EnBW 2020 Financial Strategy, Performance & Portfolio · Energy needs new impetus EnBW 2020 Financial Strategy, Performance & Portfolio Thomas Kusterer - Chief Financial Officer Capital

Energy needs new impetus

EnBW 2020 Financial Strategy, Performance & PortfolioThomas Kusterer - Chief Financial OfficerCapital Market DayKarlsruhe, 13 September 2013

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EnBW Capital Market Day 13 September 2013

› Customer and service orientation

› Marketing analysis

› Pricing

› Brand management

› Product and solution development

› Innovation and technology management

› Technology partnerships

› Trend analyses

› First-class IT

Customer and market orientation and innovation

› Performance management› KPI and external benchmarking

› Process optimisation and operational excellence

› Portfolio and investment management

› Capital efficiency and financing model

› Talent and career development

› Diversity

› Potential/performance evaluation

› Incentives and employee motivation

› Structure and governance

› Working environmental and office space

› Dialogue orientation & communication: internally and externally

Performance und portfolio Employee and organisational development

Leadership and corporate culture

› Leadership and leadership principles

› Team orientation

Four elements form the EnBW 2020 programme as a clear way forward towards our new strategic orientation

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Clear division of operational segments as a prerequisitefor stringent performance measurement

Generation & Trading Renewables Grids Sales Services1

Performance Management

System

Achievements

› High level of transparency andstandardisiation

› Consistent, clearly andstringently definedresponsibilties at operational and functional levels

› Direct access of CFO intooperational and functional units

One EnBW

› Clear segmentation ofoperational and functional units

› Core activities concentrated in one/a few units

› Concentration of operational andfunctional responsibilities in oneposition

› One integrated financeorganisation with directmanagement control ofoperational CFO´s

1 Internal Cost Centre is not being reported

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Performance Management in each business unitExample: Grids

Principles of business and basic measurement

› Basis of business: concessions (DSO) or law (TSO) › Underlying management system in the regulated business:

› Profit Centre (cost optimisation in the incentive regulation period leads to additional profitsbased on given regulated earnings (regulation period: 5 years)

› Optimisation of grid charges within the framework of regulation (lobbying, if necessary lawsuitsimilar to the decision of the German Federal Supreme Court of Justice) and cost audit(application) possible

Key performance figures

› Targeted result (Target EBITDA) derives from regulation (StromNEV, ARegV, etc.); Benchmark isthe granted regulated return ( Target EBITDA)

› Performance drivers, influencing targeted result are

› Cost (OPEX): given cost by cost planning not to be exceeded overall (key performance driversare: personnel expenses, maintenance cost, external services (settlement of services), etc.)

› Investments have an impact on interest-earning basis (assets) and therefore on grid charges(difference between new-builts and expansion of existing units -> additional grid charges via expansion factor etc. possible)

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Performance Management – DSO Electricity

Accounts receivabledays for actualconsumption

#

CE

Result Adj. EBITDA

Target SD)

Year-to-date Expectation

Actual Plan (E) Plan TargetRatio Comments/reasonsTrendFinancial number Unit

NWC

%Utilisation operatingprogamme

Empl.capac.MAK+Leasing-MAK

€/empl.capac.Specific employeecosts

%Target achievementEarnings share

%UtilisationCAPEX

%CAPEX/depreciationfor wear and tear

€ millionNet grid charges

min/aUnavailability

%Coverage factorappoved/applied for

CAPEX

Accounts receivabledays for receivepayments

#

explanation

explanation

explanation

explanation

Billed renewablefacilities/applications %

1 Stage of development

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Departments Corporate Department

Finance Department

Personnel Department

Technology Department Sales Department

Operational

› GEN Operation

› GEN Nuclear

› GEN Portfolio Development

› EnBW Kernkraft GmbH (EnKK)

› Transnet BW2

› Municipal Remuneration / Sustainable Town4

› Trading

› B2B sales(incl. DSP)

› B2C sales

› Operations

› REG3

Functional

› Corporate Development/ Strategy

› Policies/ Sustainability

› Communication

› Programme 2020

› Innovation Management

› Audit

› Accounting/Tax

› Controlling/ Investment Management

› Finance/Investor Relations

› ICS/Risk Management

› Procurement

› M&A

› IT/Telephone Conferences (internal)4

› Personnel (staff)

› Personnel (managers)

› HSSE

› Law

› Compliance

› Other / Infrastructure

› Marketing*

"Core user“ principal; 1 Assignment to C Department and T Department; 2 Management of the companies only possible via Supervisory Board and using relevant instruments; 3 Independence, management and interface functions, taking account of German Energy Industry Act (EnWG) provisions 4Structure currently still being defined

Assignment ofparticipating investments

› EWE1 › EVN› SWD

› ED

› Terranets bw2

› Turkey

› EWE1

› PRE

› ZEAG

› ODR

› GVS

› ESW

Consistent coverage of all core operations within EnBW

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Performance Management System –a requirement for Integrated Reporting

FinancialDevelopment Environment

Compliance Employees

Health andSecurity

Clients andStakeholder

EnBW Performance Management System

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Financial evidence of “Energiewende“ requires not only strict discipline but also smart solutions

Energiewende

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› The utilities sector is one of the most highly regulated

industries

› Federal elections by end of 09/2013 with big impact on the

future regulatory scheme (i.e.r subsidies)

› Flexibility as one the core aspects for coping with uncertainty

› Capex hinges on desinvestment

› EnBW´s partnership concept:

› political acceptance

› financial feasibility

Regulatory Impetus

Advantageous company size

By having a relatively high share of regulated businessEnBW gains advantage from its flexibility andpartnership approach

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Development of an attractive portfolio of participationmodels for onshore wind farms

Selection of models:

› Model A: Limited liability

company (GmbH) model

without intercompany

structure

› Model B: Limited liability

company model with

intercompany structure

› Model C: German limited

commercial partnership

(KG) model, transferring

majority after start of

commercial operations

› Model D: German limited

commercial partnership

(KG) model, transferring

majority already during

construction phase

C

Proj

ect v

olum

e

Division of construction risk1

no yes

B

D

A

low

hig

h

1 Sharing of the construction risk: initial financing in proportion to shareholder stake; risks of the construction phase (delays in completion) appropriately shared

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Financial framework designed to maintain existingdebt ratio

› Objective of being cash flow positive in eachperiod

› Well-balanced debt maturities to be onlypartially refinanced through to 2020

› EnBW is owned by long-term public shareholders

› Participation models to share risks

› Disciplined capex hinging on divestments

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EnBW‘s finance strategy of maintaining the good creditworthiness remains unchanged

Objectives of EnBW’s finance strategy

› Minimising the cost of capital

› Sufficient liquidity for operations at all times

› Limiting the interest rates risk

› Targeting a dynamic debt ratio of 3.3

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Objectives of EnBW’s financial management

EnBW‘s financial management is well crafted, with its flexibility, diversification and long-term approach

Sophisticated asset liability management to meet future

pension and nuclear liabilities

Maximum flexibility from multi-pillar strategy

Prudent asset management approach

Diversified maturity profileSupport of senior

debtholdersvia hybrid capital

Investments only in line with financial strength and

divestiture success

Debtholder protecting dividend policy

Diversified market approach

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EnBW Strategy 2020

› Structure and transformation programme in place

› Focus on regulated business

Flexible capex

Positive cash flow

pnned divestitures).

› Objective of generating a positive cash flow in each period

› H1 2013: € 535.2 m (+ 22.6%)

Capital supportive dividend policy

› Investments hinge on divestitures

› Polish assets and reduced share in EDH already divested

Summary

› Shareholder approval of the supportive dividend policy

› Track record of governmental support (2004/2005 and 2012)

Documents

EnBW 2020 Financial Strategy, Performance & Portfolio · Energy needs new impetus EnBW 2020 Financial Strategy, Performance & Portfolio Thomas Kusterer - Chief Financial Officer Capital