase) 22
  • 24. Germany and United Kingdom – Dark and spark spreads German dark spreads – Last 12 months March 2009 Key Messages 50 Germany 40 Dark spread moved upwards on EUR/MWh 30 the back of stronger power prices. 20 10 0 22.3.09 29.3.09 8.3.09 15.3.09 1.3.08 1.3.09 1.3.09 1.4.08 1.5.08 1.6.08 1.7.08 1.8.08 1.9.08 1.10.08 1.12.08 1.2.09 1.1.09 1.11.08 UK dark and spark spreads – Last 12 months March 2009 United Kingdom 60 Dark spreads have temporarily 50 strengthened when the power prices were relatively stronger GBP/MWh 40 than other commodities prices. 30 Spark spreads remain relatively 20 unchanged. 10 Legend 0 dark spread year+1 (2009/2010) excl. CO2 22.3.09 29.3.09 8.3.09 15.3.09 1.3.08 1.3.09 1.3.09 1.4.08 1.5.08 1.6.08 1.7.08 1.8.08 1.9.08 1.10.08 1.12.08 1.2.09 1.1.09 1.11.08 dark spread year+1 (2009/2010) incl. CO2 spark spread year+1 (2009/2010) excl. CO2 spark spread year+1 (2009/2010) incl. CO2 23
  • 25. German capacity margin already below 10 % German capacity balance at time of peak demand Total installed capacity (119.4 GW) Not available capacity (22.8 GW) e.g. mothballed fossil stations and limited capacity credit wind and solar Unplanned unavailabilities (4.1 GW) Planned unavailabilities (2.7 GW) Reserve for auxiliary services (7.1 GW) Capacity margin (7.1 GW = 7 %) Demand (76.7 GW) Source: BDEW 24
  • 26. Project pipeline offers flexibility to take advantage of expected falling Capex Name Type Capacity Start-up date (MW)1) 1 Irsching 4 CCGT 540 2011 Irsching 5 CCGT 430 2009 2 Datteln 4 Coal 1100 2011 3 Malzenice CCGT 430 2010/11 4 Gönyü 1 CCGT 430 2011 5 Scandale CCGT 415 2009/10 6 Grain CCGT 1275 2010 7 Ratcliffe2 Coal 2000 2013 10 8 Maasvlakte 3 Coal 1100 2013 9 9 Malmö Gas 440 2009 10 Oskarshamn Nuclear 430 2012 19 7 14 11 Emile Huchet CCGT 860 2010 16 6 8 17 2 12 Algeciras CCGT 820 2010 13 13 Staudinger 6 Coal 1100 under review 1 3 11 14 Wilhelmshaven 50+ Coal 550 under review 4 15 Tavazzano 9 CCGT 420 under review 15 16 Kingsnorth Coal 1600 under review 18 17 Antwerp Coal 1100 under review 18 Solvay CCGT 400 under review 5 19 Lubmin CCGT 625 under review 12 1. Pro rata Under construction Planned 2. Environmental upgrade 25
  • 27. Four conventional new-build projects in Russia, and one in the U.S. Midwest Name Type Capacity (MW)1) Start-up date 1 Trimble County 2 Coal 560 2010 2 Shaturskaya CCGT 400 2010 3 Yaivinskaya CCGT 400 2011 4 Surgutskaya CCGT 800 2010/11 U.S. Midwest 5 Berezovskaya Coal 780 2012 Russia 1 2 3 4 5 Under construction Planned 26
  • 28. Different load ranges require different technologies – nuclear economically most attractive for base load New entry cost assumptions for Europe1 €/MWh 100 90 80 70 60 50 Carbon @ 16€/t 40 Fuel & other variable costs 30 20 Fixed operating costs 10 Capital costs 0 Gas Hard Coal Nuclear Gas Hard Coal Base load (8000h/a) Peak load (3500h/a) 1. Investment costs and fuel prices (front-year forwards December 2008). Depending on commodity price developments, NEC´s may change accordingly. 27
  • 29. E.ON will be allocated around 70 mt1,2 of CO2 emissions allowances for the 2008-12 trading period in mn tons CO 2 99.7 7.9 In 2008, E.ON emitted 100 mn tons of CO2 in the EU 28.3 ~ 70 CO2 allocation for the 2008-12 15 trading period estimated 26.1 at 70 mn tons p.a. 16 15 LT capacity contracts transfer parts of E.ON's commodity 36.8 exposure, including CO2, to 24 RWE and Deutsche Bahn 2008 emissions 2008-12 allocation Spain / Italy Nordic U.K. Contracted capacity Central Europe excl. contracted capacity 1. 2008-12 figures are estimates and potentially subject to change, since allocation process is not yet finalized. 2. Emissions and allowances relate to the 2008 portfolio of assets 28
  • 30. Update on network regulation in Germany Start of incentive regulation: Several issues still open Formally, incentive regulation has started January 1st 2009. However, only E.ON Energie’s gas distribution network operators have so far received final revenue caps. The power distribution network operators will probably receive their final revenues caps in the coming weeks. Currently, it is unclear when our power transmission system operator E.ON Netz will get the final revenue cap. There are intensive discussions regarding the allowance of increased costs for system services. Average efficiency scores for E.ON Energie’s network operators are close to 100%, well above the industry average of ca. 93% in power and ca. 88% in gas. As a result, E.ON expects to see stable to slightly rising network charges during the first period of incentive regulation, as the scheduled annual cuts should be broadly offset by inflation. Regulation of gas transmission BNetzA has decided to disallow market-oriented network charges in gas transportation. E.ON Gastransport appealed against the BNetzA’ disallowance decision. After the BNetzA’s disallowance of market-oriented network charges in gas transportation E.ON Gastransport had to file for the first time for cost-orientated network charges at the end of 2008. It is currently unclear when BNetzA will issue a final approval. There shall be a switch to incentive regulation in 2010. 29
  • 31. Driving Renewables to industrial levels: E.ON is rapidly moving up in the ‘Gigawatt club’ Installed capacity (GW)1 2 GW of installed capacity by the end of20081: Five ~10 fold increase of Renewables capacity within less than 18 months Roll-out of ‘boutique to industrial’ approach: ~4 ~ 1 GW of capacity to be added annually 2.0 Strategic ‘firsts’: 0.4 1.0 Unique innovative partnership with Siemens 2006 2007 2008 2010 2015 to set up collaborative partnership model Global Renewables alliance with Masdar Project pipeline (GW)1 Total: 14.2 GW 4.7 Development Focused portfolio management (countries and 20% probability technologies) and clearly articulated execution of success strategy 5.0 50% probability E.ON’s global Renewables assets and carbon of success sourcing activities consolidated into a stand alone 90% probability 1.1 market unit. of success 1.4 Construction E.ON’s financial muscle and technical expertise give 2.0 Operation E.ON Climate & Renewables an edge over stand- alone competitors 1. as of 31.12.2008, hydropower not included 30
  • 32. Financial crisis: Renewables sector is affected in different ways 31 31
  • 33. E.ON has set up Climate & Renewables (EC&R) to achieve its ambitious Renewables targets EC&R remit E.ON’s generation Renewables Setting strategy, portfolio portfolio capacity (GW)1 and the investment plan for ~ 90 GW ~10 renewables 50% Managing all existing and 61 GW ~ 40% future renewables operations 35% Carbon sourcing (JI/CDM) for ~ 30% ~4 the entire E.ON Group 34% ~ 11% Driving E.ON's key growth 2% 1 11% ~ 7% aspirations 18% ~ 12% Spearheading E.ON's 2007 2015 2007 2010 2015 activities in emerging Renewables Large Hydro 1. Excluding Hydro (6,019 MW in 2007) markets Gas Coal Nuclear E.ON is investing about €6 bn between 2007-2010 and will decrease own CO2 emissions by 50% until 2030 32
  • 34. Focus on the most attractive markets: current footprint Installed Renewables capacity as of March 2009 (MW)* 250 50 1,140 Nordic UK 280 280 2,230 90 Other Renewables North Iberia America 190 Italy 2,140 Wind Germany 40 Europe (others) * E.ON Equity MW (Figures rounded), excluding large Hydro. Source E.ON 33
  • 35. Focus on the most attractive markets: project pipeline Figures as of March 2009 (MW) 2,670 14,210 6,400 1,640 Development Probability of success 20% • No absolute showstoppers are known • Reasonable chance that key steps 820 UK Nordic 4,700 concerning permits and grid connection will be successfully taken Iberia Probability of success 50% • Key steps concerning permits and North grid connection have been successfully taken or are about to be America 440 successfully taken 1,680 5,010 Probability of success 90% Italy • Ready or nearly ready to build • All permits received or about to be received • Economic viability proven 560 1,120 • Appropriate turbines available Germany 1,150 Construction Europe 2,230 Operation (others) 1,774 In addition, there is another 5,000 MW of identified sites (origination) whose likelihood of success cannot yet be evaluated 34
  • 36. Portfolio management: focus on promising technologies Technology First commercial Proof-of-concept & roll out plants technology tracking EC&R technology selection criteria Scalability Growth potential Financial attractiveness Wind Wider E.ON Group on- interest shore Closeness to E.ON capabilities Solar / thin film applications Deep dive technology Solar / CSP Wave / analysis tidal Wind off- Large coastal shore biomass Large biogas / bio- methane, Large inland biomass 35
  • 37. E.ON’s entry in the Russian power sector complements its long-term business relationship in gas Stake in Gazprom Stake in Nord Stream Long-term gas supply Gas upstream E.ON shareholding 6.4%³ E.ON shareholding 20% E.ON Ruhrgas largest customer with 41 bcm/a1 World’s largest gas reserve base Power Generation Coal supply JI-projects E.ON: 78.3 % in OGK-4 Market Units Existing2 and envisaged Central Europe and UK projects 1. E.ON Ruhrgas Gas AG plus subsidiaries 2. ‘Sustainable management of gas transportation system’ - joint project of E.ON and Gazprom 3. In October 2008 E.ON agreed with Gazprom to swap 2.93% of stake in Gazprom against 25%- participation in Yuzhno-Russkoe gas field; 36 transaction is due to close in Q4 2009
  • 38. In 2007, E.ON entered the attractive Russian power market through the acquisition of a majority stake in OGK-4 Overview MU Russia Highlights Equity investment in OGK-4 Purchase price: € 4.4 bn for 72.7%, OGK-4 generation assets thereof € 1.3 bn capital increase to finance Key figures FY 2008 investments (FX risks hedged) Net capacity 8,260 MW Mandatory offer:1 € 0.2 bn for 3.4% Electricity production 56.7 TWh Heat production 1.9 mln GCal Other: 2.2% Employees 5,318 Current shareholder structure Financials FY 2008³ ~78% E.ON Revenue € 1,044 mln ~22% minority shareholders Adjusted EBITDA € 171 mln Adjusted EBIT2 € 41 mln 1. Mandatory offer required under Russian capital market law if 30% or 50% threshold is exceeded to all minority shareholders; closing in Feb. 2008. 2. EBIT is affected by purchase price allocation effects. 3. Financials refer to Market Unit E.ON Russia 37
  • 39. Russian power industry is experiencing strong need in large-scale capital investments Obsolete and aging generating fleet Declining reserve margins in all energy systems Data refers to 2007 Data refers to December 2007 40% GW 60 31,8% Reserve margin 30% 25,4% Available capacit y 23,8% 40 20% 8,7% 20 10% 6,5% 1,4% 2,4% 0% before 1951-1960 1961-1970 1971-1980 1981-1990 1991-2000 from 2001 Center Urals Siberia N.-West South M id- Far East Volga 1950 Approximately 90% of equipment is older than Some regions (e.g. Tyumen) experience very tough 20 years supply conditions notwithstanding the crisis 97 GW (46%) of equipment exceeded its lifespan Aging equipment leads to tighter balance Source: Ministry of Industry and Energy of Russia Source: System Operator-Central Dispatching Office of the Unified Energy System 38
  • 40. Stepwise liberalization of the Russian wholesale electricity market is strongly supported by the government Liberalization scenario Current stage 5 10 15 25 “We are not going to 30 50 cut our plans in the 60 electricity industry, but 80 95 100 we will fulfil all those 90 85 75 70 plans” – Vladimir Putin, 50 Russia’s prime minister, 40 20 November 2008. 10 10 10 10 10 10 10 10 10 1H 2007 2H 2007 1H 2008 2H 2008 1H 2009 2H 2009 1H 2010 2H 2010 2011 Regulated sector (Residential) Regulated sector (Industrial) Liberalized sector New capacity + deviations from 2007 FTS balance Notes: Liberalization ratios are applied to the electricity and capacity volumes included in the FTS balance for 2007 (excl. volumes to households) The newly commissioned (from 2007) capacity and electricity produced from that capacity are sold under free market prices Capacity and electricity sold to the households are sold under the Regulated Agreements (at regulated tariffs) Source: Russian government Resolution N 205 dated April 7, 2007 39
  • 41. Power prices have picked up since the start of the liberaliza- tion, mainly driven by soaring fuel prices and demand growth Electricity spot price development January 2007 – March 2009 (RUB/MWh) 1000 Increase of domestic gas prices 800 € 19.4/MWh2 approved by the Government pushes power prices up 600 € 16.5/MWh1 € 13.8/MWh2 Spiking demand coupled with local capacity shortages 400 € 8.3/MWh1 supporting high price levels 200 Avg. spot price grew by 22% in the First zone, and by 74% in the Second zone in 2008 vs. 2007 0 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Monthly avg. First zone (Europe/Urals) Monthly avg. Second zone (Siberia) 12M avg. First zone (Europe/Urals) 12M avg. Second zone (Siberia) 1. Based on average EUR rate for 2007 of 35.03 RUB 2. Based on average EUR rate for 2008 of 36.45 RUB Source: Trading System Administrator 40
  • 42. Specific challenges for value creation at OGK-4 Specific risk Evaluation E.ON view In December 2008 Russia‘s prime-minister Suspension of power market reform Putin confirmed there will be no delay Surgutskaya 2 and Berezovskaya (73% of Significant erosion of power demand total capacity) are in regions with stable growing demand Lower than expected prices & spreads Reserve margins in particular regions still expected to tighten State interventions Market is at an early development stage, and selective fine-tuning is normal Capacity market uncertainty Adequate capacity payments for new capacities are expected Further RUB devaluation Currency for new build projects hedged, but still exposure to translation effects 41
  • 43. E.ON has a sound financial position E.ON Funding Program 2007-2010 Diverse funding structure in € bn Funding Program: 30 Successful funding of € 24.7 bn of bonds and loans since 5.9 September 2007 at average interest rate of ~5.3% 20 13.4 Broad variety of currencies and instruments 30 10 Syndicated Credit Facility: 5.4 In November 2008 extension of 364-day tranche with a 0 volume of € 7.5 bn 2007-2010 2007 2008 2009 YTD Outstanding funding bonds & bonds & bonds & funding needs In total € 12.5 bn of undrawn credit facilities available needs1 loans loans loans 2009 and 2010 Public tender offer: In February 2009 repurchase of € 1.54 bn (=36%) of € 4.25 bn bond due May 2009 Outstanding funding will be covered by using opportunities in bonds, commercial paper and loans 42 1.Funding needs include the refinancing of maturities which already existed at the start of 2007-2010 Funding Program
  • 44. Limited maturities in next three years Bonds of E.ON AG & E.ON International E.ON successfully pursued its Funding Finance B.V.1 - Maturity profile (in € bn) Program despite challenging market conditions: 5.0 Several successful reopenings of EUR Corporate 4.0 bond markets 3.0 Successful debut in USD Corporate bond market 2.0 in April 2008 Return to Sterling market in January 2009 with 1.0 landmark GBP 1.05 bn transaction 0.0 Well established borrower in CHF bond markets 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021+ (> CHF 2 billion outstanding) Maturities as of 31 December 2008 Very liquid bonds and increasing weight in Maturities added in major corporate bond indices 2009 YTD E.ON gained several capital markets awards, e.g. Repurchased notes through public tender offer in Feb 2009 IFR Corporate Issuer of the Year 2008 E.ON with constantly good access to the debt markets 1.Bond issues via E.ON International Finance B.V. are fully guaranteed by E.ON AG 43
  • 45. E.ON‘s cost of capital 2007 2008 2008 (Annual report) Adjustment (Annual report) (tax reforms) Risk-free interest rate 4.3% 4.3% 4.5% Market premium 4.0% 4.0% 4.0% Beta factor 0.85 0.88 0.88 Cost of equity after taxes 7.7% 7.8% 8.0% Average Tax rate 33% 27% 27% Cost of Equity before taxes 11.5% 10.7% 11.0% Cost of debt before taxes 4.7% 4.7% 5.7% Tax shield 1.6% 1.3% 1.5% Cost of debt after taxes 3.1% 3.4% 4.2% Share of equity 65% 65% 65% Share of debt 35% 35% 35% Cost of capital after taxes 6.1% 6.3% 6.7% Cost of Capital before taxes 9.1% 8.6% 9.1% 44
  • 46. Market units – Key financial figures 2008 € in million Sales Adjusted Adjusted Capital ROCE Cost of Value Operating EBITDA EBIT Employed (%) Capital (%) Added Cash Flow Central Europe 41,135 6,266 4,720 19,310 24.4 9.2 2,935 4,016 Pan-European Gas 27,422 3,113 2,631 17,594 15.0 8.8 1,091 2,081 U.K. 11,051 1,396 922 10,101 9.1 9.8 -71 893 Nordic 3,877 1,112 770 6,948 11.1 9.3 125 835 U.S. Midwest 1,880 549 395 6,537 6.0 8.7 -176 271 Energy Trading 31,760 649 645 868 74.3 9.2 565 -1,452 New Markets 5,862 510 90 15,596 0.6 10.4 -1,528 140 Corporate Center -36,234 -210 -295 -591 - - - -46 E.ON Group 86,753 13,385 9,878 76,363 12.9 9.1 2,902 6,738 45
  • 47. This presentation may contain forward-looking statements based on current assumptions and forecasts made by E.ON Group management and other information currently available to E.ON. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of the company and the estimates given here. E.ON AG does not intend, and does not assume any liability whatsoever, to update these forward-looking statements or to conform them to future events or developments. 46

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