MVV ENERGIE – ENERGIsING thE FutuRE

ANNuAl REpoRt2008/09

MVV energie – energising the future

annuaL rePort2008/09 MVV EnErgiE Key Figures

external sales 1 in Eurobillion adjusted ebit in Euromillion

3.5 350 3.2 3.0 300 2.6 2.5 250 249 239 2.2 2.3 2.0 1.9 200 201 199 158 1.5 150

1.0 100

0.5 50

0.0 0 2004/052005/06 2006/07 2007/08 2008/09 2004/052005/06 2006/07 2007/08 2008/09

1excluding electricity and natural gas taxes

investments1 in Euromillion cash flow in Euromillion

450 450 414 400 400 386 364 350 350

300 300 255 255 250 241 250 246 214 219 200 200 188 150 150

100 100

50 50

0 0 2004/052005/06 2006/07 2007/08 2008/09 2004/05 1 2005/06 1 2006/07 2 2007/08 2 2008/09 2

1investments in intangible assets, property,plant and equipment and 1asper DVFA/SG investment property,aswell as payments for the acquisition of fully and 2beforeworking capital and taxes proportionately consolidated companies and for other financial assets KeyFigures

MVV energie group

Euromillion 2008/09 2007/08 %Change

External sales excluding electricity and natural gas taxes 3161 2636 +20

Adjusted EBITDA 1 385 398 −3

Adjusted EBITA 1 239 249 −4

Adjusted EBIT 2 239249 −4

Adjusted EBT 2 165181 −9

Adjusted annual net surplus 2 112123 −9

Adjusted annual net surplus after minority interests 2 98 110 −11

Adjusted earnings per shareinEuro 2,3 1.48 1.69 −12

Cash flow beforeworking capital and taxes 386414 −7

Cash flow beforeworking capital and taxes per share 3 in Euro5.86 6.33 −7

Free cash flow 20 54 −63

Adjusted total assets (as of 30.9.) 4 3566 3361 +6

Adjusted equity (as of 30.9.) 5 1208 1192 +1

Adjusted equity ratio (as of 30.9.) 33.9 % 35.5%−5

Capital employed 6 2649 2444 +8

ROCE 9.0% 10.2%−12

WACC 8.5% 8.5%—

Value spread 0.5% 1.7%−71

Investments 255241 +6

Number of employees (as of 30.9.) 6053 5901 +3

1excluding non-operative IAS 39 valuation items in connection with financial derivatives 2excluding non-operative IAS 39 valuation items in connection with financial derivatives and excluding one-offcharges for write-downs at energy-related services subgroup (see reconciliation of EBIT on page 56) 3increase in number of shares (weighted annual average) from 65.3 million to 65.9 million due to capital increase 4excluding positive and negative fair values under IAS 39 5excluding net balance of positive and negative fair values under IAS 39 6adjusted equity plus financial debt plus provisions for pensions and similar obligations plus accumulated goodwill amortisation (calculated as an annual average) MVV EnErgiE Company Portrait

CompanyPortrait

MVV Energie has played aremarkable role among German energy companies since its IPO in 1999. Its business fields of electricity,district heating, gas, water, energy-related services and environmental energy provide it with aunique business portfolio. One further outstanding featureofour Group is its horizontal networking and integration of shareholdings with local and regional operations in the same business fields. With around 6000 employees, our Group generated consolidated sales of Euro3.2 billion in the 2008/09 financial year.

We areGermany‘s sixth-largest electricity supplier and one of the top five district heating companies, while also playing apioneering role with innovative products in the gas market. In our environmental energy business, we areGermany‘s third- largest operator of waste and old timber incineration plants. In our energy-related services business too, we have built up aleading position in the German market by offering decentralised energy generation and energy saving contracting services.

With our strategic alignment, we have set course to achieve further profitable and value-adding growth at our Group. To this end, we will be investing around Euro3billion over the next ten years. Renewable energies and the futuremarkets of climate protection and energy efficiency aremajor focuses in our medium and long-term strategy.Our aim is to create lasting value for our investors and to offer sustainable jobs to our employees.

Our profile is clear: MVV Energie –Energising the Future. MVV Energie–Energisingthe Future

The futurestarts now.Itistoday that we make decisions and lay foundations for our business tomorrow.These decisions affect the security and stability of the energy supply, the affordability of energy prices, the favourability of the impact on the environment and ultimately the further growth of our company.

To energise the future, we think and plan on along-term basis, while acting quickly and in atargeted manner.Weimplement our projects effectively.Inthe 2008/09 financi- al year we focused closely on developing futurescenarios, reviewing strategies and set- ting course for sustainable, i.e. profitable, environmentally awareand socially responsible growth at our group of companies. We will continue to provide our customers with a reliable supply of energy in futureaswell, while offering them intelligent and innovative products and solutions. This way,weare working to securetomorrow's energy today. MVV EnErgiE Contents

Contents

I. _MVV Energie – III. _Group Management Report Securing Tomorrow’sEnergy Today 42 _ Business Framework 42 _Energy Policy and Regulation II. _ToOur Shareholders 44 _Market Climate and Competition 20 _Letter from the CEO 46 _Impact of Weather Conditions 22 _The Executive BoardofMVV Energie AG 47 _Overview of Shareholdings and Business Activities 24 _Report of the Supervisory Board 48 _Our Corporate Strategy: 28 _The ShareofMVV Energie AG MVV Energie –Energising the Future 32 _The 2008/09 Financial Year at aGlance 50 _Energy Trading Business and Innovative 34 _Corporate Governance Sales Products 34 _Report of the Executive Board 51 _Research and Development and the Supervisory Board 52 Business Performance 35 _Compensation Report 52 _Earnings Position of the MVV Energie Group (Component of Group Management Report) 62 _Net Asset Position 38 _Declaration of Conformity 64 _Financial Position 39 _Report on the Compliance System 66 _Overall Summary of Business Performance 66 _ Basic Features of the Compensation System of the Executive and Supervisory Boards 66 _Disclosures under §289 (4) and §315 (4) HGB 68 _ Sustainability 68 _Our Basis: Economic Responsibility 68 _Our Claim: Ecological Responsibility 73 _Employees 76 _Social Responsibility 77 _Value Added Statement 78 _ Events After the Balance Sheet Date 78 _ Opportunity and Risk Report 81 _ Outlook

2 MVV Energie 2008/09 IV._Consolidated Financial Statements V. _Other Disclosures 86 _Balance Sheet 158 _Multi-Year Overview 87 _Income Statement 162 _Financial Glossary 88 _Statement of Changes in Equity 164 _Technical Glossary 89 _Segment Report Financial Calendar 90 _Cash Flow Statement Imprint 92 _Notes to the Consolidated Financial Statements 144 _Responsibility Statement 145 _Directors &Officers 151 _Scope of Consolidation of the MVV Energie Group 155 _Auditor’sReport

MVV Energie 2008/09 3 MVV EnErgiE Energising The Future

4 MVV Energie 2008/09 To shape the future, we need convincing visions to guide our actions. The “Tomorrow...”pages show how we visualise adesirable future. The futureisbuilt on present foundations. Without past experience, therecan be no progress. The “Today...”pages thereforeshow what MVV Energie has already achieved in its most important business fields.

MVV Energie 2008/09 5 MVV EnErgiE Energising The Future

even more energy will be producedfromregenerative sources.

6 MVV Energie 2008/09 Securing Tomorrow’sEnergy Today

we aremakingincreasinguse of timber,aCO2-neutral fuel.

Embedded in the foothills of Vogelsberg, Central Europe’slargest extinct volcanic region, the little town of Laubach lies idyllically situated in anatural park. Within this densely forested landscape, avery special energy pack –anenergy forest –istaking shape. On aone hectaretrial field, EnergieversorgungOffenbach (EVO) has planted 10 000 balsam poplars and willow trees. What makes these timbers special is that they areabsolutely energy-charged. They regenerate quickly,and that again and again. Generally speaking, they can be “harvested” every three years at aheight of around fifteen feet.

The energy forest comes at the beginning of our value chain, which stretches from producing regenerative raw materials to processing them into wood pellets to generating energy at biomass plants.One trailblazing project planned by EVO is the construction of anew high-performance pellet plant. The existing manufacturing capacity of 20 000 tonnes is due to be supplemented from 2011 with afurther 65 000 tonnes to amaximum of 130 000 tonnes of wood pellets ayear.

Like EVO, the MVV Energie Group as awhole is increasingly relying on timber as aclimate- friendly and environmentally-friendly resource. When it comes to biomass, we have long been the market leader in Germany,can offer in-depth expertise in operating biomass plants and have forged long-term agreements with timber suppliers. Twoexamples hereare our cooperation with the Bavarian State Forestry Commission and our takeover of A+S Naturenergie. With 18 %ofthe electricity we produce coming from renewable energies, we arealready ahead of the national average. We are continually expanding our use of renewable energies to generate electricity and heating energy from biomass and morerecently also from biogas. And we intend to make sureour growth in these business fields is just like that at the energy forest –fast and sustainable.

4.5 to 7.5 50000 139000

tonnes of CO2 ayearcan tonnes of industrial tonnes of CO2 aresaved be savedatafamilyhome pellets areenoughtoreplace ayearatthe 25 biomass by heatingwithwood 30 000 tonnes of hard coal. andthree biogasplantsat pellets instead of oil. MVV Energiedienstleistungen GmbH alone.

MVV Energie 2008/09 7 MVV EnErgiE Energising The Future

ourchildren shouldhaveasecuresupply firmly in their grasp.

8MVV Energie 2008/09 Securing Tomorrow’sEnergy Today

we aremakingour supply of gasmoresecurebybuildingstorage facilities.

November 1973: hardly acar in sight on Germany’smotorways. Due to the conflict in the Middle East, the OPEC countries impose an oil boycott.

January 2009: the spectreoffreezing living rooms is at large in Germany.The energy dispute in EasternEurope escalates. Russia turns offthe supply of gas to Ukraine and Belarus. Transit pipelines to WesternEurope remain largely empty.

The oil crisis and gas dispute make it absolutely clear –the globalisation of the energy supply loses much of its appeal when dependencies on imports arise. Calls for long-term supply security follow hot on the heels of any first-hand experience of supply bottlenecks.

Stadtwerke Kiel has adopted aforward-looking approach by storing natural gas in caverns. The advantage hereisthat unexpected supply shortages can be absorbed and consumption peaks arising at short notice in the winter months can be offset. What’smore, procurement costs can also be optimised by purchasing the gas at times of low consumption, such as the summer months.

In Rönne, adistrict of Kiel, engineers have been digging deep to maintain asecuresupply of natural gas for nearly 40 yearsnow.The first gas storage facilitywas commissionedherein1971 already and was followedin1996 by asecond larger cavern. Afurtherlarge-scale storage facility capableofholding 70 million cubic metres of natural gas is due to be completed by 2013. Storing gasonthis scale requires specific geological formations. At adepth of between 650 metres and 1800 metres,solution mining creates acavity of 500 000 cubic metres which is surrounded and sealed by fixedsoil formations. Using high-pressurecompressors, the natural gas is compressed many times over andthen stored safely in the depths of the earth.

90000 115 family homescould be heated forawhole year millioncubic meters of compressed naturalgas with naturalgas from thestorage facilities. canbestoredinthe threegas cavernsinKiel.

MVV Energie 2008/09 9 MVV EnErgiE Energising The Future

ourenergysupply will create theright chemistry at industrial parks.

10 MVV Energie 2008/09 Securing Tomorrow’sEnergy Today

IndustrieparkGersthofenbenefitsfromall-round services from asinglesource.

Working people areonly too awareofthe problem. After abusy working day,the housework is still waiting for them when they get home. It would be great if some fairy godmother could just take careofit. This little wish has already come true on amajor scale for twelve companies with 1450 employees at Industriepark Gersthofen. Industriepark Gersthofen Servicegesellschaft mbH (IGS), asubsidiary of MVV Energiedienstleistungen GmbH, takes careofthe burdensome “housework” for them. By drawing on the services offered by IGS, the location operator,the companies can channel all of their energiesinto their actual businesses. Not onlythat,asthey don‘t havetoinvest any of their own money in infrastructurefacilities, they also help their pockets.

IGS offers an all-round services package to companies on site at the industry park, mainly chemicals manufacturers, as well as to external companies in the Augsburg region. Supplying energy accounts for the lion‘s shareofthese services, as energy costs areasignificant production factor for the companies. Since July 2009, anew industrial power plant at Gersthofen has helped to reduce energy prices and enhance energy efficiency.The power plant on location, which MVV Energiedienst- leistungen invested around Euro30million to build, uses the environmentally-friendly cogeneration process to generate electricity and steam from refuse-derived fuel.

As well as supplying energy, IGS offers avariety of services to make life easier for the companies and to free up their time and financial resources for them to focus on their corebusinesses. Some examples of theservices areplant safety,waste management, occupational health and safety,fire service, railway system, facility management and personnel management services. And thereisagood reason for the fact that 130 of IGS‘s 320 employees aretrainees –the all-round service package at IGS includes offering training for all companies at the industrial park. With eight training vocations on offer (focusing on the chemicals industry), IGS is the largest trainer in Augsburg district.

43 4.4

tonnes of steam aregeneratedbythe newpower MWe is theelectricaloutput genereated by the plantfrom refuse-derivedfuel(RDF) everyhour. RDFpower plantfor theelectricity supply.

MVV Energie 2008/09 11 MVV EnErgiE Energising The Future

we will all appreciate ourwaste.

12 MVV Energie 2008/09 Securing Tomorrow’sEnergy Today

we usewaste to generate environmentally-friendlyenergy.

Therecomes atime when acherished item has done all it can for its owner and ends up in the rubbish or on the scrap heap. These redundant items, left to their fate on the edge of the street, are often real treasures for collectors and explorers, who proudly take their findings home. Repaired and polished, they then do great service or become faithful companions for their new owners.

MVV Energie has appreciated the energy potential of our cast-offs for morethan 45 years now. What we as consumers simply discardasuseless rubbish is for MVVEnergie ausefulresource and valuableraw material at the end of the utilisation cycle, one far too important to be just burned.Inits waste incineration activities, MVV Umwelt GmbH, our environmental energy subsidiary,consistently relies on the principle of “Energy from Waste” and sees this resource as an important source of energy for the future. It forms the basis for the generation of steam, with which electricity is produced using the efficient and environmentally-friendly process of cogeneration. Waste already plays ahighly significant role as an economical supplement to fossil fuels. By transforming waste into energy,we arethus making amajor contribution towards protecting resources. What’smore, we reduce emissions and thus actively protect our climate.

MVV Umwelt GmbH operates decentralised disposal and energy generation plants at four locations with atotal incineration capacity of 1.5 million tonnes of waste and biomass. This means that the company is now Germany’sthird-largest operator of energy from waste plants.

4000 000 794 1400 000 inhabitants in 19 muni- GWhofelectricity were gene- tonnes of waste have been cipalities acrossfive ratedatMVV Umwelt GmbH disposed of at theultra- federalstatesand around plants in the2008/09 financial modernenergyfrom waste 350 commercial customers year. plantinLeunasince 2005. useMVV Umwelt GmbH to disposeoftheir waste.

MVV Energie 2008/09 13 MVV EnErgiE Energising The Future

entire regionswill warm to efficientheating.

14 MVV Energie 2008/09 Securing Tomorrow’sEnergy Today

we areextendingour leadingposition in thesupply of district heating.

Some like it hot! The gorgeous orchids in the glass house at Luisenpark reach full bloom at atropical 22 to 24 degrees Celsius. The rich tropical and subtropical flora in Mannheim’s“jungle” flourish with district heating from MVV Energie –it’swhat makes the temperaturetherefeel just right.

The region’smost beautiful park is just one example of the forward-looking decisions taken over the past 50 years to preparethe way for our exemplary district heating supply.Today,MVV Energie already has one of Europe’slargest and most moderndistrict heating grids. What’smore, adistrict heating study presented in spring 2008 showed that this energy form of the futurehas further potential for growth in the Rhine/Neckar metropolitan region. By investing morethan Euro66million, MVV Energie aims to tap precisely this potential. We will concentrate and further extend the district heating grid in Mannheim. Not only that, we arealso laying a21kilometredistrict heating pipeline to Speyer with link-up possibilities for the districts of Brühl and Ketsch.

So what is it that makes district heating so good for the environment that the Federal Government is offering substantial support for its expansion? District heating is basically aby-product from the generation of electricity.AtGKM, the large power plant in Mannheim, the heat emitted when electricity is generated is channelled offinparallel by application of the cogeneration principle, and then transported via our own grid directly to customers. Compared with the conventional generation of electricity and heating energy separately,cogeneration plants work with up to 30 %less fuel, thus cutting CO2 emissions. The resources saved by this process make it highly efficient in ecological terms. And customers enjoy further benefits –district heating systems areless susceptible to breakdowns, requirelittle maintenance and areless expensive. Thanks to this clean supply of heating energy,boilers, fireplaces and fuel storage areathing of the past.

23 59% millioneuros is what Stadtwerke Ingolstadtis of householdsinMannheim –around100 000 investinginexpandingits district heating. flats–are connectedtothe district heating EnergieversorgungOffenbach is also extending supply via a525 kilometre pipe grid. Theshare itsdistrict heatinggridfurther by investing of district heatingistoberaisedto70%. around six millioneuros.

MVV Energie 2008/09 15 MVV EnErgiE Energising The Future

energy will be individuallytailoredfor everycustomer.

16 MVV Energie 2008/09 Securing Tomorrow’sEnergy Today

ourelectricity andgas products satisfycustomers'desires.

According to arepresentative study carried out by TNS Infratest, the liberalisation of electricity andgas markets has been accompanied by an increase in customers’ need to select their own tailored products from themultitude of energy products on offer.Customers want asecureand inexpensive supply of electricity and gas. At the same time, many customersaccordgreat priority to the products being compatible with the environment and climate-friendly.

How to squarethe circle? This calls for great flexibility at energy suppliers. MVV Energie acted early to tailor its product portfolio to customers’ needs. Following TERRA and FUTURA, two green electricity products available regionally,all eyes turned to SECURA Energie GmbH, asubsidiary of the MVV Energie Group, which began by offering SECURA Ökostrom, agreen electricity product, on a nationwide basis. This was followed on 1October 2009 by SECURA Naturgas, aCO2-neutral natural gas product available in select sales regions. Inexpensive prices and integrated insurance policies make these two green products especially attractive for private customers.

With its Electricity Fund for industrial and commercial customers, MVV Energie has played a pioneering role in the market for structured procurement services. This intelligent way of procuring elec- tricity on the exchange via our trading experts is now awell-established success story.Our customers have benefited from the advantages of modernprocurement. One example –40member companies in the Bavarian Stone and Soil Industry Association (BIV) procuretheir electricity via MVV Energie’s Electricity Fund. Based on atotal volume of around 36 million kilowatt hours, the potential saving for the 2010 supply year amounts to Euro469 000. That represents acost saving of no less than 29 % compared with the conventional market price. Customers with an eye not only for their costs, but also for the environment, can at asmall premium enjoy the benefits of the Electricity Fund with the ecological option.With its Gas Fund, on offer since April 2009, MVV Energie has taken the same promising, customer-friendlycourse of inexpensive, risk-minimised procurement via the exchange.

541 4527 GWhayearisthe volumeofnaturalgas for GWhofelectricity were purchased by 715 customers 51 customers acquired forthe 2010 supply year acrossthe wholeofGermany via MVV Energie’s since thelaunchofsales with MVV Energie’s structured procurement in the2008/09 financial GasFundinApril 2009. year (previousyear: 3578 GWh).

MVV Energie 2008/09 17 MVV EnErgiE To Our Shareholders

18 MVV Energie 2008/09 To OurShareholders

20 _letter from the CEO 22 _The Executive Board of MVV Energie ag 24 _report of the Supervisory Board 28 _The Share of MVV Energie ag 32 _The 2008/09 Financial Year at aglance 34 _Corporate governance 39 _report on the Compliance System

MVV Energie 2008/09 19 MVV EnErgiE To Our Shareholders

Letter from theCEO

We canlookbackonanunusual 2008/09 financial year.Itwas marked by themost profound economic andfinancialcrisisseenindecades, onewhichalsodid notsimply pass theMVV EnergieGroup by.Iamall themore pleased, therefore,thatour group of companies has come throughthisyearofcrisisingood shape. We successfully maintained ourposition in themarket. We boostedour externalsales by 20%com- paredwiththe previousyear, enablingthemtoreach almost Euro 3.2 billionfor the first time.Wethusclearly exceeded oursales target. We compliedwithour operating earnings target. At Euro 239 million, ouradjustedearnings before interest andtaxes forthe 2008/09 financial year were 4%,and thus only marginally, lowerthanthe com- parableEBITfigureinthe previousyear. We therefore metour twomostimportant quantitative targets. And forthatIwould like to thankall managers andemployees at ourgroup of companies forthe superb work they have performed.

At thesametime, we have also made considerableprogressinqualitative terms. Dr. GeorG Müller Within theframework of ourMVV 2020 strategy projectwehavecompiledalong- CEO of MVV Energie AG term strategy forour Group andcompleted thegroundwork forforward-looking investments. Thiswill provide abasis forfurther profitablegrowthcreatingvalue at ourcompany.From this it shouldbeclear that MVV Energiehas itssightsfirmlyset on thefuture. Ourstrategy, with itsfocus on market needs, means that we arelaying foundationstoday alreadytoenergiseour customers in future as well.

The achievement of oursales andearnings targets underlines both thestability of ourbusinessmodel andthe growth opportunities it harbours –evenand perhaps especiallyinperiods of difficultunderlyingconditions. What’s more,italsoshows that ourwell-balancedbusinessportfolio,innovative productsand permanentprocessof efficiency enhancementhaveenabled us to seize market opportunities andsustainably improve ourcompetitive position.That is particularly true of ourelectricity andgas sales businesswithindustrial customers acrossthe wholeofGermany.

We have also setstandards in ourenergy-related services business, whereour long- standingexperience in usingrenewableenergies in contracting projects (especially biomass) andinsupplyingutilities to real estate customers has enabled us to achieve notablesuccessinthe market.

20 MVV Energie 2008/09 In ourenvironmental energy businessaswell, we managedtocontinuetooperate our plants at fullcapacity within achallenging waste market. Thismeans that we have also made an active andsustainablecontributiontowards protecting theclimate.

We wouldliketoupholdour shareholder-friendlydividendpolicyinthisfinancial year too. With this in mind, theExecutive andSupervisory Boards will be proposing an unchanged dividendofEuro0.90 pershare forthe 2008/09 financial year forap- provalbythe Annual GeneralMeeting of MVV EnergieAGon12March 2010. On behalf of thecompany,Iwould like to thankour shareholdersfor their supportand thetrust they have placedinus. Iwould be very pleasediftheyweretoremainloyal to MVV Energieinthe 2009/10 financial year as well.

So what does thefutureholdfor us?Our market environment is constantly chang- ing. Increasingcostand competitive pressure,the second stageofincentive regula- tion,fallingdemandfor energy andpolitical climateprotectiontargets, with their implications forCO2certificatetrading, will lead to substantialstructuralchanges in ourindustry.Energyefficiency,renewableenergies andefficientcogeneration are theanswers to thechallengesofthe future!And at MVV Energiewewill be actively seizingthese opportunities.

Ouraim is to be oneofGermany’s leadingenergycompanies, as we arenow,in2020 as well.Toensurethis, we laid decisive foundationsinthe year under report within ourMVV 2020 strategy project. We areconvinced that we aretakingthe rightcourse by renewing ourstrategic alignmentand by investinganamountofEuro3billionona long-termbasis.This way, we will retain andcreatesafe andsustainablejobsand train- ingposts andgenerate attractive valuegrowthfor ourshareholdersinfutureaswell.

Mannheim, December2009

With kind regards. Yoursfaithfully,

Dr.Georg Müller CEO

MVV Energie 2008/09 21 MVV EnErgiE To Our Shareholders

From left: Dr.WernerDub,Dr. GeorgMüller,Hans-JürgenFarrenkopf,MatthiasBrückmann

22 MVV Energie 2008/09 TheExecutive BoardofMVV EnergieAG

Dr.Georg Müller Matthias Brückmann born in 1963 born in 1962

SINCe 1JaNuary2009 SINCe 1auGuST 2007 CEO Member of Executive Board of MVV Energie AG of MVV Energie AG Commercial Director Sales Director

2008 2003 To 2007 CEO CEO of RWERhein-Ruhr AG, Essen of Energieversorgung Offenbach AG

2003 To 2007 2000 To 2003 Member of Executive Board Head of Marketing and Sales Division of VSE AG, Saarbrücken at MVV Energie AG

Dr.WernerDub Hans-JürgenFarrenkopf born in 1950 born in 1949

SINCe 1JaNuary2000 SINCe 1JaNuary2003 Member of Executive Board Member of Executive Board of MVV Energie AG of MVV Energie AG Technology Director Personnel Director

1996 To 2000 1994 To 2002 Managing Director Chairman of the Group Works Council of Ferngas NordbayernGmbH, of the MVV Energie Group and Nuremberg Deputy Chairman of the Supervisory BoardofMVV Energie AG and MVV RHE AG, Mannheim 1982 To 1996 Management roles at Ruhrgas AG, Essen

MVV Energie 2008/09 23 MVV EnErgiE To Our Shareholders

Report of theSupervisory Board

Ladies and Gentlemen,

In the 2008/09 financial year,the Supervisory Boarddealt closely with the situation of the company and diligently performed the duties incumbent on it by law and under the Articles of Incorporation. We monitored and advised the Executive Board in its management of the business on an ongoing basis and satisfied ourselves as to the correctness of its actions.

In this, we wereprovided by the Executive Boardwith regular,prompt and compre- hensive information aboutthe performance and position of the company,aswell as about all business transactions of particular significance. The reports from the Executive Boardincluded presentations of the company’sbusiness, sales and earn- ings performance, as well as of itsnet asset and financial position. The Executive Boardalso regularly briefed us on the company’sfinancial, investment and personnel budgets, itsstrategic planning andits risk situationand risk management.

The Supervisory Boardmet on seven occasions during the period under report, while Dr. Peter Kurz the Audit and Personnel Committees held seven and three meetings respectively. Chairman We carefully examined and held detailed discussions, prepared whereappropriate by the relevant committees, concerning the presentations and oral reports from the Executive Board. The Supervisory Boardreached its decisions on the basis of this information and of the draft resolutions submitted by the Executive Board.

Main topics of our discussions In the past financial year,the Supervisory Boarddealt extensively with the implica- tionsofthe global financial and economic crisis for the MVV Energie Group. The Executive Boardinformed us in detail as to the economic consequences for the companyofthe macroeconomic downturnand the change in conditions on the financial markets.

One key topic of our discussions was the review and realignment of the company’s strategy.Wediscussed the results of the MVV 2020 strategy project presented by the Executive Boardon25September 2009 in great detail and approved the strategic coursesofaction identified on this basis. The Executive Boardinformed us at the same time of thenecessity of posting one-offexpenses and awrite-down in the energy-related services business division.

By resolution dated 8May 2009, the Supervisory Boardawarded the assignment to audit the separate and consolidated financial statements of MVV Energie for the 2008/09 financial year to PricewaterhouseCoopers Aktiengesellschaft Wirtschafts- prüfungsgesellschaft,Stuttgart. The Annual General Meeting in March 2009 had previously resolved in line with the proposal madebythe Supervisory Board to appoint PricewaterhouseCoopers as auditorsand group auditors for the 2008/09 financial year.

24 MVV Energie 2008/09 Major personnel matters addressed by the Supervisory Boardinthe year under report included the appointment of Dr.Georg Müller as CEO of MVV Energie AG and the extension of Dr.Werner Dub’s appointment to the Executive Board. Other important topics dealt with at our Supervisory Boardmeet- ings werethe acquisition by MVV Energiedienstleistungen GmbH of afurther 49 %ofthe shares in MVV Energiedienstleistungen Wohnen GmbH &Co. KG, the acquisition by MVV Energie AG of ashare- holdingin8KU Renewables GmbH, the contribution of the gas grid in Sinsheim into amunicipal grid companyand the raising of the cash pool limit at 24/7 Trading GmbH. The Executive Boardprovided us with regular status updates concerning the planned construction of anew generation block (Block 9) at Grosskraftwerk Mannheim AG. Furthermore, we also dealt with the 2020 Climate Protection Programme at MVV Energie AG, the progress made on expanding district heating in Mannheim and the construction of the district heating pipeline to Speyer.

Corporate governance Within the framework of the implementation of the German Corporate Governance Code, the Supervisory Boardheld an efficiency review pursuant to Point 5.6 of the Code in the past year once again, adopting the resultant enhancements for its work. Moreover,the Supervisory Boardalso reviewed the independence of its members in line with Point 5.4.2 of the Code. This review concluded that no member of the Supervisory Boardhad any business or personal dealings with the company or its Executive Boardwhich could provide grounds for any conflict of interest. This is also unrestrictedly the case for Dr.Rolf Martin Schmitz and his successor on the Supervisory Board, Dr.Dieter Steinkamp, in respect of their membership of the Executive BoardofRheinEnergie AG. As strategic partners, RheinEnergie AG and MVV Energie AG aim to establish close cooperation. The two companies do not compete with each other on the individual stages of the value chain (generation,grids, sales) either geographically or in terms of their activities. Reference is made to the internet site www.mvv-investor.de for details of corporate governance and the Declaration of Conformity adopted for the past financial year.This Declaration of Conformity can also be found on Page 38 of this Annual Report.

Committee meetings The Supervisory Boardhas established three committees to preparetopics and resolutions for the full Supervisory Board. The Supervisory Boardisinformed in detail of the work of the committees by their respective chairmen, namely Dr.Manfred Fuchs (Audit Committee) and Dr.Peter Kurz (Personnel Committee; Mediation Committee).

In the year under report, the Audit Committee discussed the annual, consolidated and quarterly financial statements prepared by the Executive Boardingreat detail. Furthermore, the Committee also dealt with the 2009/10business plan and the company’smedium-term planning, as well as examining its risk situation and risk management system.Further topics of deliberation included theoptimisationofworking capitaland theimplicationsofthe financial market andeconomiccrisis. Moreover,the Committee prepared the pro- cedure for selecting the auditors and submitted acorresponding recommendation to the Supervisory Board.

In thepastfinancialyear, thePersonnel Committeeheldpreparatory discussionsconcerningthe compensation andcontracts of membersofthe ExecutiveBoard and, amongother matters, recommended to the Supervisory Boardthat Dr.Georg Müller be appointed and that Dr.Werner Dub’sappointment be extended. Furthermore, the Committee dealt with the variable compensation confirmed by the auditor for members of the Executive Boardfor the 2007/08 financial year.

MVV Energie 2008/09 25 MVV EnErgiE To Our Shareholders

The Mediation Committee did not requireconvening pursuant to §27(3) of the German Codetermina- tion Act (MitbestG).

Changes in the composition of the Supervisory Boardand executive Board Dr.Rolf Martin Schmitz, former CEO of RheinEnergie AG, Cologne, retired from his position on the Super- visory BoardofMVV Energie AG upon retiring from his positions at RheinEnergie AG as of 30 April 2009. He was succeeded as of 9July 2009 by Dr.Dieter Steinkamp, who became CEO of RheinEnergie AG on 15 June 2009.

Furthermore, the following individuals also retired from the Supervisory BoardofMVV Energie AG: Uwe Spatz, member of the Works Council of MVV Energie AG, Klaus Lindner,trade union secretary at ver.di Rhine/Neckar,and Dr.Rudolf Friedrich, retired job centredirector,who stood down for reasons of ill health as of 30 September2009. Peter Dinges, Chairman of the Group Works Council of MVV Energie AG, joined theSupervisory Boardon1February 2009. Bodo Moray,trade union secretary at ver.di Rhine/Neckar, was appointed as amember as of 1September 2009. We would like to thank all retiring members of the Supervisory Boardfor their constructive contributions to the work of our body.

Manfred Lösch retired from his position as Deputy Chairman of the Supervisory Boardasof30Septem- ber2009. Pursuant to the proposal made by employee representatives, Peter Dinges was elected to succeed him. We would like to thank Manfred Lösch for his longstanding and committed involvement in the work of the Supervisory Board.

At an extraordinary meeting held on 23 October 2008, the Supervisory BoardofMVV Energie AG appointed Dr.Georg Müller to be amember of the Executive BoardofMVV Energie AG for afive-year term and appointed him as CEO. Dr.Müller assumed office at the beginning of 2009. The employment contract with Dr.Werner Dub, which was due to expireonschedule, was extended on 12 March 2009 for afurther five years until the end of 2014. Since January 2000, Dr.Dub has been responsible for the technology boarddivision.

approval of the consolidated financial statements The consolidated financial statements and group management report of the MVV Energie Group for 2008/09 wereaudited by PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Stuttgart, and grantedanunqualified audit opinion. Both the consolidated financial statements and the group management report wereprepared in accordance with International Financial Reporting Standards (IFRS), taking due ac- countof§315a of the German Commercial Code (HGB). The annual financial statements of MVV Energie AG prepared in line with HGBand theaccompanyingmanagementreport for the 2008/09 financial year were also audited by the auditor and granted an unqualified audit opinion.

The consolidated financial statements and group management report of the MVV Energie Group, the annual financialstatements and management reportofMVV Energie AG, the appropriation of profits proposed by theExecutive Boardand the auditor’saudit reports wereall submitted to the Supervisory Boardingood time for its respective meeting. These documents werecarefully inspected by the Audit Committee and the Supervisory Boardand werediscussed in detail in the presence of the auditor.We

26 MVV Energie 2008/09 endorse the findings of the audit performed by the auditor.Atour meeting on 18 December 2009, we approved theconsolidated financial statements and group management report of the MVV Energie Group andthe annual financial statements andmanagementreport of MVV Energie AG. The annual financial statements arethus adopted. We endorse the appropriation of profits proposed by the Executive Board.

The Executive Boardfurther compiled areport for the 2008/09 financial year on the company’srelationships with closely related companies (dependent company report). According to the report, MVV Energie AG was not disadvantaged by the legal transactions performed with associated companies outlined therein. The dependent company report was audited by the auditor,who granted the following audit opinion:

“Following our audit and assessment performed in accordance with professional obligations, we confirm • that the factual disclosures made in the report areaccurate • that the compensation of the company in the transactions listed in the report was not incommen- surately high based on the circumstances known at the time of such transaction being executed.”

Both the dependent company report and the audit report compiled by the auditor wereprovided to us in good time. Following its own review,the Supervisory Boardconcurred with the auditor’sassessment and approved the report. The auditor also audited the early warning risk identification system established at MVVEnergie AG by the Executive Boardpursuant to §91(2) of the German Stock Corporation Act (AktG). Basedonthe auditor’sassessment, this system is suited to fulfilits legalobligations.

The Supervisory Boardwould like to thank the Executive Board, the executive boards and management teams at the shareholdings, as well as all employees, members of works councils and employee representatives, for their active contributions to the successful development of our company in the 2008/09 financial year.

addendum to the report of the Supervisory Board To ensurecompliance with the new legal requirements governing management boardcompensation (VorstAG), at the end of the year under report the Supervisory Boardcommissioned areview of the exist- ing compensation system from an independent compensation expert. Any adjustments required to the compensation system once the review is available will be implemented by the Supervisory Boardinthe course of the 2009/10 financial year.

Mannheim, December 2009

Supervisory Board

Dr.Peter Kurz Chairman

MVV Energie 2008/09 27 MVV EnErgiE To Our Shareholders

TheShare of MVV EnergieAG

MVV Energie AG sharelargely unaffected by turbulence on capital markets The performance of financial markets in the 2008/09 financial year was largely determined by macro­ economic developments and highly volatile commodity and oil prices. Due to the financial and eco­ nomic crisis, the DAX, Germany’slead index, fell by 37.1%between the end of September 2008 and early March 2009. Following lowsataround3666 points, the DAX finally showed an at timeshighly volatile recovery,enablingittoreturn to 5675 points by the end of September 2009. This growthwas driven by the improved economic outlook and resultant expectationsthat the global recession would sooncome to an end.Further developments on international stockmarkets will crucially depend on future economic data and on the developmentincommodity and oil prices.

At Euro30.83, the share priceofMVV Energie AG at the end of the financialyearon30September 2009 was 7.1%downonthe previous year’sbalance sheet date.Accounting for the dividenddistribution of Euro0.90 per share in March 2009, the share priceslipped 3.5%inthe overall period under reportand thusremained more or less stable (please see share chart). Our comparative indices showed highly dispa­ rate developments overthe sameperiod. DAXsector Utilities (previously PrimeUtilities), which is largely influenced by largegroupssuch as E.ONand RWE, lost 8.1%invalue, while the SDAXrose by 2.9%.The share of MVVEnergie AG thusmaintained its groundrelatively well in adifficult market climate marked by the financialand economic crisis.

Keyfigures on shareand dividend

2008/09 2007/08 1XETRA trading 2subjecttoapproval Closing price 1 on 30.9. (Euro) 30.83 33.20 by Annual General Meeting on Annual high 1 34.04 33.75 12 March2010 Annual low 1 26.5528.00 3excluding non­operat­ ingIAS 39 valuation Market capitalisation on 30.9.(Euro million)20322188 items forfinancial Averagedaily turnover(no.ofshares) 19 16229575 derivatives and one­ offitems duetowrite­ Number of shares on 30.9.(000s) 65 90765907 downsatenergy­ Number of shares in 000s(annualweightedaverage)65907 65 297 relatedservices subgroup Number of shares with dividend entitlement (000s) 65 90765907 4numberofshares (weightedannual Dividend pershare (Euro) 0.90²0.90 average) Dividend total(Euro million)59.3² 59.3 5excluding netbalance of positive and 3, 4 Adjustedearnings pershare (Euro) 1.48 1.69 negativefairvalues Cash flow before working capitaland taxesper share 4 (Euro) 5.86 6.33 underIAS 39 6excluding minority Adjusted carrying amount pershare 4, 5, 6 (Euro) 16.5216.53 interests 7basis:closingprice Price/earnings ratio 7 20.8 19.6 in XETRAtrading Price/cashflowratio 7 5.35.2 on 30 September

Dividend yield 7 (%)2.9 2 2.7

28 MVV Energie 2008/09 ShareofMVV energie aG: performance comparison

120%

110%

100%

90%

80%

70%

60%

50%

40% 30.9.200831.3.2009 30.9.2009

MVVenergieaG SDaX DaXsectorutilities iSin dE00a0h52F5 WKna0h52F XETraMVV1 reutersMVV gn.dE BloombergMVV1gr Monthly trading volumes (no. of shares 000s)

1600

1400

1200

1000

800

600

400

200

0 Octnov decJan FebMar aprMay JunJul augSep

2008/09 2007/08

MVV Energie 2008/09 29 MVV EnErgiE To Our Shareholders

Market capitalisation remains above euro2billion Due to the decline in the shareprice, the market capitalisation of MVV Energie AG reduced to around Euro2032 million as of 30 September 2009 (previous year: Euro2188 million). The free float shareof 18.5%used to weight the sharewithin the SDAX was thus worth around Euro376 million at the end of the 2008/09 financial year (previous year: Euro407 million). Measuredinterms of its free float market capitalisation, the shareofMVV Energie AG occupied 46th position in the joint index statistics compiled for the 100 companies in the MDAX and SDAX at the end of the financial year (previous year: 51st position). This improvement is indirectly due to the sharp decline in shareprices seen at many other index members. Measured in terms of stock market trading volumes, our sharereached 61st position in the statistics (pre- vious year: 85th position).

lower trading volumes due to reduction in number of shares traded Atotal of around 4.8 million shares in MVV Energie AG weretraded across all German stock markets dur- ing the 2008/09 financial year, equivalenttoareductionofaround35%compared withthe previousyear. Due to the decline in the shareprice and the lower number of shares traded, trading volumes wereworth Euro151 million in total (previous year: Euro235 million). Overall, around 95 %ofour stock market turnover takes place on the XETRA trading platform.

Shareholder-friendly dividend policy The Annual General Meeting of MVV Energie AG held on 13 March 2009 followed the proposal made by the Executive and Supervisory Boards and approved an increase in the dividend for the 2007/08 financial year from Euro0.80 to Euro0.90. Due to the higher dividend, the distribution sum based on atotal of 65.9 million shares rose year-on-year by Euro6.6 million to Euro59.3 million. We intend to pay our shareholders an appropriate dividend consistent with our earnings performance in futureaswell. As in the previous year, the Executive and Supervisory Boards plan to proposeadividend of Euro0.90 per sharefor the 2008/09 financialyear for approval by the Annual General Meeting on 12 March 2010. This is equivalent to adividend yieldof2.9%interms of the closing price in XETRA trading on the reporting date on 30 September 2009.

Shareholderstructure

Free float: of which 15.6%institutional investors and 2.9%private shareholders 18.5% City of Mannheim EnBW AG (indirect) 15.1% 50.1%

RheinEnergie AG 16.3%

Change in shareholder structure RheinEnergie AG, Cologne, increased its stake in MVV Energie AG by 0.2%to16.3%byacquiring shares on thestock exchange in October 2008. The free float correspondingly reduced to 18.5%. The stakes held by the other major shareholders, EnBW AG (15.1 %) and the City of Mannheim (50.1 %), remained unchanged. The confidenceshownbythecapitalmarketintheMVVEnergieGroup’sgrowthstrategyisreflectedintheinvestments

30 MVV Energie 2008/09 made by Deka International S.A., Luxembourg, and Barclays Securities Ltd., UK, which now hold around 3.3%and 5.1%ofthe shares in MVV Energie AG respectively.The shares held by these companies are allocated to the free float.

MVV energie aG –ten years on the stock exchange On 2March 1999, MVV Energie AG became Germany’sfirst municipal utility company to successfully risk an IPO, thus laying the foundations for the company’sprofitable growth over the past ten years. The issue price at the time amounted to Euro16per shareand the issue was morethan three times oversubscribed.

active and successful investor relations Due to the financial crisis, the number of banks analysing the company in their research publications fell from eight in October 2008 to six currently.This is nevertheless ahigh figurefor an SDAX company.The banks regularly tracking the shareofMVV Energie AG include DZ Bank, LBBW,UniCredit, Cheuvreux, Kepler Capital Markets and Sal. Oppenheim. The Investor Relations department aims to further extend research coverage for the company’sshare.

We presented our company to large numbers of institutional investors, as well as private shareholders, at severalinvestors’ conferences and in numerous one-to-one meetings. Over and above this, we held telephoneand analysts’conferences providingextensive commentaries on thelatestearningsperform- ance of our company.One particular focus during the 2008/09 financial year was on road showsand talks with institutional investors in Germany and abroad. We visited investors in Dublin, Düsseldorf, Edinburgh, Frankfurt am Main, Geneva, Cologne, Copenhagen, London, Munich, Oslo, New York, Paris, Stock- holm, Vienna and Zurich. Up-to-date information about our sharecan be found on our homepage at www.mvv-investor.de.

We see our pleasing ranking in the 2009 Investor Relations Competition organised by Capital, abusiness journal, as providing recognition of our intensive work on the capital market. Among the 50 companies in theSDAX, MVV Energie for the first time reached 3rd position (15th position in the 2008 ranking).In cooperation with theSociety of InvestmentProfessionals in Germany (DVFA), Capital surveyed around 300financialinstitutionsinGermany andabroadinearly 2009. Around 400 analysts and fund managers assessed IR activities at SDAX companies in terms of the criteria of target group focus, transparency,track recordand extra financial reporting.

accolade for our annual report The German periodical “manager magazin” organises “The Best Annual Reports”,anannual competition which is highly regarded on the capital market. The competition involves around 200 annual and interim reports of the most important German and European publicly listed companies being analysed and subse- quently ranked. With an overall assessment of “Good”,the 2007/08 Annual Report of MVV Energie AG was ranked 7th among SDAX companies in the 2008 competition, thus once again reaching the top ten (previous year: 4th position). Our Annual Report was yet again singled out for an internationally recognised awardinthe LACP competition “Vision Awards Annual Report Competition” in the US.

MVV Energie 2008/09 31 MVV EnErgiE To Our Shareholders

The2008/09 Financial Year at aGlance

Innovative products and customer services in nationwide sales business MVVEnergie has played apioneering role in the energy market with its nationwide Electricity Fund models for industrial and commercial customers. Building on the success of its Electricity Fund, the company launched nationwide marketing for its Gas Fund product, which has been specially designed for medium- sizedand multiple location customers, in April 2009.Gas customersthereforealso stand to benefit in future from our experience in structured procurement. Alongside these product innovations, we have also further extended the range of services available to customers. In September 2009, we launched our web-based customer information portal. By entering apassword, customers can conveniently view and download their consumption and invoicing data and agreat deal of otherinformationaboutprocurement and the energy market.

Competing for private customers with green products SECURA Energie GmbH, acompany owned by the MVV Energie Group (74.9%) and RheinEnergie AG, Cologne (25.1 %), has been offering both 100 %green electricity and an all-round carefree package including an integrated insurance policy on anationwide basis since January 2008.

On 1October 2009, SECURA Energie GmbH also launched its external gas sales business for private

customers outside its home regions, offering aCO2-neutral natural gas product for household customers.

CO2-neutrality will be achieved by financing forestation projects. The trees planted will absorb greenhouse

gases, thus offsetting the CO2 released when the gas is burned.

New block at Grosskraftwerk Mannheim The Mannheim power plant Grosskraftwerk Mannheim AG (GKM) plans to build anew block powered by hardcoal and using efficient cogeneration (Block 9) by 2013. Its gross electricity output will amount to

911 MWe and its district heating output to 500 MWt.This power plant block forms the basis for securing the electricity supply in the long term and for further expanding the supply of energy-efficient district heating in Mannheim and the Rhine/Neckar metropolitan region. With afuel efficiency rate of up to 70 %, Block9willbe20%more efficient than the existing Blocks 3and 4. These will be taken from the grid for reasons of age once operations begin at Block 9. MVV Energie holds a28% stake in GKM. The regional authoritiesinKarlsruhe approved the construction and operation of Block 9with assessment notices dated 27 July 2009 (immission controlapproval) and 3August 2009 (water pollution control approval).

expansion of district heating supply Following an in-depth economic feasibility analysis, MVV Energie AG launched its district heating exten- sion and concentration programme in Mannheim in June 2009. The district heating supply grid is to be extended to areas not yet covered and concentrated in areas that arealready supplied. We intend to invest atotal of around Euro66million by 2020 in expanding district heating in the built-up sections of Mannheim and in connecting district heating grids in the Rhine/Neckar metropolitan region. Construction work on thedistrict heating pipeline from Mannheim to Speyer began in May 2009. During construc- tion,which is duefor completion in autumn 2010,itisplanned to extend district heatingtothe districts of Brühland Ketsch as well.MVV Energieisthuslayingafoundationfor furtherprofitable growth in its district heatingbusiness.

32 MVV Energie 2008/09 Major new projects in energy-related services business MVV Energiedienstleistungen GmbH Berlin took over MVV Energiedienstleistungen Wohnen GmbH &Co. KG, Berlin, in its entirety in May 2009. GSW Immobilien GmbH had previously retained a49% stake. By pooling its energy and ancillary cost optimisation expertise, our Group has now improved its position in Berlin even further. Supplying morethan 100 000 residential units, MVV Energiedienstleistungen is already theleading player in thereal estate utility market in the federal capital.

MVV Energiedienstleistungen also reported several successes in its hospital and rehabilitation clinic busi- ness. One example is the Association of Private Hospitals (VdPK) in the states of Hessen and Rheinland- Pfalz, which signed amaster cooperation agreement in April 2009. This cooperation enables the hospitals to cut their energy costs by around 10 percent without having to make any investments themselves.

In August 2009,MVV Energiedienstleistungen GmbH, Mannheim, founded RNE Rhein-Neckar Energie GmbH,Sinsheim, together with AVRAbfallverwertungsgesellschaft des Rhein-Neckar-Kreises, awaste disposal company in the Rhine/Neckar district. The new company will focus on large-scale environmentally- friendly biomass cogeneration plants and on resource-efficient energy saving contracting projects.

Strategic partnership with Stadtwerke Sinsheim Contracts governing the foundation of Stadtwerke Sinsheim Versorgungs GmbH &Co. KG weresigned in February 2009. Alongside Stadtwerke Sinsheim (10 %), the shareholders areEnBW Regional AG (60 %) and MVV RHE GmbH (30%), awholly-owned subsidiary of MVV Energie AG. Within this investment, EnBW is contributing its electricity distribution grid and MVV RHE GmbH its gas distribution grid to the joint grid company, which will take over infrastructureoperations for the supply of electricity and gas to around 35 000inhabitants in Sinsheim.

Furtherboost in economic efficiencyinthe environmental energy business Construction work on Boiler No.6and anew condensing turbine is progressing on schedule at the energy- from-waste plantinMannheim. Boiler No.6(investment:Euro117 million) will replace two older boilers (Nos. 2and 3). In the final stage, the new boiler was integrated into the existing facilities at the plant during ongoing operations. The first wasteisdue to be incinerated in December 2009.This ultramodernincinera- tion plant has further enhanced the economic efficiency of the energy-from-waste plant in Mannheim.

MVV Environment Ltd., the British subsidiary founded in September 2008, is closely examining the British waste market, which offers good development prospects. MVV Environment Ltd. is taking part in tender processes to build energy-from-waste plants in the UK.

MVV 2020 –course set for profitable growth The MVV 2020 strategy project was successfully completed at the end of September 2009 with Supervisory Boardmeetings and employee meetings in Mannheim, Offenbach and Kiel. With MVV 2020, we have laid group-wide foundations for the further profitable development of our company.Implementationbegan in early October2009.

MVV Energie 2008/09 33 MVV EnErgiE To Our Shareholders

CorporateGovernance Report of theExecutive andSupervisory Boards

The term “corporate governance” describes the entiresystem of corporate management and supervision, including its organisation, underlying business policy principles and mechanisms of internal and external supervision.

TheGerman Corporate Governance Code presented by the German Corporate Governance Code Govern- ment Commission for the first time in 2002 and continuously enhanced since then sets out nationally and internationally recognised standards of high-quality,transparent and responsible corporate management and recommends that publicly listed companies should adopt these standards. The latest new version of theGerman Corporate Governance Code dated 18 June 2009 with the amendments to the Code adopted by theGerman Corporate Governance Code Government Commission was published in the official section of the electronic Federal Official Gazette on 5August 2009.

Good corporate governance ensures that corporate management and supervision focus on safeguarding the company’songoing existence and generating sustainable value growth. For us, it provides afoundation forgaining and retaining the trust of our shareholders, customers and employees, as well as of the general public,onapermanent basis. TheExecutive andSupervisory Boards of MVVEnergie AG thereforeaccord high priority to good corporategovernance and explicitly endorse the appeal contained in the Code to manage the company in such away as to secureits continued existence and sustainably increase its value in line with the principles of the social market economy.

We see the recommendations made by the German Corporate Governance Code as representing an im- portant instrument in further developing corporate management and supervision in line with the needs of thecapital market. The Executive and Supervisory Boards of MVV Energie AG comply with the overwhelm- ingmajorityofthe Code’s recommendations. In our Declaration of Conformity we explain why we have deviated from the recommendations in afew cases.

Transparency In the past, we have always met the relevant transparency requirements in the German Commercial Code (HGB) and the German Securities Trading Act (WpHG) and also complied in full with the Code’srecom- mendations in this respect. In future, we will continue to ensurethat all of our stakeholders have access to the same information at the same time. To this end, we provide information about our company and the latest developments at our Group on our website at www.mvv-investor.de, wherewealso publish afinancial calendar with the dates for our regular financial reporting.

Group accounting is based on International Financial Reporting Standards (IFRS), while the separate finan- cial statements of MVVEnergie AG areprepared in accordance with the German Commercial Code (HGB).

34 MVV Energie 2008/09 Compensation Report (Component of GroupManagementReport)

The Executive Boardwas paid compensation totalling Euro1901 thousand in the year under report. This was structured as follows:

Compensation

Euro000s Fixed1 Variable Supervisory Total Board compensation2

Dr.Georg Müller3 336 174 11 521 Matthias Brückmann 274 181 9464 Dr.Werner Dub 263 181 16 460 Hans-Jürgen Farrenkopf 266 181 9456 Total 1139 717 45 1901

1including allowances for pension insurance, health insurance, nursing careinsurance, voluntary contributions to employers’ mutual insurance association and non-cash benefits, as well as the CEO allowance of Euro131 thousand for Dr.Georg Müller 2supervisory boardactivities at shareholdings 3from1January 2009

The members of the Executive BoardofMVV Energie AG also acted as executive boardmembers of MVV RHE AG. Since that company’sconversion into alimited company (GmbH), entered in the Commer- cial Register on 13 January 2009, they have acted as managing directors of MVV RHE GmbH. Moreover, Dr.Werner Dub was managing director of MVV GmbH from 1October 2008 until 31 December 2008. The costs of the work performed in these functions werecharged on to the associate companies.

Variable compensation is calculated on the basis of two components –the annual net surplus of the MVV EnergieGroup after minority interests pursuant to IFRS adjusted for extraordinary items under IAS 39, and the ROCE (ReturnonCapital Employed). Asuitable cap is in place. No compensation components of along-term incentive natureweregranted in the year under report.

No further payments wereeither committed or made by thirdparties.

Upon reaching retirement age, the members of the Executive Boardare entitled to receive pension benefits amountingtoacertain percentage of their fixed compensation. This percentage rises by 2% for every full year of service up to amaximum value of 70%offixed compensation. Pension payments arereduced by income earned elsewhere, benefits received under the state pension scheme and any other pension benefits attributable at least in half to employers’ contributions. If the pension benefits areclaimed pre- maturely,then the monthly pension paid is reduced by 0.5%for every month by which the claimant falls short of the applicable retirement age.

MVV Energie 2008/09 35 MVV EnErgiE To Our Shareholders

In the event of any partial reduction in the employee’sworking capacity,partial reduction in working ca- pacity due to occupational disability or total inability to work, the pension benefit amounts to 55 %ofthe employee’sfixed compensation and rises by 1%for every full year of service up to amaximum of 70 %.

One component of the pension scheme involves aclaim to provision for surviving dependents.

The pension obligations arestructured as follows:

Pension obligations Euro000s Value of final Benefit Benefit allocation to pension1 percentage2 percentage3 pension provision Service Interest cost expenses

Dr.Georg Müller 192 36%68% 160 — Matthias Brückmann 144 52%70% 106 12 Dr.Werner Dub 98 58%66% 104 53 Hans-Jürgen Farrenkopf 111 60%66% 162 56 Total 545 532 121

1achievable claim to retirement pension aged 63, taking due account of amounts deducted 2total percentage pension rate achieved for retirement pension 3benefit percentage achievable by the age of 63

Former members of the Executive Boardreceived benefits of Euro332 thousand in the year under report. Provisions totalling Euro5488 thousand have been stated for pension obligations towards former mem- bers of the Executive Board. Atotal of Euro291 thousand was allocated to this item in the financial year.

Pursuant to IAS24, related parties also include management staffperforming key functions. Alongside the Executive Board, this group of persons at the MVV Energie Group also includes active heads of divisionand authorised companyrepresentatives of MVV Energie AG. This group of persons receives its compensation exclusively from MVV Energie AG. Compensation totalling Euro2473 thousand was paid to this group of persons in the year under report, with the predominant share(Euro2381 thousand) involving payments with current maturities. Senior employees receive acompany pension amounting to up to 8.6%oftheir fixed compensation. This exclusively takes the form of adefined contribution plan. Within the channels of execution offered within the Group, senior employees can determine which biometric risks they would like to cover.Total expenses incurred for the aforementioned compensation schemes amounted to Euro 93 thousand in the year under report.

36 MVV Energie 2008/09 Compensation of Supervisory Boardmembers The compensation of our Supervisory Boardmembers is commensurate to their duties and to the respon- sibilities they assume.

The members of the Supervisory Boardreceived annual compensation of Euro10thousand each in the 2008/09financial year,with the Chairman of the Supervisory Boardreceiving twice and his deputy one and ahalftimes this figure1.The Chairman of theAudit Committeereceived additional annual compensation of Euro5thousand and the other members of this committee received additional annual compensation of Euro2.5 thousand. Moreover,until March 2009 ameeting allowance of Euro300 was paid per person per meeting of the full Supervisory Boardand of the committees. By resolution date 13 March 2009, the Annual General Meeting raised the meeting allowance to Euro1000. In line with the resolution adopted by theAnnual GeneralMeetingon13March 2009, the Chairman of the Supervisory Boardreceives double the meeting allowance for meetings of the Supervisory Board, as does the Chairman of the Audit Com- mittee for meetings of the Audit Committee.

Total compensation amounted to Euro358 2422 and was distributed as follows:

Supervisory Boardcompensation Euro Supervisory Meeting Supervisory Meeting Board allowance Board allowance compensation compensation

Dr.Peter Kurz 20 000 11 300 Prof. Dr.Norbert Loos 12 500 9100

Johannes Böttcher 12 500 8400 Manfred Lösch 17 500 10 600

Holger Buchholz 10 000 4500 Dr.Reiner Lübke 10 000 4500

Peter Dinges 6667 4200 Bodo Moray 972 2000

Werner Ehret 10 000 5700 Barbara Neumann 10 000 4500

Detlef Falk 10 000 4200 Wolfgang Raufelder 10 000 4200

Dr.Rudolf Friedrich 10 000 3500 Sabine Schlorke 10 000 3500

Dr.Manfred Fuchs 15 000 13 400 Dr.Rolf Martin Schmitz 5833 1500

Dr.Stefan Fulst-Blei 10 000 5700 Uwe Spatz 3333 1500

Reinhold Götz 12 500 8400 Christian Specht 10 000 4500

Prof. Dr.Egon Jüttner 10 000 5400 Dr.Dieter Steinkamp 2278 1000

Klaus Lindner 11 458 6100

1Supervisory Boardmembers joining or retiring from the Supervisory Boardduring the financial year receive prorated compensation in line with the duration of their membership 2the amount reported corresponds to the precise settlement of compensation for current Supervisory Boardmembers and for those members who retired in the year under report

MVV Energie 2008/09 37 MVV EnErgiE To Our Shareholders

DeclarationofConformity

The Executive and Supervisory Boards of MVV Energie AG hereby confirm that the company has complied with andcontinues to comply with the recommendations made by the German Corporate Governance Code Government Commission. In respect of the past, this Declaration refers to the version of the German CorporateGovernance Code dated 6June 2008 and published by the Federal Ministry of Justice in the officialsection of theelectronicFederal OfficialGazette on 8August2008. With regardtothe future, it refers to the recommendations of the new version of the Code dated 18 June 2009 and published in the official section of the electronic Federal Official Gazette on 5August 2009.

The following recommendations werenot and arenot complied with:

Deductible for D&O insurance –Point 3.8 (2) (in the version dated 6June 2008): “If the company takes out aD&O (directors’ and officers’ liability insurance) policy for the Management Boardand Super­ visory Board, asuitable deductible shall be agreed.” Point 3.8 (3) (in the version dated 18 June 2009) until 1July 2010: “A similar deductible must be agreed upon in any D&O policy for the Supervisory Board.”

The D&O insurance policy at MVV Energie AG, which protects the insured parties against possible claims for damages, previously did not provide any insurance cover for intentional wrongdoing or wilful negli­ gence on the part of members of the Executive and Supervisory Boards, neither did it cover against their knowingly committing any dereliction of duty.The issue of deductibles thereforeonly applied to negligent behaviour. To date, the Executive and Supervisory Boards saw themselves as being committed without qualification to the motivation and responsibility with which they performed their duties and did not believe that this required clarification in the form of adeductible. MVV Energie AG will of course comply with the legal requirements governing deductibles in D&O insurance policiesfor Executive Boardmembers from 1July 2010 onwards. In line with the recommendation made in Point 3.8 (3), we will also agree a deductible for members of the Supervisory Boardfrom1July 2010 onwards.

Nomination committee–Point 5.3.3: “The Supervisory Boardshall form anominationcommitteecom­ posedexclusively of shareholder representatives which proposes suitable candidates to the Supervisory Boardfor recommendation to the General Meeting.”

The Supervisory Boardsees no need to form anomination committee, which would oblige it to forego its proven procedureofnominating candidates for the Supervisory Boardatmeetings of the full Supervisory Board.

Performance-related compensation for members of the Supervisory Board–Point 5.4.6 (2) Sentence1:“Members of the Supervisory Boardshall receivefixed as wellasperformance­related compensation.”

The Articles of Incorporation of MVV Energie AG only provide for the fixed compensation of the Super­ visory Board, plus ameeting allowance. MVV Energie AG already commented in the past that it was not convinced by models linking the compensation of Supervisory Boardmembers to the level of dividend or to the shareprice. We have thereforerefrained from introducing any performance­related compensation components for members of the Supervisory Board.

This Declaration of Conformity is also available at our company’swebsite at www.mvv-investor.de.

38 MVV Energie 2008/09 Report on theComplianceSystem

MVV Energie introduced acomprehensive and stringent compliance system in the 2008/09 financial year. Theorganisational structures, processes and responsibilities thereby required weredetermined and the head of thegroup legaldepartmentappointed as GroupComplianceOfficer.

In thepast2008/09 financial year we provided thoseemployees with contacttocustomers in thesales, energy-related services and environmental energy businesses with detailed training as to how corruption is to be combated and as to the correct forms of behaviour when offered non-monetary gifts and invitations. Allmanagementstaff have been briefedonMVV’s compliance system.Furthermore,wehavecompiled an extensiveComplianceHandbook, whichhas been made availabletoall employeesaspartofthe MVV Management Handbook on theintranet. Here,all company employees can find the relevant regulations and explanations, together with contact partners to approach in cases of doubt.

We have laid down specific business processes for the compliance system. Gratuities and invitations are recorded and all business fields, divisions, group departments and subsidiaries aresystematically inspected on asample basis during the year and within acomprehensive audit once ayear.Employees wishing to provide any tip-offs can use the “whistleblower hotline” we have set up. At the end of the financial year, each manager responsible must confirm that legal requirements have been complied with and that the employees have been briefedand trained.Confirmation is provided using aprescribed questionnaire tailored to specific circumstances at the business unit.

MVV’scompliance system was audited by the group internal auditors in the 2008/09 financial year and assessed as being appropriate to its function.

Over and above the training already in place for newly appointed managers, we plan to provide systematic training to upcoming management staffinall areas of responsibility as well. To this end, the personnel development, group organisation, technical and group legal departments have jointly prepared asuitable seminar to inform participants on basic features of management responsibility at the MVV Energie Group. From April 2010, the seminar will be obligatory for all levels from section managers upwards.

MVV Energie 2008/09 39 MVV EnErgiE group Management report

40 MVV Energie 2008/09 GroupManagementReport

42 _Business Framework 52 _Business Performance 68 _Sustainability 78 _Events After the Balance Sheet Date 78 _Opportunity and risk report 81 _Outlook

MVV Energie 2008/09 41 MVV EnErgiE group Management report

BusinessFramework Energy Policyand Regulation

Within the increasingly international energy market, the Electricity: further improvements in market design MVV Energie Group sees its role as that of amajor municipal In the electricity market, the MVV Energie Group has called for energy supplier acting on anational and European stage. We greater efficiency based on amarket design driven by competi- campaign in the political arena and within our industry for a tive considerations. One focus hereinvolves the reform of the competitive framework which provides all market players with settlement mechanism governed by the German Renewable thesame opportunities. We actively accompany legislative and Energies Act (EEG), which was adopted by the Federal Parliament regulatory processes in the interests of further enhancing mar- on 3July 2009. Starting in 2010, this will considerably reduce ketdesigninGermanenergymarkets. risks in the sale of electricity,asthe electricity generated at EEG TheMVV EnergieGroup hasalready promoted therestructur- plants will no longer have to be physically collected by suppli- ing of the energyindustry in the lightofclimateprotection ers. Moreover,therewill be greater transparency concerning and supply security by investing in renewable energies and the settlement of the actual costs of EEG promotion in future. high-efficiency cogeneration for many years now. MVV Energie has already long campaigned for the enhance- ment of German electricity transmission grids. One key demand Competition gaining momentum on the gas market involves the abolition of conflicting regulations in the various control areas. The MVV Energie Group has long called for barriers to trad- ing and sales in the gas market to be removed. MVV Energie We thereforewelcome the proposal made by the Federal played an active role in the establishment of aGerman gas Networks Agency to net requirements and only to procure exchange, as well as in the substantial improvements in gas the net balance. The increasing cooperation currently seen grid access andmeasurestofacilitatecustomerand supplier betweentransmission grid operators in the procurement of changes introduced by the Federal Networks Agency (BNetzA). balancing energy represents another step in the right direction. We hope to see afurther substantial improvement in com- These measures have improved the competitive climate in the gas petitive conditions as aresult of increased coordination and market and enabled us, as one of the pioneers in the industry, cooperation between transmission grid operators. This should to launch nationwide sales of natural gas as of 1October 2008. result in the pooling of control areas and joint operations To identify the barriers to competition still in place we commis- management for all German transmission grids. We expect sioned asurvey whose recommendations have met with great this step to lead to asignificant improvement in market trans- interest among politicians, at regulatory authorities and within parency,closer cooperation and astandardisation of capacity our industry. auctions, processes and grid expansion planning. Furthermore, this would accelerate the change in grid operators’ perception One major group of topics involves making better use of avail- of their role towards that of “market facilitators”, i.e. as opera- able transmission and storage capacities not based on any tors and promoters of amarketplace on which intense com- physical overload of transmission grids. We support the plans petition is lived. All in all, the factors outlined above should to remove contractual bottlenecks, maximise disposable grid improve market efficiency and thus assist the sales and trad- capacities, optimise allocation and promote secondary trading. ing businesses of the MVV Energie Group. We expect these measures to bring substantial benefits for the expansionofour gassales activities. Grid regulation Since October 2009, the grid fees charged by inter-regional long-distance gas grid operators have also been regulated by The economic position of grid operators is largely determined by the Federal Networks Agency.Weexpect this to lead to greater the regulation of grid fees in the electricity and gas businesses. transparency and efficiency,for example in terms of the fees Fee reductions and the futuredevelopment in revenue caps rep- charged for transmissions between market regions and for resentamajor challenge. Alongside the guaranteeing of secure, balancing group management. We welcome the active role high-quality grid operations, revenue andcost management are played by the Federal Networks Agency in further developing thus becoming ever more significant. the gas market.

42 MVV Energie 2008/09 Incentive regulation has been in effect since 1January 2009. Brussels promotes climate protection and competition Based on the last cost approval round and individually cal- By adopting extensive legislative packages (“3rd Internal Energy culated efficiency figures, the Federal Networks Agency has Market Package”,“Green Package”), the European Union has setrevenue caps, initially for four years (gas) and five years set further milestones along the way towards creating pan- (electricity), for each grid operator.The revenue caps form the European energy markets and restructuring energy generation basis for grid utilisation fees. in thelight of climateprotectionconsiderations. Individual inefficiencies identified at the respective grid opera- MVVEnergie hopesthatthe closer integrationofenergymar- tors on the basis of the grid operator efficiency comparison kets will lead to an increase in market liquidityand in procure- now have to be eliminated by 2019. For the grid companies at ment andinvestment opportunities. We expect the work of the MVV Energie Group, the revenue cap for 2009 moreorless thenewly establishedAgencyfor theCooperation of Energy corresponds to the 2008 revenue cap. Court appeals have been Regulators (ACER) to result in afurther harmonisation and filed against assessment notices in some cases, as MVV Energie strengthening of market design on aEuropean level. does not believe that the authorities have correctly accounted for individual circumstances in all cases. Theamendment to the EU’smost important climate protec- tion instrumentswillleadtoafar more standardised EU-wide According to averdict passed by the Federal Court of Justice trading system for CO certificates from 2013, thus eliminating (BGH) on 14 August 2008, electricity and gas grid opera- 2 many of the market distortions still in place. In terms of the tors should offset the additional revenues generated in the furtherdesignofemissions trading, theMVV EnergieGroup period between submission of their applications and the tak- is campaigninginparticular for appropriate acknowledgement ing effect of the first grid fee approvals in subsequent peri- of the special role played by district heating based on highly- ods. Theregulatory authorities areexpected to start offset- efficient cogeneration. ting theseadditional revenues against the revenue cap from 1January 2010 onwards. The current legal status means that no provisions may be recognisedfor thisitem in the IFRS Market surveillance by Federal Networks Agency consolidated financial statements of the MVV Energie Group. By meeting its market surveillance obligation, the Federal Some questions concerning cost recognition arestill unsolved Networks Agency is making an ever moreimportant contri- within incentive regulation. Discrepancies between regulatory bution towards greater energy market transparency.The pub- practice at different state authorities concerning the absorp- lications of the Federal Networks Agency enable remaining tion of additional revenues present grid operators with differ- obstacles to the development in competition to be identified, ing scales of challenge. The Federal Networks Agency has set especially in terms of the use of auction revenues from cross- astandardmaximum price for energy system losses across the border supply shortage management, the deployment of bal- sector (Euro44/MWh) which is not based on the relevant level ancing energy and contractual bottlenecks in the gas storage of market prices. Cost-covering procurement is thus not pos- market. sible. We believe that costs incurred for energy system losses should be recognised in full within incentive regulation.

Furthermore, distribution grid operatorsare dependent on the Federal Networks Agency approving the costs of upstream grids punctually and deciding on investment budgets in good time, so that these costs can be accounted for in revenue caps for distribution grid operators. Discussions arestill underway concerning the specific structureofquality regulation due to apply from the second regulation period (2014 for electricity and most likely 2013 for gas).

MVV Energie 2008/09 43 MVV EnErgiE group Management report

Market Climateand Competition

Market position of theMVV EnergieGroup At US$ 59 per barrel, the average price was significantly lower ELECTRICITY: accordingtothe 2007 BDEW rankingpublished in April2009 than in the previous year.Parallel developments werealso seen we wereGermany’s sixth-largest electricity supplier in termsofturnoverwith endcustomers. in prices on national and international natural gas and coal

GAs: sincethe 2008/09 financial year,wehavebeensuccessfullyoperating in markets: EEX prices for the natural gas product Cal10 in the the nationwide gasbusinesswith ourinnovativeGas Fund models. NCG(NetConnect Germany) market region fell during the year DIsTRICT HEATING: with districtheating turnoverofaround6.1 billion kWh under report from Euro35/MWhtoEuro15/MWh. Front year in the 2008/09 financial year,MVV Energieisone of Germany’stop five districtheating providers. prices forhardcoal in the ARA region (Amsterdam, Rotterdam,

ENERGY-RELATED sERVICEs: with salesofEuro308 million in the value- Antwerp) dropped from US$ 151 per metric tonne at the begin- added services segmentinthe 2008/09 financial year,weare one of Ger- ning of October2008 to US$ 82 per metric tonne in September many’s leadingproviders of energy-relatedservices. 2009. Part of the decline in hardcoal prices was attributable ENVIRONMENTALENERGY: with incineration capacities of 1.5million tonnes ayear,MVV EnergieisGermany’s third-largestoperatorofenergyfrom to the development in cargo rates.Sea freight pricesbetween wasteplants. Richards Bay,the most important coal handling port for Europe, and the ARA region temporarily exceeded US$ 60 per tonne (spotmarket) in summer 2008 but weredown to US$ 11 per Macroeconomic framework tonne at the end of the 2008/09 financial year. The German economy underwent the severest recession since Listed prices for EU emissions rights tracked the downturnon World WarTwo in the past 2008/09 financial year.Inthe first energy markets. At an average of Euro15per tonne of CO , twoquarters, gross domestic product dropped compared with 2 prices for supply in the following year in each case weresig- theequivalentperiods in thepreviousyear. In particular,the nificantly lower in the year under report than in the previous declineinindustrialproductionled to alower volume of en- 2007/08 financial year. ergy consumption. The average price of electricity for supply in the following At thebeginning of the2nd half of thefinancialyear, various year amounted to Euro54/MWh in the 2008/09 financial macroeconomicindicatorspointed towardsrecovery,albeit at year (basic load). Prices thus reduced by morethan 20 % alow level. The Federal Statistics Office expects GDP to have compared with the previous financial year.Price levels on grown by 0.8%inthe 3rd quarter of 2009 compared with the wholesale markets in Germany weremainly influenced by the previous quarter.With regardtofuturedevelopments, reference significant year-on-year reduction in primary fuel prices and is made to the information provided in the Outlook starting on the fall in listed CO rights prices. Moreover,the decline in Page 81. 2 economic outputalso ledtodecreased electricity consumption The recession also impacted on our foreign market, the Czech at industrial customers. Republic. Based on preliminary figures from the Czech CSU Demand for gas and electricity in Germany fell significantly statistics office,the economycontracted by 4.9 %inthe in the first nine month of 2009 compared with the same pe- 2nd quarter compared withthe sameperiodinthe previous riod in theprevious year.According to the BDEW,electricity year.According to the Finance Ministry in Prague, the Czech requirements dropped by around 7%,while gas requirements Republic must expect to see a4.3%downturninGDP in 2009. also fell by around7%. Thisdecline in consumptionprimarily reflects the ongoing weakness in industrial output. Demand Energy markets received support, on the other hand, from cooler weather con- ditions at the beginning of the year and from energy demand In the 2008/09 financial year,primary energy prices wereaf- among private households and in the services sector,both of fected in particular by the fall in demand for commodities in which arerelatively immune to macroeconomic developments. the wake of the global economic and financial crisis (please see charts below). Listed prices for North Sea Brent oil ranged betweenUS$ 41 and US$ 96 per barrel between October 2008 andSeptember 2009 (Reuters IP Brent Index front month).

44 MVV Energie 2008/09 Developmentintradingpricesfor electricity andgas (Euro)

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MVV Energie 2008/09 45 MVV EnErgiE group Management report

Impact of WeatherConditions

The business performance of our group of companies is heavily 2008), the 2nd quarter (January to March 2009) was colder dependentonweather conditions. Cold outdoor temperatures than in theprevious year.Degree day figures, the indicator during the heating period (especially from October to April) we use to measureheating energy requirements, were18% have apositive impact on the district heating and gas turnover higher than the previous year’sfigureinthe 2nd quarter.An of theMVV EnergieGroup.Sustained high temperatures and unusually warm April was then followed by uneven weather low precipitation in the summer months particularly benefit conditions in the summer months of 2009. water turnover.However,this factor is of less significance for Allinall, measured in terms of average temperatures it was the earnings performance of our Group than the district heat- marginally warmer during our 2008/09 financial year (October ing and gas businesses. 2008 to September2009) than in thecorresponding previous Overall, weatherconditions in the 2008/09 financial year were year’speriod. Aggregate degree day figures at our group of characterised by sharp fluctuations between individual months. companies in the 2008/09 financial year were0.6%lower Following arelatively mild 1st quarter (October to December than the previous year’sfigures.

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46 MVV Energie 2008/09 Overview of Shareholdings andBusinessActivities Selectionofdirectand indirectshareholdings of MVV EnergieAG

Municipal utility shareholdings Shared services and sales companies

MVV RHE GmbH (100%) 24/7 Netze GmbH 2 Mannheim

Stadtwerke Kiel Aktiengesellschaft (51%) 24/7 Trading GmbH 3 Mannheim

Köthen Energie GmbH (100%) 24/7 IT-Services GmbH 4 Kiel

Stadtwerke Solingen GmbH (49.9%) 24/7 Metering GmbH 5 Offenbach

Energieversorgung Offenbach Aktiengesellschaft (48.61%) 1 24/7 United Billing GmbH 6 Offenbach

Stadtwerke Ingolstadt Beteiligungen GmbH (48.4%) 24/7 Insurance Services GmbH 7 Mannheim

Stadtwerke Buchen GmbH &Co. KG (25.1%) SECURA Energie GmbH 8 Mannheim

Stadtwerke Schwetzingen GmbH &Co. KG (10%)

MVV Energie CZ a.s. Czech Republic (100%)

Environmental energy and energy-related services

MVV Umwelt GmbH (100%) MVV Energiedienstleistungen GmbH (100%) 9

MVV O&M GmbH (100%) 35 majority shareholdings in the business fields of:

MVV BioPower GmbH (100%) Contracting

–MVV TREA Leuna GmbH (100%) Energy efficiency and management

MVV BMKW Mannheim GmbH (100%) Industrial parks

BHG Biomasse Handelsgesellschaft mbH (100%) Consulting

Biomasse Rhein-Main GmbH (33.33%)

MVV Environment Ltd. UK (100%)

MVV Umwelt Ressourcen GmbH (100%)

1majority of voting rights 2MVV EnergieaG(70%),EnergieversorgungoffenbachaG(30%) 3MVV EnergieaG(54.9%),StadtwerkeKielaG(25.1 %),EnergieversorgungoffenbachaG(12.5%), Stadtwerke Solingen GmbH (5%),StadtwerkeIngolstadtEnergieGmbH(2.5%) 4MVV EnergieaG(50%),StadtwerkeKielaG(50%) 5MVV EnergieaG(49%),EnergieversorgungoffenbachaG(51 %) 6EnergieversorgungoffenbachaG(70%),StadtwerkeKielaG(30%) 7MVV EnergieaG(68.4%),StadtwerkeKielaG(14 %),EnergieversorgungoffenbachaG(17.6%) 8MVV EnergieaG(54.9%),rheinEnergieaG(25.1 %),EnergieversorgungoffenbachaG(15 %), Stadtwerke IngolstadtEnergieGmbH(5%) 9new focusareasresulting from MVV2020

Status:30September 2009

MVV Energie 2008/09 47 MVV EnErgiE group Management report

OurCorporate Strategy:MVV Energie–Energisingthe Future

As apublicly listed energy supplier,MVV Energie can rely on The increase in competition is one of several factors exerting asustainable well-balanced portfolio of business fields –elec- pressureonmargins. Alongside the regulation of grid fees, fur- tricity,district heating, gas, water,energy-related services and ther significant factors in this respect include the expiry of the

environmental energy.Driven by the concept of ahorizontal allocation of CO2 certificatesfreeofcharge and unbundling network, we have achieved notable success in recent financial requirements,which will lead to considerable costs due, for years, and that in spite of difficult markets and underlying con- example, to the introduction of new IT systems. At the same ditions. So what strategic decisions have we taken to secure time, the changes in our industry arealso generating growth the futuresuccess of our group of companies? opportunities. Twoexamples hereare the new business fields of energy efficiency and renewable energies.

We aresecuring tomorrow’senergy today Our claim: Energising the Future As part of the MVV 2020 strategy project carried out between Marchand September 2009 we analysed the medium to long- The MVV Energie Group’snew alignment enables its compa- term challenges facing ourGroup.Inthis, we addressedthe nies and employees to draw on their strengths at their various specific challenges facing each individual level of the value locations and to exploit their regional identities. By ensuring chain. We identified the resulting strategic options and then cooperationbetween all of the shareholdings in our Group, integrated these into agroup strategy. This intensive work we areable to achieve significantly greater efficiency and make was jointly performed by managers and experts at our most moretargeted use of our joint expertise. At the same time, important companies. we thus provide our shareholdings with afar wider range of regional entrepreneurial opportunities.

Conflictinginterestsinour sector We arefocusing on three key aspects:

The energy supply industry faces far-reachingchangesinthe • Efficiency coming years, aprocess which will present the industry with • Regionalism considerable challenges but one which also offers new op- • Sustainability portunities. Political requirements, such as the introduction of Our claim across all areas of activity is that of operational excel- CO certificates and the promotion of the use of renewable 2 lence. This means that, alongside strategic options, we have energies in the generation of electricity and supply of district also identified areas whereoptimisation is required. Our ob- heating, arefocusing on energy efficiency and climate pro- jective hereisthat of “Once Together”, i.e. the work should tection.This trend is being supported by volatileand often always be performed wherethe best personnel and organi- high energy prices.Overall, the sector faces the prospect of sational conditions areavailable. Our activities aretherefore substantialstructuralchange. as decentralised as possible and as centralised as necessary. At thesametime, consumptionofenergy, especially heating This way,weare also able to boost regionalism, the second key energy,isconsistently falling. In futurethis will also be the case aspect of our strategy.Weaim to retain and strengthen our for electricity.Alongside increasing energy efficiency,anarea regional identities within the Group. We draw on our autono- which is beingstrongly promoted, the role played by demo- mous brands,our contacts with customers and cooperation graphic developments and the economic crisis should also not partners andour successful business models across the Group be underestimated. In all, these developments areleading to to generate growth in our regions. moreintense competition in the industry. The thirdand key success factor in our strategy is sustainability. We see sustainability as involving abalance of the tried and tested andthe new, of short-term contingencies and longer- term perspectives,ofoptimisation and growth, and of security andinnovation.

48 MVV Energie 2008/09 Investments in profitable, value-adding growth These arethe focuses for our investments in the future, for which we intend to make around Euro1.4 billion available We areand will remain an integrated energy company cover- by 2020. Our balance of the new and the tried and tested ing the entirevalue chain. We have derived our investment is also reflected in our investments. Alongside this sum of focuses on this basis: Euro 1.4 billion we also plan to channel afurther Euro1.6 We will invest in EXPANDINGRENEWABLE ENERGIEs. We are billion into supply security,i.e. into our grids and plants. convincedthat the futurelies in renewable energies, regardless All in all, we will thereforebeinvesting Euro3billion over the of how long the period of transition for conventional energies next 10 years. This way,wewill enable the MVV Energie Group lasts. Energy generation is avery long-term business, and we to energise the future–efficiently,regionally and sustainably. will now be switching our portfolio of power plants to “renew- able” on astep-by-step basis. Continually monitoring further opportunities This does not mean that we would want or be able to do without the new BLOCK9ATGROssKRAFTWERKMANNHEIM, The mobilisation of further growth topics depends on the the large power plant in Mannheim, which is afurther focus relevant market circumstances, their ability to retain value, of investment. This is being built and is necessary to ensure developments in profitability,financing opportunities and the the security of the supply of electricity and district heating in possibilityofworking together with suitable partners. Among the Rhine/Neckar metropolitan region. Apart from this, how- others, these topics include building new gas-steam power ever,wewill no longer be expanding the shareofcoal in our plants and expanding the environmental energy segment, as generation activities. We aim to achieve abroader base of well as cooperating with municipal utility companies. generation activities and will thereforebefocusing in future on renewable energies and, wherefavourable opportunities Investigating further topics for the future arise, on otherfuels such as gas. The work undertaken on MVV 2020 gave rise to aseries of Our thirdfocus of investment remains that of ENERGY-RELATED additional topics for the future. We intend to address these sERVICEs. The market for energy efficiency,especially in the in the longer term so as to position ourselves in these poten- industrial sector,isone of the few segments in the energy tial new areas at an early stage. Among others, these topics market for which attractive growth opportunities areforecast. include electromobility,which we arealready promoting to- Within this area, we will nevertheless focus on those business gether with our partner SAP within the “FutureFleet” project fields which we can exploit profitably and with the necessary (please also see Outlook from Page 81 onwards) and smart expertise, namely contracting, energy efficiency consulting, grids, which already form part of the “E-Energy Model City industrial parks and consulting. of Mannheim” project. We see our fourth strategic cornerstone in CONCENTRATING ANDEXPANDINGDIsTRICT HEATING. We have already laid ma- Consistently tracking the implementation jor foundationsatall locations for the profitable exploitation of of our strategy this environmentally-friendly supply of heating energy. To allow us to accompany the implementation of our strategic Our fifth focus, one which requires less investment but is no plansefficiently,wehave established comprehensive reporting less important, is theprofitable EXPANsION OF NATIONWIDE structures enabling us to monitorthe individual processsteps sALEsWITHINDUsTRIAL CUsTOMERs. Here, we aim to consist- at alltimes. entlymaintainand furtherdevelop thesuccessfulcoursewe have taken with innovative products such as the Electricity We areconvinced that, by realigning the strategy in this way, and Gas Funds. we have laid afoundation for the further profitable and value- adding growth of the MVV Energie Group.

MVV Energie 2008/09 49 MVV EnErgiE group Management report

Energy TradingBusinessand Innovative Sales Products

Energy trading business pooled and expanded Acquiring customers with innovative sales activities

The MVV Energie Group pools all of its activities on whole- Developments on the energy markets have also led to sale energy markets at 24 /7Trading GmbH, acompany jointly increased risk awareness among the customers of the owned by MVV Energie AG, Stadtwerke Kiel, Energieversorgung MVV Energie Group and to substantial demand for flexible Offenbach, Stadtwerke Solingen and Stadtwerke Ingolstadt. and innovative products. This has been accounted for by in- tensifying the cooperation between 24 /7 Trading and sales The Group’senergy procurement, management of procure- departments, with thestructured procurement of wholesale ment and generation portfolios and proprietary trading products now customary to the market and portfolio manage- arepooled at 24 /7 Trading GmbH, with all commodities of ment services also being made available with optimised risk relevance for the MVV Energie Group, such as electricity,natu- andcost structures to further groups of customers. With its ralgas andemissions rights,being reported at this company nationwide Electricity Fund, MVV Energie has played apio- together with theassociated physical and financial products neering role in the structured procurement service market in andprice hedgingtransactionsfor coal andoil. Germany. 24 /7Trading GmbH plays an active role both on the European Following its success in the electricity sales market, bilateral(over-the-counter/OTC)wholesale market and on the MVV Energie was one of the first players to successfully enter EEX and EXAA electricity exchanges. This represents acritical the nationwide gas business with multiple location, industrial successfactor for the competitive and professional procure- and commercial customers in the 2008/09 financial year,and ment of energy for the companies in the MVV Energie Group. that in spite of the difficult underlying framework. By analogy To further boost the growth of the MVV Energie Group, all of with theElectricity Fund, since April 2009 the Gas Fund has the activities at 24 /7Trading GmbH werebrought together at enabledour customersinthe gasbusinessaswelltobenefit theMannheim location as of 1January 2009. This has enabled from theMVV EnergieGroup’s experience in structured pro- due account to be taken of the increasing convergence of curement on the wholesale market. wholesale energy markets, especially for electricity and gas. Moreover, it has ensured thatabroad range of competitive For environmentally-awareand price-conscious customers, energy productsismade availabletothe customers of the MVV Energie’sElectricity Fund also makes inexpensive green MVV Energie Group via its various sales structures. electricity available to industrial and commercial custom- ers. For our private customers, green electricity products are The wholesale energy markets on which 24 /7Trading GmbH offered at our various locations and on anationwide basis with is active have undergone far-reaching changes in the course the SECURA Ökostrom product. Alongside SECURA Ökostrom, of the financial and economic crisis. The withdrawal of specu- which supplies 100%electricity from regenerative sources and lative capital from the energy markets has led to adrastic an insurance policy integrated into the price, since October fall in prices and to significantly morevolatile market prices. 2009 SECURA Energie GmbH has also offered aCO-neutral Our professional risk management has shown itself capable of 2 natural gas product. meeting these challenges. The portfolio management in place at the MVV Energie Group has proven to be extremely robust NATURA Biogas is afurther climate-friendly sales product, rep- in this market situation. Notwithstanding the difficult market resenting amixtureofconventional natural gas and biogas climate, it has been possible to significantly expand the busi- produced from regenerative sources. This “green heating ness, particular in the field of gas trading. product”, which will be available from 1January 2010, will enable homeowners to meet the morestringent require- ments of the German Renewable Heating Energy Supply Act (E-WärmeG).

50 MVV Energie 2008/09 Research andDevelopment

One of the key challenges of the futureisthat of ensuring smart energy grids that the energy supply remains reliable while making it more The “Model City of Mannheim” project was launched within sustainable in both economic and ecological terms. In view of the “E-Energy” federal lighthouse project in November 2008. this, our growth-driven business strategy accords high prior- MVVEnergie is acting as lead manager in aconsortium of nine ity to developing forward-looking products, applications and partners.The first studiesweresuccessfully completed at the services relevant to the energy supply.Inthe foreground of end of July 2009, thus laying afoundation for the scheduled our research and development activities areinnovative solu- implementation of newbusiness models and system solutions. tions focusing in particular on the enhancement of decen- Theplanned launch of thesecondround of field trials in the tralised and efficiency-enhancing technologies, as well as on summer of 2010 should now demonstrate the functionality implementing theseinour business fields. We made further of the overall system. By the end of 2011, around 1500 field promisingprogresswith decentralised cogeneration plants for trial participants in Mannheim will be able to benefit from in- privatehouseholds in the year under report. The “Model City novative energy services. In particular,the consortium will also of Mannheim” showcase project promoted by the Federal be addressing futurechallenges facing the grid infrastructure. Government is developing on schedule and has consistently Theplanned system involves acomprehensive solution for a deliveredgood results. high-efficiency energy system based on intelligent networks (smart grids) and residential units (smart houses). It is intended Micro-cogeneration systems for private use to involvecustomers in decentralisedenergymanagement, to give them abetter overviewoftheir own energyconsump- In the 2008/09 financial year we further expanded our devel- tion patterns and to manage the distribution of energy from opment focus on “Cogeneration Systems for Detached and renewable energy sources. Semidetached Houses”using both Stirling engines powered by naturalgas andfuelcellheating appliances.The practical trials carried out with around 40 WhisperGen appliances at smart metering at the MVV Energie Group pilot households at the MVV Energie Group and cooperation Theintroduction of so-called smart meters also represents a partners confirmed the technical, economic and ecological majorsteptowards achievinggreater energy efficiency in pri- benefits of this innovative technology in everyday use. Working vate households. In our field trials for the market launch of on the basis of cogeneration, the gas-powered WhisperGen thenew technology,smart meters arebeing installed across house energy plant simultaneously produces heating energy alldivisions at more than 1000 customers. These customers (maximum:13kW)and electricity(1kW)for detached and t e receive all instruments necessary to track their daily consump- semidetached houses on adecentralised basis, andthuswith- tion and costs. This way,they can identify potential savings outany conduction loss.The electricitygenerated is remuner- and exploit these to their advantage. At the same time, we are ated and fed into the public grid when not required in the investigatinghow we canperform ourmeteringand invoicing household. Depending on heating needs at the pilothouse- services even moreefficiently and inexpensively in futureby holds, up to one tonne of CO and ten percent of primary 2 making optimal use of smart meters. energy could be saved per household per year compared with the separate generation of heating energy and electricity. The expenditureonR&D aimed at optimising processes, prod- uct development and technical enhancements, which has been calculated on the basis of astatistical survey,amounted Fuel cells supply heating energy and electricity to around Euro 6million at theMVV Energie Group in the year Since 2008, MVV Energie has been acooperation partner in underreport (please also see Multi-Year Overview from Page the nationwide “Callux –Fuel Cell for Private Homes” project 158 onwards). MVV Energie employed six technology and in- promoted by theFederal Ministry of Transport, Building and novation managers in the period under report. Furthermore, UrbanDevelopment.MVV Energiehas so farcommenced op- more than 70 employees from other divisions commit asig- erations with nine fuel cell heating appliances powered by nificant portion of their time to supporting R&D in current natural gas at private customers in and around Mannheim innovation projects. and is testing them extensively in terms of their suitability for everyday use over atwo-year period in each case.

MVV Energie 2008/09 51 MVV EnErgiE group Management report

BusinessPerformance Earnings Position of theMVV EnergieGroup

Economic crisis leaves its mark External sales of the MVV Energie Group by segment Euromillion 2008/09 2007/08 %change The implications of the economic and financial crisis have also not left the MVV Energie Group unaffected. Electricity 1760 1382 +27 District heating 294 303 −3 The decline in production accompanying the economic down- Gas 486 356 +37 turn made itself felt in the form of lower demand, especially in Water 101 102 −1 theelectricity business andtoalesserextentatindustrialgas Value-added services 308 277 +11 customers. Companieswithlarge shares of industrial custom- Environmental energy 194 194 — ers wereaffected moreseverely than those with compara- Other/consolidation 18 22 −18 tively low shares of industrial customers. Energy consumption 3161 2636 +20 in other customer segments (private, public sector,multiple location and real estate customers), by contrast, has hardly been affected by the economic crisis. In the value-added services segment we launched operations at the new refuse-derived fuel (RDF) power plant in Korbach, The decline in manufacturing output due to economic devel- consolidated A+S Naturenergie GmbH, Pfaffenhofen, for the opments also led to reduced volumes of industrial and com- first time and extended our supply to real estate customers in mercial waste on the German market. In conjunction with Berlin, thus boosting our sales. extended incineration capacities, the lower volume of waste meantthat waste prices cameunder pressureinGermany.This sales volumes of the MVV Energie Group1 developmentalso impacted on the environmental energy busi- 2008/09 2007/08 %change ness at the MVV Energie Group. By working with intelligent Electricity kWh million 19 582 18 188 +8 materialsflow management, we could nevertheless operate 2,3 our waste incineration plants at the MVV Energie Group at of which wholesale 6939 5797 +20 full capacity. of which retail/secondary distributors 3 12 643 12 391 +2 District heating in kWh million 7217 7006 +3 In the energy-related services business, the industrial park busi- Gas in kWh million 10 851 9166 +18 ness was affected by reduced volumes due to the recession. of which wholesale 3 1529 864 +77

of which retail/secondary distributors 3 9322 8302 +12

sales growth in spite of economic crisis Water in m³ million 53.2 55.1 −3 Combustible waste delivered We wereable to increase our external sales (excluding electricity in tonnes 000s 1599 1550 +3 and natural gas taxes) in spite of the economic crisis and the fur-

therintensification in competition in electricity and gas markets. 1total volumes from all segments Sales improved by 20%compared with the previous year to 2recalculation of proprietary trading in year under report and previous year 3reallocation of secondary distributors in year under report and previous year reach around Euro3.2 billion. We thereforeexceeded the sales forecast for the 2008/09 financial year provided in last year’s management report (around Euro2.8 billion) by aclear margin. Development in further key items in the income statement This substantial increase in sales was driven in particular by growth in the electricity and gas segments. Sales benefited Costs of materials showed disproportionate year-on-year from volume growth in the electricity trading business and in growth compared with sales, rising by 28 %toEuro2344 the nationwide electricity and gas business, as well as from million. This development was due above all to increased en- price increases. The electricity and gas segments areour ergy procurement costs in the electricity,district heating and Group’sstrongest divisions in terms of sales. gas businesses. These costs wereaffected not only by higher volumes, but also by price increases. Costs of purchased serv- ices rose by Euro28million to Euro305 million. These largely involved ahigher volume of third-party services for plant

52 MVV Energie 2008/09 External sales of the MVV Energie Group by segment

Environmental energy Other /consolidation 6% 1%

Value-added services 10%

Water Electricity 3% 56% gas 15%

District heating 9%

Adjusted EBIT of the MVV Energie Group by segment

Environmental energy Electricity 30% 15%

District heating 15%

Value-added services 7%

Water gas 6% 27%

MVV Energie 2008/09 53 MVV EnErgiE group Management report

operation and maintenance. These factors morethan com- market prices as of the balance sheet date. Hedged items are pensated for the cost savings we achieved by pooling materials only recognised upon physical delivery on the performance procurement across our Group’slocations. date. These measurements of energy trading transactions as of the balance sheet dates ultimately balance out over the term Personnel expenses rose by Euro9million (+ 3%)toEuro314 from the contracting date through to delivery.The commodity million in the 2008/09 financial year.The main reasons for this derivativesfor the energy trading business showed negative increase werecollectively agreed pay rises and changes in the fair values at thebalance sheetdatefor the2008/09 financial scope of consolidation. year,ascurrent market prices as of 30 September2009were The development in other operating income and expenses was lower than when the hedge transactions wereconcluded. determined by the mandatory measurement of commodity Given the rise in listed market prices in the previous year as of derivatives as of the balance sheet date required by IAS 39. On 30 September2008,the spot measurement of energy trad- anet basis, expenses of Euro 229 million wereposted in the ingderivatives as of thebalance sheetdatefor the2007/08 year under report due to the substantial year-on-year reduc- financial yearresultedinpositive fair values at our group of tion in market prices for commodities futures (energy trading companies.

derivatives, CO2 emissions rights and coal swaps). This negative valuation item contrasts with the positive valuation item of One-offitem due to restructuring expenses Euro88million reported in the previous year.These high opposing valuation items reflect the sharp fluctuations in prices In September 2009, the MVV Energie Group approved anew on these markets in 2008 and 2009, as well as our position as strategic alignment for the Group on the basis of its MVV 2020 anet buyer on the wholesale market. The spot measurement strategy project. Among other measures, the implementation of commodity derivatives as of the balance sheet date is not of the new strategy requires arealignment of the energy- cash-effective and has no influence on our operating business. related services subgroup. To this end, arestructuring plan was compiled and approved beforethe end of the year under ExcludingIAS 39 valuationitems,other operatingincome report. This aims to achieve sustainable efficiency and earnings rose year-on-year by Euro44million to Euro122 million. This enhancements at the energy-related services subgroup. The increase was chiefly due to reversals of provisions, sales of restructuring plan triggered event-specific impairment tests emissions rights and disposals of assets. The other operating under IAS 36. These made it necessary to post impairment income generated from the sale of emissions rights was coun- losses in the 2008/09 financial year.The restructuring expenses tered by other operating expenses partly offsetting this item. for the 2008/09 financial year mainly involve impairments of assets. Moreover,other items have also arisen and have been Notes on the fair value measurement recognised as provisions for restructuring. The restructuring of commodity derivatives expenses amount to around Euro33million in total.

MVV Energie procures the electricity volumes required for its customers via 24 /7 Trading GmbH from external trading Reconciliation with adjusted EBIT used partners or on the exchange. The procurement agreements for management purposes thereby contracted act as hedges for customer sales contracts For internal management purposes we refer to adjusted EBIT, with delivery at later dates, so-called hedged items. To mini- i.e. to operating earnings beforeinterest and taxes exclud- mise risks and to hedge against price risks, we cover these ingthe impact on earnings of the fair value measurement hedged items promptly with hedging transactions (especially of commodityderivatives as of the balance sheet date re- futures contracts). These hedges (financial instruments) have quired by IAS 39 and excluding the aforementioned one-off to be measured at current market prices as of the balance restructuring expenses. In the interests of comparability and sheet dates (IAS 39). Procurement agreements contracted transparency,wecommentinour financial reporting on the and retained to cover expected proprietary procurement and earnings position of the MVV Energie Group and the earnings sales needs generally do not requiremeasurement at current performanceofour business segments on the basis of this key

54 MVV Energie 2008/09 Electricity sales of the MVV Energie Group in Euromillion

1800 1 760 1600 1400 1382 1200 1079 1000 966 882 800 600 400 200 0 2004/052005/06 1 2006/07 1 2007/08 1 2008/09 1

1proprietary electricity tradingsales reported on anet basis, i.e. only showingthe grossmargin generated

District heating sales of the MVV Energie Group in Euromillion

350 300 303 294 276 272 250 250 200 150 100 50 0 2004/052005/062006/07 2007/08 2008/09

Gas sales of the MVV Energie Group in Euromillion

500 486 450 447 400 366 350 342 356 300 250 200 150 100 50 0 2004/052005/062006/07 2007/08 2008/09

MVV Energie 2008/09 55 MVV EnErgiE group Management report

earnings figure, as it provides amoremeaningful indication of Presentation of adjusted annual net surplus our ongoing earnings strength. With our adjusted annual net surplus and adjusted annual net surplus after minority interests we have reported our two Reconciliation of EBIT (income statement) with adjusted EBIT key net income figures following adjustment for the fair value Euromillion 2008/09 2007/08 +/– change measurement of commodity derivatives as of the balance

EBIT as reported in income statement −23337 −360 sheet required by IFRS and for one-offrestructuring expenses. Financial derivatives measurement item 229 −88+317 We have also eliminated the IAS 39 item when determining adjusted taxesonincome. Theone-off restructuring expenses Restructuring expenses 33 —+33 arelargely not deductible for tax purposes. =Adjusted EBIT 239 249 −10 Ouradjusted EBT decreased by Euro16million (– 9%)from Euro 181 millioninthe previous year to Euro 165 million in the Adjusted EBIT for 2008/09 within expected range 2008/09financialyear. Thetax rate forthe 2008/09financial in spite of economic crisis year based on adjusted EBT amounts to 32.4 %(previous year: 31.2%). Our Group managed to absorb the effects of the economic crisis felt across all sectors comparatively well. The adjusted EBIT Based on the EBT of Euro–96 million reported in the in- generated by the MVV Energie Group in the 2008/09 financial come statement (previous year: Euro269 million), the tax year amounted to Euro239 million and werethus slightly lower rate amounts to 22.2%(previous year: 31.2%). The low tax (– 4%)than in the previous year (Euro249 million). Despite the rate in the year under report was primarily due to deferred economic crisis, we thus managed to meet the earnings forecast taxincome from the IAS 39 valuation item. The income tax provided in last year’sgroup management report. The marginal expenses of Euro–21 million stated for the year under re- year-on-year decline in adjusted EBIT was chiefly due to the elec- port consist of current taxes of Euro37million and deferred tricity and environmental energy segments. The reasons for the taxes of Euro–58 million (tax income). The previous year’s decline in segment earnings areoutlined on Page 58 onwards. income tax expenses of Euro84million included current taxes of Euro56million and deferred taxes of Euro28million (tax Adjusted EBIT of the MVV Energie Group by segment expenses). Deferred taxeswereaffected by IAS 39 valuation Euromillion 2008/09 2007/08 %change itemsbothinthe year underreport and in the previous year.

Electricity 35 64 −45 Net of restructuring expenses and having deducted taxes District heating 36 38 −5 on income adjusted for the commodity derivatives meas- Gas 66 35 +89 urement item, the adjusted net surplus for the 2008/09 fi- Water 14 10 +40 nancial year amounted to Euro112 million (previous year: Value-added services 18 20 −10 Euro123 million). Environmental energy 71 81 −12 Having accounted for the shareofearnings attributable to Other/consolidation −1 1−200 minority shareholders,the MVV Energie Group reported an 239 249 −4 adjusted net surplus after minority interests of Euro98mil- lion for the year under report, compared with afigureof Euro110 million in the previous year.

Calculated on this basis, adjusted earnings per sharefor the 2008/09 financial year amounted to Euro1.48, as against Euro1.69 in the previous year.Asaresult of the capital in- crease in October 2007, the weighted annual average number of shares rose from 65.3 million to 65.9 million in the 2008/09 financial year.This factorreduced adjusted earnings per share by one cent.

56 MVV Energie 2008/09 Water sales of the MVV Energie Group in Euromillion

120 106 107 100 104 102 101 80 60 40 20 0 2004/052005/062006/07 2007/08 2008/09

Value-added services sales of the MVV Energie Group in Euromillion

350 300 308 277 250 263 200 150 149 107 100 50 0 2004/052005/062006/07 2007/08 2008/09

Environmental energy sales of the MVV Energie Group in Euromillion

250 200 194 194 193 184 150 131 100 50 0 2004/052005/062006/07 2007/08 2008/09

MVV Energie 2008/09 57 MVV EnErgiE group Management report

Earnings position at our shareholdings segment performance in the energy business

Electricity turnover of the MVV Energie Group1 Our German municipal utility shareholdings in Kiel, Offenbach, kWh million 2008/09 2007/08 %change Ingolstadt, Solingen and Köthen and the twelve district heat- 2,3 ing shareholdings at our wholly-owned Czech subsidiary Wholesale 6939 5797 +20 MVV Energie CZ a.s. generated sales of Euro1222 million Industrial and commercial customers/ secondary distributors 3 9902 9735 +2 prior to consolidation in the 2008/09 financial year.The previ- Private and business customers 1828 1898 −4 ous year’ssales (including the Polish subgroup) amounted to 18 669 17 430 +7 Euro 1138 million (+7%). All of the aforementioned share- holdings reported sales growth. 1excluding electricity turnover in environmental energy and value-added services segments 2recalculation of proprietary trading in year under report and previous year As aresult of the period of high coal and oil prices, the ma- 3reallocation of secondary distributors in year under report and previous year jority of our municipal utility shareholdings raised their prices in the electricity,district heating and gas businesses at the Our electricity turnover rose year-on-year by 7%to 18.7 bil- beginning of the 2008/09 financial year and in some cases as lion kWh. This growth was driven by the expansion in the of 1January 2009. Given the reduction in listed oil prices, all electricity trading business. Substantial volume growth in shareholdingsintroduced double-digit percentage cuts in their the nationwide sale of electricity to industrial, commercial gasrates as of 1April 2009.MVV EnergieAGalsoreduced its andsecondary distribution customers enabled us to more district heating rates as of the same date. than compensate for the reduction in volumes at industrial customers in the end customer business on account of the Adjusted EBIT at our municipal utility and district heating economic crisis. Due to competitive factors, our electricity shareholdings decreased year-on-year by Euro1million (– 1%) turnover with private and business customers declined by to Euro111 million. 4%.The rate of private household customers changing sup- The cost-cutting and efficiency enhancement measures already plier at our Group was lower than the national average of introduced by Stadtwerke Kiel AG (SWK) arebeing upheld. around 21 %calculated by the Federal Association of the Of crucial importance for SWK is the futurealignment of the German Energy and Water Industries (BDEW) in September powerplant Gemeinschaftskraftwerk Kiel (GKK). As well as an 2009. Our low rate of customers changing supplier is the re- extensiontothe plant'slifecycle,alternativestocoal, the fuel sult of successful customer retention measures and attractive currently used, arealso under review. electricity products.

In December 2008, the supervisory boards of Stadtwerke Electricity sales (excluding electricity taxes) grew by 27%to Velbert and the investment company of the town of Velbert Euro1.8 billion. This growth was driven by volumes and prices. decided against Rheinisch-Bergischer Stadtwerke-Verbund Notwithstanding this sales growth, adjusted EBIT in the electric- (RBSV), an association of the municipal utility companies of the ity segment fell year-on-year by Euro29million to Euro35mil- townsofSolingen, Remscheid and Velbert due to be launched lion (– 45 %).The reduction in earnings was attributable to nu- on 1January 2009. Following the failureofthis three-way merous individual factors. The main causes included increased merger with Velbert, the municipal utility companies in performance and CO costs for electricity procurement, lower Remscheid and Solingen investigated the possibility of agrid 2 revenues from electricity generated at proprietary power cooperation and rejected this at the end of September 2009. plants, positive one-offeffects in the previous year,the costs Overall, it was apparent that the regulatory risks virtually bal- of building up sales activities at SECURA Energie GmbH and anced out the synergies expected from ajoint grid company. the effects of the economic crisis. The economic downturn led to aproduction-related decline in turnover in the industrial customerportfolioand to lossesonthe resale of electricity volumes not required. The losses incurred on resale resulted from thedifference between original procurement prices on the futures market and current market prices.

58 MVV Energie 2008/09 District heating turnover of the MVV Energie Group1 Unlike in the previous year and by analogy with the electric- kWh million 2008/09 2007/08 %change ity segment, following the introduction of anew controlling District heating andmanagement system we now report sales activities with Secondary distributors 691 686 +1 industrial and commercial customers and those with secondary Industrial and commercial distribution customersincombined form in the gas segment. customers 1054 1638 −36 The year-on-year increase in sales by Euro130 million (+ 37%) Private and business customers 3004 2900 +4 was due first and foremost to volume growth and to the de- 4749 5224 −9 layed introduction of price increases at our companies as of steam 1October 2008 and in some cases also as of 1January 2009. Industrial and commercial customers 188 337 −44 Thesewereattributabletothe sharp riseinoil prices in the 4937 5561 −11 previous year.Inthe wake of falling oil price listings, gas prices werecut by double-digit percentage amounts in the course 1excluding district heating turnover in environmental energy and value-added services segments of the 2009 calendar year.Overall, gas rates at the end of the reporting year wereinsome cases lower than in October 2006. Sales volumes in the district heating segment fell year-on-year Adjusted EBIT in the gas segment improved by Euro31mil- by 624 million kWh (– 11%) to 4937 million kWh, while sales liontoEuro66million. This increase was driven in particu- dropped by Euro9million (– 3%)toEuro294 million. These re- lar by strong volume growth and the resultant positive mar- ductions werelargely due to adeconsolidation item. Excluding gin effects, as well as by the aforementioned price factors. the sales volumes supplied in the previous year through to Furthermore, earnings benefited from one-offincome on the the sale of the Polish shareholdings (639 million kWh), our sale of two local gas grids at the Mannheim subgroup and district heating turnover showed aslight year-on-year increase prorated revenues on the sale of agas cavernatthe Kiel sub- of 0.3%.Sales in the district heating segment excluding the group. Further positive earnings items included the reversal Polish deconsolidation item (Euro26million) grew year-on- of provisions and cost savings due to the optimisation of gas year by Euro17million (+ 6%). procurement for special contract customers. Adjusted EBIT in the district heating segment decreased by Euro2million to Euro36million (– 5%). This reduction was Water turnover of the MVV Energie Group1 attributable in particular to the deconsolidationofour Polish m3 million 2008/09 2007/08 %change activities in the previous year. Secondary distributors 5.4 5.3 +2 Industrial and commercial customers 3.7 4.3 −14 Gas turnover of the MVV Energie Group1 Private and business customers 43.8 45.2 −3 kWh million 2008/09 2007/08 %change 52.9 54.8 −3 Wholesale 2 1529 864 +77

Industrial and commercial customers/ 1excluding water turnover in value-added services segment secondary distributors 2 5193 3860 +35 Private and business customers 3756 3907 −4 Turnover in the water segment decreased by 3% to 52.9 mil- 10 478 8631 +21 lion m3 in the year under report. The water business is heavily dependent on private and business customers, who account for 1excluding gas turnover in environmental energy and value-added services segments around 83%ofour water turnover.The decline was chiefly the 2reallocation of secondary distributors in year under report and previous year result of lower water turnover in Kiel. The steady reduction in volumes also felt at other water supply companies in Germany In the gas segment, sales volumes rose to 10.5 billion kWh, is areflection of moresparing consumption, for example due up 21%onthe previous year.This strong growth was driven to increasing use of water-efficient household appliances. above all by increased sales volumes in the nationwide gas busi- ness.MVV Energie AG already supplied around 1.1 billion kWh of gasinthe first year of activity in its successfully established nationwide gas business.

MVV Energie 2008/09 59 MVV EnErgiE group Management report

Water salesfell by 1% to Euro101 million, mainlyon Environmental energy turnover and incineration volumes of the MVV Energie Group account of lower volumes. Adjusted EBIT nevertheless rose by 2008/09 2007/08 %change Euro4million to Euro14million. Alongside cost savings, this Electricity turnover (including improvement was due above all to lower maintenance costs. secondary distributors) in kWh million 388 387 —

Steam turnover in kWh million 401 415 −3 Contracting: energy and water turnover of the MVV Energie Group Combustible waste delivered 2008/09 2007/08 %change in tonnes 000s 1527 1542 −1 Electricity turnover in kWh million 525 371 +42 Heating water turnover in kWh million 1247 616 +102 At Euro194 million, sales in the environmental energy segment Steam turnover in kWh million 632 414 +53 were at the same level as in the previous year.Ofsegment sales Gas turnover in kWh million 373 535 −30 in the2008/09 financial year,asum of Euro 154 million was Water turnover in m³ million 0.3 0.3 — generated from waste incineration at our Mannheim, Offenbach Combustible waste delivered andLeuna locations (previous year: Euro157 million). We gener- in tonnes 000s 72 8 +800 ated salesofEuro40million in our energy business, i.e. from the generation of electricity and steam, in the year under report

Value-added services sales of the MVV Energie Group (previous year: Euro37million). Euromillion 2008/09 2007/08 %change Adjusted EBIT declined year-on-year by Euro 10 million to Euro ERS holding company 40 43 −7 71 million. In conjunctionwithexcesscapacityatincineration Energy efficiency and management 132 82 +61 plants in Germany, the economic downturnled commercial Industrial parks and large projects 85 79 +8 waste prices to fall in the waste business. Moreover,earnings Consulting 25 22 +14 werealso negatively affected by downtime at the energy from MVV Energiedienstleistungen 282 226 +25 waste plants in Mannheim and Leuna due to inspection meas- Energy-related services at ures and interruptions to operations. These led to increased municipal utility shareholdings 25 55 −55 costsfor the procurement of gas, as well as for reorganisation, Energy-related services 307 281 +9 temporary storage and maintenance measures, especially at Other value-added services/consolidation 1−4—Boilers2and 3, whichare more than 40 years old. The new 308 277 +11 Boiler 6will commence operations in December 2009.

The “Other” line item includes services not directly allocable to Sales in the value-added services segment rose by 11%to any individual segment, as well as consolidation items. Euro308 million. Adjusted EBIT dropped year-on-year by Euro2million to Euro18million. Positive sales and earnings contributions came from the expansion in the heating con- tracting business for the real estate sector,fromIndustriepark Gersthofen ServicegesellschaftmbH and from the launch of operations at the refuse-derived fuel (RDF) power plant at theKorbach location. However,these weremorethan off- set by reduced earnings contributions at the Offenbach and Kiel shareholdings, whosevalue-added services businesses are influenced by the shared service companies reported there, namely 24 /7IT-Services GmbH, Kiel, and 24 /7United Billing GmbH, Offenbach.

60 MVV Energie 2008/09 Quarterly performance The earnings of the MVV Energie Group aretraditionally weak in the 4th quarter due to the lack of earnings contributions Our sales in the 4th quarter of 2008/09 (July to September from the heating energy business in the summer months. 2009) grew year-on-year by 14 %toEuro679 million. This Moreover,weprefer to perform maintenance and inspection growth wasdriven in particular by the electricity and value- measures during this period. added services segments. sales by quarter in Euromillion Value-based company management in 2008/09

1200 Themost important key figureinour value-based company 1000 958 management and the related capital management is the value 830 800 749 694 spread. This key figurecorresponds to the difference between 663 630 679 600 594 the period-specific returnoncapital employed (ROCE) and the 400 weighted average cost of capital (WACC). It thereforeprovides

200 an indication of the value added we have generated measured

0 in terms of our costs of capital. ROCE expresses operating earn- Q1 Q2 Q3 Q4 ings beforeinterest, taxes on income and goodwill amortisa- tion (adjusted EBITA) as apercentage of the capital employed 2008/09 2007/08 to generate such earnings. The ROCE for the year under report amounts to 9.0%(previous year excluding IAS 39 item: 10.2 %). Adjusted EBIT for the 4th quarter of 2008/09 amounted to The WACC figure, the second component in our key value Euro–11 million. By comparison, adjusted EBIT for the 4th quarter spread figure, represents the long-term minimum economic re- of theprevious year amounted to Euro–2million. This downturn turngenerated on operations. Capital costs areweighted on waschiefly due to the reduction in price rates as of 1April 2009 the basis of the shares of equity and debt capital in the capital andtofalling prices in the waste business. These wereexacer- employed.The calculation of these capital shares is based not batedbythe negative impact of the economic crisis on earnings on thecarrying values, but rather on the market values by which in theelectricity business in the 4th quarter of 2008/09. This factor potential investors measuretheir investment alternatives. had not yet made itself felt to the same extent in the previous year’s quarter. Therewerenochanges in basic capital management require- ments compared with the previous year.Asinthe previous Adjusted EBIT by quarter in Euromillion year,the WACC indicator for the year under report was based 140 on borrowing interest of 5.5%, atax shield of 30%and an

120 120 equity ratio market value of 50%. The other parameters used 107 to calculate the WACC figurewerealso left unchanged (risk- 100 92 87 free interest: 4.5 %; beta factor: 0.7; market risk premium: 80 5.0%). As in the previous year,the weighted costs of capital 60 57 before taxes thus amounted to 8.5 %inthe year under report. 40 38

20

0

−20 −2 −11 −40 Q1 Q2 Q3 Q4

2008/09 2007/08

MVV Energie 2008/09 61 MVV EnErgiE group Management report

NetAsset Position

Key figures in % The expansion in our Group’sbusiness activities is clearly

12.0 % reflected in the balance sheet, wherethe total assets of the MVV Energie Group grew to Euro3954 million as of 10.0 % 1.7 30 September 2009, up Euro167 million (+ 4%)compared 8.0% 0.5 with 30 September 2008. 6.0 % 9.0 8.5 10.2 8.5 4.0 % Balance sheet structureinEuromillion (shares in %) 2.0 % 4500 0.0 % 4000 2008/09 2007/08 71 28 3500 72 34

ROCE WACC ValueSpread 3000 2500 43 38 Subtracting the WACC of 8.5 %(previous year:8.5%) from 2000

the ROCE of 9.0%(previous year:10.2%)producesapositive 1500

value spread of 0.5%for the 2008/09 financial year (previous 1000 29 29 28 28 year: 1.7%). The decline in the adjusted value spread reflects 500 theimpact of the economic and financial crisis on the earnings 0 strength of the MVV Energie Group. Assets Liabilities Assets Liabilities 2008/09 2008/09 2007/08 2007/08

Assets Liabilities Non-current assets Equity Currentassets Non-current debt Currentdebt

The asset side of the balance sheet is dominated by non-cur- rent assets. Due mainly to ahigher volume of property,plant andequipment and an increase in intangible assets, these rose to Euro 2795 million, equivalent to growth of Euro70million (+ 3%)compared with 30 September 2008. Following invest- ments and additions(initial consolidations) on the one hand and disposals, scheduled depreciation and asset impairments on the other,property,plant and equipment, which account for50%of total assets (previous year: 52%), showed an over- allnet increase of Euro40million (+ 2%)toEuro1996 million. The high shareofproperty,plant and equipment underlines theintensity of investment at ourgroup of companies.

We have reported shareholdings that weremainly recognised under other financial assets in previous years in the associates item (Euro75million) for the first time in the year under report. In particular,these include our shareholdings in the power plants Grosskraftwerk Mannheim AG and Gemeinschaftskraftwerk Kiel GmbH, in ZVO Energie GmbH and in Biomasse Rhein-Main GmbH.Thisreclassification is also the main reason for the re- duction in other financial assets from Euro175 million in the previous year to Euro103 million.Details on changes in the scope of consolidation have been provided in the notes to the consolidated financial statements (Page 92).

62 MVV Energie 2008/09 At Euro272 million as of 30 September 2009, non-current On the liabilities side, the equity of the MVV Energie Group de- other receivables and assets wereatthe same level as in the clined year-on-year by Euro157 million to Euro1113 million. previous year.The largest item hereinvolved the positive fair This development was chiefly due to the annual net deficit for values of energy trading transactions requiring recognition the year under report (including IAS 39 valuation items and underIAS 39 (financial derivatives). Current assets rose to one-offrestructuring expenses) and to the higher dividend Euro1160 million, up Euro98million (+ 9%)onthe previ- distributed for the 2007/08 financial year.The shareofequity ous year’sbalance sheet date, and thus now make up 29 % attributable to minority interests amounted to Euro103 mil- of total assets (previous year: 28 %). This increase was chiefly lion as of 30 September 2009 (previous year: Euro116 million). driven by theyear-on-year rise in cash and cash equivalents by Theequity ratio amounted to 28.1%asof30September 2009 Euro 224 million to Euro321 million. This in turnwas mainly (previous year: 33.5%). due to the issuing of promissory note bonds amounting to For the internal management of our Group, we also eliminate Euro203 million to secureliquidity reserves, as well as to the the cumulative valuation items for financial derivatives recog- utilisation of credit lines. nised under IAS 39 from our balance sheet. It is then apparent Trade receivables fell to Euro463 million, down Euro73million that therewas aslight increase in the capital generated by the on 30 September2008. Compared with the volume reported at MVV Energie Group and that the outflow due to the higher theend of the previous quarter on 30 June 2009 (Euro590 mil- dividend could be compensated for by the capital generated lion), trade receivables reduced by Euro127 million. Alongside from operations. On the asset side, we eliminate the posi- seasonal factors, this decline –inspite of ahigher overall volume tive fair values of financial derivatives amounting to Euro388 of receivables due to sales growth –was the result of optimised million (previous year: Euro426 million). On the equity and receivables management and the netting of transactions cus- liabilities side, we eliminate the negative fair values of Euro483 tomary in theenergy trading business. The economic crisis did million from liabilities (previousyear:Euro348 million)and the not lead to any material defaults on receivables in the 2008/09 resultant net balance of Euro94million recognised under eq- financial year. uity (previous year: Euro78million). On this adjusted basis, the equity ratioofthe MVVEnergie Groupamountedto33.9% At Euro 282 million, current other receivables and assets were in theyearunder report (previous year: 35.5%). at the same level as in the previous year.Within this item, current receivables from security deposits for energy trading Compared with the previous year,non-current debt rose by transactions,which areexchanged with external trading part- Euro 253 million to Euro1698 million and current debt by ners to reduce counterparty risk given the sharp fluctuations in Euro71million to Euro1143 million. By analogy with the as- fair values of energytrading derivatives, increased year-on-year set side of the balance sheet, the development in non-current from Euro11million to Euro91million. This effect was coun- andcurrent other liabilities was determined by the negative tered by areductioninloansand alower volume of current fair values of financial instruments recognised under IAS 39 derivative financial instruments. (energy trading derivatives). No security deposits bilaterally agreed with trading partners to alleviate the sharp fluctua- The amount of Euro37million reported in the assets held for tions in fair values of energy trading transactions werere- sale item in the previous year related in particular to the pur- ported under current other liabilities as of 30 September 2009 chase price receivable agreed for the Polish subgroup, which (previous year: Euro44million). The development in financial had not yet been realised at the previous year’sbalance sheet debt has been reported on the following pages. date and was initially contributed to the newly founded com- pany MVV Nederland B.V., Netherlands. The inflow of funds from this sale was received in the 1st quarter of the 2008/09 financial year.

MVV Energie 2008/09 63 MVV EnErgiE group Management report

Investments Investments in financial assets primarily involved the acquisition of newshareholdings in the energy-related services business. These The volume of investment amounted to Euro255 million in the related to the acquisition of the remaining 49%ofthe shares in year under report (previous year: Euro241 million). Atotal of MVV Energiedienstleistungen Wohnen GmbH &Co. KG, Berlin. Euro 238 million was invested in intangible assets, property, This shareholding was thus stocked up to 100%. The sharehold- plantand equipmentand investment property (previous year: ing in the Czech company Českolipská teplárenská a.s., Česká Euro 208 million), while Euro17million was invested in the Lípa, was raised significantly from 35%to94.99%. acquisitionoffully andproportionately consolidated compa- nies andother financial assets (previous year: Euro33million). Investments of the MVV Energie Group1

The growth in investments in intangible assets, property,plant Euromillion 2008/09 2007/08 %change

and equipment and investment property related in particular Electricity 27 29 −7

to the environmental energy,district heating and value-add- District heating 56 25 +124 ed services segments. The largest investment projects were Gas 13 16 −19 theconstruction of Boiler No. 6atthe energy from waste Water 12 10 +20 plant in Mannheim, extending the supply of district heating Value-added services 52 49 +6 in Mannheim,Kieland Offenbachand thestart of construc- Environmental energy 64 59 +8 tion work on thedistrictheating transportpipelinetoSpeyer. Focuses of investment in the value-added services segment Other 14 20 −30 included theconstruction of the industrial power plants at 238 208 +14 Korbach and Gersthofen, which werecompleted on schedule 1investments in intangible assets, property,plant and equipment and commenced operations during the year under report. In and investment property Mertingen in Bavaria, MVV Energiedienstleistungen GmbH in- vested together with the Bavarian State Forestry Commission in abiomass cogeneration plant whereoperations commenced Financial Position on schedule at the beginning of November 2009.

Cash flow statement Investments of the MVV Energie Group1 in the 2008/09 financial year The cash flow beforeworking capital and taxes showed a slight year-on-year reduction of Euro28million to Euro386 million. Thespecial IAS39valuation item andone-off restruc- Growth investments Replacement investments Euro119 million Euro119 million turing expenses, which werelargely responsible for the year- Euro238 m on-year decline in annual earnings beforetaxes on income in the 2008/09 financial year,wereneutralised completely on the level of changes in other non-cash income and expenses (IAS 39 item) and of depreciation and amortisation (impair- ments).Furthermore, ahigher volume of non-current provi- 1investments in intangible assets, property,plant and equipment and investment property sions for personnel items and refurbishment wereutilised than in thepreviousyear’speriod and ahigher volume of gains on In its electricity,district heating, gas and water businesses, the the disposal of non-current assets not effective in the cash flow Group invested above all in modernising and optimising its beforeworking capital and taxes weregenerated. Moreover, supply facilities and distribution grids. Work continued at the the inflows from interest payments received werehigher in Kiel subgroup on the construction of the thirdgas cavern. A the previous year’speriod than in the current financial year. furthermajor project relates to the renovation of the supply tunnel underKielFirth.

64 MVV Energie 2008/09 The cash flow from operating activities amounted to Euro258 Ourfinancing policy focuses on flexibility and the use of both million and thus showed aslight reduction of Euro4million short-term and long-term sources of financing. The parent com- compared with the previous year.This decrease was largely pany MVVEnergie AG manages acash pool for itself and 14 other due to ahigh outflow of funds for security deposits (margins) companies within our Group. In this capacity,itprocures and safe- and asimultaneous outflow of financial funds due to mar- guards both its own liquidity,aswell as the financial funds of the gins deposited with us in the previous year.This outflow was shareholdings included in thecash pool. The capital required for compensated for virtually in full by significantly improved cash investmentsismade available in the form of shareholder loans. management of trade receivables and payables. In the course of the international financial crisis two develop- Following the deduction of increased investments of Euro238 ments impacting on our Group have become apparent. When millioninintangible assets, property,plant and equipment and concluding new short and medium-term loan agreements we investment property (previous year: Euro208 million), the have benefited from the widespread reduction in interest rates. Group generated apositive free cash flow of Euro20million These wereoffset by significantly higher lending rates required in the 2008/09 financial year (previous year: Euro54million). by lenderseven though the creditworthiness of MVV Energie Our free cash flow thus improved markedly compared with AG has actually improved. Overall, this resulted in slightly higher the first nine months of 2008/09, for which the free cash flow credit termsthan beforethe financial crisis. reported was still negative at Euro–110 million (previous year: Our non-current financial debt amounted to Euro1073 million Euro +26million). as of 30 September 2009, up Euro160 million on 30 September At the same time, the cash flow of Euro–178 million from in- 2008. This increase was due to the issuing of the aforementioned vesting activities (previous year: Euro–176 million) underlines promissory note bonds (with afive-year term) and to the taking theongoing efforts to maintain our Group’sgrowth course. up of mostly long-term loans. Current financial debt grew Thefunds required for this chiefly came from ahigher volume year-on-year by Euro116 million to Euro440 million. The rise of new borrowing, including promissory note bonds. As a in current financial debt was chiefly attributable to increased result, the cash flow from financing activities was clearly posi- short-term financingrequirementsfor higher securitydeposits tive at Euro146 million in the year under report. Mainly due in the context of energy trading transactions, as well as to to high loan repayments, the previous year’sfigurewas still reclassifications from non-current to current items. The growth negative at Euro–90 million. Further details can be found in in non-current and current financial debt is reflected at the the consolidated financial statements from Page 86 onwards. balance sheet date in cash and cash equivalents on the asset side of the balance sheet.

Financial position and financial management Net financial debt (financial debt less cash and cash equivalents) amounted to Euro1192 million, up Euro52million on the previ- The MVV Energie Group reported cash and cash equivalents of ous year’sbalance sheet date (30 September 2008). Euro321 million in its cash flow statement as of the balance sheet date on 30 September 2009 (previous year: Euro97mil- All in all, our equity base provides us with agood foundation lion). Our group of companies thus has sufficient fundstocover for maintaining abalanced mix of capital market financing for its liquidity requirements. In the year under report, financial investments in our sustainable growth, even in times of limited funds wereprimarily obtained from the cash flow from opera- liquidity on the financial markets. tions, the issuing of promissory note bonds and the taking up of credit facilities.MVV Energie AG and other companies within theGroup have bilateral credit lines.

MVV Energie 2008/09 65 MVV EnErgiE group Management report

Overall Summary Basic Features of theCompensationSystem of BusinessPerformance of theExecutive andSupervisory Boards

During theperiodcovered by ourfinancial year the German We have provided asummary of the basic features of the economy underwentits severest recession since the end of compensation system anddisclosures concerning the com- World WarTwo, one which has also left its mark on the earn- pensation of members of the Executive and Supervisory Boards ings performance of the MVV Energie Group. Notwithstanding for the 2008/09 financial year in the Compensation Report. theslight revival in the economy apparent in the second half of This takesdue account of the requirements of the German 2009, macroeconomic developments up to the time at which Commercial Code (HGB) and the recommendations of the our 2008/09 consolidated financial statements wereprepared German Corporate Governance Code. still harboured great uncertainties. For its activity,the Executive Boardreceives total compensation In view of this difficult underlying framework, our group of that is divided into fixed and variable components. The com- companies maintained its ground well in the 2008/09 financial pensation of the Executive and Supervisory Boards has been year.Wesee the fact that we reached the operating earnings presented in the Compensation Report, which forms part of target announced at the beginning of the year in spite of the the Corporate Governance Report on Pages 34 to 38 and is economic crisis as representing asuccess. We also assess the also part of thecombined Group Management Report. This developmentinour net asset and financial positions positively. componenthas thereforenot been duplicated here. Theincreased volume of investment couldbefinanced in full from thecashflow from operatingactivitiesonceagain in the year underreport. With an equity ratio of 28.1%, we have a Disclosures under §289 (4) and§315 (4) HGB good foundationfor maintaining our ability to obtain abal- ancedmix of capitalmarketfinancingfor theinvestments in Composition of sharecapital and restrictions ourfurther growth. on voting rights or assignment of shares We launched our “Once Together” project at the beginning The company’ssharecapital amounted to Euro168.72 mil- of October 2009. In this, we will be working together with lion in total at the balance sheet date on 30 September 2009 ourmajor shareholdings to gradually implement the priori- and was divided into 65.9 million individual registered shares ties identified within the MVV 2020 strategy project. We are with aprorated amount in the sharecapital of Euro2.56 per confident that our investments, with their long-term focus, share. Each shareentitles its holder to one vote at the Annual will enable us to achieve our target of generating sustainable General Meeting of MVV Energie AG. The City of Mannheim profitable growth. indirectly held 50.1% of the shares in MVV Energie AG at the balance sheet date. RheinEnergie AG, Cologne, increased its direct shareholding by 0.2 %to16.3%inOctober 2008 by acquiringsharesonthe stockexchange. EnBW AG,Karlsruhe, continuedtoholdadirectstake of 15.1%ofthe shares. The remaining 18.5%ofthe shares wereinfreefloat at the bal- ance sheet date.

Thereare no restrictions on voting rights or the assignment of shares.Thereare also no shares with special rights lend- ing powers of control, neither is thereany control of voting rights as defined in §289 (4)No. 5and §315 (4)No. 5ofthe German Commercial Code (HGB).

66 MVV Energie 2008/09 Regulations for appointment and dismissal of million to Euro168.72 million from the available Authorised Executive Boardmembers and amendments to Capital Ibyissuing 10.1 million new shares in returnfor cash Articles of Incorporation contributions with subscription rights for shareholders in MVV Energie AG. These new shares, which enjoyed dividend Pursuant to the company’sArticles of Incorporation, the entitlement from 1October 2006, wereoffered to sharehold- Executive BoardofMVV Energie AG consists of at least two ers at aprice of Euro22.50 per share. members. The Supervisory Boardisresponsible for determin- ing the number of members, their appointmentand dismissal. The 2006 Annual General Meeting authorised the Executive Members areappointed for amaximum of five years, with BoardofMVV Energie AG, subject to approval by the repeated appointments permitted. Supervisory Board, to increase the company’ssharecapital within the framework of an employee shareprogramme by Amendments to the Articles of Incorporation must be under- issuing new shares from Authorised Capital II on one or sev- taken in accordance with §133 and §179 of the German Stock eral occasions up to 9March 2011 up to atotal of Euro3.4 Corporation Act (AktG). Pursuant to §11(3) of the Articles of million to the exclusion of shareholders’ subscription rights Incorporation, the Supervisory Boardisauthorised to amend (Authorised Capital II). This was equivalent to 2.4%ofexisting the Articles of Incorporation only in respect of their wording. sharecapital upon adoption of the resolution. The Executive Pursuant to §19(1) of the Articles of Incorporation, asimple Boardacted on this authorisation on 20 September 2006 by majority of the sharecapital with voting entitlement partici- issuing63,290new shares amountingtoEuro162 thousand, pating in theadoption of aresolution is sufficient to amend equivalent to 0.1%ofthe sharecapital. The Executive Board the Articles of Incorporation, unless mandatory legal provisions made no use of this authorisation in the 2007/08 and 2008/09 requirealarger majority. financial years.

By resolution on 13 March 2009, the Annual General Meeting Powers of the Executive Boardtoissue authorised the Executive Boarduntil 10 September 2010 to and buy back shares acquiretreasury stock by way of one or several buybacks with The Annual General Meeting of MVV Energie AG authorised the aprorated amount in the sharecapital of Euro16.87 million Executive Boardbyresolution on 4March 2005 to increase the attributable to these shares, equivalent to 10%ofexisting company’ssharecapital on one or several occasions by up to sharecapital upon adoption of the resolution. The Executive Euro 39.0 million, equivalent to around 30%ofexisting share BoardofMVV Energie AG did not act on this authorisation in capital upon adoption of the resolution (Authorised Capital I). the 2008/09 financial year.

Having drawn on Authorised Capital Itothe extent of almost 10%on15November 2005 by issuing 5.0 million new Compensation agreements shares on thecapital market by wayofanaccelerated book (change of control clauses) building process, thereremained Authorised Capital Iamount- Thereare no provisions, generally agreements, governing any ingtoEuro26.2 million. On 11 October 2007, the Executive change of control due to atakeover bid (change of control BoardofMVV Energie AG resolved with the approval of the clauses),neither has the company concluded any compen- Supervisory Boardtoact on the authorisation granted to it by sation agreements with members of the Executive Boardor the Articles of Incorporation and to increase the sharecapital employees for the event of atakeover bid. by Euro25.96 million. This capital increase was successfully completed at the beginning of November 2007. The share capital of MVV Energie AG was increased by Euro25.96

MVV Energie 2008/09 67 MVV EnErgiE group Management report

Sustainability OurBasis:Economic Responsibility OurClaim: Ecological Responsibility

MVV Energie’scommitment to sustainable business practice is Focus on climate protection targets at the heart of its claim: MVV Energie –Energising the Future. To cut greenhouse gas emissions, the shareofelectricity gener- If the Group is to meet its economic, social and ecological sus- ated from renewable energies in Germany is to be increased tainability targets then it must maintain its economic stability from 13%in2007, the base year,toatleast 30%by2020. and generate further profitable growth. Only this way can we Moreover,the shareofelectricity produced using cogenera- secure the supply of utilities to our customers in the long term, tion is to be raised to around 25%over the same period. create andretain sustainable jobs and training positions, gen- TheMVV Energie Group is making amajor contribution in erate attractive dividends for our shareholders and make our avariety of ways to support the achievement of the Federal contribution towards restructuring the energy industry along Government’sclimate protection targets and of asustainable ecological lines. It is on these high standards that we base our energy supply. strategic planning. With its climate protection programme, MVV Energie AG Thekey figures in the Multi-Year Overview on pages 158 to intends to invest atotal of morethan Euro100 million by 2020 161 underline the economic strength and potential of our in climate protection projects in Mannheim and the Rhine/ group of companies. Over the past five years, sales at the Neckar metropolitan region, such as extending district heat- MVV Energie Group have shown consistent growth in the ingand optimising energy useatmunicipal properties.Weare difficult market climate in the energy sector,increasing from thus taking our responsibility towards the region seriously and Euro1.9 billion (2004/05) to their current level of around Euro helping the population and city administration in Mannheim 3.2 billion. Adjusted EBIT grew by 51%fromEuro158 million to achieve their climate protection targets. in the2004/05 financial year to Euro239 million in the year underreport. Due in particular to the sale of our Polish share- The Climate Protection Fund, which has avolume of Euro10 holdings, the total workforce at our Group reduced over the million by 2020, also forms part of the climate protection pro- same period from 6449 to 6053 employees. gramme. In cooperation with the City of Mannheim and the Climate Protection Agency founded in spring 2009, this fund During this five-year period we invested around Euro1billion will support projects aimed at enhancing energy efficiency in maintaining, optimising, modernising and expanding our and expanding renewable energies. It awards non-repayable supply facilities and distribution grids. Our investments in the grants within theframework of amass promotion programme energy,disposal and water businesses areofalong-term nature and an individual promotion programme. The main focuses and requirehigh volumes of capital outlay.Our economic and and guidelines for this promotion arecurrently being com- financial strength is the foundation which allows us to assume piled. Together with the “Energy Refurbishment” subsidy alevel of social and ecological responsibility that goes beyond programme offered by the municipal council, this means that legal requirements. The key futuretopics of climate protection, funds of morethan Euro1million ayear areavailable for cli- energy efficiency and supply security play an outstanding role mate protection in Mannheim.This way,individual inhabitants in our business activities. To ensurethat tomorrow’senergy canhavetheir very ownclimate protection measures directly supply is environmentally-friendly and energy-efficient, we are supported and subsidised. already working today on developing innovative and modern products, concepts and services. By offering the utmost qual- The Climate Protection Agency of the City of Mannheim and ity, good products and comprehensive services, we aim to be a MVV Energie AG acts as an information and advice centre reliable partner for our customers. for small and medium-sized companies, schools, clubs and citizens,helping them to save energy,improve their energy efficiency and use renewable energies. Our shareholdings in Offenbach, Kiel,Solingenand Ingolstadt also have theirown climateprotectionprojects.

68 MVV Energie 2008/09 The shareofelectricity we generate using Net electricity generation from renewable energies (including biomass cogeneration) of the MVV Energie Group in Germany renewable energies and cogeneration is growing GWh 2008/09

In our energy generation,wefocused on the efficient and Biomass power plants 478 resource-saving principle of cogeneration and on renewable Biogas plants 14 energies at an early stage, while also investing in efficiency- subtotal for biomass 492 enhancingmeasuresand technologies.Thisway,weare con- Biogenic shareofwaste/RDF 198 tributing actively towards the process of structural change in the energy industry required due to climate policy. Hydroelectricity 4 Total 694 Our Group produced around 3.8 TWh of electricity at its own generation facilities in the2008/09 financial year (previous year: Installed renewable energies and waste/RDF capacity 4.1 TWh). This reductionwas due to lower volumes of elec- of the MVV Energie Group in Germany tricity generated at the Grosskraftwerk Mannheim (GKM) and MWe 2008/09 Gemeinschaftskraftwerk Kiel (GKK) power plants. Although Biomass power plants 71 the overall volume of electricity generated declined, the vol- Biogas plants 2 umes produced from renewable energies (0.7 TWh) and using subtotal for biomass 73 energy-efficient cogeneration (0.9 TWh) nevertheless remained Waste/RDF 118 at the same level as in the previous year.Most of the electricity Hydroelectricity 2 we generate from renewable energies is derived from biomass and the biogenic shareinwaste incineration. Other electricity Total 193 generation relates above all to the electricity volumes generated in thecondensing turbines at the GKM and GKK power plants. Waste and biomass replace fossil fuels MVV Energie is well ahead of the national average with the When using waste and biomass, we exploit the energy po- shareofelectricity it generates using environmentally-friendly tential within household and commercial waste to generate and energy-efficient means. Our Group generated 18%ofits steam and electricity using the highly efficient cogeneration electricity using renewable energies in the 2008/09 financial method.Using wasteand biomassfor energy generation pur- year (previous year: 17%). Cogeneration accounts for afurther poses helps us to protect the limited supply of fossil fuels. 25%ofour electricity volumes (previous year: 24%). All in all, MVV Energie produced 43%ofits electricity using environ- Thematerials flow management pooled at MVV Umwelt mentally-friendly renewable energies and energy-efficient Ressourcen GmbH safeguards capacity utilisation rates at our cogeneration in the year under report (previous year: 41%). By wasteincineration and biomass plants. This company also man- comparison,anaverage of 15%ofgross electricity generation ages the shareholding in BAS Bergsträsser Aufbereitungs- und volumesinGermany in 2008 came from renewable energies Sortiergesellschaft, acompany which has been supplying waste (previous year: 14%) and 9% from cogeneration (previous volumesfromthe newly built sorting plant in Heppenheim since year: 9%). Together,they thereforemade up around 24%of thebeginning of the 2008/09 financial year. electricity volumes in 2008 (previous year: 23%). Please also In the 2008/09 financial year,weused atotal of around 1.6 mil- seethe charts on Page 71. lion tonnesofnon-recyclable wasteand biomassfor energy gen- To ensurecomparability,our data only refers to Germany. erationpurposes at our energy from waste plants in Mannheim, These figures thereforedonot include power plant, generation Leuna and Offenbach, our biomass power plants in Mannheim and emissions data for our Czech subgroup, which accounts and Königs Wusterhausen, our refuse-derived fuel (RDF) power for around 2.5 %oftotal electricity generation volumes at plants in Gersthofen and Korbach and afurther 25 biomass our Group. power plants and biomass cogeneration plants currently oper- ated in the energy-related services business.

MVV Energie 2008/09 69 MVV EnErgiE group Management report

In our energy-related services business as well, our decentral- Energieversorgung Offenbach AG. This company procures ised energy generation also mainly relies on efficient cogen- landscape conservation materials for use as aregenerative eration and increasingly on the use of renewable energies, fuel,especially in Hessen, and then prepares these for use. especially biomass (wood chips and pellets) and biogas. Energieversorgung Offenbach AG (EVO) now operates more than 30 localheating grids in the Rhine/Main region. Here, the In August, the industrial cogeneration plant in Korbach re- necessaryheating energy volumesare generatedmostlyfrom ported increased mercury emissions due to the delivery of con- naturalgas,but increasingly also from pellets. In the2009/10 taminatedfuel. Theplant operator immediatelyimplemented financial year EVOplans to buildaproprietary planttomanu- all of the changes required by the environmental authorities factureindustrialpellets.These canthenbeincinerated at the forthe Kassel region. As aresult, waste incineration could be heating plant instead of coal. Viaits shareholding in IWO-Pellet recommenced at the beginning of November 2009. In the Rhein-Main GmbH, EVO now supplies pellets to morethan interim period, the waste incineration boiler was powered by 400 customers in the wider Rhine/Main region. To promote its natural gas. As confirmed by the regional authorities, there own production of timber,aregenerative fuel, EVO is planting was no danger for local residents. 10 000fast-growing balsam poplars and willow trees on aone hectaretrial field. Energy-efficient energy supply concepts in value-added services business Biogas plants Our alternative energy supply concepts, which on the one Since the 2007/08 financial year we have been invest- hand involve modernenergy-saving technologies and on the inginthe biogas business, building plants with capaci- other the use of regenerative fuels, have met with great inter- ties of between 500 kW and 1000 kW.These generate est on the market. environmentally-friendly electricity and heating energy Since May 2009, the district authorities in Neckar-Odenwald from regenerative fuels. Our MVV Energiedienstleistungen have been relying on the expertise offered by MVV Energie- GmbH subsidiary now operates three biogas plants in dienstleistungen.Energycosts at eightschools thereare to be Mechau /Sachsen-Anhalt, Karow /Mecklenburg-Vorpommern cutbyatotal of more than Euro500 000 ayear.The measures andVosshöhlen /Schleswig-Holstein. to achieve this include installing two wood chip plants and two solar energy facilities. Funds channelled into environmental Wood chips areused for energy generation purposes at the bio- protection measures mass cogenerationplants in Pfalzgrafenweiler and Mertingen. The MVV Umwelt subgroup invested around Euro61million Thesteam andhot waterthereby generatedare supplied to in modern, environmentally-friendly waste utilisation facilities companiesonlocation, whilethe electricityadditionallypro- in the year under report (previous year: Euro54million). The ducedfromcogenerationisfed into thepublicgrid. major shareofthese funds (87%) was channelled into waste Long-term contracts with timber suppliersenable us to extend disposal in Mannheim with the construction of the new waste- our value chain and to secureanadequate supply of fuel. Over fired boiler No. 6. Around 10%was channelled into keeping and above our cooperation with the Bavarian State Forestry the air clean and afurther 3%into waterprotection measures. Commission, we have also acquired a70%stake in A+S Natur- Expenditureonenvironmental protection measures for ongo- energie GmbH, Pfaffenhofen. We havethus supplemented our ing operations totalled around Euro66million in the 2008/09 value chain to include fuel production in the states of Baden- financial year (previous year: Euro43million). Of this, 64% Württemberg, Rheinland-Pfalz and Saarland and now supply related to waste disposal (previous year: 50%), 35%toair energy produced from regenerative sources “from the region purification (previous year: 49%) and 1%to water protection and for the region”. and noise reduction measures (previous year: 1%).

To cover the entirevalue chain from fuel through to opera- Anew water purification plant took up operations at the tion, in February 2008 MVV Energiedienstleistungen jointly Mannheim cogeneration plant at the beginning of 2009. founded Biokraft Naturbrennstoffe GmbH together with This has significantly reduced well water requirements and

70 MVV Energie 2008/09 Electricity generated at the MVV Energie Group in Germany 2008/09: 3.8 TWh

Electricity from cogeneration 25 %

Other electricity generation Electricity from renewable energies, 57 % including biomass cogeneration and biogenic share of waste 18 %

Electricity generated at the MVV Energie Group in Germany 2007/08: 4.1 TWh

Electricity from cogeneration 24 %

Other electricity generation Electricity from renewable energies, including biomass cogeneration and 59 % biogenic share of waste 17 %

Gross electricity generated in Germany in 2008: 639 TWh 1

Electricity from cogeneration 9%

Electricity from renewable energies, including biomass cogeneration and Other electricity generation biogenic share of waste 76 % 15 %

1preliminary total

MVV Energie 2008/09 71 MVV EnErgiE group Management report

resultant wastewater volumes. Accompanying process opti- One important project for the futurerelates to the prepara- misations have enabled us to avoid wastewater by recycling tions made in the district heating business field at Stadtwerke it internally.Since August 2009, the cogeneration plant has Ingolstadt EnergieGmbH. The contracts to procureheating en- been awastewater-free operation in terms of its processes. ergy from arefinery and to supply district heating to alarge in- This way,wehave helped the environment while at the same dustrial customer weresigned in the year under report. This will time reducing our operating costs. promote the extension of the district heating gridinIngolstadt, akey cornerstone of the company’sfuturedevelopment.

Building up trust by communicating with the public The integrated energy concept at Stadtwerke Kiel is press- ing ahead with expanding cogeneration, thus enabling the MVVUmwelt runsvisitorcentresatits waste-firedpower plants company to acquirefurther district heating customers in inner in Mannheim and Leuna. Here, members of the public can in- city districts. form themselves aboutoperating processes and the resultant emissions. In more than forty years, these have welcomed well over 100000 guests to guided tours and events. This reflects Ecological sales products thegreat interest shown by the general public and enables us With our green electricity products, we offer private customers to build up avaluable basis of trust in this sensitive area. at our locations and nationwide the opportunity to purchase electricity from environmentally-friendly sources. Customers

CO2 emissions who have opted for FUTURA Ökostrom at MVV Energie AG, for example, only pay around one euromoreamonth than the The thermal and electricity generation plants at MVV Energie usualrate and thus make avaluable contribution towards pro- that aregoverned by emissions trading regulations emitted tecting resources. This attractive price for FUTURA Ökostrom around 3.4 million tonnes of CO in the year under report. This 2 is guaranteed to the end of 2010. FUTURA Ökostrom is also figureispartlybased on estimations. offeredbyEVO and Köthen Energie. Our shareholdings in Kiel, Ingolstadt andSolingenalsooffer theircustomers greenelec- CO2 emissionsrights tricityproducts. milliontonnes 2008/09

1 CO2 emissionscertificates purchased 1.1 SECURA Ökostrom, which offers electricity from 100%regen-

1 erativesources,issoldnationwideand also hasaninsurance CO2 emissions certificates sold 1.0 policy integrated into the rate. What’smore, since October 1by24/7Trading GmbH for the MVV Energie Group 2009 SECURA Energie GmbH has also been offering aCO2- neutral natural gas product in the form of SECURA Naturgas.

Extending the supply of resource-saving district heating CO2-neutrality is guaranteed by our cooperation partner First Climate, one of the leading providers in this market. By anal- Generating electricity and heating energy simultaneously by ogy with SECURA Ökostrom, as well as ecological compatibil- means of cogeneration enables the use of primary fuels, and itySECURA Naturgas also offers customers asecurity package. thus CO emissions, per kilowatt hour to be cut substantially 2 Should theheating breakdown, theproduct covers onefree compared with separate generation. Once the transit pipeline installation engineer calloutand rapidrepair work costing up to Speyer has been completed, this city too will also be supplied to Euro250. SECURA Naturgas began to be supplied in se- with district heating from the GKM power plant from 2010 on- lected sales regions in Germany from 1October 2009. wards. The new district heating pipeline is viewed as representing amilestone in terms of connecting district heating grids across As of 30 September 2009, our companies in Mannheim, federalstate boundaries in the Rhine/Neckar metropolitan region. Offenbach, Kiel,Ingolstadt, Solingen and Köthen supplied around 60 000 customers with green electricity products. That is Energieversorgung Offenbach AG (EVO) is also extending and around 10 %ofthe total of around 637 000 private household concentrating its district heating grid. Following Offenbach, customers at the MVV Energie Group. The equivalent figurefor the Gravenbruch district in Neu-Isenburg and Dietzenbach, 30 September 2008 was still only 36 000 customers, or 6% of Heusenstamm is now the fourth district to be linked up to all household customers. EVO’sdistrict heating grid.

72 MVV Energie 2008/09 Employees

Personnel totals develop on target New compensation system introduced

The Group’sworkforce grew year-on-year by atotal of 152 Anew employee classification and compensation contract employeesinthe 2008/09 financial year.This was chiefly due was agreed together with anew job evaluation process for to 52 employeesjoining the Group uponthe initial consoli- MVV Energie AG and the companies affiliated to the in- dation of A+SNaturenergie GmbH, as well as to growth in house compensation system in March 2009. As aresult, basic theenvironmental energy segment and at the shared serv- monthly compensation was raised by 4.1%retrospectively as ice companies 24 /7 United Billing GmbH and 24 /7 Trading of 1January 2009 for aterm of twelve months and the existing GmbH. Employee totals at the municipal utility shareholdings job evaluation process was replaced by an analytical assess- in Offenbach and Köthen decreased in line with the respective ment process. In conjunction with salary analyses, the new budgets. Due to initial consolidation, the number of emp- compensation system should ensurethat employees arepaid loyees abroad rose by 18 to 580. in line with market norms. Performance-related profit partici- pation,which is based on the performance of the company

Personnel figures (headcount) at the balance sheet date andthe employee’s individual performance, has not been af- 2008/09 2007/08 +/–change fected. The total level of variable compensation for employees MVV Energie AG 1523 1527 –4 is determined using the same criteria which also apply for the Executive Boardand management staff. Fully consolidated shareholdings 3833 3661 +172 MVV Energie AG with fully consolidated shareholdings 5356 5188 +168 Personnel development programmes Proportionately consolidated shareholdings 681 685 –4 We arepreparing for the challenges of the future, and in par- MVV Energie Group 1 6037 5873 +164 ticular for demographic change, by offering all-round person- External personnel at nel development and avariety of training, development and MHKW Mannheim 16 28 –12 promotional measures. In meeting our need for specialist and 6053 5901 +152 management staff, we accordequal priority to training our staffwith the existing range of management and promotion 1including 418 trainees (previous year 433) programmes available to the various classes of employees and to offering vocational training based on futurerequire- Forward-looking HR activities ments. The vocations on offer range from energy electri- cian to Bachelor of Engineering at the Baden-Wuerttemberg OurHRactivities support theimplementationofour corporate Cooperative State University. strategy.The key objectives of our personnel policies aretoat- tract and retain well-qualified staff, to compensate them in line The Junior Consulting Team (JCT) at MVV Energie AG is an with their performance, to promote them with further training interdisciplinary team consisting of ten university graduates anddevelopment measures andtocreateaworking environ- from various academic backgrounds whose tasks arederived ment which motivates them and enhances their performance. from strategic and operating projects. The members of the team base their work on the objectives set by the internal client, develop suitable potential solutions and thus gain ex- perienceinthe kind of tasksthey will face aftertheir time in the JCT.

The success of our employee promotion is also reflected in individual awards. Katrin Geeb, our employee responsible for the HR foundation programmes, was singled out for the “HR Next Generation Award” at the HRM Expo fair in Cologne.

MVV Energie 2008/09 73 MVV EnErgiE group Management report

Family-friendly personnel policies extended GmbH and MVV O&M GmbH in the 2008/09 financial year, compared with the sector average of 21 work-related acci- We support our employees in combining their professional dents per 1000 employees. The number of work-related acci- commitments with their family lives. Following in the footsteps dents averaged 7per million working hours at our companies, of MVV Energie AG in Mannheim, in the year under report as against17inour sector.Our comparison is based on the EVO AG too was awarded the berufundfamilie® certificate, a most recent available figures issued by the Gas, Water and government certification of family-friendly employment poli- District HeatingIndustry Employers Liability Association for cies. EVO AG also received the 2008 Hessen State Prize in the 2007. We regret to report that one employee of an external large company category for its exemplary employment and company commissioned to perform inspection work at our en- integration of people with severedisabilities. ergy from waste plant in Mannheim suffered afatal accident. In terms of the measures intended to help employees to meet both family and work commitments, MVV EnergieAGsupple- Corporate cultureonthe move mented its existing childcarepossibilities in the 2008/09 finan- cial year with afurther focus on the topic of relatives in need of Building on the success of the previous “move” dialogues, care. The family-friendly services for parents wereextended to asecond phase, in which amember of the Executive Board includeemergency carefor children aged six months upwards. was available to answer questions from employees, began in autumn 2008.This has provided aforum for open, and at times also controversial, discussion. MVV Energie AG and Occupational health andsafety Stadtwerke Kiel AG bothheld moderated feedback rounds The MVV Energie Group has introduced health and safety man- forthe first time, at which managers received professional agement systems to help in meeting its statutory occupational bottom-upappraisals from their employees. This was followed health and safety obligations. These systemsare necessary for up by theagreement of measures to optimise cooperation. the performance of intragroup occupational health and safety SinceJune 2009, our After Work Academy (AWA)has offered audits. In October2008, the technical safetymanagement employees at MVV EnergieAGthe opportunity to attend brief (TSM)inplace at companies in the consolidatedgroup was lectures givenbyin-house experts, providing insights into their successfully audited by the VDN, DVGW and AGFW specialist areas of work or atopic of current relevance. To enable the associations. The certificates attest that MVV Energie AG main- change processatthe companytobeaccompanied more ef- tains ahigh level of technical and organisational safety across fectively, some employees have been appointed as “Change all operating processes in the electricity, gas, waterand district Agents” in order to support the “move” programme. heating segments. With MVV Energie AG, Energieversorgung Offenbach AG and 24 /7Netze GmbH, this is the first time in Germanythat technical safety management (TSM) has been successful start to health programmes simultaneously auditedattwo energy suppliersand agridop- Within the framework of the five-star health programme erator.24/7Metering GmbH, which operates around 500 000 arange of activities intended to protect and promote em- meters on behalf of thegrid company,was also involved in the ployees’ health hasbeen developed in Mannheim in coop- certification process. eration with the Institute of Sports and Exercise Science at An integrated management system (IMS) was introduced at the University of Heidelberg. These can be monitored using MVV Umwelt GmbH in June 2009 in order to securecertifi- aspecially developed balanced scorecard. In Offenbach too, cation forQuality Management (ISO 9001), Environmental an extensive health promotion programme has been intro- Management (ISO 14001), Energy Management Systems duced in cooperationwith health insurance companies and (EN 16001) and Occupational Health and Safety (BS 18001). the Offenbach Adult Education Centre. Stadtwerke Kiel AG performedascientifically-basedemployee survey on “Work An average of 11 work-related accidents occurred per 1000 and Health” with the University of Kiel, the findings of which employees at our parent company MVV Energie AG and arenow in the process of being implemented. our shareholdings Stadtwerke Kiel AG, Energieversorgung Offenbach AG, Stadtwerke Ingolstadt Beteiligungen GmbH, Stadtwerke Solingen GmbH,MVV Energiedienstleistungen

74 MVV Energie 2008/09 Employees of the MVV Energie Group

7000 6392 6287 6355 6000 5873 6037 1 437 1 383 1 088 562 580 5000

4000

3000 3227 3335 3708 3784 3934

2000

1000 1 728 1 569 1 559 1 527 1 523 0 2004/052005/062006/07 2007/08 2008/09

MVVEnergieAG Germanshareholdings Foreignshareholdings status30.9.2009

Employee age structureofthe MVV Energie Group in %

71 29 under 26 12

66 34 26 –35 16

70 30 36 –45 29

77 23 46 –55 29

81 19 56 and over 14

0% 5% 10 %15% 20 %25% 30 %

male female status30.9.2009

MVV Energie 2008/09 75 MVV EnErgiE group Management report

Social Responsibility

Focus on regional responsibility MVV Energie AG made funds of Euro100 000 available to an emergency assistance fund in both 2008 and 2009. In li- The companies within the MVV Energie Group bear aparticu- aisonwith independentwelfareorganisationsand the City of lar economic, social and ecological responsibility towards the Mannheim,this fund assists private customers who through locations wherethey operate. As reliable energy,water and no faultoftheir ownare in financial difficulties to cover their wastedisposal providers for industry,business, public sector energy and water costs. organisationsand privatehouseholds, andasemployers also offering vocational training andnot leastasinvestors,weare ENERGIEVERsORGUNGOFFENBACHAG (EVO) has extended its key drivers in the economic development of our respective sponsorship agreement with the Offenbacher Kickers and has towns and regions. thus been principal sponsor to this traditional football club for eight years now.Moreover,EVO has introduced sports jersey With the extensive sponsorship and promotion they provide in sponsoring in acknowledgement of the valuable work per- the fields of science, cultureand sport, our companies make formed in other popular sports clubs. valuable contributions to the benefit of the local populations in their various regions. One key focus of our social commitment In its social commitment, sTADTWERKE KIEL AG focused above all is on promoting upcoming talent. What’smore, we aregreatly on popular sport and sponsoring upcoming talent. Within its committedtooffering high-quality training positions to young sports sponsorship activities, the organisation of the 24sieben people.Wealso make amajor contribution towards promot- sailing camp is an especially successful project. This coopera- ing education and science. This is also in our own interests, tion between the state capital of Kiel and Stadtwerke Kiel, the as it helps us to recruit the next generation of well-qualified only one of its kind in Germany,introduced children and young managers. That is why we cooperate closely with the universi- people to sailingfor the seventh year already.Inthe year under ties in Mannheim and the Mannheim Business School. report, the camp gave 7500 interested young people the op- portunity of gaining initial experience of sailing. As energy supplier to the region, MVVENERGIEAG meets its responsibility both towards its home city of Mannheim and to sTADTWERKE sOLINGENGMBH (SWS) maintained its focus on the entireRhine/Neckar metropolitan region. One particular supporting children and young people in the 2008/09 financial priority for us hereisstrengthening cooperation within the re- yearaswell. In cooperationwith Deutsche Umwelt-Aktion gion. Under the motto of “Strength for City and Region”, the e.V.,anenvironmental protection organisation, aseries of Sponsorship Fund of MVV Energie AG, which has supported lessons on renewable energies and natural gas wereheld in initiatives in the Rhine/Neckar metropolitan region with atotal 70 classes each schoolsemester. In its “Fifty-fifty” project, SWS of Euro100 000 ayear,isnow entering its tenth round. Since helps schools to save energy by making morethan half of its launch, morethan 1000 clubs and groups have applied for the energy costs thereby saved directly available to schools. support from the Sponsorship Fund in the various application Together with agymnastics club, SWS offers awelfarefund rounds. 217 sports, cultural, scientific and social projects have offering assistance to parents who find themselves in situa- already been promoted with atotal of Euro450 000. tions of need.

MVVEnergie AG is supporting the Rhine/Neckar metropoli- In its sponsorship activities, sTADTWERKE INGOLsTADTGMBH tan regionasone of the patrons afterwhich the new Rhine/ focused in the year under report on education. In its Neckar Arena in Sinsheim, the stadium used by the national “KLASSE!Kids” project, primary school pupils wereprovided league team TSG1899 Hoffenheim, is named. At the same with targeted tuitiononenvironmental protection and climate time,MVV Energie AG is also the official energy partner of change. TSG 1899 Hoffenheim. In terms of our sport sponsorship activi- KöTHEN ENERGIEGMBH is committed to supporting sports, ties,since 2007 we have cooperated within afive-year partner- cultural, educational and welfareprojects. Among other activi- ship with the record-holding German ice hockey league team, ties, it assists people living with disabilities via the local dis- the Mannheim Eagles (Adler) and arealso continuing to pro- abled persons association. In the support it provides to schools mote their next generation team, the Mannheim Young Eagles. it has focused in particular on promoting musical education foryoung people.

76 MVV Energie 2008/09 ValueAddedStatement

The value added statement portrays the contribution made At 41%, the largest shareofour value added benefited our by thebusiness activities of the MVV Energie Group to so- employees (previous year: 38%). ciety and to the aggregate total for the German economy. Of the value added for local, regional and national authori- Moreover,the statement also shows which groups and players ties, asum of Euro180 million, mainly consisting of energy have benefited from thevalue addedthereby generated. taxes, is attributable to the state (previous year: Euro179 The value added corresponds to the company’sper- million).This corresponds to a24% share(previous year: formance net of input costs, such as costs of materials, 23%).The remaining Euro94million (previous year: Euro other expenses and other taxes, and less depreciation 113 million) is attributable to local authorities (taxes and con- and amortisation. In the 2008/09 financial year,the ad- cession fees). Their shareofvalue added amounts to 12% justed valueadded of the MVV Energie Group fell year- (previous year: 14%). on-year by 5% to Euro756 million. This decline was The shareattributable to lenders rose from 7% to 9%.Our chiefly due to higher input costs, which morethan compen- shareholders received an 8% shareofvalue added (previous sated for the growth in the company’sperformance. The year: 7%). The remaining shareof6%(previous year: 11%) increase in the company’sperformance was driven above all remains at the MVV Energie Group to finance the company’s by sales. further growth.

Value added statement Euromillion 2008/09 2007/08 %change Company performance 3440 2928 +17 Input costs –2538 –1977 +28 Depreciation/amortisation –146 –152 –4 Value added 756 799 –5 to Employees 314 305 +3 to Shareholders1 59 53 +11 to Lenders 65 57 +14 to State authorities 274 292 –6 to the MVV Energie Group 44 92 –52

1dividend paid in financial year

MVV Energie 2008/09 77 MVV EnErgiE group Management report

Events Afterthe Opportunity and BalanceSheet Date Risk Report

Following the successful completion of the MVV 2020 strategy One cornerstone of our corporate management, with its focus project, implementation began directly at the onset of the on long-termsuccess,isriskmanagement. This enablesusnot 2009/10 financial year.Atthe kick-offmeeting, workgroups only to meet legal requirements, but also to identify opportuni- wereset up with managers from all operating and administra- ties and risks at an early stage and manage them effectively. tive divisionsatthe companies involved and work schedules The system includes risk policy guidelines, responsibilities, and atimeplan werelaid down. All relevant processes and analytical and evaluative procedures and key risk figures. The structures arebeing analysed and evaluated in order to identify risk limit system reacts sensitively to any potential risks to the the best solution in each case. company’sexistence. Such risks can thereforebeidentified at an early stage on both group and company level. The effective- The title of the implementation project “Energising the Future ness of the risk management system forms part of the annual –Once Together” underlines its objective. By pooling our re- audit performed by the internal auditors. Moreover,the early sources, we can achieve ajoint operating model ensuring warning risk system pursuant to §91(2) of the German Stock competitive and efficient business processes based on best Corporation Act (AktG) is also audited by the auditors. practice principles, as well as cost savings, at our group of companies. This way,weare laying foundations for the suc- Our organisational structurefacilitates the comprehen- cessful implementation of the growth strategy formulated sive and rapid analysis of risks and opportunities within the within MVV 2020. MVV Energie Group. Working within an established process, each unit with risk exposurereports risks and opportunities to On 13 October 2009, the Federal Networks Agency (BNetzA) the centralrisk controlling departmentonamonthly basis. This presented its 2009 Monitoring Report to the public. department then analyses and aggregates this data and initi- Accordingly,competition in the German electricity and gas ates measures to avert, reduce or reallocate risk. Risk reports markets gained further momentum in 2008, with increasing outlining the current risk and opportunity situation arepro- numbers of companies offering electricity as well as gas prod- vided to Executive Boardmembers and individual companies ucts to households outside their own regions and nationwide. on amonthly basis and to the Supervisory Boardonaquarterly Over and above the factors outlined in the group manage- basis. The ExecutiveBoardisinformedofspecialcasesim- ment report, the economic and financial crisis has not had mediately and reports these in turntothe Supervisory Board. anyfurther material implications for the net asset, financial Within our risk aggregation framework we have classified six and earnings position of the Group since the end of the fi- major types of risk. nancial year.

Price risks and opportunities

Price risks and opportunities arise on account of changes in market prices and exchange rates. Significant sources of un- certainty faced by the MVV Energie Group include changes in market prices for electricity on the sales side and changes in emission rights and fuel prices on the procurement side. Fuel prices, and especially coal,gas and oil prices, haveshown great volatility in recent years. Both falling and rising prices may lead to reductions in margins, as we arenot always able to pass on increasedcosts to end customers, or only following acertain delay.

We limit our price risks and optimise our potential opportuni- ties with theassistance of derivative financial instruments such as swapsand otherfinancialhedging instruments. Risksand

78 MVV Energie 2008/09 opportunities resulting from changes in prices aremanaged activities of theMVV EnergieGroup areonlypartlydependent by 24 /7 Trading GmbH, the central energy trading company on developments in theoverall economy, but wereneverthe- of the MVV Energie Group. less affected in the year under report by lower electricity,heat- ing and gas sales to individual industrial and business custom- Movements in exchange rates areonly of subordinate significance. ers on account of the recession. Not only that, sales volumes may also fluctuate due to defective quality,substitution, cus- Operating risks and opportunities tomer dependency or new competitors in the liberalised mar- ket. Furthermore, procurement also involves risks in the form Operational, organisational, IT,personnel, security and model of any deficiency in the quality or quantity of raw materials risks arepooled in the operating risks category.Inparticu- and supplies, supply bottlenecks and dependence on suppliers lar,operational risks also include potential breakdowns at the forspecific products andutilities. power plants of the MVV Energie Group, afactor which could lead to financial losses. As aprecaution, insurance policies We rely on our energy trading activities in particular to reduce have been concluded to reduce risks. Moreover,plant operat- volume risks and exploit opportunities and we arealso design- ing capacity is safeguarded with continuous supervision of ing new competitive products. ongoing operations and scheduled inspections. Equally,there is the opportunity of exploiting favourable market develop- Legislative risks ments and shorter inspection periods to boost power plant deployment levels. Legislative risks aresubdivided into legal and regulatory risks.

Given that energy supply projects often have very long terms, Thoserisks arising due to legal proceedings, supply obligations the design and costing standards for these projects are or product liability aresummarisedunderlegalrisks.Moreover, especially high. We minimise the resultant risks with stringent legalrisks alsoincluderisks relating to erroneous or unen- project and quality management and by continuously enhanc- forceable contracts. These risks arelimited centrally by the ing our internal instruments. Group’slegal department, which is also responsible for the correct drafting of contracts and, if necessary,for managing Well-qualified employees and managers provide the basis legal proceedings. for the company’ssuccess. Attracting and retaining such employees thereforerepresents acritical success factor.The Regulatory risks involve those risks arising due to antitrust, pat- employees of the MVV Energie Group arepromoted with ent, accounting and tax law,aswell as approval procedures, targeted personnel development programmes offered on all speciallegal conditions, special public sector conditions and levels andalsoreceive ongoing training. The risk of it not be- the provisions of environmental law.The most significant regu- ing possible to find suitable replacements in the event of key latory risk to date entailed the reduction of grid fees due to in- personnel leaving the company is thus viewed as low. centive regulation, which came into force on 1January 2009. Following the approvals issued by the regulatory authorities in 2009, revenue caps have now basically been set for electri- Volume risks and opportunities city and gas grids for the entirefirst regulatory period up to Volume risks and opportunities relatetothe turnover of the 2012 and 2013 respectively.Changes in the legal framework MVV Energie Group’sproducts and to the procurement of provided by theGerman Incentive Regulation Ordinance could input materials. Amajor shareofthese risks and opportuni- nevertheless lead to afurther reduction in grid fee revenues ties is attributable to weather conditions during the winter in future. months.Relatively high temperatures in the winter months To be able to counter futureregulatory risks adequately and in lead to lower volumes of district heating and gas being sold, good time,weconstantly monitor developments in the energy afactor which could impact negatively on the company’searn- industry andplayanactiverole in the energy policy opinion- ings position. Correspondingly,very cold winters harbour po- forming process. tentialopportunities for the MVV Energie Group. The business

MVV Energie 2008/09 79 MVV EnErgiE group Management report

Financing risks Alongside the risk of customers failing to settle their liabilities in part or in total, receivables default risk is also seen as including Financingrisks comprise liquidity and interest rate risks, as well the risk of any deterioration in customers’ creditworthiness. To as receivable default risks and risks relating to non-compliance limit the impact of such risks, we only perform our transactions with financial covenantsagreedwhen taking up debt capital. with banks and trading partners of good credit standing. Where One financial covenant based on the equity ratio was agreed in necessary,the provision of security and guarantees is agreed. connection with the placement of two promissory note bonds takenupinthe 2008/09 financial year.Non-compliance would strategic risks and opportunities allow the lenders to terminate the facility prematurely.The MVV Energie Group is not subject to any statutory minimum By strategic risks, we mean those investment risks which may capital requirements, but aims to maintain an appropriate arise on account of the MVV Energie Group’sgrowth focus. equity ratio enabling it to obtain agood rating on the capital These include erroneous, poorly prepared or inaccurate stra- market. This allows us to optimise our costs of capital. The tegic assessments concerning company takeovers, sharehold- equity ratio depicts group shareholders’ equity as apropor- ings in municipal utility companies, joint ventures, alliances, tion of total assets. Shareholders’ equity consists of the share projects or new markets and technologies. To avert such risks, capital, capital reserve, retained earnings, unappropriated projects areevaluated by the relevant specialist departments in net profit and minority interests. Measures aimed at ensuring astructured process and then decided on by abody chaired by compliance with the targeted equity ratio areinitially identi- theExecutive Board. Particularly significant acquisition projects fied within the business planning process and also within the (M&A) arereviewed on the basis of strict economic criteria in investment planning processfor major (unbudgeted) invest- conjunction withanoverall assessment of the opportunity/risk ment measures.Byissuing shares,the companycan adjust its position of the existing portfolio. equity base to requirements. Given our comparatively strong The MVV Energie Group also faces strategic opportunities due equity base, we only see alow risk of non-compliance with to the growing importance of renewable energies and energy this contractual requirement. efficiency.Wehavelongstanding experience and great techni- The MVV Energie Group was not affected by any bank in- cal expertise in these areas, which arealso being promoted by solvencies during the financial market crisis from September thegovernment. This head start over the competition provides 2008 onwards. As aprecaution, we established asystem of the MVV Energie Group with good opportunities within the ongoingbankrisksupervision andimplemented anumberof market. preventative andother measures in response. These included increasing our available liquidity and extending the range of Overallrisk lenders. Wherepossible, we diversified our business relation- ships across all segments of the banking sector (cooperative, The Executive Boardhas assessed the present overall risk situa- public sector,private sector). The Group optimises its liquidity tion of theMVV EnergieGroup.Fromacurrent perspective, position by means of internal group cash pooling, asystem thereare no indications of any risks which could have en- whichalso impacts positively on net interest expenses. Due dangered the continued existence of the company during the to two opposing factors, financing terms showed aslight net period under report, or which could do so in future. deterioration in the past 2008/09 financial year in the course of the financial market crisis. While base rates fell due to cen- tral bank measures, risk premiums increased even though the credit standing of the MVV Energie Group remained stable and even improved partly.

80 MVV Energie 2008/09 Outlook

Strategic realignment The British waste market offers pleasing development pros- pects. MVV Environment Ltd., the British subsidiary founded We arefacing the fundamental changes in the underlying in September 2008, is examining the British marketand has framework and the market climate in aspirit of entrepreneur- already taken part in bidding processes for the construction ship. That is why we have compiled along-term strategy up to of energy from waste plants. An initial tender decision is to be 2020 to enable us to proactively confront the growing chal- expected in spring 2010. lenges in the energy market and consistently draw on the op- portunities thereby arising. We laid the foundations and took MVV Energie has built up apromising market position by of- the decisions necessary for this in the 2008/09 financial year fering innovative products meeting customers’ needs in the within theframework of afive-month strategy project called electricityand gas markets. In the coming years, we aim to MVV 2020 (please also see “Corporate Strategy” on Page 48). achieve profitable expansion, especially in our nationwide sales Implementation of the reformulated strategy already began with industrial customers. To this end, we will supplement at thestart of the new 2009/10 financial year.Our business existing products, boost our sales team and expand our busi- policies continue to be based on stability and profitability,even ness services. in difficult times. Our aim is to remain an integrated energy company covering all stages of the value chain and to be one of Macroeconomic framework Germany’sleading regional energy companies in ten years’ time as well.With this aim in mind, we intend to make Euro3billion We expect the development in the overall economy to continue available up to 2020 for investments in our future. to be held back by the consequences of the economic and financial crisis in the next two years as well. In their autumn survey published on 15 October 2009, German economic re- Futuresales markets and products search institutesforecast a5%year-on-year decline in German The MVV Energie Group sees numerous growth opportunities gross domestic product in 2009 as awhole. Following this for its diversified business portfolio. We aim to acquireaddi- drastic downturn, 2010 is expected to bring marginal eco- tionalmarket shareinexisting markets and to access newmar- nomic growth of 1.2%compared with the low level in 2009. kets.One majorfocus in this respect is on expanding the use It is difficult to make any forecasts concerning developments of renewable energy sources in energy generation. In this, we further down the line. Notwithstanding the emerging revival in will rely in particular on wind energy,biomass and geothermal the economy,wesee these developments as still being subject energy.Asecond focus involves the energy-related services to numerous uncertainties. The highvolume of public sector business field,which we intend to strengthen following its debtincurred to master the economic crisis, falling tradetax restructuring and to further develop in atargeted manner with receipts due to economic developments and higher unem- aparticular focus on energy efficiency,animportant topic for ployment totals will severely burden state budgets in 2009 the future. We have the necessary competence and longstand- and 2010. ing experience heretoenable us to offer economically viable solutions to our customers. Futuresituation in the sector The same is true for the district heating supply,which we intend Viewed realistically,itwill not be possible to cover our future to extend and concentrate at all locations in line with the doubling energy requirements with renewable energies alone, even if of thevolume of electricity produced using cogeneration planned we expand regenerative energies, save energy and achieve by the German government. We will uphold our commitment efficiency enhancements. In terms of the energy mix, it will to the construction of Block 9atthe Mannheim power plant notyet be possible to do without fossil fuels in the coming Grosskraftwerk Mannheim (GKM). This block, which will work decades. Pricecompetition has intensified on the electricity with cogeneration, forms the basis for asecure, resource- and gas markets and private and industrial customers’ will- efficient supply of electricity in the long term while at the same ingness to change supplier has risen. The use of innovative time providing afoundation for the planned extension and technologies with increasedenergy efficiency and the trend concentration of the district heating supply in Mannheim and towards saving energy will lead energy consumption volumes the Rhine/Neckar metropolitanregion. No further expansionin our portfolio of coal-fired power plants is planned.

MVV Energie 2008/09 81 MVV EnErgiE group Management report

in Germany to stagnate, or even to decline. According to fur- Expected development in key income and ther forecasts, commodity and energy prices will rise again in expenses items the longer term. Starting in 2013, CO emissions rights will no 2 Our energy procurement costs arelargely determined by on- longer be allocated free of charge. This will impact negatively going developments in primary energy prices. Ahigh degree on the profitability of electricity generation. of volatility is to be expected on energy markets in future, also In our waste business, we see the marketclimate as becoming dependingonthe further development in the global economy. moredifficult. We expect to see further incineration facilities, In itsprocurement of naturalgas,our groupofcompanies has especially refuse-derived fuel (RDF) power plants, taking up relied on abroad-based portfolio of suppliers and on struc- operations in Germany.The introduction of additional capacity tured products, rather than on full supply agreements, for and the expected decline in waste volumes will lead to afall many years now. in waste prices.

Expected earnings performance Trend towards cooperation in the municipal The great uncertainties in the current economic climate make it utility market moredifficult to issue an earnings forecast. Furthermore, expec- Increasing competition, incentive regulation and the financial tations concerning our earnings performance in the 2009/10 and economic crisis have raised the pressureonmunicipal and 2010/11 financial years arealso influenced by the imple- utility companies to adapt. Falling profitability and the trend mentation of our MVV 2020 strategy,which began in October towards utility companies and grid operators being returned 2009. We arecurrently analysing and evaluating all relevant into municipal ownership upon the expiry of concession agree- structures andprocesses. On this basis, we aredeveloping a ments give rise to agreater need for cooperation. We will joint operational model in order to ensurecompetitive and ef- closely examine any cooperation or acquisition opportuni- ficient business processes and realise cost savings at the Group. ties arising in cases wherethis makes strategic and economic We cannot exclude the possibility of one-offcharges on earn- sense. New shareholdings areonly interesting for us when the ings in the further course of the 2009/10 financial year.The im- companies in question areconsistent with our strategy. plications of theeconomic and financial crisis, which we cannot yet assess, could also lead to further provision or impairment requirements. Expected earnings position and sales performance Furthermore, depending on futuredevelopments in primary The exceptional circumstances due to the economic and finan- fuel and wholesale electricity prices and the volume of ener- cial crisis and the resultant uncertainties also affecting our sec- gy trading derivatives requiringrecognition under IAS 39, the tor limit our ability to issue any forecast concerning our future MVV Energie Group may be obliged to post non-cash earn- earnings position. Our sales performance in the 2009/10 finan- ings items on acurrently unquantifiable scale as aresult of the cial year will depend not only on weather conditions, but also measurement of financial derivatives as of the balance sheet on the as yet unforeseeable consequences and duration of the date under IAS 39 in the 2009/10 financial year as well. We economic crisis. We expect to achieve further expansion in our expect the strategic course we aretaking to impact on earnings, nationwide electricity and gas sales due to new industrial, com- contributing to increased profitability at the MVV Energie Group mercial and multiple location customers. Inthe environmental in the following 2010/11 financial year. energy segment we expect the decline in waste prices to affect sales negatively.Byactively managing materials flows and ex- panding our scope of action, we expect to be able to operate our plants at fullcapacity in the 2009/10 financial year as well. By launchingoperationsatthe waste-fired boiler No.6 at the Mannheim location,which will replace two older boilers, and at anew condensing turbine (expected in December 2009), we will substantiallyraise the energy yield and economic efficiency of the energy from waste plant in Mannheim.

82 MVV Energie 2008/09 Development in dividend Futureresearch and development

The Executive Boardplans to uphold the shareholder-friendly The market launch of WhisperGen appliances, which have dividend policy and, as in the previous year,intends to pro- been tested in field trials, is scheduled for the 2009/10 poseadividendofEuro0.90 per share for approval by the financial year.Within the multi-year “Callux” group project, Annual General Meeting for the 2008/09 financial year on MVVEnergie will operateatotal of around 30 fuel cell heat- 12 March 2010. ingappliancesuntil 2013 andprepare thewidespreadmarket launch of this energy-efficient technology in close cooperation with themanufacturers of theappliances. Investments In cooperationwithSAP AG andother partners,MVV Energie Our investment budgets for the 2009/10 financial year and fol- plans to implement agroundbreaking nationwide project in lowing 2010/11 financial year will be significantly influenced by theseminal market of electro-mobility in thecomingfinancial the implementation of the new strategic alignment published year.Electricvehiclesare to be included in thecompany’s car in October 2009. Our futureinvestments will focus on energy fleet forthe first time andusedinregular everyday traffic. For generation from renewable energy sources, the district heat- this, we will not only be supplying and operating the necessary ing supply,the construction of Block 9atGKM, energy-related charging infrastructure, but will also be supplying the fleet services and industrial customer sales. with electricity from 100%renewable energy sources. As the winning region in the “Smart Grids, Renewable Energy and Expected financial position Electro-mobility” competition, the project is being promoted with morethan Euro2million from the Federal Ministry of Givenour solid financial structure, we see good possibilities the Environment. of beingable to implement the planned investments in our futureinthe 2009/10 financial year and subsequent 2010/11 financial year,thus enabling us then to profit from the result- Overall summary of expected ant returns. developments at the Group

The implications of the economic and financial crisis will con- Futureopportunities and risks tinue to make themselves felt in the 2009/10 financial year as well. Demand for energy at industrial customers is only Even accounting for the current financial and economic crisis, expected to rise following sustained growth in new orders and thereare still no indications of any risks which could endanger aresultant increase in production. Alongside these external the continued existence of the company in future. No further factors,the 2009/10 financial year will also be significantly riskshave been added to the six risk categories listed in our influenced within the Group by the implementation of the Opportunityand Risk Report for2008/09 (Page78onwards). MVV 2020 strategy and the restructuring and strategic re- Climate protection targets harbour opportunities for our alignment of the MVV Energiedienstleistungen subgroup. The Group to generate profitable growth in the medium and long implementation of these measures will enhance the earnings terms. In particular,the state promotion for the expansion of strength of the high-growth energy-related services division renewable energies and cogeneration will boost our business and sustainably boost the futureearnings performance of our in the coming years. entiregroup of companies.

MVV Energie 2008/09 83 MVV EnErgiE Consolidated Financial Statements

84 MVV Energie 2008/09 Consolidated Financial Statements

86 _Balance Sheet 87 _income Statement 88 _Statement of Changes in Equity 89 _Segment report 90 _Cash Flow Statement 92 _notes to the Consolidated Financial Statements 144 _responsibility Statement 145 _Directors &Officers 151 _Scope of Consolidation of the MVV Energie group 155 _Auditor’sreport

MVV Energie 2008/09 85 MVV EnErgiE Consolidated Financial Statements

BalanceSheet as of 30.9.2009

Balancesheet of theMVV EnergieGroup Euro000s 30.9.2009 30.9.2008 Notes Assets Non-current assets Intangible assets 329 850 314 928 1 Property,plant and equipment 1995 644 1955 484 2 Investment property 6317 6583 3 Associates 75 138 —4 Other financial assets 103 377 174 783 5 Other receivables and assets 272 389 272 500 6 Deferred tax assets 11 991 968 20 2794 706 2725 246 Current assets Inventories 50 788 57 088 7 Trade receivables 463 294 536 142 8 Other receivables and assets 282 356 284 395 6 Taxreceivables 40 359 50 327 9 Securities 1534 7 Cash andcashequivalents 321 170 97 123 10 Assets held forsale—36 681 11 1159 501 1061 763 3954 207 3787 009 Equityand liabilities Equity 12 Share capital168 721 168 721 Capitalreserve 455 241 455 241 Retained earnings, including unappropriated netprofit 371 409 505 421 Accumulated other comprehensive income 14 739 24 308 Capitalofthe MVVEnergieGroup 1010 110 1153 691 Minority interests103 029 116 061 1113 139 1269 752 Non-currentdebt Provisions114 387 130 234 13, 14, 15 Financialdebt1073 074 912 572 16 Other liabilities 376 126 213 798 17 Deferred taxliabilities 134 274 188 036 20 1697 861 1444 640 Currentdebt Other provisions156 223 186 088 13, 15 Taxprovisions24366 44 428 13, 15 Financialdebt439 681 324 020 16 Tradepayables 236 816 240 312 18 Other liabilities 243 620 249 026 17 Taxliabilities 42 501 28 743 19 1143 207 1072 617 3954 207 3787 009

86 MVV Energie 2008/09 Income Statement from 1.10.2008 to 30.9.2009

Income statement of theMVV EnergieGroup Euro000s 2008/2009 2007/2008 Notes Sales 3330 960 2809 372 less electricity and natural gas taxes 169 965 173 629 Sales after electricity and natural gas taxes 3160 995 2635 743 23 Changes in inventories –4290 6553 Own work capitalised 16 662 14 148 24 Other operating income 317 228 452 047 25 Cost of materials 2343 563 1832 376 26 Personnel expenses 314 186 304 900 27 Other operating expenses 685 224 493 591 28 Income from associates 4287 —29 Other income from shareholdings 4511 8456 29 EBITDA 156 420 486 080 Depreciation 146 033 149 438 30 EBITA10387 336 642 Restructuring expenses 32 952 —31 EBIT –22565 336 642 of whichresultofIAS 39 derivativemeasurement –228 557 88 158 of which EBIT beforeresult of IAS 39 derivative measurement 205 992 248 484 Financing income 10 392 9407 32 Financingexpenses 84 213 77 269 33 EBT–96 386 268 780 Taxesonincome–21 374 83 764 34 Annual net deficit/surplus–75 012 185 016 Minority interests701 15 059 Shareofearnings attributable to shareholders in MVVEnergieAG (annual net deficit/surplusafter minorityinterests) –75713 169 957 35

Diluted and basic earnings per share(Euro) –1.15 2.60 35

MVV Energie 2008/09 87 MVV EnErgiE Consolidated Financial Statements

StatementofChanges in Equity

Statement of changes in equity Accumulated other comprehensive income Euro000s Sharecapital Capital Retained Differential Fair value Capital Minority Total of MVV reserve of earnings, amount from measure- of the MVV interests capital Energie AG MVV including un- currency ment of Energie Energie AG appropriated translation financial Group net profit instruments Balance at 1.10.2007 142 764 255 523 383 397 13 170 3487 798 341 115 361 913 702 Income and expenses recognised directly in equity ———9585 3565 13 150 –367 12 783 Result of business operations ——169 957 ——169 957 15 059 185 016 Comprehensive income for period ——169 957 9585 3565 183 107 14 692 197 799

Distribution of dividend ——–52725 ——–52725 –10415 –63140 Capital increase 25 957 199 718 ———225 675 —225 675 Change in scope of consolidation ——4792 –5499 —–707 –3577 –4284 Balance at 30.9.2008 168 721 455 241 505 421 17 256 7052 1153 691 116 061 1269 752

Income and expenses recognised directly in equity ———–905 –8664 –9569 –3166 –12735 Result of business operations ——–75713 ——–75713 701 –75012 Comprehensive income for period ——–75713 –905 –8664 –85282 –2465 –87747

Distribution of dividend ——–59316 ——–59316 –12034 –71350 Change in retained earnings ——423 ——423 –117 306 Change in scope of consolidation ——594 ——594 1584 2178 Balance at 30.9.2009 168 721 455 241 371 409 16 351 –1612 1010 110 103 029 1113 139

Further information about equity has been provided under Note 12

88 MVV Energie 2008/09 SegmentReport

Income statement by segment External sales Intercompany sales Scheduled Impairment losses excluding energy taxes excluding energy taxes depreciation and restructuring Euro000s 2008/2009 2007/2008 2008/2009 2007/2008 2008/2009 2007/2008 2008/2009 2007/2008 Electricity 1760 137 1381 737 58 115 36 029 24 567 24 452 —— District heating 293 453 303 101 24 304 24 297 25 924 28 096 487 10 Gas 486 383 356 390 30 580 43 244 15 663 15 220 —— Water 100 514 102 496 398 380 10 767 10 572 —— Value-added services 308 156 276 737 75 056 84 887 19 159 11 185 33 052 183 Environmental energy 194 402 193 655 44 147 41 512 35 944 36 645 —27 Other /consolidation 17 950 21 627 – 232 600 – 230 349 13 005 18 020 417 5028 MVV Energie Group 3160 995 2635 743 ——145 029 144 190 33 956 5248

Income statement by segment EBIT EBIT beforeIAS 39 Non-cash Income and restructuring expenses from associates Euro000s 2008/2009 2007/2008 2008/2009 2007/2008 2008/2009 2007/2008 2008/2009 2007/2008 Electricity –166 346 143 672 34 605 64 522 11 185 6358 1614 — District heating 36 651 38 723 35 554 38 106 823 4943 —— Gas 37 905 43 462 66 272 35 071 –833 2101 307 — Water 14 061 9574 14 061 9574 707 680 —— Value-added services –14643 19 858 18 195 19 858 594 2985 —— Environmental energy 70 668 80 741 70 668 80 741 3794 2955 48 — Other /consolidation – 861 612 –411 612 12 847 14 369 2318 — MVV Energie Group –22565 336 642 238 944 248 484 29 117 34 391 4287 —

Balance sheet by segment Investments Assets Liabilities Carrying amount of associates Euro000s 30.9.2009 30.9.2008 30.9.2009 30.9.2008 30.9.2009 30.9.2008 30.9.2009 30.9.2008 Electricity 27 411 28 574 889 254 1318 539 277 176 304 424 34 059 — District heating 55 802 25 253 496 229 547 254 133 371 124 345 —— Gas 12 663 16 144 399 465 381 210 116 515 86 952 5660 — Water 11 661 10 559 242 325 288 438 60 499 58 467 —— Value-added services 51 633 48 622 333 614 249 140 117 920 133 866 —— Environmental energy 64 596 59 374 535 520 438 410 133 227 139 784 —— Other /consolidation 13 991 19 807564 838355 974290 267190 0412898—

Unallocated (balance sheet) ——492 962 208 044 1712 093 1479 378 32 521 — MVV Energie Group 237 757 208 333 3954 207 3787 009 2841 068 2517 257 75 138 —

Further information about Segment Reporting has been provided under Note 36

MVV Energie 2008/09 89 MVV EnErgiE Consolidated Financial Statements

Cash Flow Statement 1, 3

Cash flowstatement Euro000s 2008/2009 2007/2008 Annual net surplus beforetaxes on income –96386 268 780 Amortisation of intangible assets, depreciation of property,plant and equipment and investment property 177 504 149 438 Net financial result 73 821 67 862 Interest received 7644 9497 Change in non-current provisions –7206 –550 Other non-cash income and expenses 238 544 –76437 Result of disposal of non-current assets –7701 –4958 Cash flow beforeworking capital and taxes 386 220 413 632

Change in other assets –99358 –151 668 Change in other liabilities 66 031 57 030 Change in current provisions –38580 –21032 Income taxes paid –56643 –36021 Cash flow from operating activities 257 670 261 941

Investments in intangible assets, property,plant and equipment and investment property –237 757 –208 333 (Free cash flow) (19 913) (53 608)

Proceeds from disposal of intangible assets, property,plant and equipment and investment property 20 981 19 650 Proceeds from subsidy payments 12 632 12 143 Proceeds from sale of fully and proportionately consolidated companies 34 800 — Proceeds from sale of other financial assets 8909 42 173

Payments for acquisition of fully and proportionately consolidated companies2 1193 237 Payments for other financial assets –18811 –32909 Payments of cash and cash equivalents due to disposal of group companies —–8550 Cash flow from investing activities –178 053–175589

Proceeds from taking up of loans 672867 304136 Payments for redemption of loans –380 676–485115 Proceeds from capital increases —225 675 Dividend payment –59316 –52725 Dividend payment to minority shareholders –12034 –10415 Interest paid –74959 –71502 Cash flow from financing activities 145882 –89946

Cash-effective changes in cash and cash equivalents 225499 –3594 Change in cash and cash equivalents due to currency translation –1452 1134 Cash and cash equivalents at 1.10.2008 (2007) 97 12399583

Cash and cash equivalents at 30.9.2009 (2008)3 321170 97 123

90 MVV Energie 2008/09 Cash flow –aggregate presentation Euro000s 2008/2009 2007/2008 Cash and cash equivalents at 1.10.2008 (2007) 97 123 99 583 Cash flow from operating activities 257670 261941 Cash flow from investing activities –178 053–175589 Cash flow from financing activities 145882 –89946 Change in cash and cash equivalents due to currency translation –1452 1134

Cash and cash equivalents at 30.9.2009 (2008)3 321170 97 123

1explanations of changes in the previous year’sfigures can be found under “Changes in Accounting Policies” 2please see explanations under “Scope of Consolidation and Changes in Scope of Consolidation" 3further information about the Cash Flow Statement has been provided under Note 37

MVV Energie 2008/09 91 MVV EnErgiE Consolidated Financial Statements

Notestothe 2008/2009 Consolidated Financial Statements of theMVV EnergieGroup

General principles Changes in accounting policies

The consolidated financial statements of the MVV Energie The International Accounting Standards Board(IASB) and the Grouphave been prepared pursuant to §315a (1) of the International Financial Reporting Interpretations Committee German Commercial Code (HGB) in accordance with the In- (IFRIC) have revised or newly adopted some standards and in- ternational Financial Reporting Standards(IFRS) issued by the terpretationswhich requiremandatory application for the first International Accounting Standards Board (IASB) and the in- time in the 2008/09 financial year.The MVV Energie Group terpretations of the International Financial Reporting Interpret- applied the following standards and interpretations for the ations Committee(IFRIC) as adopted by the EU. Full application first time in the 2008/09 financial year: has been made of all of the standards of the International

Accounting Standards Board(IASB) and interpretations of the IFRIC 13 Customer Loyalty Programmes International Financial Reporting Interpretations Committee IFRIC 14 IAS 19 –The Limit on aDefined Benefit Asset, Minimum (IFRIC) as adopted by the EU and requiring mandatory applica- Funding Requirements and Their Interaction tion as of 30 September 2009. IFRIC 16 Hedges of aNet Investment in aForeign Operation

The consolidated financial statements have been prepared IFRIC 13 “CuSToMER LoyALTy PRoGRAMMES”: This interpretation as of the reporting date for the annual financial statements governs the recognition of sales revenues in connection with of MVV Energie AG and refer to the 2008/09 financial year customer loyaltyprogrammes organised by the manufactur- (1 October 2008 to 30 September 2009). MVV Energie AG has ersand services providersthemselvesorbythird parties. The its legal domicile in Mannheim, Germany.The MVV Energie interpretation requires first-time application in financial years Group acts as an energy distributor and service provider in the beginning on or after 1July 2008. It was endorsed by the EU fields of electricity,district heating, gas, water,environmental in December 2008. energy and value-added services. Environmental energy ac- tivities focusonthe incineration of waste. The consolidated IFRIC 14 “IAS 19 – ThE LIMIT oN ADEFINED BENEFIT ASSET, MINI- financial statements have been compiled in euros. Unless MuM FuNDING REquIREMENTS AND ThEIR INTERACTIoN”: This in- otherwise indicated, all amounts have been stated in thousand terpretation provides guidelines for determining the maximum euros (Euro000s). surplus which may be recognisedasanasset underIAS 19 Employee Benefits in connection with adefined benefit plan. In addition to thebalance sheet and income statement, the The interpretation requires first-time application in financial statement of changes in equity,the segment report and the years beginning on or after 1July 2008. It was endorsed by cash flow statement have been presented separately.The in- theEUinDecember2008. come statement has been prepared in accordance with the total cost method. In the interests of clarity,individual items have IFRIC 16 “hEDGES oF ANET INVESTMENT IN AFoREIGN oPERATIoN”: been presented in summarised form in the balance sheet and This governs the application of hedge accounting to the income statement and broken down and outlined separately hedge pursuant to IAS 39.71 et seq. and clarifies doubtful in the notes. questions concerning the hedging of aforeign operation. The interpretation requires first-time application in financial years The Executive BoardofMVV Energie AG is responsible for the beginning on or after 1October 2008. It was endorsed by the preparation, completeness and accuracy of the consolidated EU in June 2009. financial statements and the group management report.The consolidated financial statements and group management Apart from extended disclosures in the notes, the initialap- report wereprepared by the Executive Boardand forwarded plication of these new requirements did not have any material to the Supervisory Boardon27November 2009 for adoption implications for the net asset, financial or earnings position of and publication. the MVV Energie Group.

The consolidated financial statements of MVV Energie AG (MVV Energie Group) areincluded in the consolidated financial statements of MVV GmbH, Mannheim, (MVV Group), which are published in the electronic Federal Gazette (Bundesanzeiger).

92 MVV Energie 2008/09 Implications of new accounting standards not yet requiring EU in January 2009. EU endorsement of the amendments for application: 2009 was still outstanding as of 30 September 2009.

The IASB and the IFRIC have adopted the following standards Ias 1amendment (2007) “presentatIon oF FInancIal state- and interpretations not yet requiring mandatory application in ments”: The amendments relate in particular to the introduc- the 2008/09 financial year and of which no voluntary premature tion of astatement of comprehensive income including both application has been made: the earnings generated in agiven period and as yet unrealised gains and losses previously recognised in equity.This statement

Improvement Project (2008/2009) Omnibus Standard is due to replace the income statement in its existing form. As a Amending Various IFRSs result of this amendment, non-owner-related changes in equity IAS 1Amendment (2007) Presentation of Financial Statements will in futurebestrictly separated from owner-related changes in IAS 23 Amendment (2007) Capitalisation of Borrowing Costs equity.Extended disclosures will also have to be made on other IAS 32 and IAS 1Financial Instruments: Presentation comprehensive income. This amendment to the standardrequires (Puttable Instruments) first-time application in financial years beginning on or after IFRS 1/IAS 27 Amendments (2008) First-time Adoption of International 1January 2009. It was endorsed by the EU in December 2008. Financial Reporting Standards and Consolidated and Separate Financial Statements Ias 23 amendment (2007) “capItalIsatIon oF BorrowIng IFRS 1Amendment (2008) First-time Adoption of International costs”: The revised version of IAS 23 has abolished the option Financial Reporting Standards previously permitted of recognising borrowing costs directly IFRS 2Amendment (2008) Share-based Compensation incurred on the acquisition, construction or production of (Vesting Conditions and Cancellation) qualifying assets immediately through profit or loss. In future, IFRS 2Amendment (2009) Clarification of Accounting for Group Cash-settled Share-based Payment these borrowing costs will requiremandatory capitalisation Transactions as costs of acquisition or manufacture. The amendment to IFRS 3/IAS 27 Amendment (2008) Business Combinations and this standardrequires first-time application in financial years Consolidated and Separate Financial Statements beginningonorafter 1January 2009.Itwas endorsed by the IFRS 7Amendment (2009) Improving Disclosures on Financial EU in December 2008. Instruments IFRS 8Operating Segments Ias32 and Ias 1 (2008) “FInancIal Instruments: presentatIon IFRIC 9/IAS 39 Amendment (2009) Embedded Derivatives (puttaBle Instruments)”: This standardisofcrucial importance for the delineation of equity and debt capital. The new version IFRIC 12 Service Concession Arrangements allows puttable instruments to be classified as equity in specific IFRIC 15 Agreements for the Construction of Real Estate circumstances. This is dependent on compensation being agreed IFRIC 17 Distributions of Non-cash Assets to at fair value and that the contributions thereby made represent Owners the most subordinate claim to the net assets of the company. IFRIC 18 Transfers of Assets from Customers The amendment to the standardrequires first-time application IAS 39 (2008) Recognition and Measurement in financial years beginning on or after 1January 2009. It was (Eligible Hedged Item) endorsed by the EU in January 2009. IAS 39 (2008) Reclassifications of Financial Assets

Improvement project (2008) and (2009) "Improvements to IFrss”: Within the framework of its annual improvement projects,the IASB has pooled minor amendments and clari- fications to various standards in an omnibus standard. These amendments areintended to specify requirements and to eliminate unintended inconsistencies between the standards. The amendments require first-time application in financial years beginning on or after 1January 2009 and 1July 2009 respectively.The amendments for 2008 wereendorsed by the

MVV Energie 2008/09 93 MVV EnErgiE Consolidated Financial Statements

IFRS 1/IAS 27 AMENDMENTS (2008) “FIRST-TIME ADoPTIoN oF INTER- through profit or loss. The amendment to the standardrequires NATIoNAL FINANCIAL REPoRTING STANDARDS”AND “CoNSoLIDATED first-time application in financial years beginning on or after AND SEPARATE FINANCIAL STATEMENTS”: These amendments 1July 2009. It was endorsed by the EU in June 2009. mainly involve the introduction of simplifications for the initial IFRS 7 AMENDMENT (2009) “IMPRoVING DISCLoSuRES oN FINAN- measurement of subsidiaries and for the separation of profits in CIAL INSTRuMENTS”: Thisamendment provides for extended theacquisition period. The amendment to the standardrequires disclosures on fair value measurements and liquidity risk. The first-time application in financial years beginning on or after amendment to the standardrequires first-time application 1January 2009. It was endorsed by the EU in January 2009. in financial years beginning on or after 1January 2009. EU IFRS 1 AMENDMENTS (2008) “FIRST-TIMEADoPTIoN oF INTERNA- endorsement was still outstanding as of 30 September 2009. TIoNAL FINANCIAL REPoRTING STANDARDS”: The versionofIFRS 1 IFRS 8“oPERATING SEGMENTS”: IFRS 8replaces the previous now published retains the contents of the previous version standardIAS 14. This standardstipulates that operating with an amended structure. The amendment to the standard segments must be identified on the basis of the company’s requires first-time application in financial years beginning on internal reportingstructures (management approach). This or after 1July 2009. EU endorsement was still outstanding as interpretation requires first-time application in financial years of 30 September 2009. beginning on or after 1January 2009. It was endorsed by the IFRS 2AMENDMENT (2008) “ShARE-BASED PAyMENT (VESTING EU in November 2007. CoNDITIoNS AND CANCELLATIoN)”: This defines the vesting IFRIC 9/IAS 39 AMENDMENT (2009) “EMBEDDED DERIVATIVES”: conditions for share-basedcompensation plans moreprecisely This amendment clarifies the accounting treatment of embed- and specifies the regulations applicable in the event of the ded derivatives for companies which make use of areclas- prematuretermination of compensation plans. The amend- sification amendment. The amendment to this interpretation ment to the standardrequires first-time application in financial and standardrequires first-time application in financial years yearsbeginning on or after1January 2009.Itwas endorsed beginning on or after 30 June 2009. EU endorsement was still by theEUinDecember2008. outstanding as of 30 September 2009. IFRS 2 AMENDMENT(2009) “CLARIFICATIoN oF ACCouNTING FoR IFRIC12“SERVICE CoNCESSIoN ARRANGEMENTS”: This interpreta- GRouPCASh-SETTLED ShARE-BASED PAyMENT TRANSACTIoNS”: tion governs the recognition of arrangements wherethe public This amendmentclarifies howanindividualsubsidiarywithin sector concludes contracts with private companies involving agroup should account for specific share-based compensation the performance of public sector tasks. To perform these agreements in its own financial statements. The amendment tasks, the private company uses infrastructurewhich remains to thestandardrequires first-time application in financial years at the disposal of the public sector.The private company is beginningonorafter 1January 2010.EUendorsement was responsible for the construction, operation and maintenance stilloutstanding as of 30 September2009. of the infrastructure. This interpretation requires first-time IFRS 3/IAS 27 AMENDMENTS (2008) “BuSINESS CoMBINATIoNS” application in financial years beginning on or after 1January AND “CoNSoLIDATED AND SEPARATE FINANCIAL STATEMENTS”: 2008. It was endorsed by the EU in March 2009. As well as the option of measuring minority interests at fair IFRIC 15 “AGREEMENTS FoR ThE CoNSTRuCTIoN oF REAL ESTATE”: value(full goodwill approach)oratproratednet assets upon This interpretation governs the applicability of the competing abusinessacquisition,these amendments introducethe reas- standards IAS 11 and IAS 18 in respect of real estate sales sessment through profit or loss of shares held upon control wherethe contract is concluded with the buyer prior to the ultimately being gained and the recognition directly in equity completion of construction work.Thisinterpretationrequires of changes in the level of shareholding not leading to aloss first-timeapplication in financial years beginning on or after of control. Also worthy of mention arethe mandatory recog- 1January 2009. It was endorsed by the EU in July 2009. nition upon acquisition of any consideration contingent on futureevents and the recognition of transactions expenses

94 MVV Energie 2008/09 IFRIC 17 “DISTRIBuTIoNS oF NoN-CASh ASSETS To owNERS”: This to segment reporting. Apart from the amendments required interpretation governs how acompany must measureassets in thepresentation of the financial statements, the first-time other than cash which it transfers to owners by way of profit applicationofthe other requirements is not expected to have distribution. This interpretation requires first-time application any materialimplications for the consolidated financial state- in financial years beginning on or after 1July 2009. EU endorse- ments of the MVV Energie Group. ment wasstill outstanding as of 30 September 2009. To enhance transparency and in contrast to the presentation IFRIC 18 “TRANSFERS oF ASSETS FRoM CuSToMERS”: This inter- in the 2007/08 financial year,inthe cash flow statement the pretation clarifies the requirements of IFRS for arrangements in dividend payment line item has been supplemented by the which acompany receives property,plant or operating funds dividend payment to minority shareholders line item. The from acustomer which the company must then use either to comparable figures have been adjusted as appropriate. These connect the customer to adistribution network or to provide amendments did not lead to any displacements within the the customer with ongoing access to asupply of goods or cash flow statement. services. It also deals with cases whereacompany receives cash on the condition that it will acquireormanufactureone Scope of consolidation and changes of the aforementioned assets. This interpretation, which was in the scope of consolidation published in January 2009, requires first-time application in financial years beginning on or after 1July 2009. EU endorse- In addition to MVV Energie AG, 56 German and foreign sub- ment was still outstanding as of 30 September 2009. sidiariesinwhich MVV Energie AG directly or indirectly holds a majority of the voting rights have been fully consolidated in the IAS 39 (2008) “RECoGNITIoN AND MEASuREMENT (ELIGIBLE consolidated financial statements of the MVV Energie Group hEDGED ITEM)”: This standardspecifies the application of for the 2008/09financialyear(previous year: 53).The relevant hedge accounting to hedges of the unilateral risks involved control concept requires the parent company to exercise acon- in ahedged item and to hedged items involving inflation. The trolling influence in the case of fully consolidated companies. amendment to the standardrequires first-time application This is the case for all companies fully consolidated. in financial years beginning on or after 1July 2008. It was endorsed by the EU in September 2009. Alist of the shareholdings of the MVV Energie Group has been provided from Page 151onwards and has also been published IAS 39 AMENDMENT “RECLASSIFICATIoNS oF FINANCIAL ASSETS”: in theelectronicFederal Gazette(Bundesanzeiger). This revision of the standardallows the reclassification of some financial instruments out of the measured at fair value Thefollowing companies wereincluded in the consolidated through profit or loss and available for sale categories in financial statements by way of full consolidation for the first specified circumstances and deems such reclassification to time during the period under report: be permissible. The amendment to the standardrequires • MVV Umwelt Ressourcen GmbH, Mannheim first-time application in financial years beginning on or after • Českolipská teplárenská a.s., Česká Lípa, Czech Republic 1July 2009. It was endorsed by the EU in September 2009. • A+S Naturenergie GmbH, Pfaffenhofen • MVV Energiedienstleistungen GmbH Nord, Hamburg The implications of the first-time application of IFRIC 9, IFRIC 17 • Waldenergie BayernGmbH, Gersthofen and IFRIC 18, as well as of the improvement project (2008) and IFRS 3, on the consolidated financial statements of the The initial inclusion of these companies in the consolidated MVV Energie Group arecurrently under review.IAS 23 and financialstatements did not result in any material changes IFRIC 12 will have implications for the net asset, financial and in the net asset, financial or earnings position of the Group. earnings position. The application of IAS 1will lead to changes MVV Umwelt Ressourcen GmbH, Mannheim, MVV Energie- in thepresentation of the income statement and the statement dienstleistungen GmbH Nord, Hamburg, and Waldenergie of changesinequity.These cannot yet be reliably determined. BayernGmbH, Gersthofen, arenewly founded companies. The application of IFRS 8will not result in any material changes

MVV Energie 2008/09 95 MVV EnErgiE Consolidated Financial Statements

In the 1st quarter of the 2008/09 financial year,DECON Deutsche stocked up to 100 %, with acorresponding reduction in Energie-Consult Ingenieurgesellschaft mit beschränkter Haftung, minority interests. Bad Homburg v. d. Höhe, was merged into MVV decon GmbH, The shareholding held in Českolipská teplárenská a.s., Česká Mannheim, and MVV Energiedienstleistungen GmbH IS Süd- Lípa, Czech Republic, acompany in the Czech subgroup, was west, Mannheim, was mergedinto MVV Energiedienstleistun- increased from 35.00 %to94.99%. Accordingly,this company gen GmbH Südwest, Mannheim. The incorporating companies was fully consolidated in the consolidated financial statements areboth group companies. These mergers had no implications for the first time in the 2nd quarter of the 2008/09 financial for the net asset, financial and earnings position of the Group. year.The fair values of the company’sassets and liabilities The remaining 49%ofthe shares in MVV Energiedienstleis- identifiable upon acquisition arepresented in the following tungen Wohnen GmbH &Co. KG, Berlin, wereacquired in table. The purchase price allocation for the company thereby the1st quarter of the 2008/09 financial year at apurchase acquired hasnot yet been completed; the figures stated below price of Euro13000 thousand. The shareholding was thus aretherefore stillsubject to amendment.

Identifiable assets and liabilities Českolipská teplárenská a.s., Ceská Lípa A+S Naturenergie Gmbh, Pfaffenhofen Euro000s Recognised upon Carrying amount Recognised upon Carrying amount upon acquisition initial consolidation initial consolidation Intangible assets 10 10 310 2 Property,plant and equipment 1888 1888 4571 4571 Deferred tax assets ——216 216 Inventories, receivables, other assets 8872 8872 2275 2275 Cash and cash equivalents 7127 7127 87 87 Provisions 263 263 142 142 Other liabilities 10 307 10 307 5660 5660 Deferred tax liabilities 47 47 256 167 Fair value of net assets 7280 7280 1401 1182 Shareacquired in company 4367 4367 1401 827 Debit difference 1339 ——— Goodwill ——4867 — Earnings contribution since date of initial consolidation 2648 —–727 —

Thedebit difference of Euro1339 thousand was recognised A+S Naturenergie GmbH, Pfaffenhofen, and MVV Energie- directly through profit or loss and is included in other operat- dienstleistungen GmbH Nord, Hamburg, wereincluded in ing income. The purchase price obligation was settled in cash. the scope of consolidation in the 3rd quarter of 2008/09. The costs directly attributable to the acquisition amounted to A70% stake in A+S Naturenergie GmbH was acquired in Euro424 thousand. returnfor payment in the previous year (1 April 2008) and rec- ognised under other financial assets. The company successfully The disclosureofproforma sales and earnings has been omit- completed its introduction of IFRS in the year under report. ted, as the aggregate implications of the company acquisition Upon initial consolidation, the goodwill of A+S Naturenergie for MVV Energie AG arenot material. amounted to Euro4867 thousand. The purchaseprice obliga- tion was settled in cash. The costs directly attributable to the acquisition amounted to Euro68thousand. The remaining 30 %ofthe shares will be acquired in two further tranches by 2011, with the purchase price having avariable structure.

96 MVV Energie 2008/09 Aliability has been recognised for this portion of the purchase Joint ventures account for the following shares of the balance price. Goodwill may thereforestill change retrospectively. sheet and income statement of the MVV Energie Group:

The assets of Euro36681 thousand reported as held for sale as of 30 September 2008 mainly involved the shareholding Balance sheet of Euro34049 thousand in MVV Polska Sp. zo.o., Warsaw, Euromillion 30.9.2009 30.9.2008 Poland, which had been contributed to MVV Nederland B.V., Assets Amsterdam, Netherlands. Asale price of Euro34800 thousand Non-current assets 144.4 138.6 was received in the current 2008/09 financial year.The sale Current assets 48.4 41.0 price was settled in cash. No assets or liabilities wereclassified 192.8 179.6 as available for sale as of 30 September 2009. Equity and liabilities Equity 88.2 98.4 Overall, the changes in the scope of consolidation have not Non-current debt 52.8 42.1 had any material influence on the net asset, financial and earn- ings position of the MVV Energie Group. Current debt 51.8 39.1 192.8 179.6 All companies included in the consolidated financial state- ments have30September as their uniform reporting date.The annual financialstatementsofthe companiesincludedinthe Income statement consolidated financialstatementsofthe MVVEnergie Group Euromillion 2008/2009 2007/2008 have been basedonuniform accounting policies. Sales 226.4 201.1 Stadtwerke Solingen and Stadtwerke Ingolstadt represent Own work capitalised and changes in inventories 1.0 2.0 the Group’sprincipal joint ventures. Their business fields Other operating income 11.8 11.1 arecongruent with those of MVV Energie AG. Kielspeicher Cost of materials 169.1 141.7 103 GmbH &Co. KG, Kiel, was included in the consolidated financial statements of the MVV Energie Group on apropor- Personnel expenses 18.2 17.7 tionate basis for the first time in the 2008/09financial year.Its Other operating expenses 38.5 22.9 business activities focus on the storage of gas. Other income from shareholdings 0.3 0.3 EBITDA 13.7 32.2 Depreciation 7.5 7.5 EBITA6.2 24.7 Goodwill amortisation —— EBIT 6.2 24.7 Financing income 0.1 0.1 Financing expenses 2.1 2.3 EBT 4.2 22.5 Taxes on income 2.3 7.1 Annual net surplus 1.9 15.4

MVV Energie 2008/09 97 MVV EnErgiE Consolidated Financial Statements

The following companies wereincluded in the consolidated Minority interests represent the shareofearnings and net financial statements for the first time using the equity method assets not attributable to the Group. Minority interests are in the period under report: recognised separately in the consolidated income statement andconsolidatedbalance sheet. In theconsolidatedbalance • Biomasse Rhein-Main GmbH, Flörsheim-Wicker • Gemeinschaftskraftwerk Kiel GmbH, Kiel sheet, they arerecognised within equity,separately from the • Grosskraftwerk Mannheim AG, Mannheim equity attributable to shareholders in the parent company. • Stadtwerke Buchen GmbH &Co. KG, Buchen Wherethe capital does not qualify as equity under IFRS, the • Stadtwerke Sinsheim Versorgungs GmbH &Co. KG, minority interests acquired arerecognised as debt capital. This Sinsheim debtcapital is measured in line with the respectivecontractual • ZVO Energie GmbH, Timmendorfer Strand terms.

Stadtwerke Sinsheim Versorgungs GmbH &Co. KG, Sinsheim, Receivables and liabilities have been offset against each other, was acquired in the 2008/09 financial year.The other com- as have income and expenses between consolidated companies. panies listed wererecognised under other shareholdings in Material intercompany results have also been eliminated. previous years. Theproportionate consolidation of joint ventures is performed The companies included in the consolidated financial state- in accordance with the same principles. Interests in associates ments as of 30 September 2009 have been presented in the areaccounted for using the equity method. list of shareholdings from Page 151 onwards. Shareholdings in companies not included by way of full or proportionate consolidation or by application of the equity Consolidation methods method have been accounted for pursuant to IAS 39 (2008).

The annual financial statements included in consolidation have been prepared on the basis of uniform accounting policies as Currency translation of 30 September 2009. Transactions in foreign currencies arerecognised at con- Subsidiaries arefully consolidated upon acquisition, i.e. from solidated companies at the spot rate applicable at the time the time at which the Group gains control. Their inclusion in of the transaction. Monetary assets and liabilities stated in a the consolidated financial statements ends as soon as they are foreign currency aretranslated at each balance sheet date at no longer controlled by the parent company.Capital consoli- the rate valid on the balance sheet date. Non-monetary items dation is performed using the purchase method. This involves measured at historic cost in aforeign currency aretranslated the costs of acquisition relating to the business combination at the rate valid on the date of the transaction. Non-monetary being allocated to the identifiable assets acquired and the itemsmeasured at fair value in aforeign currency aretrans- identifiable liabilities and contingent liabilities assumed on the latedatthe rate validuponthe fair valuebeing determined. basis of their fair values upon acquisition. Any remaining credit Any resultant exchange rate gainsand losses arerecognised difference is reported under intangible assets as goodwill. directly through profit or loss as other operating income or Capitalised goodwill is not subject to scheduled amortisation, other operating expenses. but is rather tested for impairment once ayear or if there The annual financial statements of foreign group companies areany indications of impairment. Goodwill remaining upon aretranslated into euros (the reporting currency of the Group) deconsolidation is accounted for in the proceeds on disposal. in accordance with the functional currency concept. This in- Any debit differences arising arerecognised directlythrough volves the respective national currency at all companies thereby profit or loss. affected in view of the fact that they conduct their business in their national currencies as independent foreign entities within the Group in financial, economic and organisational terms. Modified reporting date rates areused to translate the financial statements of foreign companies. This involves assets andliabilities being translated from their national currencies into euros at the meanexchange rate valid on the balance

98 MVV Energie 2008/09 sheet date (reporting date rate). Income and expense items Intangible assets aretranslated using annual average exchange rates. Currency Intangible assets wereacquired in returnfor payment and differences resulting from the translation of the equity of the arecarried at cost. Apart from goodwill, they aresubject to foreign companies or from the application of differing transla- scheduled straight-line amortisation based on their pattern tion rates for the balance sheet and the income statement are of consumption. Thereare no intangible assets with useful recognised directly in equity as retained earnings (differential lives classified as indefinite. CO emissions rights with holding amount from currency translation). 2 periodslonger than one year and requiring purchase by the Currency translation has been based on the following ex- MVV Energie Group arerecognised as intangible assets at cost, change rates: while rights allocated free of charge arerecognised at Euro0.

Developmentexpenses arecapitalised whereanewly devel- Currency translation oped productorprocess canbeclearly delineated,istechni- Reporting date rate Average rate callyfeasibleand is intended forinternaluse or sale. Afurther 1Euro 30.9.2009 30.9.2008 2008/2009 2007/2008 condition for capitalisation is sufficient likelihood that the Polish zloty (PLN) ———3.516 development expenses will lead to futureinflows of funds. Czech crown (CZK) 25.164 24.660 26.292 25.317 Capitaliseddevelopment expenses aresubject to scheduled British pound (GBP) 0.909 0.790 0.874 0.793 amortisation over the estimated period of sale of the products. Research expenses arenot eligible for capitalisation and are Due to the disposal of the Polish subgroup in the previous expensed in the period in which they areincurred. financial year,the relevant reporting date rates have been Goodwill is not subject to scheduled amortisation, but is rather omitted. The exchange rate upon the disposal of the Polish tested for impairment annually or morefrequently should any subgroup amounted to 3.206 (Euro/PLN). The average rate specific indications of impairment arise. Goodwill is allocated for the 2007/08 financial year was calculated up to the date for this purposetocash generating unitsonthe levelofthe of deconsolidation. legalentities or of subgroups consisting of legal entities be- longingtogetheringeographicalormaterialterms. Accounting policies

Assets and liabilities aremeasured at amortised cost in all cases with the exception of certain financial assets, liabilities and in- struments which IAS 39 (2008) requires to be measured at fair value and wherethis can be reliably determined. Non-current receivables and debt arerecognised at present value. Assets andliabilities arenettedwhere therelevant requirements are met. Assets and liabilities with different dates of transaction andfinancial performance arerecognised as of the transaction dates. Income andexpensesderived from assets or liabilities arerecognised under earnings from operations or net interest expenses depending on the respective balance sheet item. Period deferrals areaccounted for wherenecessary.Such items arerecognised directly in equity whereInternational Account- ing Standards so requireand arepresented separately in the statement of changes in equity.

Theunderlying principles of recognition and measurement ap- pliedwhenpreparing theconsolidatedfinancial statements of theMVV EnergieGroup areset outbelow.

MVVEnergie 2008/09 99 MVV EnErgiE Consolidated Financial Statements

Property,plant and equipment Impairment of intangible assets, property,plant and equipment and investment property Property,plant and equipment is stated at cost, less propor- tionatedepreciationtoaccount forthe declineinthe valueof The carrying amounts of intangible assets, property,plantand theassets. In thecaseofinternallygenerated property,plant equipment and investment property areassessed for impair- and equipment, the costs of manufactureare based on al- ment at each reporting date. An impairment test pursuant to locable direct costs and acommensurate shareofoverhead IAS 36 is undertaken should therebeany indication of impair- expenses. Borrowing costs arenot capitalised. ment. Wherethe carrying amount of an asset is higher than itsrecoverable amount (the higher of its fair value less disposal Thecosts of assets arereduced by public subsidies (investment costsorits valueinuse), thecarryingamountiswritten down grants)received and by customer payments for construction to the recoverable amount. The fair value represents abest andhouse connection costs in the case of new connections estimate of the recoverable amount. The recoverable amount or extensions to existing connections. Public subsidies are must be determined for each asset, unless the asset does not recognisedwhereitisreasonably certain thatthe subsidies generate any largely independent cash flows. In this case, the will be grantedand the relevant conditions have been met. amountshouldbestated for which an independent thirdparty Investment grants relate exclusively to asset-based subsidies. would acquirethe cash generating unit at the balance sheet These grants arereported separately from investments in the date. The fair value /value in use of the cash generating units overview of property,plant and equipment. aredetermined based on the cash flow forecasts approved by Items of property,plant and equipment have been subject the management and supervisory bodies of MVV Energie AG. to straight-line depreciation consistent with their patternof Such cash flow forecasts arebased on the experience and re- consumption. Depreciation is undertaken prorata temporis in sults in previous financial years, as well as on expectations as to the year of addition. Scheduled depreciation is based on the futuremarket developments. The cash flow forecastsalso refer following useful lives: to the expected development in key macroeconomic figures derivedfromeconomicand financialstudies.Key assumptions useful lives in years used in theforecastconcernthe development of the price of Buildings 25 –50 crudeoil, natural gas and coal on the global markets, the price Technical equipment and machinery 8–40 of electricity and gas on the wholesale and end consumer Transmission grids 30 –40 marketsand the development of market shares and of the Plant and office equipment 4–15 relevant regulatory framework. The cash flow forecasts cover a detailedbudgeting period of five years. Figures for subsequent financial years arebased on an extrapolation of the results Investment property of the final year in the detailed budgeting period. Reference is made to currentestimates of growth rates. These growth The investmentproperty item includes real estateheld for rates correspond to the average long-term growth rates on the purpose of generating rental income or long-term value the markets in which the companies operate and areconsist- growth and which is not used for operating purposes. Such entwith external sources of information concerning market property is measured at amortisedcost. Transaction expenses expectations. Impairment losses arerecognised when the areincluded in the initial measurement. The real estate thereby recoverable amount of the asset (value in use) falls short of its recognised is subject to straight-line depreciation over aperiod carrying amount. Wherethe recoverable amount exceeds the of 25 to 33 years. The fair values aredetermined in regular im- carrying amount in subsequent periods, the assets arewritten pairment tests undertaken in the form of independent surveys up to amaximum of amortised cost. based on internationallyrecognised methods.

100 MVV Energie 2008/09 Goodwill is not written up. Should the carrying amount of a other financial assets cash generating unit to whichthe goodwill has been allocated Other financial assets consist of loans, leasing receivables, exceed its recoverable amount, the goodwill thereby allocated securities and other shareholdings, which aremeasured and is written down first. Any further write-down requirement is classified as follows. Loans areclassified under loans and then accounted for by means of aprorated reduction in the receivables and leasing receivables under leases. These items carrying amountsofthe other assets at the cash generating aremeasured at amortised cost, less impairments where unit. applicable.Other shareholdings and other majority share- The MVV Energie Group leases specific items of property,plant holdings have also been allocated to other financial assets. and equipment (leased items). Lease contracts for items in Other majority shareholdings and other shareholdings are which the MVV Energie Group bears the principal risks and measured at amortisedcost, corrected wherenecessary to rewards resulting from ownership of the leased item areclassi- account for impairment due to areduction in expected cash fied as finance leases. Assets in connection with finance leases flows or for existing default risks. Finance leases whereall arecapitalised at the beginning of the leasing term at the risks and rewards of ownership aretransferred to the lessee lower of the fair value of the leased item and the present arerecognised as areceivable at the present value of the value of minimum leasing payments. Leasing liabilities of the minimum leasing payments (net investment value). Securities same amount arerecognised under non-current and current arerecognised at fair value. liabilities. Any default risks identifiable for financial assets areaccounted Each leasing instalment is divided into its respective interest for with write-downs. These write-downs arerecognised under and principal components in such away that the leasing liabili- income from shareholdings or under net interest expenses. ties remain constant. The interest component of the leasing instalment is recognised through profit or loss in the income Receivables and other assets statement. Items of property,plant and equipment governed by finance leases aredepreciated over the shorter of their Receivables and other assets include trade receivables, other economic useful life or the term of the lease. receivables and assets and tax receivables. Apart from deriva- tive financialinstruments, these aremeasured at amortised cost. Initial measurement is undertaken as of the date of Associates the transaction. Any write-downs required arebased on the Associates arerecognised using the equity method and are actual level of default risk. The value of receivables is generally measured initially at cost and subsequently at the amortised correctedbymeans of awrite-down account. Current other value of the prorated net assets. The carrying amounts are assets also include the current portion of leasing receivables increased or reduced annually to account for prorated earn- andloans. Measurement of the current portions of leasing ings, dividend distributions and other changes in equity.Any receivables and loans is based on the same principles as goodwill thereby recognised is included in the value of the measurement of the non-current portions. These principles shareholding, rather than being reported separately.Impair- were outlined under financial assets. ment losses arerecognised when the recoverable amount falls Trade receivables include accruals /deferrals to cover energy short of the carryingamount. and water sales not yet read or invoiced as of the balance sheet date. Part-payments made in the context of annual consumptioninvoicing arededucted from the receivables. Receivables from customers arerecognised at amortised cost. Default risks existing at the balance sheet date arecovered by adequate write-downs. Receivables arederecognised im- mediately upon becoming uncollectible. The carrying amounts reported arebasically equivalent to their respective fair values.

MVV Energie 2008/09 101 MVV EnErgiE Consolidated Financial Statements

CO2 emissions rights with remaining terms of less than one year Cash and cash equivalents requiring purchase or exchange by the MVV Energie Group are Cash and cash equivalents consist of cash on hand and credit recognised at cost as other assets, while rights allocated free balances at bankswith original terms of less than three months. of charge have been recognised at Euro0.

Assets and liabilities held for sale Customer-specific construction contracts Assets which can be sold in their current state and whose sale Customer-specific construction contracts arerecognised at is highly probable arereported as assets held for sale. These percentage of completion. This means that the prorated sales may involve individual non-current assets, groups of assets and the costs of sales incurred arerecognised at the percent- or business divisions. Liabilitiesdue to be dispensed with in age of completion, based on the contractual arrangements atransaction together with assets arereported separately as with thecustomers, reached by the balance sheet date, as “liabilities held for sale.” soon as the results of the constructioncontract can be reli- ably estimated. Percentage of completion is calculated on Non-current assets held for sale arenolonger subject to sched- the basis of the project costs incurred by the balance sheet uled depreciation and amortisation, but arerather recognised date as aproportion of the total costs of the project. In the at fair value, less disposal costs, wherethis is lower than the balancesheet,the salespostedinlinewiththeir percentage carrying amount. Gains or losses resulting from the measure- of completion arereduced by advance payments received ment of individual assets held for sale or disposal groups are and recognised under trade receivables. As soon as the result recognised under earnings from continuing operations until of aconstruction contract cannot be reliably estimated, the their ultimate disposal. Gains or losses resulting from the revenues from the contract areonly recognised at the level of measurementofdiscontinued operations at fair value less the contract costs incurred and which areprobably collectible. disposalcosts arerecognised as earnings from discontinued Losses on contracts areimmediately expensed in full as soon operations. as they areexpected.

Deferred taxes Inventories Deferred taxes arestated for temporary differences between Inventories consistofraw materials and supplies, unfinished thetax balance sheets and IFRS balance sheets at individual and finished products and services, as well as advance pay- companiesarising from themeasurement of assets andliabili- ments made for such. They aremeasured at the lower of cost ties fortax purposes on theone hand andfor external IFRS ac- or net sale value. Cost of acquisition or manufacturefor raw counting on the other,aswell as from consolidation processes materials and supplies has been calculated using the aver- impacting on earnings. Moreover,deferred tax assets have also age cost method. The manufacturing costs of unfinished and been recognised for tax reduction claimsresulting from the ex- finished products and services include allocable direct costs pectedutilisation in subsequent years of existing losses carried andacommensurate shareofthe material and production forward. Such claims arecapitalised if therealisation of these overheads required based on normal capacity utilisation levels losses carried forwardcan be assumed with adequate certainty and thus include production-related full costs.The amounts on the basisofexisting business plans. Deferred taxes have stated arereduced as appropriate to account for risks resulting been calculated basedonthe tax ratesvalid or expected at from anyimpairmentintheir utility. the individual organisational units upon realisation. Account is taken of the tax regulations valid or already adopted at the bal- ance sheet date. The calculation of deferred taxes in Germany has been based on atax rate of 30%(previous year: 30%). This results from the unchanged corporate income tax rate of 15%, the unchanged solidarity surcharge of 5.5%and the Group’saverage trade tax rate of 14%(previous year: 14%). Theequivalent calculations for foreign companies arebased on therespective national tax rates. Wherethe requirements

102 MVV Energie 2008/09 of IAS 12 aremet, deferred tax assets and liabilities arestated The key parameters used in the calculation of the defined on anet basis for each company or fiscal unit. benefit plans as of 30 September 2009 are:

30.9.2009 30.9.2008 Provisions Discount rate 5.40% 6.00% Provisions arerecognised for all legal or constructive obliga- Futuresalary increases 0.50 –3.25%2.00 –2.75% tions to thirdpartiesatthe balance sheet date as aresult Futurepensions increases 0.50 –2.70%1.00 –2.75% of past events, when it is probable that afutureoutflow of resources will be required to settle the obligations and the Thepension scheme for employees of the MVV Energie Group amounts can be reliably estimated. Provisions arerecognised at is largely arranged in line with collective wage and salary their expected performance amounts and arenot netted with agreements specific to the respective companies. This results refund claims. Provisions based on large numbers of events of in indirect pension obligations to employees which arecovered the same natureare recognised at the expected value of the almost exclusivelybymunicipal supplementary pension compa- potential results. nies (ZVK). This requires allocations to be made for retirement Allnon-current provisions have been recognised at their ex- periods. The payments made in this context serve to finance pected performance amounts discounted as of the balance current pension outlays. According to IFRS, this type of pen- sheet date. sion plan represents adefined benefit plan, as the individual benefits provided by the ZVK to former employees of member Provisionsfor pensionsand similar obligations arestated ex- companies arenot dependent on the level of contributions clusively for defined benefit plans. Pursuant to IAS 19, these paid into the pension fund. Moreover,asthe employees of pension provisions arecalculated using the projected unit several member companies areinsured by the ZVK, this type credit method. As well as pensions and vested claims known of pension plan is to be considered amulti-employer plan and at the balance sheet date, this method also accounts for sal- thus requires the application of special regulations. ary and pension increases expected in future. The calculation made application of the 2005 Gmortality tables published by Given the redistribution of the benefits provided by the ZVK Prof. Dr.Klaus Heubeck. As the Group does not have any plan amongits member companies and the lack of adequate in- assets, its pension obligations arecovered in full by provisions. formation about the age structures, personnel turnover and To the extent that they exceed 10%ofthe scope of the obliga- salaries of theemployees thereby covered, no information is tion, actuarial gains and losses resulting from changes in the available on the proportion of futurefinancial obligations (eco- assumptions underlying the calculation arerecognised through nomic obligation) accruing to the MVV Energie Group. In view profit or loss over the average remaining working life of the of this, IFRS does not permit recognition of the provisions and employees entitled. the scheme has to be treated as adefined contribution plan.

Liabilities

Liabilities arerecognised at their repayment amounts or,where necessary,atpresent value.

Liabilities from finance leases arecarried at the present value of futureleasing payments. Apart from derivative financial instruments, other liabilities aremeasured at amortised cost, which is basically equivalent to their fair values.

Trade payables aremeasured at amortised cost.

MVV Energie 2008/09 103 MVV EnErgiE Consolidated Financial Statements

The other financial debt item includes the present value of Cash flow hedges serve to hedge against the risk of fluctuations payment obligations resulting from puttable instruments. in future cash flows relating to arecognised asset or liability,or According to IAS 32, agreements involving an obligation to to ahighly likely planned transaction. Wherethe financial instru- purchase equity instruments represent afinancial liability in the ment is acash flow hedge, the unrealised gains and losses on amount of thepresent value of the purchase price, irrespective the hedge areinitially recognised in equity under the fair value of whetherfulfilment of this obligation is dependent on an op- measurement of financial instruments. They areonly taken tion rightbeing exercised by the contractual partner and of the into the income statement upon the hedged item taking effect probabilityofsuch right being exercised. Accordingly,minority through profit or loss and thus compensate for the impact of interests arerecognised as current or non-current debt in line the underlying transaction on the income statement. with the contractual arrangements. These financial obligations IAS 39 sets out hedge accounting requirements. In particular, aremeasured at fair value in accordance with IAS 39 (2008). it requires hedging relationships to be extensively documented The difference between the exercise price and the carrying and effective, i.e. both prospective and retrospective changes in amount of the minority interests is treated as apurchase price thefair value of the hedge have to lie within arange of 80%to obligation dependent on futureevents by analogy with the 125%ofthe opposing changes in the fair value of the hedged requirements for the presentation of business combinations, item. Only the effective portion of ahedging relationship may unless other contractual arrangements requireapplication. The be recognised in equity under retained earnings. The ineffective earnings distributed to minority shareholders arerecognised portion must be credited or charged directly to earnings in the as financingexpenses, as arechanges in thepresent valueof income statement. thepotential paymentobligations. The Group makes no use of the fair value option.

Contingent liabilitiesand financial obligations Measurement uncertainties Contingent liabilities involve potential obligations to third parties or existing obligations for which an outflow of resources Discretionary decisions have to be made when applying the is unlikely or whose amount cannot be reliably determined. accounting policies. Moreover,the preparation of consolidated Contingent liabilities arenot recognised in the balance sheet. financial statements in accordance with IFRS requires assump- The volume of obligations stated in the notes for contingent tions and estimates to be made which could impact on the liabilitiescorresponds to the scope of liability at the balance values stated for the assets and liabilities, income and expenses sheetdate. thereby recognised, as well as on the disclosureofcontingent liabilities.

Derivative financial instruments

Derivative financial instruments arecarried at fair value through profit or loss and recognised as assets or liabilities. Derivative financial instruments include interest and currency derivatives, as well as derivative commodities contracts, mainly for electricity,gas and coal. The amounts recognised arede- rived from market values or using generally recognised valua- tion methods (present value method or option pricing models basedoncurrent market parameters). Changes in the value of derivative financial instruments arerecognised directly in equity under fair value measurement of financial instruments in caseswherethey serve to hedge futurecash flows and form part of ahedging relationship with such, and wherethey meet the requirements of hedge accounting set out in IAS 39. Other changesintheir valueare recognised as income or expenses under other operating income or expenses.

104 MVV Energie 2008/09 Discretionary decisions in the application The principal estimates involved in the measurement of provi- of accounting policies sions for pensions and similar obligations include the discount factor,biometrical probabilities and trend assumptions. Any Theexercising of discretion in the application of accounting deviation in the development of these estimates could result policies has not had any material influence on the values of in differences arising between the amounts recognised and the the assets and liabilities as reported in the financial statements. obligations actually arising in the course of time. As actuarial gains and losses areonly recognised when they exceed 10% uncertainties involved in estimate of the higher of the scope of obligation or the fair value of the plan assets, changes in the discount factor generally do Thefollowing section provides information on the most im- nothave any material influence on the carrying amount of portant forward-looking assumptions and major sources of theprovision recognised at the MVV Energie Group in the uncertainty involved in estimates made at the balance sheet next financial year. date, as aresult of which thereisarisk that amajor adjustment will be required in the carrying amounts of assets and liabilities The measurement of sales and costs of materials is dependent in thecomingfinancial year. on estimates to the extent that consumption deferrals have been undertaken as of thebalance sheet date for trade re- Thefairvaluesofassetsand liabilitiesand theusefullives of ceivables and payables already incurred but not yet invoiced. assets have been determined on the basis of management assessment. The same applies to the calculation of any impair- Compensation liabilities for partnerships arerecognised at ment of assets. In the 2008/09 financial year,changes arose in prorated fair value. This is determined by compiling acompany the measurement of receivables. The implicationsofthis are valuation, taking dueaccount of current budgets and the yield described in Note 8. This involved adjusting impairment rates curve. for overdue receivables to current market circumstances. When assessing these measurement uncertainties, reference The MVV Energie Group tests its carrying amounts and is always made to thebest information available at the bal- goodwill for impairment at least once ayear and when any ance sheet date. Actual amounts may differ from estimates. events or changesincircumstances indicate that this might The carrying amounts recognised in the financial statements be the case. This requires an estimation of the value in use of which aresubject to these uncertainties have been stated in thecash generating unit to which the goodwill is allocated. the balance sheet and the accompanying information provided To estimate the value in use, the MVV Energie Group has to in the notes. estimate the cash flow surpluses expected to be generated by No material changes in the assumptions underlying the ac- the cash generating unit in futureand furthermoretoselect counting policies weretobeexpected upon the preparation an appropriate discount rate to calculate the present value of of these consolidated financialstatements. In this respect, no the cash flow.All assumptions and estimates arebased on noteworthy adjustments arecurrently to be expected in the circumstances and assessments at the balance sheet date or assumptions and estimates or in the carrying amounts of the at the date during the financial year on which event-specific relevant assets and liabilities in the 2009/10 financial year. impairment becomes necessary.Any deviation in the develop- ment of the underlying framework could result in differences arisingbetween such estimates and actual values. Appropriate amendments aremadeinsuchcases to theassumptions and if necessary to the carrying amount of the goodwill. Further detailscan be foundinNote1.

Moreover,assumptions also have to be made when calculat- ingactual and deferred taxes. In particular,the possibility of generating corresponding futuretaxable income plays amajor role in the assessment as to whether it will be possible to use deferred tax assets.

MVV Energie 2008/09 105 MVV EnErgiE Consolidated Financial Statements

Notesonthe BalanceSheet

1Intangible assets The carrying amounts stated for goodwill arestructured as follows: Intangible assets include concessions, industrial property rights and similar rights, goodwill and advance payments. Euro000s 30.9.2009 30.9.2008 Therequirements governing the capitalisation of development Energieversorgung Offenbach subgroup 65 066 65 066 expenses werenot met in the 2008/09 financial year.Like Stadtwerke Solingen subgroup 59 472 59 472 research expenses, these have thereforebeen recognised as Stadtwerke Ingolstadt subgroup 53 759 53 759 expenses in the period in which they wereincurred. The vol- MVV Energiedienstleistungen Wohnen ume of expenses qualifying as research expenses under IFRS GmbH &Co. KG, Berlin 13 220 13 220 amounted to Euro3415 thousand in the 2008/09 financial MVV Energiedienstleistungen GmbH Mitte, Berlin 12 346 12 346 year (previous year: Euro1871 thousand). Research and devel- MVV Czech subgroup 5170 5307 opment expenses mainly relate to activities aimed at achieving A+S Naturenergie GmbH, Pfaffenhofen 4867 — ongoing improvements in working processes, product devel- Biomassen-Heizkraftwerk Altenstadt GmbH, opment and technological enhancements. Altenstadt 3343 3343 Other 7003 7003 Concessions, industrial property rights and similar rights and 224 246 219 516 values consist of softwareand of contractually agreed grants to customers and suppliers. The useful lives of such rights are For the purposes of performing impairment tests, goodwill was based on the relevant economic aspects or contractual require- allocated to cash generating units. The cash generating units ments and range from 3to50years. basically correspond to the legal subgroups or individual Goodwill is tested for impairment at least once ayear.Asin companies. No write-downs wereundertaken in the 2008/09 the previous year,growth rates ranging from 0.5%to1.0% financial year.After the inclusion of A+S Naturenergie GmbH wereused in the budgets for the impairment test performed in the scope of consolidation of the MVV Energie Group, its in the 2008/09 financial year. goodwill of Euro 4867 thousand has been reported openly for the first time. The change at the MVV Czech subgroup was The recoverable amount /value in use was determined by due to currency translation effects in the 2008/09 financial discounting the cash flows expected at the German sharehold- year. ings using discount rates (weighted cost of capital) averaging 8.5%beforetaxes. The discount rates have been determined In the 2008/09 financial year,accumulated historic scheduled on the basis of available market data. amortisation was offset against accumulated costs of acquisi- tion and manufactureamounting to Euro29063 thousand pursuant to IFRS 3.79.b. The previous year’sfigures were adjusted accordingly.

106 MVV Energie 2008/09 Intangible assets Euro000s Concessions, industrial Goodwill Advance payments Total property rights and similar rights and values Gross value at 1.10.2007 216 930 258 921 2216 478 067 Change in scope of consolidation –521 –7312 —–7833 Currency adjustments 225 1081 31309 Investments 2299 —3093 5392 Disposals 1870 ——1870 Reclassifications 2688 5454 –1403 6739 Gross value at 30.9.2008 219 751 258 144 3909 481 804 Amortisation at 1.10.2007 115 117 37 870 3152 990 Change in scope of consolidation –352 –4995 —–5347 Currency adjustment 168 299 —467 Scheduled amortisation 15 051 ——15 051 Disposals 1568 ——1568 Reclassifications –171 5454 —5283 Amortisation at 30.9.2008 128 245 38 628 3166 876

Net value at 30.9.2008 91 506 219 516 3906 314 928

Gross value at 1.10.2008 219 751 258 144 3909 481 804 Change in scope of consolidation 593 4867 —5460 Currency adjustments –33–190 1–222 Investments 3733 —19885 23 618 Disposals 349 —3352 Reclassifications 6388 —–3269 3119 Gross value at 30.9.2009 230 083 262 821 20 523 513 427 Amortisation at 1.10.2008 128 245 38 628 3166 876 Change in scope of consolidation 203 ——203 Currency adjustments –27–53 —–80 Scheduled amortisation 15 999 ——15 999 Extraordinary amortisation 361 ——361 Disposals 271 —3274 Reclassifications 492 ——492 Amortisation at 30.9.2009 145 002 38 575 —183 577

Net value at 30.9.2009 85 081 224 246 20 523 329 850

The extraordinary amortisation posted in the 2008/09 financial year took the form of asset impairments due to the restructur- ing measures implemented at the energy-related services subgroup.

MVV Energie 2008/09 107 MVV EnErgiE Consolidated Financial Statements

2Property,plant and equipment

Property,plant and equipment Euro000s Land, leasehold rights Technical equipment Other assets, plant Advance payments Total and buildings, and machinery and office and construction including buildings equipment in progress on third-party land Gross value at 1.10.2007 720 905 3220 599 217 982 96 446 4255 932 Change in scope of consolidation –35393 –23275 –1281 –1387 –61336 Currency adjustments 13 938 11 136 338 377 25 789 Investments 8840 49 733 11 938 132 430 202 941 Subsidy payments received 12 12 113 18 —12143 Disposals 21 658 25 955 19 930 365 67 908 Reclassifications 11 061 42 133 4710 –59105 –1201 Gross value at 30.9.2008 697 681 3262 258 213 739 168 396 4342 074 Depreciation at 1.10.2007 304 413 1864 091 151 272 253 2320 029 Change in scope of consolidation –14495 –12670 –972 —–28 137 Currency adjustments 4287 6556 262 30 11 135 Scheduled depreciation 16 111 100 877 11 881 —128 869 Extraordinary depreciation 3071 1772 395 10 5248 Disposals 14 706 18 644 17 375 —50725 Reclassifications —171 ——171 Depreciation at 30.9.2008 298 681 1942 153 145 463 293 2386 590

Net value at 30.9.2008 399 000 1320 105 68 276 168 103 1955 484

Gross value at 1.10.2008 697 681 3262 258 213 739 168 396 4342 074 Change in scope of consolidation 1847 11 494 888 15 403 29 632 Currency adjustments –1700 –1277 –15152 –2840 Investments 9648 55 639 7322 143 360 215 969 Subsidy payments received 611552 31071 12 632 Disposals 7347 48 134 11 033 537 67 051 Reclassifications 20 105 106 022 –1241 –128 005 –3119 Gross value at 30.9.2009 720 228 3374 450 209 657 197 698 4502 033 Depreciation at 1.10.2008 298 681 1942 153 145 463 293 2386 590 Change in scope of consolidation 497 7717 609 —8823 Currency adjustments –468 –736 —–19 –1223 Scheduled depreciation 15 061 104 505 9198 —128 764 Extraordinary depreciation 5988 25 981 145 —32114 Disposals 3802 33 796 10 307 282 48 187 Reclassifications –27995 –1468 8–492 Depreciation at 30.9.2009 315 930 2046 819 143 640 —2506 389

Net value at 30.9.2009 404 298 1327 631 66 017 197 698 1995 644

108 MVV Energie 2008/09 The majority of extraordinary depreciation involved asset im- Investment property pairmentsdue to the restructuring measures implemented at Euro000s 2008/2009 2007/2008 the energy-related services subgroup (Euro31110 thousand). Gross value at 1.10. 7479 7479 Other extraordinary depreciation mainly involved impairments Investments —— of land and buildings, technical equipment, machinery,plant Gross value at 30.9. 7479 7479 and office equipment. This was due to adjustments to pre- vailing market conditions or to areduction in the earnings Depreciation at 1.10. 896 626 expected from futureuse. Depreciation 266 270 Rented or leased items of property,plant and equipment in which Depreciation at 30.9. 1162 896 economic ownershipwas attributable to the MVV Energie Group Net value at 30.9. 6317 6583 as aresult of the relevant contractual terms wereofimmaterial significance in the 2008/09 financial year. 4Associates Property,plant and equipment up to an equivalent value of Euro 81 million have been provided as security for financial In previous years, associates werereported under other finan- liabilities (previous year: Euro82million). This mainly involves cial assets. They have thereforebeen presented in the 2008/09 land and buildings. financial year as reclassifications from other financial assets to associates. The change in the scopeofconsolidationrelates to the shareholding in Stadtwerke Sinsheim, which was first 3Investment property included in the 2008/09 financial year.The following overviews The fair value of investment property is determined on the present the development in the carrying amounts of associates basis of valuations performed by independent surveyors. A and in key items in their balance sheets and income statements. newsurvey will be obtained as of 30 September 2010, as therehave been no indications of potential impairment in the Associates meantime. The fair value corresponds to the amount for which Euro000s 2008/2009 2007/2008 an assetcould be exchanged between informed parties willing Gross value at 1.10. —— to reach agreement at arm’slength on the balance sheet date. Change in scope of consolidation 5353 — Rental income amounted to Euro665 thousand in the finan- Measurement at equity –859 — cial year(previous year: Euro664 thousand).Direct operating Addition —— expenses (excluding scheduled depreciation) amounted to Reclassification 71 901 — Euro115 thousand (previous year: Euro65thousand). There Gross value at 30.9. 76 395 — werenochanges in the holdings of investment property com- pared with the previous year.The investment property relates Amortisation at 1.10. —— to aretirement home in Solingen and aresidential and office Change in scope of consolidation —— building let out in Köthen. Amortisation —— Reclassification 1257 — Amortisation at 30.9. 1257 — Net value at 30.9. 75 138 —

MVV Energie 2008/09 109 MVV EnErgiE Consolidated Financial Statements

Associates account for the following assets, liabilities, equity, 5other financial assets sales and annual net surplus: Other financial assets include other majority shareholdings, other shareholdings, general loans, loans in connection with Euro000s 2008/2009 2007/2008 finance leases and securities. Non-current assets 653 255 — Current assets 255 392 — Write-downs and the development in other financial assets have been reported in the table below,aswell under income from Provisions 505 287 — associates andother income from shareholdings (Note 29) and Liabilities 213 580 — financing income (Note 32) and financing expenses (Note 33). Equity 189 780 — Sales 722 629 — Loans and the loans in connectionwith financeleases havefixed Annual net surplus 11 244 — interest rates, with an average interest rate of 3.4%(previous year:5.5%). The average period for which interest rates remain Theinvestment income received by the MVV Energie Group fixedamounts to 9years (previous year: 11 years) in the case of from theseassociatesinthe 2008/09financial year amounted fixed-rate loans and to 16 years (previous year: 13 years) in the to Euro 5146 thousand. case of finance leases. The reclassifications mainly involve the reclassification of the aforementioned items to current financial Apart from Biomasse Rhein-Main GmbH, Flörsheim-Wicker, assets in line with their respective maturities. andincontrast to the MVV Energie Group,the associateshave financial years ending on 31 December.Nopublicly listed Further information about financial instruments has been market price is available. provided under Note 22.

Thereare no restrictions on disposal or other encumbrances.

110 MVV Energie 2008/09 other financial assets Euro000s Other majority Other Loans Loans in connection Securities Total shareholdings shareholdings general with finance leases Gross value at 1.10.2007 14 276 118 667 15 178 25 695 3583 177 399 Currency adjustments —1918 ———1918 Change in scope of consolidation —–333 ———–333 Investments/additions 11 798 3449 6881 8501 2280 32 909 Disposals 3816 18 670 5291 2968 823 31 568 Reclassifications –796 796 –4492 4574 —82 Balance at 30.9.2008 21 462 105 827 12 276 35 802 5040 180 407

Amortisation at 1.10.2007 5066 1579 4823 —4811516 Amortisation —1997 ——531 2528 Disposals 3606 486 4328 ——8420 Amortisation at 30.9.2008 1460 3090 495 —579 5624

Net value at 30.9.2008 20 002 102 737 11 781 35 802 4441 174 783

Gross value at 1.10.2008 21 462 105 827 12 276 35 802 5040 180 407 Currency adjustments –10—–3 ——–13 Change in scope of consolidation –9053 –1936 —52—–10937 Investments/additions 7639 408 4478 9286 1993 23 804 Disposals 340 6027 5527 789 1695 14 378 Reclassifications –4904 –66997 –2644 4024 –1528 –72049 Balance at 30.9.2009 14 794 31 275 8580 48 375 3810 106 834

Amortisation at 1.10.2008 1460 3090 495 —579 5624 Currency adjustments –10—— ——–10 Change in scope of consolidation 1036 75 ———1111 Amortisation 536 42 —3369680 Write-ups ——— —479 479 Disposals —1717 495 ——2212 Reclassifications —–1257 ———–1257 Amortisation at 30.9.2009 3022 233 —33169 3457

Net value at 30.9.2009 11 772 31 042 8580 48 342 3641 103 377

MVV Energie 2008/09 111 MVV EnErgiE Consolidated Financial Statements

The reduction in other majority shareholdings is chiefly due to The transition from these payments to gross investments in the change in the scope of consolidation resulting from the leases is as follows: initial consolidation of A+S Naturenergie GmbH, Pfaffenhofen,

and Kielspeicher 103 GmbH &Co. KG, Kiel. Euro000s 30.9.2009 30.9.2008 The reduction in other shareholdings is mainly attributable Present value of minimum leasing payments with maturities <1year 12 939 5070 to the reclassification as associates of the shareholdings held Present value of minimum leasing payments in Biomasse Rhein-Main GmbH, Flörsheim-Wicker,(carrying with maturities >1year amount: Euro3050 thousand), Gemeinschaftskraftwerk one to five years 20 734 16 011 Kiel GmbH, Kiel, (carrying amount: Euro9673 thousand), longer than five years 36 465 19 791 Grosskraftwerk Mannheim AG, Mannheim, (carrying amount: Present value of minimum leasing pay- Euro25400 thousand), Stadtwerke Buchen GmbH &Co. KG, ments with maturities >1year 57 199 35 802 Buchen,(carrying amount: Euro4383 thousand) and ZVO Ener- Total present value of minimum leasing payments 70 138 40 872 gie GmbH, Timmendorfer Strand, (carrying amount: Euro28138 Financing income not yet realised 11 027 15 441 thousand). Gross investments in finance leases 81 165 56 313 Securities chiefly consist of shareholdings in funds held in most cases to securepart-time early retirement credit balances.

Otherfinancial assets alsoinclude the non-current shareof finance leases. In several contracting projects, the MVV Ener- gie Group acts as lessor in the context of finance lease agree- ments. In finance lease agreements, the major risks and rewards areassigned to the lessee. The respective assets arerecognised at the present value of the minimum leasing payments.

112 MVV Energie 2008/09 6other receivables and assets

Other receivables and assets have been broken down into their respective contents and counterparties in the tables below. The hedging relationship has also been stated in the case of derivative financial instruments. other receivables and assets 30.9.2009 30.9.2008 Euro000s Non-current Current Total Non-current Current Total Derivative financial instruments 256 351 119 853 376 204 262 033 164 367 426 400 Receivables from security deposits for energy trading transactions —91416 91 416 —11396 11 396 Deferred expenses and accrued income 4616 8956 13 572 2596 20 566 23 162 Receivables and assets from contracting agreements without finance leases 7207 485 7692 7468 462 7930 Receivables in connection with finance leases —5789 5789 — 2737 2737 Suppliers with debit balances —3566 3566 —4174 4174 Loans —2712 2712 —39720 39 720 Refund claims 1934 424 2358 —3227 3227 Escrow accounts —1389 1389 —500 500 Emissions rights —1041 1041 —3481 3481 Receivables from employees —986 986 —590 590 Cash pool receivables ——— —218 218 Miscellaneous other assets 2281 45 739 48 020 403 32 957 33 360 272 389 282 356 554 745 272 500 284 395 556 895

Derivative financial instruments 30.9.2009 30.9.2008 Euro000s Non-current Current Total Non-current Current Total Derivative financial instruments 256 351 119 853 376 204 262 033 164 367 426 400 of which without hedge 256 138 119 493 375 631 254 745 160 183 414 928 of which cash flow hedges 213 360 573 7288 4184 11 472

Derivative financial instruments involve interest, currency and commodity derivatives mainly for electricity,gas and coal. Further information about financial instruments can be found under Note 22.

MVV Energie 2008/09 113 MVV EnErgiE Consolidated Financial Statements

other receivables and assets 30.9.2009 30.9.2008 Euro000s Non-current Current Total Non-current Current Total Other receivables and assets from other shareholdings —524 524 — 352 352 from other majority shareholdings 107 113 220 83 2724 2807 from thirdparties 272 282 281 719 554 001 272 417 281 319 553 736 272 389 282 356 554 745 272 500 284 395 556 895

Write-downs on other receivables and assets developed as To minimise the counterparty risk involved in highly fluctuating follows: fair values of energy trading derivatives, security deposits are exchanged with external partners. These involve margins. To write-downs reduce counterparty risks, payments aremade both on the Euro000s 2008/2009 2007/2008 EEX(European Energy Exchange) and in some cases within Balance at 1.10. 257 96 the framework of bilateral agreements. These arereflected

Net reversals/additions – 138 161 in receivables from security deposits for energy trading trans- Balance at 30.9. 119 257 actions. Receivables from security deposits amount to Euro91416 thousand (previous year: Euro11396 thousand).

The credit risks involved in other receivables and assets and Loans mainly involve current loans to MVV GmbH amounting their maturity structurewereasfollows: to Euro2712 thousand (previous year: Euro32233 thousand). Receivables and assets from contracting agreements without Credit risks and maturity finance leases involve investments in the value-added services Euro000s 30.9.2009 30.9.2008 segment leading to energy savings at customers and thus to a Neither overdue nor impaired 550 756 552 058 receipt of revenues at the MVV Energie Group in future.

Overdue but not impaired Miscellaneous other assets largely involve input tax only eligible ≤6months 2571 3784 for deduction upon invoicing (Euro31824 thousand; previous >6months ≤1year 828 201 year: Euro11495 thousand). Therewerenoindications of >1year 74 557 impairment in the case of non-impaired other receivables and Net value of assets written down 516 295 assets. All write-downs undertaken werecalculated following 554 745 556 895 individual consideration of each case and werenot based on any general allowance.

114 MVV Energie 2008/09 7Inventories Write-downs on trade receivables developed as follows:

Inventories write-downs Euro000s 30.9.2009 30.9.2008 Euro000s 2008/2009 2007/2008 Raw materials and supplies 30 323 30 533 Balance at 1.10. 22 738 19 449 Unfinished and finished products and Utilised 1696 2022 services and merchandise 20 465 26 243 Net additions 12 012 5311 Advance payments —312 Balance at 30.9. 33 054 22 738 50 788 57 088

The calculation of write-down requirements was adapted to Therewerenorestrictions on disposal or other encumbrances the current market situation in the 2008/09 financial year. (apart from retentions of title). Write-downs of Euro730 Since then, receivables have been written down on the basis thousand wererecognised on inventories (previous year: Euro of manual dunning indicators and their actualage. To account 499 thousand; including write-backs of Euro609 thousand). for the declining collectibility of receivables with increasing Write-downs werebased on the inventory turnover rates of age, write-down requirements arenow determined based on theassetsinquestion. the age of the receivable. For large receivables, this is accom- panied by an individual case assessment in order to determine 8Trade receivables acorrect write-down requirement. This adjustment in the calculation of write-downs resulted in additional expenses of Euro8704 thousand. Trade receivables Euro000s 30.9.2009 30.9.2008 The credit risks and maturity structureoftrade receivables Trade receivables 463 294 536 142 wereasfollows: of which due from other majority shareholdings 2946 257 Credit risks and maturity of which due from associates 3885 — Euro000s 30.9.2009 30.9.2008 of which due from other shareholdings 2063 — Neither overdue nor impaired 366 148 403 141 Overdue but not impaired Trade receivables have terms of under one year. ≤6months 71 861 88 795 The trade receivables recognised as of 30 September 2009 >6months ≤1year 2491 10 347 include receivables of Euro8486 thousand for the settlement >1year 5783 7446 of construction contracts in line with their percentage of Net value of receivables written down 17 011 26 413 completion. The advance payments of Euro10800 thousand 463 294 536 142 received for these projects have already been accounted for. Revenues of Euro5649 thousand wererecognised for contract Therewerenoindications of write-down requirements for construction in the year under report. Total costs incurred as non-impaired trade receivables. All write-downs undertaken of the balance sheet date amounted to Euro17636 thou- were calculated on the basis of individual or group considera- sand.Construction contracts thus resulted in aloss of Euro tion and werenot based on general allowances. 91 thousand.

MVV Energie 2008/09 115 MVV EnErgiE Consolidated Financial Statements

9Tax receivables AuThoRISED CAPITAL I: By resolution dated 4March 2005, the Annual General Meeting authorised the Executive Board, subject The tax receivables of Euro40359 thousand (previous year: to the consent of the Supervisory Board, to increase the share Euro50327 thousand) mainly relate to refund claims for cor- capitalbyuptoEuro39000 thousand (Authorised Capital I). porate income tax and capital gains tax, as well as to input TheExecutive Boardacted on this authorisation with the con- tax credits, and have been recognised at face value and where sent of the Supervisory Boardfor the first time on 15 November necessary at present value. 2005. As aresult of the issue of 5million new shares, the share capital was increased by Euro12800 thousand (9.86%) from 10 Cash and cash equivalents Euro129 802 thousand to Euro142 602 thousand.

Cash and cash equivalents primarily consist of credit balances On 11 October 2007, the Executive BoardofMVV Energie AG at banks. Proportionately consolidated companies account resolved with the consent of the Supervisory Boardtoact on for atotal of Euro3056 thousand (previous year: Euro1349 the authorisation granted to it by the Articles of Incorporation thousand). No cash or cash equivalents aresubject to restric- andtoincrease the sharecapital by Euro25.96 million. The tions on disposal. capitalincreasewas successfully completedatthe beginning of November 2007.The sharecapital of MVVEnergie AG was Within the framework of short-term liquidity management increasedfromavailable Authorised Capital IbyEuro25.96 structures, credit balances areexclusively deposited at banks million to Euro168.72 million by issuing 10.1 million new of impeccable creditworthiness. As in the previous year,such shares in returnfor cash contributions and with shareholders’ balances bear interest at interbank levels. subscription rights.

The authorisation dated 4March 2005 was amended at the 11 Assets held for sale Supervisory Boardmeeting on 11 October 2007, taking due The amount of Euro36681 thousand reported under assets account of the previous utilisation of the authorisation, to held for sale as of 30 September 2008 chiefly related to the empower the Executive Boarduntil 3March 2010 to increase shareholding in MVVPolska Sp. zo.o., Warsaw,Poland, which the sharecapital by an additional amount of up to Euro243 had been deposited at MVV Nederland B.V., Netherlands thousand (Authorised Capital I). (Euro34049 thousand). Asale price of Euro34800 thousand AuThoRISED CAPITAL II: By resolution adopted on 10 March 2006, was realised in the year under report. the Annual General Meeting of MVV Energie AG authorised Furthermore, an office building reported as held for sale was theExecutive Boardtoincrease the company’ssharecapital transferred to its new owner as of 1October 2008. The sale on one or several occasions by atotal of up to Euro3400 price of Euro3700 thousand was also realised. thousand within the framework of the employee sharepro- gramme. The Executive Boardacted on this authorisation with the consent of the Supervisory Boardon20September 12 Equity 2006. As aresult of the issue of 63 290 new shares, the share Thestructureand development of equity have been presented capitalincreased by 0.11%fromEuro142 602 thousand to in the“Statementofchanges in equity”. Euro142 764 thousand. Shareholders’ subscription rights were excluded. An amount of Euro3238 thousand of Authorised ShARE CAPITAL: The sharecapital of MVV Energie AG amounts Capital II is thereforestill available. to Euro168 721 thousand and is divided into 65 906 796 in- dividual registered shares of Euro2.56 each. All registered CAPITAL RESERVE: The capitalreserve relates to MVV Ener- shares arepaid up in full. The City of Mannheim indirectly gie AG. This reserve includes external inflows of funds requir- owned 50.1%ofthe sharecapital as of 30 September 2009, ing inclusion under §272 of theGerman CommercialCode while RheinEnergie AG held 16.3 %and EnBW Energie Baden- (HGB). The transaction costs of the capital increase executed Württemberg AG 15.1%ofthe shares. The remaining 18.5 % on 11 October2007,which arerecognised as areductionin of theshareswereinfreefloat. equity (capital reserve), amounted to Euro2464 thousand. The income tax relief of Euro1164 thousand in connection with thetransaction costs was accounted for in the capital reserve.

116 MVV Energie 2008/09 RETAINED EARNINGS: In addition to the prorated retained earn- PRoPoSED APPRoPRIATIoN oF EARNINGS: The Executive Board ings of MVV Energie AG and of the other consolidated com- proposes appropriating the unappropriated net profit of panies sincethe date of initial consolidation, retained earnings MVV Energie AG for the 2008/09 financial year as follows: also includeaccumulated changes recognised directly in equity Distribution of adividend of Euro0.90 per individual sharefor as aresult of the measurement of financial instruments at fair the 2008/09 financial year (total: Euro59316 116.40). The value, whichmainly relate to hedging relationships recognised Annual General Meeting to be held on 12 March 2010 will underIAS 39 (2008), as well as currency translation differences decide on payment of the dividend. arising upon the translation of foreign financial statements and accumulated annual results. An amount of Euro8664 thousand was withdrawn from the fair value reserve during the financial year (previous year: transfer into reserve of Euro 3565 thousand)

13 Provisions

Provisions 30.9.2009 30.9.2008 Euro000s Non-current Current Total Non-current Current Total Provisions for pensions and similar obligations 36 567 —36567 35 922 —35922 Taxprovisions —24366 24 366 —44428 44 428 Other provisions Personnel expenses 24 805 42 205 67 010 24 242 44 907 69 149 Early retirement 36 810 6345 43 155 46 293 —46293 Services not yet invoiced —42578 42 578 —70850 70 850 Restructuring obligations —911 911 ——— Refurbishment measures 7017 —7017 11 246 —11246 Miscellaneous contingencies 9188 64 184 73 372 12 531 70 331 82 862 Total 114 387 180 589 294 976 130 234 230 516 360 750

Detailed explanations of provisions have been provided under Notes 14 and 15.

MVV Energie 2008/09 117 MVV EnErgiE Consolidated Financial Statements

14 Provisions for pensions and similar obligations The expenses recognised for these pensions and similar ob- ligations structured as defined benefit plans comprise the The company pension plans consist of defined contribution following items: and defined benefit plans.

An amount of Euro22323 thousand was paid into state Pension provision expenses pension systems in the 2008/09 financial year (previous year: Euro000s 2008/2009 2007/2008 Euro22195 thousand). The payments made to municipal Service cost 921 2013 supplementary pension companies (ZVK) and the state pen- Interest expenses 1951 1705 sion system areviewedaspaymentstodefined contribution Adjustment due to retrospective pension plans. These contributions have been recognised as service cost recognised —96 expenses andreported under personnel expenses. Adjustment due to actuarial gains/losses recognised –32–8 Current payments to the municipal supplementary pension 2840 3806 company (ZVK) represent expenses incurred in the given finan- cial year.These expenses amounted to Euro 14 531 thousand The interest expenses for vested pension claims have been in the past financial year (previous year: Euro13912 thou- reported in the income statement under financing expenses sand). The pension obligations of the ZVK as determined in (interestand similarexpenses).Other expenses have been rec- an approximatecalculation pursuant to IFRS for current and ognised as personnel expenses. The increase in service cost in former membersofthe MVVEnergie Groupare Euro 273 mil- the previous year’speriod was principally due to the departure lion (previous year: Euro261 million) above the proportion of Dr.Rudolf Schulten. accruing to the MVV Energie Group from the policy reserve recognised at the ZVK (labour law obligation). The structureof The present value of defined benefit obligations developed the relevant contracts means that the policy reserve required as follows: pursuant to labour lawobligations cannot be clearly allocated. Thefigures stated thereforecorrespond to the most probable Development in pension claims values. Euro000s 2008/2009 2007/2008 Present value of pension claims Furthermore, thereare direct pension obligations resulting as of 1.10. 34 896 35 194 from former collectively agreed provisions (measured in terms Current service cost 921 2109 of duration of company service and remuneration of employ- Interest expenses 1951 1705 ees), as well as individual commitments made to members of Payments made to beneficiaries –2195 –2195 the Executive Board. Actuarial gains /losses 1011 –1285 Changes in scope of consolidation —–504 Other changes —–128 Present value of pension claims as of 30.9. 36 584 34 896

118 MVV Energie 2008/09 The transition from the amount recognised for claims relating to pensions and similar obligations to the present value of pension claims is structured as follows:

Amount recognised for pensions and similar obligations Euro000s 30.9.2009 30.9.2008 30.9.2007 30.9.2006 30.9.2005 Present value of pensions claims 36 584 34 896 35 194 32 444 34 414 Actuarial gains /losses not yet settled –171026 –921 –3360 –3032 Provisions for pensions and similar obligations 36 567 35 922 34 273 29 084 31 382 Empirical adjustments (changes in assumptions) 1157 –881 542 669 N/A

The empirical adjustments to the present value of pension claims Pension payments of Euro2183 thousand areforecast for (changes in assumptions) represent part of the actuarial gains existing pension obligations for the following financial year. and losses attributable to pension claims for the given year.No No plan assets have been created. data was collected for the balance sheet date on 30 September 2005 as these disclosures werenot mandatory at that time.

MVV Energie 2008/09 119 MVV EnErgiE Consolidated Financial Statements

15 other provisions

other provisions Euro000s Balance at Change in Currency utilised Reversed Added Re- Interest Balance at 1.10.2008 scope of adjust- classified portion 30.9.2009 consoli- ments dation Non-current provisions Pensions and similar obligations 35 922 ——2195 —889 —1951 36 567 Other provisions Early retirement 46 293 ——10 114 439 4624 –5813 2259 36 810 Personnel expenses 24 242 ——1128 223 2830 –2205 1289 24 805 Refurbishment 11 246 ——2762 1892 ——425 7017 Miscellaneous contingencies 12 531 —–90 529 4111 4348 –3325 364 9188 Total other provisions 94 312 —–90 14 533 6665 11 802 –11343 4337 77 820 Total non-current provisions 130 234 —–90 16 728 6665 12 691 –11343 6288 114 387

Current provisions Taxprovisions 44 428 —–15 24 275 9268 13 496 ——24 366 Other provisions Personnel expenses 44 907 121 239213 4601 39 316 8018 —48550 Services not yet invoiced 70 850 26 —60281 6285 38 268 ——42 578 Miscellaneous contingencies 70 331 282 –9138747 13 334 43 329 3325 —65095 Total other provisions 186 088 429 –89138 241 24 220 120 913 11 343 —156 223 Total current provisions 230 516 429 –104 162 516 33 488 134 409 11 343 —180 589

Total provisions 360 750 429 –194 179 244 40 153 147 100 —6288 294 976

Taxprovisions include provisions for taxes on income, such The actuarial assumptions correspond to those used in the as corporateincome tax including the solidarity surcharge, measurement of pensions and comparable provisions. The and trade tax. The level of provision recognised was mainly decline in provisions for early retirement is the result of lower influenced by the receipt of trade tax assessment notices for utilisation of part-time early retirement agreements. previous years. Theprovision for personnel expenses mainly includes collec- The provisions for early retirement expenses mainly relate to tively agreed obligations, such as allowances, compensation legal and constructive obligations towards employees as a payments,bonus payments,benefitsinkind, employee work- result of part-time early retirement agreements. inghours creditsand anniversarybonuses.

120 MVVEnergie 2008/09 The services not yet invoiced item principally involves supplies several individual risks for which the level of claim is uncertain. and services from thirdparties which have already been pro- The valuation has been based on the most likely outcome of vided but not yet invoiced. These have been measured on the the litigation expected on the basis of the information currently basis of appropriate estimates. The decline in this item is chiefly available. Moreover,this item includes restructuring obligations due to alower volume of electricity trading transactions. mainly involving realignment measures within the energy-related services subgroup. Miscellaneous contingencies include provisions for energy sup- pliesand for disposal and dismantling obligations. Furthermore, We expect the provisions recognised to be utilised in line with this item also includes provisions for litigation risks. These involve their respective terms.

16 Financial debt

Financial debt 30.9.2009 30.9.2008 Euro000s Non-current Current Total Non-current Current Total Liabilities to banks 1010 393 288 569 1298 962 838 808 186 234 1025 042 in connection with finance leases 5160 777 5937 4015 946 4961 to other shareholdings —460 460 —3425 3425 to other majority shareholdings —1309 1309 ——— Kiel put option —120 578 120 578 —120 578 120 578 Partnership compensation liabilities ———14 257 895 15 152 Other financial debt 57 521 27 988 85 509 55 492 11 942 67 434 1073 074 439 681 1512 755 912 572 324 020 1236 592

Maturities in years 30.9.2009 30.9.2008 Euro000s <1year 1–5years >5years <1year 1–5years >5years Liabilities to banks 288 569 691 967 318 426 186 234 520 625 318 183 in connection with finance leases 777 3543 1617 946 2137 1878 to other shareholdings and majority shareholdings 1769 ——3425 —— Other financial debt 148 566 14 347 43 174 133 415 13 723 56 026 439 681 709 857 363 217 324 020 536 485 376 087

MVV Energie 2008/09 121 MVV EnErgiE Consolidated Financial Statements

The fixed-rate liabilities to banks amounting to Euro946 million The Kiel put option includes the present value of the payment (previous year: Euro627 million) have an average interest rate obligations resulting from the writer obligation on the part of of 4.7%(previous year: 4.9%). The floating-rate liabilities to MVV Energie AG towards the City of Kiel for its shareholding banks amounting to Euro353 million (previous year: Euro398 in Stadtwerke Kiel AG. The put option held by the City of Kiel million) have an average interest rate of 3.9%(previous year: may be exercised at any time up to 6November 2010. 4.6%). As in the previous year,the average remaining period In the previous year,partnership compensation liabilities of the fixed rate in the case of fixed-rate liabilities amounts related to the limited capital and annual earnings allocable to seven years. to minority shareholders in MVV Energiedienstleistungen As of 30 September 2009, the MVV Energie Group had unuti- Wohnen GmbH &Co. KG, Berlin. The remaining shares in lised committed credit lines of Euro354 million at its disposal MVV Energiedienstleistungen Wohnen GmbH &CoKG, Berlin, (previous year: Euro268 million). wereacquired in the 2008/09 financial year.

Liabilities in connection with finance leases arerecognised at Other financial debt includes aliability of Euro37764 thousand the present value of futureleasing payments. The fair values of due to MVV GmbH, Mannheim (previous year: Euro38991 the other financial debt arebasically equivalent to the carrying thousand), which charged interest at an average of 6.2%in amounts reported. the year under report (previous year: 5.6%).

The liabilities in connection with finance leases involve various Of the financial debt, an amount of Euro81million is secured items of technical equipment and plant and office equipment. by the pledging of property,plant and equipment (previous The agreements provide for extension options in some cases, year: Euro82million). but do not include any purchase options or price adjustment clauses.

The transition from the present value of futureminimum leas- ing payments to the liabilities reported is as follows:

Present value of minimum leasing payments Euro000s 30.9.2009 30.9.2008 Present value of minimum leasing payments by maturity up to 1year 825 946 1to5years 3453 2137 longer than 5years 1617 1878 Total 5895 4961 Financing costs not yet recognised 2131 1779 Gross liabilities in connection with finance leases 8026 6740

122 MVV Energie 2008/09 17 other liabilities

Other liabilities have been broken down into their respective contents and counterparties in the tables below.The hedg- ing relationship has also been stated in the case of derivative financial instruments. other liabilities 30.9.2009 30.9.2008 Euro000s Non-current Current Total Non-current Current Total Derivative financial instruments 355 649 155 401 511 050 192 407 122 320 314 727 Advance payments received —36156 36 156 523 25 572 26 095 Deferred income and accrued expenses 16 246 12 647 28 893 18 944 9050 27 994 Interest liabilities —7512 7512 —4098 4098 Customer credit balances —7490 7490 —4380 4380 Concession duties —1659 1659 —11665 11 665 Social security liabilities —237 237 —294 294 Liabilities for security deposits for energy trading transactions ——— —44 386 44 386 Miscellaneous other liabilities 4231 22 518 26 749 1924 27 261 29 185 376 126 243 620 619 746 213 798 249 026 462 824

Liabilities 30.9.2009 30.9.2008 Euro000s Non-current Current Total Non-current Current Total Liabilities to thirdparties 374 286 204 925 579 211 212 967 216 656 429 623 to majority shareholdings —11 —3844 3844 to other related parties 1840 2538 4378 308 2953 3261 to other shareholdings ——— —11 Advance payments received for orders —36156 36 156 523 25 572 26 095 376 126 243 620 619 746 213 798 249 026 462 824

Derivative financial instruments involve interest, currency and commodity derivatives for electricity,gas and coal. Further information about financial instruments can be found under Note 22.

MVV Energie 2008/09 123 MVV EnErgiE Consolidated Financial Statements

Derivative financial instruments 30.9.2009 30.9.2008 Euro000s Non-current Current Total Non-current Current Total Derivative financial instruments 355 649 155 401 511 050 192 407 122 320 314 727 of which without hedges 352 385 150 606 502 991 191 543 122 308 313 851 of which cash flow hedges 3264 4795 8059 864 12 876

The most significant item under deferred income and accrued expenses is an advance fee amounting to Euro11540 thou- sand received for the incineration of waste in conjunction with the takeover of an energy from waste plant by Energiever- sorgung Offenbach AG (previous year: Euro14256 thousand).

To reduce the counterparty risk involved in highly fluctuat- ing fair values of energy trading derivatives, security deposits (margins) areexchanged with the EEX. Moreover,the Group has also entered into bilateral risk reduction agreements in some cases. Therewerenolonger any liabilities for security de- posits as of the balance sheet date (previous year: Euro44386 thousand).

18 Trade payables

Trade payables Euro000s 30.9.2009 30.9.2008 To suppliers 223 443 238 869 To other majority shareholdings 1774 901 To associates 10 808 — To other shareholdings 791 542 236 816 240 312

All trade payables have terms of under one year.

19 Taxliabilities

The tax liabilities of Euro42501 thousand (previousyear: Euro 28 743 thousand) mainly relate to energy taxes and value added tax.

124 MVV Energie 2008/09 20 Deferred taxes

The deferred taxes reported for 2008/09 relate to the following items:

Deferred taxes 30.9.2009 30.9.2008 Euro000s Deferred tax assets Deferred tax liabilities Deferred tax assets Deferred tax liabilities Intangible assets 3831 –15237 3743 –17261 Property,plant and equipment, including investment property 8273 –131 197 2804 –130 304 Inventories 1189 –362 1708 –562 Special item —–9243 —–7997 Other assets and positive fair values of derivatives 10 696 –304 249 929 –177 223 Provisions for pensions 2651 —2998 — Non-current other provisions 5603 –235 10 067 –2 Current other provisions 4538 –17740 3194 –1682 Liabilities and negative fair values of derivatives 331 663 –11674 131 441 –7405 Losses carried forward1887 —2816 — Consolidation —–895 — –4111 Deferred taxes (gross) 370 331 –490 832 159 700 –346 547 Value adjustment –1782 —–221 — Netting –356 558 356 558 –158 511 158 511 Deferred taxes (net) 11 991 –134 274 968 –188 036

Of the (net) deferred taxes presented above, Euro8869 Deferredtaxes amountingtoEuro2202 thousand (previous thousand relate to current deferred tax assets and Euro5352 year: Euro–3150 thousand) wererecognised directly in equity thousand to current deferred tax liabilities. In addition to the in the 2008/09 financial year.This corresponds to ayear-on-year aforementioned deferred tax assets, the company also has tax change of Euro–5352 thousand in the volume of deferred claims relating to unutilised losses carried forwardnot eligible taxes recognised in equity (previous year: Euro1556 thousand). for imputation amounting to Euro24.4 million for corporate income tax (previous year: Euro16.0 million) and to Euro30.6 million for trade tax (previous year: Euro17.7 million). Of these, Euro0.3 million may only be used until 2014.

No deferred tax liabilities have been stated for temporary differences of Euro2540 thousand (previous year: Euro992 thousand) between the value of shareholdings in the tax balance sheet and their respective value in the consolidated financial statements, as such differences areunlikely to be reversed by means of dividend distributions or by disposal of the respective companies in the foreseeable future.

MVV Energie 2008/09 125 MVV EnErgiE Consolidated Financial Statements

21 Contingent claims, contingent liabilities 22 Financial instruments and financial obligations Financial instruments can be divided into primary and deriva- The volume of obligations listed below corresponds to the tive financial instruments. scope of liability pertaining at the balance sheet date. The PRIMARyFINANCIAL INSTRuMENTS: shareholdings, loans, securi- company has such obligations in the form of guarantees and ties, trade receivables, other cash receivables and cash and bills of exchange amounting to Euro73.9 million (previous cash equivalents arereported as financial assets on the asset year: Euro6.9 million). No collateral has been provided for side of the balance sheet. These areinitially measured at cost. third-party liabilities (previous year: Euro10.8 million). Transaction costs areincluded. Thepurchase commitments of the MVV Energie Group in con- Financial assets aresubsequently measured either at fair value nectionwithordersplacedfor investmentsinintangibleassets or at amortised cost. The subsequent measurement of finan- and property,plant and equipment amounted to Euro26.4 cial assets in the “financial assets available for sale” category is million (previous year: Euro12.2 million). generally basedontheirfair values. Pursuant to IAS 39 (2008), The financial obligations relating to operating leases primarily changesinfairvaluesare recognised directly in equity,taking involve water grids, the car pool and IT equipment. The mini- due account of deferred taxes. Upon retirement, these are mum leasing payments have the following maturity. takeninto the income statement. The asset is written down through profit or loss in the event of therebeing any objective Minimum leasing payments for operating leases indications of impairment. Assets whose fair value cannot be Nominal value reliably estimated aremeasured at amortised cost. The subse- Euro000s 30.9.2009 30.9.2008 quent measurement of financialassets in the “loans and re- Operating leases ceivables granted by the company” and “financial instruments up to 1year 11 879 9884 held to maturity” categories has been based on amortised 1year to 5years 22 457 25 066 cost, with application of the effective interest rate method longer than 5years 17 037 14 321 whereappropriate. The amortised cost of afinancial asset is equivalent to the fair value of the consideration provided, 51 373 49 271 adjusted to account for impairments, interest payments and principal repayments. Impairment losses arerecognised for In leasing agreements whereeconomic ownership remains any identifiable risks, especially those resulting from expected with the lessor (operating leasing), the assets thereby leased payment defaults or from areduction in expected cash flows. arerecognised at the lessor.The leasing expenses incurred are Impairment losses arerecognised directly in period earnings. recognised as expenses over the term of the leasing contract. Purchases and sales of financial assets executed on customary The contracts provide for extension options in some cases, marketterms arerecognised on the date of the transaction, but do not include any purchase options or price adjustment i.e. on the date on whichthe company assumed the liabilityto clauses. purchase the asset. Purchases and sales executed on custom- TheGroup has acontingent claim from the State of Baden- ary market terms arepurchases or sales requiring transfer of Württemberg and the City of Mannheim in connection with the assets within aperiod determined by market regulations aland decontamination measure. The contingent claim has a or conventions. cash value of Euro2.0 million. The fair values of financial instruments traded on organised marketsare determined by reference to the bid prices listed on thestock market on thebalance sheetdate. Thefairvalue of financial instruments for which thereisnoactive market areestimated with due application of valuation techniques.

126 MVV Energie 2008/09 These methods arebased on recent transactions performed on Swaps also largely falling within the scope of cash flow hedge customary market terms, on the current market value of other accounting have been used to limit fluctuations in futurecash instruments which areessentially the same instruments, on flows from the gas business resulting from variable market analysis of discounted cash flows or on option pricing models. prices. In the field of interest hedges, existing underlying trans- actions have been included in cash flow hedges with terms of Financial assets areretired when the contractual rights to up to nine years as of 30 September 2009. In the field of com- cash flows from the asset expireorwhen the financial asset modity hedges,the terms of planned hedged items amount to is transferred, provided that all significant risks and rewards up to threeyears. Both interest rate hedging instruments and relating to ownership of the asset arealso transferred and the commodity derivatives requirenet settlements to be paid at power to dispose over the asset has been ceded. contractually fixed dates largely corresponding to the hedged Financialdebt, tradepayablesand other liabilitiesare reported items. Thehedging instruments involve swaps which generate as financialliabilities on the liabilities side of the balance sheet. cash flowsthroughoutthe entirecontractual term. Financial liabilities aremainly recognised at amortised cost, Expenses of Euro8664 thousand wererecognised directly in with application of the effective interest method whereap- equity in the 2008/09 financial year (previous year: income of propriate. In the case of financial debt, cost is equivalent to Euro3565 thousand). theamountpaidout.Inthe case of tradepayablesand other liabilities, cost is equivalent to thefairvalue of theconsidera- The amounts withdrawn from equity in connection with cash tion received. flow hedge accounting wereasfollows:

Financial liabilities areretired when the underlying obligation Euro000s 30.9.2009 30.9.2008 has been met or has terminated or expired. Included in EBIT 1808 159 As in the previousyear,nouse was made of the optionofallo- Included in financing expenses –3013 1013 cating financialassets and financial liabilities to the “measured Totalamounts withdrawn–1205 1172 at fair valuethrough profit or loss”category.

DERIVATIVE FINANCIAL INSTRuMENTS: Derivative financial instru- The ineffective portion of cashflow hedges resulted in income mentsmainlyinclude interest rate derivatives, as well as cur- of Euro114 thousand in the 2008/09 financial year (previous rency and commodity derivatives for electricity,gas and coal. year: Euro0thousand). The results of ineffective portions of Commodity derivatives areinmost cases fulfilled by physical cashflow hedges arerecognised as other operating income or delivery. expenses.For interest rate hedges, the results arerecognised under other interest income and expenses. Interest rate risks arelimited by drawing in particular on in- terest swaps. Theseinstruments secure the cash flowsfrom The carrying amounts have been presented and broken down interest-bearing non-current financial liabilities by means of into IAS 39 measurement categories in the following tables. cash flow hedge accounting. Forwardexchange contracts The fair values arebasically equivalent to the carrying amounts. areconcluded in US dollars to securecurrency fluctuations in The classes presented arebased on the measurement catego- financial coal. ries defined in IAS 39. As in the previous year,therewereno reclassifications between IAS 39 measurement categories in Pending transactions intended to securemarket prices in the the 2008/09 financial year. field of energy trading fall within the scope of IAS 39 (2008) and have to be recognised as financial instruments, while the hedged items (sales contracts) aregenerally not covered by IAS 39 (2008). The accounting treatment under IAS 39 (2008) relates in particular to commodity futures transactions requir- ing physical delivery which have to be resold in the context of adjustments to actual loads. This has led to increased earnings volatility.

MVV Energie 2008/09 127 MVV EnErgiE Consolidated Financial Statements

Assets as of 30.9.2008 Not within Loans and Held Available Derivatives Value scope of IFRS 7 receivables for trading for sale in hedge recognised accounting under IAS 17 Euro000s Carrying amount Carrying amount Carrying amount Carrying amount Carrying amount Carrying amount Financial assets —11781 4461 122 739 —35802 Trade receivables —536 142 ———— Other receivables and assets 38 138 87 287 414 928 —11472 5070 Cash, cash equivalents and securities —97123 7——— 38 138 732 333 419 396 122 739 11 472 40 872

Liabilities as of 30.9.2008 Not within At amortised cost Held Derivatives Value scope of IFRS 7 for trading in hedge recognised accounting under IAS 17 Euro000s Carrying amount Carrying amount Carrying amount Carrying amount Carrying amount Financial debt — 1231 631 ——4961 Trade payables —240 312 ——— Other liabilities 54 409 93 688 313 851 876 — 54 409 1565 631 313 851 876 4961

Assets as of 30.9.2009 Not within Loans and held Available Derivatives Value scope of IFRS 7 receivables for trading for sale in hedge recognised accounting under IAS 17 Euro000s Carrying amount Carrying amount Carrying amount Carrying amount Carrying amount Carrying amount Financial assets 75 138 8580 3641 42 814 —48342 Trade receivables —463 294 ———— Other receivables and assets 62 657 110 072 375 631 23 573 5789 Cash, cash equivalents and securities —321 170 1534 ——— 137 795 903 116 380 806 42 837 573 54 131

Liabilities as of 30.9.2009 Not within At held Derivatives Value scope of IFRS 7 amortised cost for trading in hedge recognised accounting under IAS 17 Euro000s Carrying amount Carrying amount Carrying amount Carrying amount Carrying amount Financial debt —1506 818 ——5937 Trade payables —236 816 ——— Other liabilities 65 329 43 367 502 991 8059 — 65 329 1787 001 502 991 8059 5937

128 MVV Energie 2008/09 Net ReSULtS BY MeASUReMeNt CAteGORY: Financial instru- total interest income and expenses ments have been recognised in the income statement with the Euro000s 2008/2009 2007/2008 followingnet results (pursuant to IFRS 7). The interest income Total interest income 9805 9407 and interest expenses in connection with financial assets and Total interest expenses 77 15271125 financial liabilities not measured at fair value arereported under total interest income and expenses in the following section. Total interest income and expenses areattributable to financial assets and financial liabilities not measured at fair value. The net Net results (IFRS 7) financing result also includes interest components for provi- Euro000s 2008/2009 2007/2008 sions not covered by IFRS 7disclosurerequirements, as a Financial assets and financial liabilities result of which the figures published herediffer from the net held for trading –254 739 87 627 financing result. The interest income reported heremainly re- Financial assets available for sale 3974 8456 sults from credit balances at banks, overnight and fixed-term Loans and receivables –15825 –5848 depositsand loans. The interest expenses largely relate to loan Financial liabilities measured at amortised cost ——obligations. As in the previous year,total interest income does not include any interest on financial assets already impaired.

The presentation of net results takes due account of standalone FINANCING ANd pRICe RISkS: Generalinformation on financ- derivatives included in the “financial assets and financial liabili- ingand price risks: The MVV Energie Group is exposed to ties held for trading” measurement category.The net result in the market price risks resulting from changes in interest rates and "financial assets and financial liabilities held for trading” cat- exchange rates, as well as in other prices. The Group is ex- egory is largely attributable to fair value measurement under posed to commodity price risks in terms of its procurement and IAS 39. sales activities. Furthermore, the MVV Energie Group is subject to credit risks resulting in particular from trade receivables. Thenet result in the “available for sale” category chiefly in- Moreover,the Group also faces liquidity risks in connection volves income anddistributions from shareholdings, as well as with credit andmarket price risks or with adeterioration in disposal gainsand write-downs. itsoperating business or disturbances on financial markets. Thenet results in the “loans and receivables” category pre- Financing risks include liquidity and interest rate risks, as dominantly relate to write-downs and additions. well as receivables default risks and risks resulting from non- compliance with key figures agreed in connectionwith the The development in financial liabilities measured at amortised taking up of debt capital (financial covenants). cost is attributable to the total interest income and expenses presented below. Market pricerisks result in particular from fluctuations in prices on theenergy markets, as well as from changes in The write-downs undertaken on financial assets in the “avail- interest rates. Apart from the US dollar,exchange rate risk is able forsale” category amounted to Euro578 thousand in the of subordinate significance for the MVV Energie Group. This 2008/09financial year (previous year: Euro1997 thousand). is due to the international commitments of the MVV Energie Financial assets amounting to Euro16991 thousand were Group not being classified as material. The US dollar is the written down in the “loans and receivables” category (previ- most important foreign currency at the Group, as this is the ous year: Euro8560 thousand). currency used to settle all key raw materials and fuels. The MVV Energie Group pursues the objective of covering itself against risks by means of systematic risk management. To this end, discretionary frameworks, responsibilities, separation of functions and checks arelaid down on the basis of internal guidelines.

MVV Energie 2008/09 129 MVV EnErgiE Consolidated Financial Statements

Derivative financial instruments areused to cover against The MVV Energie Group is exposed to credit risks in its sales market price risks. For interest rate risks, these mainly involve business, as customers may potentially fail to meet their pay- interest swaps. Commodity derivatives aredeployed in the ment obligations. This risk is limited by regularly inspecting field of energy trading. The use of commodity derivatives for the creditworthiness of major items in our customer portfolio. proprietary energy trading purposes is only permitted within The maximum default risk for the financial assets reported in narrow limits and is restricted and monitored by separate the balance sheet (receivables, derivatives and other assets, as organisational units. well as cash and cash equivalents and assets held for sale) is CREDIT RISkS: The risk of economic loss arising as aresult of a equivalent to their carrying amounts. The volume of defaults counterparty failingtomeet its contractual payment obliga- was immaterial both in the year under report and the previous tions is defined as credit risk. Credit risk encompasses both the year. risk of direct default and the risk of reduced creditworthiness. As derivatives may be subject to substantial fluctuations in The MVV Energie Group maintains its credit and trading rela- their fair values, the counterparty risk of the derivative finan- tionships predominantly with banks and other trading partners cialassetshas been presented in the followingoverview.In of impeccable creditworthiness. Credit risks towards contract- general, only recognised accounts have been included. Where ual partners areinspected upon conclusion of the contract netting agreements areinplace with atrading partner,the and monitored continuously.Credit risk is limited by setting actual risk, i.e. the net risk, has been presented. No account trading limits for business partners and, whereappropriate, by has been taken of counterparties with negative net balances, theprovision of cash collateral.Where possible,default risk is i.e. wherethereisnocounterparty risk. In all other cases, the already reduced in advance by means of suitable framework figures have not been netted against negative fair values. agreements with trading partners.

130 MVV Energie 2008/09 Counterparty risk at 30.9.2009 in Euro000s Total of which <1year of which 1–5years of which >5years Counterparty rating as per Nominal Counter- Nominal Counter- Nominal Counter- Nominal Counter- Standard&Poor’sand /or value party risk value party risk value party risk value party risk Moody’s AAA and Aaa to AA- and Aa3 4112 291 2826 127 1286 164 —— AA- and A1 or A+ and Aa3 to A- and A3 1172 425 11 386 844 677 8916 327 605 2467 143 3 A- and Baa1 or BBB+ and A3 to BBB- or Baa3 26 721 2287 21 857 986 4864 1301 —— BBB- and Ba1 or BB+ and Baa3 to BB- and Ba3 ———————— Other 1381 384 30 778 876 187 8126 505 197 22 652 —— 2584 642 44 742 1745 547 18 155 838 952 26 584 143 3

Counterparty risk at 30.9.2008 in Euro000s Total of which <1year of which 1–5years of which >5years Counterparty rating as per Nominal Counterparty Nominal Counterparty Nominal Counterparty Nominal Counterparty Standard&Poor’sand /or value risk value risk value risk value risk Moody’s AAA and Aaa to AA- and Aa3 184 637 20 759 130 388 16 083 54 249 4676 — — AA- and A1 or A+ and Aa3 to A- and A3 1552 153 67 347 964 104 18 841 579 627 48 261 8422 245 A- and Baa1 or BBB+ and A3 to BBB- or Baa3 19 103 —10196 —8907 ——— BBB- and Ba1 or BB+ and Baa3 to BB- and Ba3 — ——————— Other 1193 452 38 858 643 496 14 688 549 956 24 170 — — 2949 345 126 964 1748 184 49 612 1192 739 77 107 8422 245

The major shareofthe nominal derivative volume involves LIquIDITyRISkS: Liquidityrisk involvesthe risk of acompany trading partners for which external ratings areavailable. In- not being able to meet its financial obligations adequately. ternal ratings areavailable for the nominal derivative volumes The MVV Energie Group is subject to liquidity risks as aresult reported under “Other”. of its obligation to meet its liabilities in full and on time, as well as itsobligation to service security payments (margins) Due to clearing agreements, therewas no creditrisk as of from energy trading partners. Cash and liquidity management 30 September 2009 for trading transactions concluded with at the MVV Energie Group is responsible for maintaining the stockexchanges with anominal valueofEuro459 090 thou- Group’ssolvency at all times. This involves calculating all cash sand(previous year: Euro496 549 thousand). requirements and all cash surpluses. The major subgroups have acash pooling process which enables bank transactions to be reduced to areasonable limit.

MVV Energie 2008/09 131 MVV EnErgiE Consolidated Financial Statements

Afinancial budget is compiled for liquidity management purposes. Any financing requirements arising arecovered by means of suitable liquidity management instruments. Along- side the liquidity available on adaily basis, the MVV Energie Group has further liquidity reserves in the form of committed credit lines. The volume of committed credit lines available was extended in the period under report to provide the Group with additionalliquidityreserves in the difficult market cli- mate resulting from the international financial market crisis. In view of its available liquidity and existing credit lines, the MVV Energie Group does not see itself as being exposed to any major liquidity risks.

Group companies within the MVV Energie Group aregenerally refinanced by local banks of impeccable creditworthiness, as well as by MVV Energie AG.

Contractually agreed outflows of funds for financial liabilities arepresented in undiscounted form in the table below.The figuresinclude the corresponding interest payments.

Undiscounted cash flows as of 30.9.2009 as of 30.9.2008 Euro000s Maturities Maturities Maturities Maturities Maturities Maturities <1year 1–5years >5years <1year 1–5years >5years Non-derivative financial liabilities Liabilities to banks 340 099 831 405 371 064 227 026 626 990 380 399 Liabilities in connection with finance leases 1265 4765 1996 946 3479 2315 Trade payables 236 816 ——240 312 —— Other financial debt 151 523 18 065 47 828 138 190 15 979 61 353 Other financial liabilities 39 137 3928 302 91 789 1555 344 Derivative financial liabilities 506 975 1237 491 84 938 883 673 462 1140 1275 815 2095 654 421 274 1637 146 1321 465 445 551

132 MVV Energie 2008/09 INTEREST RATE RISkS: Interest rate risks relate to credit balances CoMMoDITy PRICE RISkS: Within the framework of our energy at banks on the asset side and to floating-rate liabilities to trading activities, energy trading contracts areconcluded for banks on the liabilities side of the balance sheet. Apart from the purposes of price risk management, adjustments to actual these items, interest rate risks chiefly involve derivatives in the loads and margin optimisation. These proprietary trading con- form of swap transactions. The interest rate risks mainly relate tracts primarilyserve economic hedging purposes and areonly to the euroarea. permittedwithinnarrow, clearlydefined limits.

The impact of changes in interest rates on annual earnings Pricechangerisks mainlyarise in connectionwiththe procure- and equity areanalysed below.This analysis has been based ment andsaleofelectricity andgas andthe procurementof on the assumption that thereare no changes in any other coal and emissions rights. These price risks arehedged with parameters, such as exchangerates. The analysis only includes suitable financialinstruments with reference to continuously financialinstruments whereinterestrate risk could impact on reviewed market price expectations.The Group made use of equity or annual earnings. Reference has been made in the derivative hedginginstruments during the year under report. analysis to the median value of changes in the current yield in The hedging instruments used mainly involved forwards, the past ten years. futures, swaps and options.

Any upwardordownwardvariance in the level of interest rates The sensitivity involved in the measurement of electricity,coal, in the euroareaby10%as of the balance sheet date on 30 Sep- gas and emissions rights derivatives is analysed in the follow- tember 2009 would have increased /decreased the annual net ingsection. The analysis has been based on the assumption surplusbyatotal of Euro218 thousand /Euro189 thousand that thereare no changesinother parameters andthatthere (previous year: Euro0/Euro0). This variance would have in- is ahigh degree of mutual dependency between individual creased /reduced equity by atotal of Euro1241 thousand / commodities. The analysis only includes derivatives for which Euro1193 thousand (previous year: Euro716 thousand / fluctuations in market values could impact on equity or on Euro735 thousand). annual earnings. These involve derivatives requiring manda- tory recognition. The analysisdoes not include derivatives FoREIGN CuRRENCy RISkS: Foreign currency risksmainly arise earmarked for the physical delivery of non-financial items in in the context of procuring raw materials and fuels settled in line with the company’sexpected proprietary procurement, US dollars on international markets. These areprocured by sale or utilisation (own use). These do not requirerecognition means of commodities futures intended to securethe com- under IAS 39. The sensitivities set out below thereforedonot modity andfuel requirements known of at agiven point in correspond to the actual economic risks and merely serve to time. The resultant payment obligations in US dollars whose meet IFRS 7disclosurerequirements. amounts and maturities arealready known when the com- modities futuresare agreed aresubject to foreign currency If the market price at the balance sheet date on 30 September risk. The major part of this risk is eliminated by concluding 2009 had been 10%higher /lower (previous year: 10%), then forwardexchange contracts congruent with the cash flows this would have increased /decreased the annual net surplus in US dollars. by Euro36850 thousand /Euro37888 thousand (previous year:Euro34747 thousand/Euro34409 thousand). Equity would have increased /reduced by Euro37098 thousand / Euro 38 136 thousand as of the same date (previous year: Euro35838 thousand /Euro35500 thousand).

MVV Energie 2008/09 133 MVV EnErgiE Consolidated Financial Statements

The following table depicts the nominal volumes and fair values of the derivatives used:

Nominal volumes and fair values as of 30.9.2009 as of 30.9.2008 Euro000s Nominal volumesFairvalues Nominal volumes Fair values Total with Total with remaining remaining terms of more terms of more than 1year than 1year Interest derivatives 237 793 122 147 –8804 286 178 247 530 2769 Commodity derivatives 3374 005 1382 719 –123 241 3950 207 1979 491 108 904 Currency derivatives 39 905 17 775 –2801 ——— 3651 703 1522 641 –134 846 4236 385 2227 021 111 673

Interest derivatives almost exclusively involve interest swaps. Thecurrencyderivatives areintendedtohedge financialcoal in US dollars.

Commodityderivatives canbesubdividedasfollows:

Commodityderivatives 30.9.2009 30.9.2008 Euro000s Nominal Fair Nominal Fair volumes values volumes values Commodity derivatives Electricity 3242 805 –85159 3826 852 82 263 Coal 16 982 –14547 57 209 22 250 Gas 114 218 –23535 66 146 4391 3374 005 –123 241 3950 207 108 904

Commodity derivatives Futures 3354 039 –110 019 3725 157 72 106 Swaps 19 966 –13222 220 442 36 775 Swaptions ——4608 23 3374 005 –123 241 3950 207 108 904

The positive fair values amounting to Euro376 204 thousand (previous year: Euro426 400 thousand) werenot offset by any margining liabilities (previous year: Euro44386 thou- sand). These arereported under other liabilities. The negative fair values amounting to Euro511 050 thousand (previous year: Euro314 181 thousand) arecountered by cash col- lateral amounting to Euro91416 thousand (previous year: Euro11396 thousand).

134 MVV Energie 2008/09 Notesonthe Income Statement

23 Sales after electricity and natural gas taxes Other operating income includes positive valuation items relating to energy trading transactions requiring measure- Sales include all revenues generated by the typical business ment under IAS 39 (2008). Valuation items relating to energy activities of the Group. They arerecognised upon the transfer trading transactions have been reported on agross basis. of significantrisks and rewards to customers or upon perform- This valuation-dependent income is offset by corresponding ance of the respective services, provided that payment can expenses. reliably be expected. The composition of sales broken down into individual segments can be found in the segment report The increase in income from reversals of provisions was mainly under Note 36. due to areview of the chances of success in legal disputes and to the non-utilisation of provisions for personnel-related measures. 24 own work capitalised The other operating income from emissions rights is countered Ownworkcapitalised chieflyinvolves construction and expan- by otheroperating expensespartly compensatingfor this item. sion measures relating to distribution grids and power plants. This income arises from the saleofemissions certificates above cost of acquisitionorfromthe conclusion of derivative swap 25 other operating income transactions.

The increase in income from sales of assets was chiefly due other operating income to the disposal of two gas grids and one gas storage facility. Euro000s 2008/2009 2007/2008 Income The income from reversals of debit differences (badwill) was from energy trading transactions attributable to theinitial consolidation of Českolipská teplá- recognised under IAS 39 195418 374 286 renská a.s., Česká Lípa, Czech Republic. from reversals of provisions 30 88519648 from emissions rights 27 2084231 26 Cost of materials from sales of assets 12 7613163 from agency agreements and personnel supplies 8221 6544 Cost of materials from credits and refunds 5758 1567 Euro000s 2008/2009 2007/2008 from benefits to employees 2500 2529 Raw materials, supplies and purchased goods 2038 3591555 873 from collections of outstanding receivables 2497 2467 Purchased services 305204 276 503 from foreign currency effects 2354 1420 2343 5631832 376 from rental agreements 1985 1741 from reimbursements The cost of materials includes write-downs on raw materials of damages claims 1575 4458 and supplies amounting to Euro730 thousand (previous year: from reversals of debit differences Euro1108 thousand). Write-backs of raw materials and sup- upon initial consolidation 1339 — plies due to increased net disposal prices arealso included at from IT services and telecommunications 1315 373 Euro0thousand (previous year: Euro609 thousand). from reversals of write-downs and receipts on receivables already retired 1165 2712 Expenses for purchased services mainly relate to expenses Other 22 247 26 908 for grid utilisation fees, third-party services for operating and 317228 452 047 maintaining plant and the provision of personnel.

The rise in cost of materials is primarily due to the increase in energy procurement costs.

MVV Energie 2008/09 135 MVV EnErgiE Consolidated Financial Statements

27 Personnel expenses Other operating expenses include negative valuation items relating to energy trading transactions requiring measurement Personnel expenses underIAS 39 (2008).Valuation items relating to energy trad- Euro000s 2008/2009 2007/2008 ingtransactions have been reported on agross basis. These Wages and salaries 251028 238 342 valuation-dependentexpensesare counteredbyother operat- Social security expenses ing incomepartly offsettingthis item. and welfareexpenses 45 11242223 Pension expenses 18 04624335 The figures stated have been supplemented to include 314186 304 900 expenses for emissions rights. The previous year’sfigures have been adjusted accordingly.The other operating expenses for The MVVEnergieGroup had an annualaverage of 5908 emissions rights arecountered by other operating income employees (previous year: 6180). This figureincludes 418 partly offsetting this item. These expenses arise from the sale trainees (previous year: 388). Of the total workforce,675 of emissions certificates below cost of acquisition or from the individualswereemployed at proportionately consolidated conclusion of derivative swap transactions. companies (previous year: 1022). The reduction in the number The increase in maintenance, repair and IT service expenses of employees was chiefly due to the sale of KPEC Komunalne waschiefly due to IT consulting services procured externally Przedsiebiorstwo Energetyki Cieplnej Sp. zo.o., Bydgoszcz, in connection with projects. Poland, as well as to the deconsolidation of the Polish subgroup in the 2007/08 financial year. The increase in write-downs and receivables defaults was mainly due to achange in the write-down concept used. The decline in pension expenses was principally due to the Reference is made to the information provided under Note 8. provisions, particularly for benefits in kind, recognised in the previous year. The information stated for operating taxes has been extended to includeenergy taxes attributable to own use. In the previous year,these werestill included in other operating expenses. 28 Other operating expenses

Other operating expenses 29 Income from associates and other income Euro000s 2008/2009 2007/2008 from shareholdings Expenses for energy trading transactions recognised under IAS 39 423975 286 128 Income from associates Concession duty 56 655 56 915 Euro000s 2008/2009 2007/2008 Expenses for emissions rights 25 669— Income from associates 4287 — Contributions, fees and duties 23 73723649 Income from other shareholdings 3800 7910 Legal, consulting and surveyor expenses 18 327 16 922 Income from sales of financial assets 7821928 Maintenance, repair and IT service expenses 18 097 5738 Income/expenses from assumption of results –29615 Additions to write-downs and receivables defaults 16 991 8487 Write-downs on other shareholdings –42–1997 Rental and leasing expenses 16 31216916 8798 8456 Public relations expenses 12 47312347 Personnel and welfareexpenses 12 41612889 Operating taxes (including energy taxes) 9834 5454 30 Depreciation and amortisation Losses incurred sales of assets 6879 8003 Expenses for foreign currency effects 2633 675 Depreciation and amortisation Accounting and year-end expenses 1581 2145 Euro000s 2008/2009 2007/2008 Office materials and specialist literature13701682 Depreciation and amortisation 146033 149 438 Business hospitality 595475 of which extraordinary 1004 5248 Damages expenses 389587 Other 37 29134579 685224 493 591

136 MVV Energie 2008/09 Extraordinary depreciation and amortisation mainly related to The measurement of minority ownership of commercial partner- adjustments to current market values amounting to Euro835 ships resulted for the first time in interest income of Euro2152 thousand for buildings (previous year: Euro3071 thousand), thousand in the 2008/09 financial year.Corresponding interest to Euro24thousand for technical equipment and machinery expenses werereported in the previous year. (previous year: Euro1772 thousand)and to Euro145 thou- sand for plant and office equipment. This was necessary due 33 Financing expenses to adjustments to market conditions or to areduction in the income expected from futureuse. Financing expenses Euro000s 2008/2009 2007/2008 31 Restructuring expenses Interest expenses on overdraft facilities, non-current and current loans 51 66348080 In September 2009, the MVV Energie Group approved anew Kiel put option 12 74010231 strategic alignment for the Group on the basis of its MVV 2020 Compounding of provisions 6288 5540 strategy project. Among other measures, the implementation Write-downs on securities 69 531 of the new strategy requires arealignment of the energy- Interest expenses from minority ownership related services subgroup. To this end, arestructuring plan of commercial partnerships —3866 was compiled and approved beforethe end of the year under Write-downs on current loans —73 report. This aims to achieve sustainable efficiency and earnings Interest and similar expenses 13 453 8948 enhancements at the energy-related services subgroup. 8421377269

Restructuring plans trigger event-specific impairment tests under IAS 36. These made it necessary to post impairment Theinformation for the previous year has been extended to losses in the past financial year. includeinterest expenses on overdraft facilities, non-current and current loans. In the previous year these werestill shown The restructuring expenses for the current 2008/09financial under interest and similar expenses. The interest expenses rec- year mainly involve impairments of assets. Moreover,other ognised forthe valuation of minority ownership of commercial items have also arisen within the restructuring plan and have partnerships in the2007/08 financialyearwerecountered by been recognised as provisions forrestructuring. The restructur- corresponding interest income in the 2008/09 financial year. ing expenses amount to Euro32952 thousand in total.

34 Taxes on income 32 Financing income

Taxes on income Financing income Euro000s 2008/2009 2007/2008 Euro000s 2008/2009 2007/2008 Actual taxes 36 808 55 581 Interest income from finance leases 2497 2220 Deferred taxes –58182 28 183 Interest income from minority ownership of commercial partnerships 2152 — –21374 83 764 Interest income from current account, overnight and fixed-term deposits 1488 3362 Current tax expenses include the trade and corporate income Write-backs to securities 479— tax charge, as well as foreign taxes on income. Income from general loans 182 605 Other interest and similar income 3594 3220 Of deferred tax income, an amount of Euro55million relates 10 3929407 to the arising and /orreversal of temporary differences (previ- ous year: Euro27.5 million). The difference to overall deferred tax income is due to the change in the write-down on losses The information stated for the previous year has been ex- carried forwardand the utilisation through profit or loss of tended to include interest income from overdraft, overnight losses carried forward. andfixed-termdeposits. In thepreviousyear, thesewerestill reported under other interest and similar income. The previous year’s figures have been adjusted accordingly.

MVV Energie 2008/09 137 MVV EnErgiE Consolidated Financial Statements

Actual tax expenses werereduced by Euro1million by using tax The number of individual registered shares of MVV Energie AG losses not previously recognised (previous year: Euro416 thousand). amounts to 65 906 796. The weighted annual average is cal- culated to the nearest day. The transition from expected tax expenses to those actually reported is presented in the following table: The dividend for the 2008/09 financial year is based on the proposal made by the ExecutiveBoardand is subject to ap- Transition to income tax rate proval by the Annual General Meeting on 12 March 2010. Euro000s 2008/2009 2007/2008 This proposal involves the distribution of adividend totalling Earnings beforetaxes (EBT) –96386 268 780 Euro59316 thousand. The appropriation of earnings pro- Expected tax expenses posedfor the 2007/08financialyear was approvedbythe based on tax rate of 30%–28 916 80 634 Annual General Meeting on 13 March 2009. Atotal dividend Deviations resulting from of Euro59316 thousand was distributed. As therewereno trade tax assessment base 5587 3328 option rights to shares in MVV Energie AG at the balance sheet Income from capitalisation of corporate income tax credit claims ——date, it is not necessary to account for any dilution effects. Deviations from expected tax rate –1451 –1483

Change in tax rate and tax legislation —–283 36 Segment reporting Change in write-downs for losses and losses for which no deferred taxes arerecognised 3209 –1598 The segmentation of the MVV Energie Group has been based Non-deductible expenses 1855 3904 on the internal reporting structures to the Executive Board Tax-exempt income –2270 –2572 and the Supervisory Board. Of segment sales with external Earnings of shareholdings customers, 96.8%weregenerated in Germany (previousyear: recognised at equity 258—95.5%). The total carrying amount of the assets located in Non-deductible goodwill amortisation Germany amounts Euro3728 259 thousand, or 94.3%oftotal and other consolidation measures 2085 –2889 assets (previous year: Euro3617 290 thousand or 95.5%). Non-deductible items resulting from application of IAS 32 (2003) 3822 4229 The MVV Energie Group does not exceed the limits set out in Taxes for previous years –4376 225 IAS 14.69 in terms of its volume of sales, assets and invest- Effect of equity procurement expenses —819 ments and has thereforeforegone disclosures on geographical Other –1177 –550 segmentation. Effective tax expenses –21374 83 764 The electricity segment includes the value creation stages Effective tax rate in %22.2 31.2 involved in the generation, trading, distribution and sale of electricity.The gas and district heating segments include the valuecreation stages involved in the procurement, distribution 35 Shareofearnings attributable to shareholders and sale of gas and of heating water and steam. As well as in MVV Energie AG and earnings per share procurement, distribution and sale, the water segment also includes the value creation stage of production (waterworks). Shareofearnings attributable to shareholders in MVVEnergieAG Alongside the activities of the MVV Energiedienstleistungen 2008/2009 2007/2008 subgroup, the value-added services segment also includes Shareofearnings attributable to shareholders in MVV Energie AG (Euro000s) –75713 169 957 the value-added services business at the municipal utility Number of shares companies, and in particular the shared service companies for (weighted annual average in thousands) 65 907 65 297 IT,billing and metering. The environmental energy segment Earnings per share(Euro) –1.15 2.60 includes the activities relating to the generation of energy from Dividend per share(Euro) 0.90 0.90 waste (municipal and private waste) and from waste timber.

138 MVV Energie 2008/09 The other /consolidation line item depicts both consolida- The cash flow beforeworkingcapital and taxes forthe tion items and those activities not allocable to the business 2008/09 financial year is only slightly lower than the previous segments. The carrying amounts of shareholdings arealso year’sfigure, as the decline in earnings (EBT) was compensated reported in the segment earnings and segment assets of the for by increased depreciation and amortisation, mainly in con- other /consolidation section in cases wherethey largely cannot nection with asset impairments at the energy-related services be allocated to one of the business segments. subgroup. The most significant year-on-year changes areto be found in the net surplus beforetaxes on income and in Internal sales represent the volume of sales between the group othernon-cash income and expenses. These aredue to the companies. Transfer prices applied to transfersbetween the IAS 39 valuation and areeliminated in the context of changes segments correspond to customarymarket prices. Segment in working capital. sales areequivalent to the sum of internal and external sales. The decline in the cash flow from operating activities was due Operating earnings (EBIT) have been selected to represent to asubstantial increase in income tax payments. This effect segment earnings. We have refrained from depicting the was exacerbated by the decline in current provisions. The transition to unappropriated net profit in our segment report changes in other assets and liabilities werelargely due to non- as this is already presented in the income statement. cash changes, mainly as aresult of the derivatives recognised Other non-cash expenses principally relatetoadditions to in theaccounts (IAS 39 valuation). The high volume of cash write-downs on receivables and to non-current provisions. flow beforeworking capital and taxes meant that the cash flow from operating activities was positive overall. Segment assets and segment liabilities represent the gross as- sets and gross liabilities of the respective business segments, As aresult of increased investments in intangible assets, excludingany times which cannot be allocated. Unallocable property,plant and equipment and investment property,the itemsmainlyinvolve currentand deferred income taxes, cash free cash flow of the MVVEnergie Group declinedcompared andcashequivalents,financial receivables and financial debt. with the previous year. The negativecash flow from investing activities also reduced slightly compared with the previous year.The main changes in this respect werethe lower volume 37 Cash flow statement of investments in financial assets and the inflow of funds from Thecash flow statement portrays the flow of funds from oper- thesale of the Polish subgroup, which was already reported as atingactivities, investingactivitiesand financingactivities. The availablefor sale in thepreviousyear. cash flowsfrominvesting andfinancing activities have been Duetoincreased borrowing, thecashflowfromfinancing ac- calculated directly.The cash flow from operating activities, by tivities wasmarkedlypositive. This factor wasopposed by the contrast, has been derived indirectly. higher dividend paymentand increased interest payments. The Inflows of funds from the acquisition and disposal of consoli- cash flow from financing activities for the 2007/08 financial dated companies areincluded in the cash flow from investing year wassignificantly affected by thecapital increase. activities. The cash and cash equivalents thereby acquired (disposed of) have been offset against payments made for 38 Capitalmanagement the acquisition (proceeds from the divestment). MVV Energie AG is not subject to any statutory minimum The structureofthe cash flow statement has been amended capital requirements, but pursues its internal objective of using compared with the annual financial statements as of 30 Sep- effective financial management to maintain its equity ratio at a tember 2008. In contrast to the presentation in the 2007/08 level necessary to attain agood rating in the banking market. financial year and in the interests of greater transparency, This enables the costs of capital to be optimised. the dividend payment line item has been supplemented by the dividend payment to minority shareholders line item. The The equity ratio represents consolidated shareholders’ equity comparable figures have been adjusted accordingly.These as aproportion of total assets. Shareholders’ equity consists of amendments have not led to any displacements within the sharecapital, capital reserves, retained earnings, the respective cash flow statement. unappropriated net profit and minority interests.

MVV Energie 2008/09 139 MVV EnErgiE Consolidated Financial Statements

Measures to comply with the targeted equity ratio initially 39 Related party disclosures take place within the business planning process and within Business transactions performed between the parent company the framework of investment budgeting in the case of major and its consolidated subsidiaries, which constitute related (unplanned) investment measures. By issuing shares, the parties, arenot outlined in this section, as they have been company is able to adjust its equity base to requirements. eliminated in the course of consolidation. The key figureused in the value-based management of the The City of Mannheim is the sole shareholder of MVV GmbH. company and the capital management thereby required is the MVV GmbH owns 99.99%ofthe shares in MVV Verkehr AG, value spread. This key figureiscalculated as the difference which in turnhas a50.1%shareholding in MVV Energie AG. between the period-based returnoncapital employed (ROCE) TheCity of Mannheim and the companies it controls therefore and the weighted average cost of capital (WACC). represent related parties as defined in IFRS. Therehave been no changes in underlying capital manage- Numerous contractually agreed legal relationships areinplace ment requirements compared with the previous year. between companies of the MVV Energie Group and the City of Mannheim and the companies which it controls (electricity,gas, water,district heating supply agreements, rental, leasing and service agreements). Moreover,thereisalso aconcession agree- ment betweenMVV Energie AG and the City of Mannheim.

Relatedparty disclosures Goods and services provided Receivables Liabilities Income Expenses Euro000s 2008/2009 2007/2008 2008/2009 2007/2008 30.9.2009 30.9.2008 30.9.2009 30.9.2008 Abfallwirtschaft Mannheim 285 754 6208 3597 283 282 2656 — ABG Abfallbeseitigungs- gesellschaft mbH 30 605 23 608 5213 3474 5262463 8 GBG Mannheimer Wohnungsbaugesellschaft mbH 10 502 10 038 83 35 2651 2059 1828 — m:con –Mannheimer Kongress- und Touristik GmbH 3186 3985 557 3175 8265 5676 —— MVV GmbH 1072 925 2269 2293 156 164 38 933 38 991 MVV OEG AG 531 445 1—100 52 —— MVV Verkehr AG 1042 1769 51 60 946 1079 71 Rhein-Neckar-Verkehr GmbH 7920 7554 432 —5567 5384 678 — Stadtentwässerung Mannheim 1400 2968 963 1671 539 966 151 — City of Mannheim 10 632 13 902 19 891 21 039 5489 1445 74 19 Other companies controlled by the City of Mannheim 4675 9108 232 92 1292 5171 1001 151 Associates 43 915 —172 266 —3885 —10808 — Proportionately consolidated companies 55 602 77 723 9086 22 181 21 571 3861 4718 4135 Other majority shareholdings 5294 7972 6239 5224 7733 9981 3085 4745 Total 176 661 160 751 223 491 62 841 58 482 36 14666402 48050

140 MVV Energie 2008/09 The supply and service relationships with companies affiliated The costs of the work performed in these functions were to MVV Energie AG in most cases involve unilateral supply charged on to the associate companies. and service relationships. The supply and service relationships Variable compensation is calculated on the basis of two com- with theCity of Mannheim have mainly been offset against ponents: the annual net surplus of the MVV Energie Group the relevant concession duties in the presentation. The conces- after minority interests pursuant to IFRS adjusted for extraor- sion duties to theCity of Mannheim amounted to Euro19746 dinary items under IAS 39, and the ROCE (ReturnonCapital thousand (previous year: Euro19891 thousand). For reasons Employed). Asuitable cap is in place. of transparency,the overview of relationships with related par- ties has been extended to include disclosures on companies No compensation components of along-termincentive nature in whichmajorityshareholdings areheld. Thecorresponding weregranted in the year under report. figures for the previous year have been supplemented. Fur- No further payments wereeither committed or made by third thermore, the business transactions relevant to the first-time parties. recognition of associates by way of equity consolidation have been listed. Upon reaching retirement age, the members of the Executive Boardare entitled to receive pension benefits amounting to a All business agreements havebeen concluded on custom- certain percentage of their fixed compensation. This percent- ary market terms and arebasically analogous to the supply age rises by 2%for every full year of service up to amaximum and service agreements concluded with other companies. value of 70%offixedcompensation.Pensionpayments are MVV Energie AG has compiled adependent company report in reduced by income earned elsewhere, benefits received under accordance with §312 of the German Stock Corporation Act the state pension scheme and any other pension benefits at- (AktG) for the financial year ending on 30 September 2009. tributable at least in half to employers’ contributions. If the The Executive Boardreceived total compensation of Euro1901 pension benefits areclaimed prematurely,then the monthly thousand in the year under report. This was structured as follows: pension paid is reduced by 0.5 %for every month by which the claimant falls short of the applicable retirement age. Compensation In theevent of any partial reduction in the employee’sworking Euro000s Fixed1 Variable Board Total compen- capacity,partial reduction in working capacity due to occupa- 2 sation tional disability or total inability to work, the pension benefit 3 Dr.Georg Müller 336 174 11 521 amounts to 55%ofthe employee’sfixed compensation and Matthias Brückmann 274 181 9464 rises by 1% for every full year of service up to amaximum of Dr.Werner Dub 263 181 16 460 70%. Onecomponent of the pension scheme involves aclaim Hans-Jürgen Farrenkopf 266 181 9456 to provisionfor survivingdependents. Total 1139 717 45 1901

1including allowances for pension insurance, health insurance, nursing careinsurance, voluntary contributions to employers’ mutual insurance association and non-cash benefits, as well as the CEO allowance of Euro131 thousand for Dr.Georg Müller 2supervisory boardactivities at shareholdings 3since joining the company on 1January 2009

The members of the Executive BoardofMVV Energie AG also actedasexecutive boardmembers of MVV RHE AG. Since that company’sconversion into alimited company (GmbH), entered in the Commercial Register on 13 January 2009, they have acted as managing directors of MVV RHE GmbH. Moreover, Dr.Werner Dub was managing director of MVV GmbH from 1October 2008 until 31 December 2008.

MVV Energie 2008/09 141 MVV EnErgiE Consolidated Financial Statements

The pension obligations arestructured as follows:

Pension obligations Euro000s Value Benefit Benefit Allocation to of final pension1 percentage2 percentage3 pension provision

Service cost Interest expense Dr.Georg Müller 192 36%68% 160 — Matthias Brückmann 144 52%70% 106 12 Dr.Werner Dub 98 58%66% 104 53 Hans-Jürgen Farrenkopf 111 60%66% 162 56 Total 545 532 121

1achievable claim to retirement pension aged 63, taking due account of amounts deducted 2total percentage pension rate achieved for retirement pension 3benefit percentage achievable by the age of 63

Former members of the Executive Boardreceived benefits of Moreover,uptoand including March 2009 ameeting allow- Euro332 thousand in the year under report. Provisions totalling ance of Euro300 was paid per person per meeting of the full Euro5488 thousand have been stated for pension obligations Supervisory Boardand of the committees. By resolution dated towards former members of the Executive Board. Atotal of Euro 13 March 2009, the Annual General Meeting raised the allow- 291 thousand was allocated to this item in the financial year. ance forparticipating in meetings of the Supervisory Boardand of SupervisoryBoardcommittees to Euro1000. The Chairman Pursuant to IAS 24, related parties also include management staff of the Supervisory Boardreceives double the meeting allowance performing key functions. Alongside the Executive Board, at the for meetings of the Supervisory Board, as does the Chairman MVVEnergie Group these also include active heads of division of the Audit Committee for meetings of the Audit Committee. and authorised company representatives of MVV Energie AG. Total compensation amounted to Euro358 thousand. This group of persons receives its compensation exclusively from MVV Energie AG. Compensation totalling Euro2473 The members of the Supervisory Boardand the Executive thousand was paid to this group of persons in the year under Boardhave been presented in aseparate overview. report, with the predominant share(Euro2381 thousand) involving payments with current maturities. 40 Auditor’sfee Senior employees receive acompany pension amounting to up The following fees wererecognised as expenses for the services to 8.6%oftheir fixed compensation. This exclusively takes the performed by the auditor of the consolidatedfinancial statements, form of adefined contribution plan. Within the channels of PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprü- execution offered within the Group, senior employees can de- fungsgesellschaft, Stuttgart (previous year: Ernst &Young AG termine which biometric risks they would like to cover.Total ex- Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft, penses incurred forthe aforementioned compensation schemes Mannheim), in the 2008/09 financial year: amounted to Euro 93 thousand in the year under report.

The members of the Supervisory Boardreceived annual com- Auditor’sfee pensation of Euro10thousand each in the 2008/09 financial Euro000s 2008/2009 2007/2008 year,with the Chairman of the Supervisory Boardreceiving Audit 788818 twice and his deputy one and ahalf times this figure. The Other auditing services 20 153 Chairman of the Audit Committee received additional annual Taxadvisory services 42 1 compensation of Euro5thousand and the other members of Other services 531484 this committeereceived additional annual compensation of 1381 1456 Euro2.5 thousand.

142 MVV Energie 2008/09 41 Declaration of Conformity (§ 161 AktG)

The Executive Boardand Supervisory BoardofMVV Energie AG have submitted their Declaration of Conformity with the German Corporate Governance Code pursuant to §161 of theGermanStock CorporationAct (AktG) andhavemadeit availabletothe company’sshareholders.

The complete declaration has been published on the internet at www.mvv-investor.de.

42 Information on concessions

In addition to the concession between the City of Mannheim and MVV Energie AG (please see Note 39 “Related party disclosures”), further concessions have also been concluded between companies of the MVV Energie Group and local and regional authorities. The remaining terms range from three to 21 years. In these agreements, responsibility has been assigned for operating the respective supply networks and providing for their maintenance. Should these agreements not be extended upon expiry,the facilities for supplying the respective utilityservice must be taken over by the municipali- ties upon payment of commensuratecompensation.

43 Events afterthe balance sheetdate

We arenot awareofany events after the balance sheetdate.

Mannheim, 27 November2009

MVV Energie AG

Executive Board

Dr.Müller Brückmann Dr.Dub Farrenkopf

MVV Energie 2008/09 143 MVV EnErgiE Consolidated Financial Statements

Responsibility Statement

“Weaffirm that, to the best of our knowledge, the consoli- datedfinancial statements give atrue and fair view of the net asset, financial and earnings position of the Group in accord- ance with applicable accounting principles and the group man- agement report provides afair review of the development and performanceofthe business and the position of the Group, together with adescription of the principal opportunities and risksassociated withthe expecteddevelopment of the Group.”

Mannheim, 27 November 2009

MVV Energie AG

Executive Board

Dr.Müller Brückmann Dr.Dub Farrenkopf

144 MVV Energie 2008/09 Directors &Officers

ExecutiveBoardofMVV EnergieAG SupervisoryBoardofMVV EnergieAG

Dr.Georg Müller Dr.Peter kurz klausLindner1 (since 1January 2009) Chairman (until 31 August 2009) Chairman LordHigh Mayor of City of Mannheim Trade Union Secretary at ver.di Commercial Director

Manfred Lösch1 Prof.Dr. NorbertLoos MatthiasBrückmann Deputy Chairman Managing Partner Sales (until 30 September 2009) of Loos Beteiligungs-GmbH Works Council of MVV Energie AG Dr.werner Dub Dr.ReinerLübke1 Technology johannes Böttcher1 Head of InfrastructureService Division Chairman of Works Council of at MVV Energie AG hans-jürgenFarrenkopf Energieversorgung Offenbach AG Personnel BodoMoray1 holgerBuchholz1 (since 1September 2009) Trade Union Secretary at ver.di Kiel Trade Union Secretary at ver.di Rhine /Neckar Peter Dinges1 (since 1February 2009) BarbaraNeumann1 Chairman of Works Council of MVV Group Chairman of Works Council of Stadtwerke Kiel AG (since 1October 2009) Deputy Chairman wolfgang Raufelder Architect werner Ehret1 Deputy Chairman of Works Council of MVV Energie AG Sabine Schlorke1 Trade Union Secretary at ver.di Rhine /Neckar DetlefFalk1 Deputy Chairman of Works Council of Stadtwerke Kiel AG Dr.RolfMartinSchmitz (until 30 April 2009) Dr.RudolfFriedrich CEO of RheinEnergie AG, Cologne Retired Job CentreDirector (until 30 April 2009)

Dr.Manfred Fuchs uweSpatz1 Deputy Chairman (until 31 January 2009) of Supervisory Boardof Works Council of MVV Energie AG FUCHS PETROLUB AG, Mannheim Christian Specht Dr.Stefan Fulst-Blei First Mayor of City of Mannheim Vocational Training College Lecturer Dr.Dieter Steinkamp Reinhold Götz (since 9July 2009) Graduate in Commercial Training CEO of RheinEnergie AG, Cologne 1st Representative IG Metall Mannheim (since 15 June 2009)

Prof.Dr. Egon jüttner The additional positions and activities of the Member of Federal Parliament (MdB) members of the Supervisory Boardare listed 1employee representative in detail on the following pages.

MVV Energie 2008/09 145 MVV EnErgiE Consolidated Financial Statements

Membersofthe SupervisoryBoardofMVV EnergieAG

Name and occupation Positions held on other statutory Membership of comparable supervisoryboards of German German and foreign company companies supervisoryboards

Dr.Peter kurz • Faculty of Clinical Medicine at the University • GBG Mannheimer Wohnungsbaugesellschaft Chairman of Heidelberg, Klinikum Mannheim GmbH mbH, Mannheim (Chairman) LordHigh Mayor of the University Hospital, Mannheim (Chairman) • m:con –Mannheimer Kongress- und Touristik City of Mannheim • MVV GmbH, Mannheim (Chairman) GmbH, Mannheim (Chairman) • MVV OEG AG, Mannheim (Chairman) • Popakademie Baden-Württemberg GmbH, • MVV RHE AG, Mannheim (Chairman) Mannheim (until 19 December 2008) • Rhein-Neckar-Verkehr GmbH, Mannheim • MVV Verkehr AG, Mannheim (Chairman) (Chairman) • Sparkasse Rhein Neckar Nord, Mannheim • Stadtmarketing Mannheim GmbH, Mannheim

Manfred Lösch • Energieversorgung Offenbach AG (EVO), • — Deputy Chairman Offenbach (until 30 September 2009) • MVV GmbH, Mannheim Works Council of MVV Energie AG

johannes Böttcher • Energieversorgung Offenbach AG (EVO), • — Chairman of Works Council of Offenbach Energieversorgung Offenbach AG

holgerBuchholz • MVV GmbH, Mannheim • — Trade Union Secretary at ver.di • Stadtwerke Kiel AG, Kiel Kiel

Peter Dinges • 24/7 Netze GmbH, Mannheim • SECURA Energie GmbH, Mannheim (since 1February 2009) • MVV Umwelt GmbH, Mannheim Chairman of Works Council of MVV Group (since 1October 2009) Deputy Chairman

werner Ehret • MVV GmbH, Mannheim • — Deputy Chairman of Works Council of MVV Energie AG

DetlefFalk • Stadtwerke Kiel AG, Kiel • — Deputy Chairman of Works Council of Stadtwerke Kiel AG

146 MVV Energie 2008/09 Name and occupation Positions held on other statutory Membership of comparable supervisoryboards of German German and foreign company companies supervisoryboards

Dr.RudolfFriedrich • MVV Verkehr AG, Mannheim • BBS Bau- und Betriebsservice GmbH, Mannheim Retired Job CentreDirector (until 21 July 2009) • Fleischversorgungszentrum Mannheim GmbH, Mannheim

Dr.Manfred Fuchs • FUCHS PETROLUB AG, Mannheim • Hilger u. KernGmbH, Mannheim Deputy Chairman of Supervisory (Deputy Chairman) (Chairman of Advisory Board) BoardofFUCHS PETROLUB AG, Mannheim

Dr.Stefan Fulst-Blei • MVV GmbH, Mannheim • GBG Mannheimer Wohnungsbaugesellschaft Vocational Training College • MVV OEG AG, Mannheim mbH, Mannheim Lecturer • Mannheimer Abendakademie und Volkshochschule GmbH, Mannheim • Rhein-Neckar-Verkehr GmbH, Mannheim • Sparkasse Rhein Neckar Nord, Mannheim • Stadtmarketing Mannheim GmbH, Mannheim

Reinhold Götz • MVV GmbH, Mannheim • — Graduate in Commercial Training 1st Representative IG Metall Mannheim

Prof.Dr. Egon jüttner • MVV GmbH, Mannheim • Haus-, Wohnungs- und Grundeigentümer- Member of Federal Parliament • MVV RHE AG, Mannheim verein Mannheim e.V., Mannheim (MdB) (until 19 December 2008) klausLindner • MVV GmbH, Mannheim • Eurogate Geschäftsführungs (until 31 August 2009) (until 31 August 2009) GmbH &Co. KGaA, Bremen Trade Union Secretary at (since 24 June 2009) ver.di Rhine /Neckar (until 30 April 2009) Trade Union Secretary at ver.di Federal Administration (since 1May 2009)

MVV Energie 2008/09 147 MVV EnErgiE Consolidated Financial Statements

Name and occupation Positions held on other statutory Membership of comparable supervisoryboards of German German and foreign company companies supervisoryboards

Prof.Dr. NorbertLoos • BHS tabletop AG, Selb (Chairman) • LTSCorp. West Caldwell, NJ, USA Managing Partner of • Dürr AG, Stuttgart (Chairman) Loos Beteiligungs-GmbH (Deputy Chairman) • m:con –Mannheimer Kongress- • Hans R. Schmidt Holding AG, Offenburg und Touristik GmbH, Mannheim (Chairman) • Stadt Mannheim Beteiligungsgesellschaft mbH, • LTSLohmann Therapie-Systeme AG, Mannheim Andernach (Chairman) • MVV GmbH, Mannheim

Dr.ReinerLübke • — • Stadtwerke Schwetzingen GmbH &Co. KG, Head of InfrastructureService Schwetzingen Division at MVV Energie AG • Stadtwerke Schwetzingen Verwaltungs- gesellschaft mbH, Schwetzingen

BodoMoray • — • — (since 1September 2009) Trade Union Secretary at ver.di Rhine /Neckar

BarbaraNeumann • 24/7 IT-Services GmbH, Kiel • — Chairman of Works Council of • MVV GmbH, Mannheim Stadtwerke Kiel AG • Stadtwerke Kiel AG, Kiel

wolfgang Raufelder • MVV GmbH, Mannheim • Mannheimer Parkhausbetriebe GmbH, Architect • MVV Verkehr AG, Mannheim Mannheim • Rhein-Neckar Flugplatz GmbH, Mannheim

Sabine Schlorke • — • — Trade Union Secretary at ver.di Rhine /Neckar

148 MVV Energie 2008/09 Name and occupation Positions held on other statutory Membership of comparable supervisoryboards of German German and foreign company companies supervisoryboards

Dr.RolfMartinSchmitz • NetCologne Gesellschaft für Telekom- • AggerEnergie GmbH, Gummersbach (until 30 April 2009) munikation mbH, Cologne (Chairman) (Chairman) CEO of RheinEnergie AG, (until 21 April 2009) (until 21 April 2009) Cologne • rhenag Rheinische Energie • AVGAbfallentsorgungs- und (until 30 April 2009) Aktiengesellschaft, Cologne Verwertungsgesellschaft Köln mbH, Cologne (until 21 April 2009) (until 30 April 2009) • AWBAbfallwirtschaftsbetriebe Köln GmbH &Co. KG, Cologne (until 31 December 2008) • Bergische Licht-, Kraft- und Wasserwerke (BELKAW) GmbH, Bergisch Gladbach (until 21 April 2009) • BRUNATA-METRONA Wärmemesser- Gesellschaft Schultheiß GmbH &Co, Hürth (until 21 April 2009) • Energie- und Wasserversorgung Bonn /Rhein- Sieg GmbH, Bonn (until 31 March 2009) • Energieversorgung Leverkusen GmbH & Co.KG (EVL), Leverkusen (until 21 April 2009) • evd energieversorgung dormagen GmbH, Dormagen (until 21 April 2009) • Gasversorgungsgesellschaft mbH Rhein-Erft, Hürth (until 21 April 2009) • Kölner Außenwerbung GmbH, Cologne (until 31 December 2008) • Stadtwerke Troisdorf GmbH, Troisdorf (until 21 April 2009) uweSpatz • 24/7 Netze GmbH, Mannheim • SECURA Energie GmbH, Mannheim (until 31 January 2009) • 24/7 Trading GmbH, Mannheim Works Council of • MVV GmbH, Mannheim MVV Energie AG • MVV Umwelt GmbH, Mannheim

Christian Specht • MVV GmbH, Mannheim • BBS Bau- und Betriebsservice GmbH First Mayor of • MVV RHE AG, Mannheim Mannheim City of Mannheim (until 19 December 2008) • GBG Mannheimer Wohnungsbaugesellschaft • MVV Verkehr AG, Mannheim mbH, Mannheim • Mannheimer Stadtreklame GmbH, Mannheim • Rhein-Neckar Flugplatz GmbH, Mannheim • Rhein-Neckar-Verkehr GmbH, Mannheim

MVV Energie 2008/09 149 MVV EnErgiE Consolidated Financial Statements

Name and occupation Positions held on other statutory Membership of comparable supervisoryboards of German German and foreign company companies supervisoryboards

Dr.Dieter Steinkamp • NetCologne Gesellschaft für • AggerEnergie GmbH, Gummersbach (since 9July 2009) Telekommunikation mbH, Cologne (Chairman) CEO of RheinEnergie AG, (Chairman) • Bergische Licht-, Kraft- u. Wasser-Werke Cologne • rhenag Rheinische Energie (BELKAW) GmbH, Bergisch Gladbach (since 15 June 2009) Aktiengesellschaft, Cologne (Deputy Chairman of Supervisory Board) • BRUNATA-METRONA Wärmemesser- Gesellschaft Schultheiss GmbH &Co, Hürth • Energieversorgung Leverkusen GmbH &Co. KG (EVL), Leverkusen • Gasversorgungsgesellschaft mbH Rhein-Erft, Hürth, (Chairman of Supervisory Board) • METRONA Wärmemesser-Gesellschaft Schultheiß GmbH &Co. KG, Hürth • SECURA Energie GmbH, Mannheim, (Deputy Chairman of Supervisory Board) • Stadtwerke Leichlingen GmbH, Leichlingen • Stadtwerke Troisdorf GmbH, Troisdorf

Division heads at MVVEnergieAG1

Dr.Christophhelle Ralph Rischmüller General Director Real Estate Management Energy Business and Group Strategy Bernhard Schumacher hans-Georg hägele Sales Group Controlling Elke Zinser Gunter kühn Business Controlling and Materials Management Personnel, Social and WelfareServices

Dr.ReinerLübke InfrastructureService 1not Directors and Officers

150 MVV Energie 2008/09 ScopeofConsolidationofthe MVV EnergieGroup

Scope of consolidation of the MVV Energie Group as of 30.9.2009 Shareofcapital Equity 000s Annual result 000s Localcurrency in % (local currency) (local currency) Associates (fully consolidated subsidiaries) Germany

24/7 IT-ServicesGmbH, Kiel 7 100.00680 –184 EUR 24/7 Metering GmbH, OffenbachamMain100.001496 910EUR

24/7 NetzeGmbH, Mannheim 5 100.005999 –8835 EUR

24/7 TradingGmbH, Mannheim 5, 7 92.50 10 804407 EUR 24/7 United BillingGmbH, OffenbachamMain100.0039–123EUR

24sieben GmbH, Kiel 5, 7 100.00110 383EUR

A+SNaturenergieGmbH, Pfaffenhofen 7, 13 100.00129 –1047 EUR ABeG AbwasserbetriebsgesellschaftmbH,Offenbach am Main 51.00367 68 EUR

BFEInstitut fürEnergie undUmweltGmbH, Mühlhausen 5, 7 100.00700 1132 EUR

Biomassen-HeizkraftwerkAltenstadt GmbH, Altenstadt 7 100.00–298–2343 EUR

EnergieversorgungOffenbach Aktiengesellschaft,Offenbach am Main 2 48.61128 86721019 EUR eternegy GmbH, Mannheim100.00 –8978 176EUR Gasversorgung OffenbachGmbH, OffenbachamMain74.90 15 5745099EUR

GeTeBe Gesellschaft fürTechnologieberatungmbH,Berlin7 100.0014478 776EUR IndustrieparkGersthofenServicegesellschaft mbH, Gersthofen (previously: IndustrieparkGersthofenServicegesellschaft mbH&Co. KG, Gersthofen) 5, 7 100.0010773 2611 EUR

Köthen EnergieGmbH, Köthen 7 100.005171729 EUR

Köthen EnergieNetzGmbH, Köthen 5, 7 100.0024120 EUR

MVVBioPowerGmbH, Königs Wusterhausen 7 100.0016143 4117 EUR

MVVBMKWMannheimGmbH, Mannheim 5, 7 100.0012304 3410 EUR

MVVdecon GmbH, Mannheim 7 100.00488 –913 EUR

MVVEnergiedienstleistungenGmbH, Mannheim 5 100.0076543 –35242 EUR

MVVEnergiedienstleistungenGmbH&Co. KG IK Korbach, Korbach 7 100.001767–5994 EUR MVVEnergiedienstleistungenGmbHMitte,Berlin (previously: MVVEnergiedienstleistungen GmbHBerlin,Berlin) 5, 7 100.0023926 1624 EUR

MVVEnergiedienstleistungenGmbHIKLudwigshafen, Mannheim 7 100.00–3903 –5039 EUR

MVVEnergiedienstleistungenGmbHNord, Hamburg 5, 7 100.001743471 EUR MVVEnergiedienstleistungenGmbHSolingen, Solingen (previously: ENSERVAGmbH, Solingen) 7 51.002617298 EUR MVVEnergiedienstleistungenGmbHSüd,Gersthofen (previously: MVVEnergiedienstleistungen GmbHISBayern, Gersthofen) 5, 7 100.001746–349EUR

MVVEnergiedienstleistungenGmbHSüdwest,Mannheim 5, 7 100.005515986 EUR

MVVEnergiedienstleistungenGmbHWest, Solingen 5, 7 100.00520 –575 EUR

MVVEnergiedienstleistungenWohnenGmbH&Co. KG,Berlin 7 100.0042802834EUR

MVVO&M GmbH, Mannheim 5, 7 100.00122611899 EUR

MVVRHE GmbH, Mannheim(previously: MVVRHE AG,Mannheim) 5 100.0056389 4850 EUR

MVVTREALeuna GmbH, Leuna 5, 7 100.0052806130EUR

MVVUmweltGmbH, Mannheim 5, 7 100.0049473 34 630EUR

MVVUmweltRessourcenGmbH, Mannheim 5, 7 100.0022251240EUR

SECURA EnergieGmbH, Mannheim 5, 7 69.901000 –3773 EUR

Stadtwerke Kiel Aktiengesellschaft,Kiel 7 51.00138 46515614 EUR

MVV Energie 2008/09 151 MVV EnErgiE Consolidated Financial Statements

Scope of consolidation of the MVV Energie Group as of 30.9.2009 Shareofcapital Equity 000s Annual result 000s Localcurrency in % (local currency) (local currency)

SWKiel Erzeugung GmbH,Kiel 5, 7 100.00251843EUR

SWKielNetzGmbH, Kiel 5, 7 100.0025–31 405EUR

SWKielService GmbH, Kiel 5, 7 100.0025–865EUR WaldenergieBayernGmbH, Gersthofen (previously: MVVAlpha neun GmbH, Gersthofen) 7 50.102312–382EUR

ZEDERVerwaltungsgesellschaft mbH&Co. Vermietungs KG,Pullach 3, 9 0.00–7524 –1175 EUR

Associates (fully consolidated subsidiaries) International

Českolipskáteplárenskáa.s., ČeskáLípa, CzechRepublic 12 94.9990859 392CZK Českolipskéteplo a.s.,Prague, CzechRepublic 100.00105 93396883 CZK CTZ s.r.o.,UherskéHradiště,Czech Republic 50.96 99 6297459CZK ENERGIEHoldinga.s., Prague, CzechRepublic 100.00 483190 65 915CZK Jabloneckáteplárenskáarealitnía.s., Jablonecnad Nisou, CzechRepublic 65.78 350439 34 907CZK Městskéinženýrské sítě Studénka a.s.,Studénka,Czech Republic 100.00 68 188–7347 CZK MVVEnergieCZa.s., Prague (previously: MVVEnergieCZs.r.o., Prague),Czech Republic 100.001795648 170431 CZK MVVenservisa.s., ČeskáLípa, CzechRepublic 100.00 –12567 –6087 CZK MVVNederland B.V.,Amsterdam,Netherlands 100.00 36 4281626EUR OPATHERM a.s.,Opava,Czech Republic 100.0095089 11 184CZK POWGEN a.s.,Prague, CzechRepublic 100.00 18 3287188CZK Teplárna Libereca.s., Liberec, CzechRepublic 70.00394 346–4795 CZK TERMO Děčína.s., Děčín, CzechRepublic 96.91 262887 24 174CZK Zásobování teplem Vsetína.s., Vsetín, CzechRepublic98.82 194518 47 490CZK

other majorityshareholdings Germany

24/7 InsuranceServicesGmbH, Mannheim 9 100.00202 131EUR

24solution S-H GmbH, Kiel 9 90.003910EUR

8KURenewables GmbH, Berlin 9 100.0024–1EUR

BHG Biomasse HandelsgesellschaftmbH,Mannheim 8 100.00138894EUR

Bioenergie PfalzgrafenweilerGmbH, Pfalzgrafenweiler 9 51.00417 –415 EUR

Biokraft Naturbrennstoffe GmbH, OffenbachamMain 9 100.0067–948EUR

Erschließungsträgergesellschaft St.Leon-RotmbH,St. Leon-Rot 9 80.00261EUR

Erschließungsträgergesellschaft WeezembH,Weeze 9 75.0013–6EUR

Gersthofen Verwaltungs GmbH,Gersthofen 9 100.00301EUR

Kielspeicher 103Verwaltungs-GmbH, Kiel 9 51.0042–8EUR

ManfredPitzerGmbHEntsorgung, Recycling, Transporte,Ulm 6, 8 100.00279 217EUR

MVVEnergiedienstleistungenGmbHRegioplan,Mannheim 5, 9 100.00950 198EUR MVVEnergiedienstleistungenVerwaltungs GmbH Biogas Mechau, Mannheim 9 100.0021–4EUR MVVEnergiedienstleistungenVerwaltungs GmbH IK Korbach, Mannheim 9 100.0024–2EUR

152 MVV Energie 2008/09 Scope of consolidation of the MVV Energie Group as of 30.9.2009 Shareofcapital Equity 000s Annual result 000s Localcurrency in % (local currency) (local currency)

MVVEnergiedienstleistungenWohnenGeschäftsführungs GmbH,Berlin 9 100.00182EUR

MVVIndustriekraftwerk Gengenbach GmbH(MVVIKG), Mannheim 9 100.00428 –79EUR

NordlandEnergie GmbH, Kiel 9 69.90102430EUR

REGIOPLANProjekt GmbH, Mannheim 9 100.0013–15 EUR

RNERhein-NeckarEnergie GmbH, Sinsheim 6, 11 50.10——EUR

ZweckverbandWasserversorgungKurpfalz(ZWK),Heidelberg 8 51.0070710EUR

International

BFEInstitut fürEnergie undUmweltGmbH, Romanshorn,Switzerland 9 100.005411CHF

East-West-Energy-Agency(EWEA), Moscow,RussianFederation 8 100.00382 –188 RUB EMBInstituutvoorEnergie en Milieu B.V.,Oosterhout (previously: BFENederland B.V.,Oosterhout), Netherlands 9, 12 100.009–9 EUR

MVVdecon NigeriaLtd., Abuja, Nigeria 6, 11 98.00——NGN

MVVEnvironmentLimited,London, UK 7 100.00110 60 GBP

RegioplanIngenieure Salzburg GmbH, Salzburg, Austria 9 100.0027–39 EUR jointlyownedcompanies(proportionate consolidation) Germany

Kielspeicher 103GmbH&Co. KG,Kiel 7 51.0069192512EUR reginova GmbH, Ingolstadt 5, 7, 15 100.00500 3EUR

Stadtwerke Ingolstadt Beteiligungen GmbH,Ingolstadt 4, 7 48.4042607 16 526EUR

Stadtwerke Ingolstadt EnergieGmbH, Ingolstadt 5, 7, 15 100.0010489665EUR

Stadtwerke Ingolstadt NetzeGmbH, Ingolstadt 5, 7, 15 100.0025834 11 012EUR

Stadtwerke SolingenGmbH, Solingen 4, 7 49.9061350 8667 EUR

Stadtwerke SolingenNetzGmbH, Solingen 5, 7, 12,15 100.00250 –14425 EUR

Associates (atequity) Germany

Biomasse Rhein-Main GmbH, Flörsheim-Wicker 7 33.3311373 143EUR

Gemeinschaftskraftwerk Kiel GmbH, Kiel 8 50.0017770 1534 EUR

GrosskraftwerkMannheimAG, Mannheim 8 28.00114 1426647EUR

Stadtwerke Buchen GmbH&Co. KG,Buchen 8 25.106648 1759 EUR

Stadtwerke SinsheimVersorgungs GmbH&Co. KG,Sinsheim 6, 11 30.00——EUR

ZVOEnergie GmbH, TimmendorferStrand 8 49.9054379 3762 EUR

MVV Energie 2008/09 153 MVV EnErgiE Consolidated Financial Statements

Scope of consolidation of the MVV Energie Group as of 30.9.2009 Shareofcapital Equity 000s Annual result 000s Localcurrency in % (local currency) (local currency) other shareholdings Germany

24sieben aqua nordGmbH, Kiel 9 50.0076–11 EUR BAS–Bergsträßer Aufbereitungs-und Sortierungsgesellschaft mbH, Heppenheim 9 49.004215EUR

beka ebusinessGmbH, Cologne 8 30.00156 5EUR

e:duoGmbH, Essen 9 50.00–631–419EUR

EnergiedienstleistungenDannenberg(Elbe)GmbH, Dannenberg 9 49.00265 –39EUR

enservaGmbH, Solingen 5, 6, 8, 12,15 100.00500 –65EUR ESN EnergieSystemeNordGmbH, Schwentinental (previously: EnergiesystemeNordGmbH, Schwentinental) 8 25.002512588 EUR

Fernwärme Rhein-NeckarGmbH, Mannheim 8 50.0033231534EUR

HENHolzEnergie NordschwarzwaldGmbH, Nagold 8 30.00707 –52EUR

itec InformationstechnologieSolingenGmbH, Solingen 8, 15 100.001366619 EUR

iwoPelletRhein-Main GmbH, OffenbachamMain 9, 12 24.92 –548 –160 EUR

KielNETGmbHGesellschaftfür Kommunikation,Kiel 8 50.0080043004EUR

Klimaschutzagentur MannheimgemeinnützigeGmbH, Mannheim 6, 11 40.00——EUR

Kommunaler WindenergieparkSchleswig-Holstein GbR, Neumünster 10 20.00847 336EUR

Main-Kinzig-Entsorgungs-und Verwertungs GmbH, Hanau 8 49.00235 3EUR

Maintal-WerkeGesellschaftmit beschränkter Haftung, Maintal 8 49.0012121 1357 EUR

Management Stadtwerke Buchen GmbH, Buchen 8 25.20342EUR

ÖPPRheinNeckarGmbH, Mannheim 9, 14 50.00360EUR

RBSV GmbH, Solingen 8, 12 21.40584 –16EUR

Stadtwerke Langen Gesellschaft mit beschränkter Haftung, Langen 8 10.0021395 3723 EUR

Stadtwerke SchwetzingenGmbH&Co. KG,Schwetzingen 8 10.0014782 1783 EUR

Stadtwerke SchwetzingenVerwaltungsgesellschaft mbH, Schwetzingen 8 10.003613EUR

Stadtwerke SinsheimVerwaltungs GmbH,Sinsheim 6, 11 30.00——EUR

Wasserversorgungsverband “Neckargruppe”,Edingen-Neckarhausen 10 25.00377 0EUR

Wasserwerk Baumberg GmbH, Solingen 8, 15 50.00615 –999 EUR WVEWasserversorgungs-und -entsorgungsgesellschaft Schriesheim mbH, Schriesheim 8 24.5010250EUR

1shareofcapital pursuant to §16(4) of the German Stock Corporation Act (AktG) 10 annual financial statements as of 31.12.2007 2majority of voting rights 11 first annual financial statements not available 3special purpose entity 12 financial statements for short financial year 4joint management pursuant to contractual agreement 13 100%due to purchase options 5profit transfer agreement, annual result beforetransfer 14 company sold, ownership transferred as of 1.10.2009 6addition in current financial year 15 subsidiary of proportionately consolidated company 7preliminary figures 8annual financial statements as of 31.12.2008 9annual financial statements as of 30.9.2008

154 MVV Energie 2008/09 Auditor’sReport

“Wehave audited the consolidated financial statements Our audit has not led to any reservations. prepared by MVV Energie AG, Mannheim, comprising the In our opinion based on the findings of our audit the consoli- balance sheet, the income statement, statement of changes datedfinancial statements comply with IFRSs as adopted by in equity,cash flow statement and the notes to the consoli- the EU and the additional requirements of German commercial datedfinancial statements,togetherwiththe groupmanage- law pursuant to §315a Abs. 1HGB and give atrue and fair ment report for the business year from 1October 2008 to view of the net assets, financial position and results of opera- 30 September 2009. The preparation of the consolidated tionsofthe Group in accordancewith theserequirements. The financial statements and the group management report in group management report is consistent with the consolidated accordance with IFRSs as adopted by the EU and /orthe ad- financial statements and as awhole provides asuitable view ditional requirements of German commercial law pursuant to of theGroup’sposition and suitably presents the opportunities §(Article) 315a Abs. (paragraph) 1HGB ("Handelsgesetz- andrisks of future development.” buch”: German Commercial Code) is the responsibility of the Company’sBoardofManaging Directors. Our responsibility is Stuttgart, 27 November 2009 to expressanopinion on the consolidated financial statements andonthe groupmanagementreport based on our audit. PricewaterhouseCoopers We conducted our audit of the consolidated financial state- Aktiengesellschaft ments in accordance with §317 HGB and German gener- Wirtschaftsprüfungsgesellschaft ally accepted standards for the audit of financial statements promulgatedbythe Institut derWirtschaftsprüfer (Institute of Public Auditors in Germany) (IDW). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated finan- Claus Banschbach Rolf Küpfer cial statements in accordance with the applicable financial German Public Auditor German Public Auditor reporting framework and in the group management report aredetected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations as to possible misstatements aretaken into account in the determination of audit proce- dures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the group management report areexamined primarily on atest basis within the framework of the audit. The audit includes as- sessing the annual financial statements of those entities included in consolidation, the determination of the entities to be included in consolidation, the accounting and consoli- dation principles usedand significant estimates madebythe Company´sBoardofManaging Directors, as well as evaluating the overall presentation of the consolidated financial state- ments and the group management report. We believe that our audit provides areasonable basis for our opinion.

MVV Energie 2008/09 155 MVV EnErgiE Other Disclosures

156 MVV Energie 2008/09 OtherDisclosures

158 _Multi-Year Overview 162 _Financial glossary 164 _Technical glossary

MVV Energie 2008/09 157 MVV EnErgiE Other Disclosures

Multi-YearOverview

Multi-year overview of the MVV Energie Group

2004/05 1 2005/06 2006/07 2 2007/08 2 2008/09 2, 3 Income statement (Euromillion)

Sales excluding electricity and natural gas taxes 1864 4 2170 4 2259 4 2636 4 3161 4 Adjusted EBITDA 287 370 344 398 385 Adjusted EBITA156 223 200 249 239 Adjusted EBIT 158 201 199 249 239 Adjusted EBT 80 128 123 181 165 Adjusted annual net surplus 41 64 126 123 112 Adjusted annual net surplus after minority interests 28 50 109 110 98

External sales excluding electricity and natural gas taxes (Euromillion)

Electricity 882 4 966 4 1079 4 1382 4 1760 4 District heating 250 276 272 303 294 Gas 366 447 342 356 486 Water 106 107 104 102 101

Value-added services 107 149 263 277 308 Environmental energy 131 193 184 194 194 Other/consolidation 22 32 15 22 18 MVV Energie Group 1864 2170 2259 2636 3161

Adjusted EBIT (Euromillion)

Electricity 39 20 38 2 64 35 2 District heating 40 51 42 38 36

Gas 35 31 11 35 66 2 Water 15 21 19 10 14

Value-added services 16 12 19 20 18 3 Environmental energy 27 68 71 81 71 Other/consolidation –14–12 –111–11 MVV Energie Group 158 201 199 249 239

Assets (Euromillion) Electricity 734 845 860 1319 889 District heating 474 505 562 547 496 Gas 331 318 331 381 399 Water 288 273 282 289 242 Value-added services 145 159 285 249 334 Environmental energy 445 468 474 438 536 Other/consolidation 230 395 293 356 565 Unallocated (balance sheet) 273 190 191 208 493 MVV Energie Group 2920 3153 3278 3787 3954

158 MVV Energie 2008/09 Multi-year overview of the MVV Energie Group

2004/05 1 2005/06 2006/07 2 2007/08 2 2008/09 2, 3

Investments (Euromillion) Electricity 22 18 22 29 27 District heating 24 19 28 25 56 Gas 17 22 19 16 13 Water 13 12 12 10 12 Value-added services 818304952 Environmental energy 64 81 34 59 64 Other/consolidation 14 20 20 20 14 Investments in property,plant and equipment 162 190 165 208 238 Investments in financial assets 52 29 90 33 17 MVV Energie Group 214 219 255 241 255

R&D expenditure (Euromillion) Process optimisation 11252 Product development 21433 Technical enhancement 11311 MVV Energie Group 43996

Balance sheet figures (Euromillion) Non-current assets 2339 2361 2479 2725 2795 Current assets 579 792 799 1062 1159 Sharecapital 130 143 143 169 169 Capital reserve 178 255 255 455 455 Retained earnings, including unappropriated net profit 315 324 383 506 371 Accumulated other comprehensive income 910172415 Minority interests 105 105 116 116 103 Equity 737 837 914 1270 1113 Non-current debt 1397 1366 1377 1445 1698 Current debt 784 950 987 1072 1143 Total assets 2918 3153 3278 3787 3954

Key balance sheet figures and ratios

Cash flow (Euromillion) 188 5 246 5 364 6 414 6 386 6

Free cash flow 7 (Euromillion) 53 –152 188 54 20

Adjusted equity ratio 8 in %25.3 26.5 27.9 33.5 33.9

Capital employed 9 2263 2293 2390 2444 2649

ROCE 10 in %6.9 9.7 8.4 10.2 9.0

WACC 11 in %7.5 7.5 7.5 8.5 8.5

Value spread 4,12 in %–0.6 2.2 0.9 1.7 0.5

MVV Energie 2008/09 159 MVV EnErgiE Other Disclosures

Multi-year overview of the MVV Energie Group

2004/05 1 2005/06 2006/07 2 2007/08 2 2008/09 2, 3

Shareand dividend Closing price on 30.9. (Euro) 19.29 23.23 29.49 33.20 30.83

Annual high 13 (Euro) 19.50 25.40 34.24 33.75 34.04

Annual low 13 (Euro) 13.90 17.40 22.00 28.00 26.55 Market capitalisation on 30.9. (Euromillion) 978 1295 1645 2188 2032 Average daily trading volume (no. of shares) 18 149 27 289 32 396 29 575 19 162

No. of individual shares on 30.9. (million) 50.704 55.767 55.767 65.907 65.907 No. of shares entitled to dividends (million) 55.704 55.767 55.767 65.907 65.907

Dividend per share(Euro) 0.75 0.80 0.80 0.90 0.90 14

Total dividend (Euromillion) 41.8 44.6 52.7 15 59.3 59.3 14

Adjusted earnings per share(Euro) 0.55 0.91 1.96 1.69 1.48 16

Cash flow per share(Euro) 3.71 5 4.47 5 6.52 6 6.33 6 5.86 6, 16

Adjusted book value per share 17 (Euro) 12.46 13.29 14.32 16.53 18 16.52 16, 18

Price/earnings ratio 35.1 25.5 15.0 19.6 19 20.8 16, 19

Price/cash flow ratio 5.2 5 5.2 5 4.5 6 5.2 6, 19 5.3 6, 16, 19

Dividend yield 19 in %3.9 3.4 2.7 2.7 2.9 14

Sales volumes 20

Electricity turnover 21 (kWh million) 13 022 14 343 14 302 18 188 19 582

of which wholesale 21, 22 (kWh million) 3227 3368 3003 5797 6939

of which retail/secondary distributors 22 (kWh million) 10 695 10 975 11 299 12 391 12 643 District heating turnover (kWh million) 7446 7343 6299 7006 7217 Gas turnover (kWh million) 11 096 11 513 9456 9166 10 851

of which wholesale 22 (kWh million) —490 624 864 1529

of which retail/secondary distributors 22 (kWh million) 11 096 11 023 8332 8302 9322

Water turnover (m3 million) 58 58 55 55 53 Combustible waste delivered (tonnes 000s) 872 1229 1409 1550 1599

160 MVV Energie 2008/09 Multi-year overview of the MVV Energie Group

2004/05 1 2005/06 2006/07 2 2007/08 2 2008/09 2, Employees (as of 30.9.) MVV Energie AG including MVV RHE GmbH 1728 1569 1559 1527 1523 Fully consolidated shareholdings 3114 3156 3765 3661 3833 MVV Energie AG with fully consolidated shareholdings 4842 4725 5324 5188 5356 Proportionately consolidated shareholdings 1550 1562 1031 685 681 MVV Energie Group 6392 6287 6355 5873 6037 External personnel at Mannheim energy from waste plant 57 51 39 28 16 6449 6338 6394 5901 6053

1starting in the 2005/06 financial year: initial recognition of put option at Stadtwerke 10 returnoncapital employed (adjusted EBITAasapercentage of capital employed) Kiel AG (previous year’sfigures adjusted) 11 weighted average cost of capital 2starting in the 2006/07 financial year: adjusted, i.e. excluding non-operative IAS 39 12 value spread (ROCE less WACC) valuation items in connection with financial derivatives 13 XETRA trading 32008/09 financial year: adjusted, i.e. excluding non-operative IAS 39 valuation items 14 pending approval by the Annual General Meeting on 12 March 2010 in connection with financial derivatives and excluding one-offcharges for write-downs at energy-related services subgroup 15 entitled to dividend from 23 October 2007: 65 906 796 individual shares 4energy trading sales reported on anet basis, i.e. only showing the margin actually 16 weighted number of individual shares: 65 906 796 realised 17 excluding minority interests, weighted annual average number of shares 5pursuant to the Society of Investment Professionals in Germany 18 excluding net balance of positive and negative fair values under IAS 39 (DVFA)/Schmalenbach-Gesellschaft 19 basis: closing price in XETRA trading on 30 September 6starting in the 2006/07 financial year: beforeworking capital and taxes 20 total volume for all segments 7inflow of funds from operating activities, less investments in intangible assets, 21 recalculation of proprietary trading in year under report (previous years adjusted) property,plant and equipment and investment property 22 reallocation of secondary distributors in year under report (previous years adjusted) 8starting in the 2007/08 financial year: adjusted equity as aproportion of adjusted total assets 9adjusted equity plus financial debt plus provisions for pensions and similar obligations plus accumulated goodwill amortisation (calculated as an annual average)

MVV Energie 2008/09 161 MVV EnErgiE Other Disclosures

Financial Glossary

ADjuSTED EARNINGS PER SHARE BETAFACTOR FREE CASH FlOw

Earnings per sharerepresent the annual net The beta factor (ß) portrays the relative risk The free cash flow portrays the extent surplus after minority interests divided by harboured by an individual sharecompared to which acompany is able to cover its the number of shares. Adjusted earnings with an index. Abeta factor higher than investments from its cash flow from per shareare based on the adjusted net one means that the shareinvolves greater operating activities, i.e. net of investments surplus after minority interests. This key risk than its comparative market. The in intangible assets, property,plant and earnings figureisstated net of the earnings reverse is the case for abeta factor lower equipment and investment property. and tax impact of the measurement of than one. financial derivatives as of the balance sheet date under IAS 39 and one-offwrite-downs IMPAIRMENT TEST on non-current assets. The number of CAPITAl EMPlOYED An impairment test is atest performed on shares corresponds to the weighted average This is the capital used by acompany on intangible assets (goodwill, patents, licences number of our shares in circulation during which external providers of capital are etc.) and financial assets (values of share- the period under report. entitled to areturn. holdings) to ascertain their ongoing value.

ADjuSTED EBIT CASH FlOw INTERNATIONAl FINANCIAl REPORTING The abbreviation EBIT stands for Earnings STANDARDS (IFRS) The cash flow presents all inflows and BeforeInterest and Taxes. For internal man- outflows of cash and cash equivalents International accounting regulations issued agement purposes we use adjusted EBIT, in agiven period. by the International Accounting Standards i.e. EBIT excluding the impact on earnings Board(IASB). Based on aRegulation adopt- of the measurement of financial derivatives ed by the European Union (EU), parent com- at fair value as of the balance sheet date D&O INSuRANCE panies oriented towards the capital market under IAS 39 and excluding one-offand in the EU have been obliged since 1January special items (e.g. one-offwrite-downs on Directors and officers insurance is afinancial 2005, and at the latest since 1January non-current assets). loss liability insurance policy concluded by a 2007, to apply IFRS when preparing their company to protect its directors and officers consolidated financial statements. These against costs arising as aresult of legal regulations aim to achieve an international ADjuSTED EQuITY RATIO disputes. harmonisation of accounting requirements The equity ratio presents equity as apro- and thus to enhance the comparability of portion of total assets. For internal manage- consolidated financial statements. DIVIDEND ment purposes, we adjust both sides of our balance sheet to eliminate the cumulative Profit-based payment to shareholders. measurement items for financial derivatives MARKET CAPITAlISATION measured under IAS 39. We adjust equity This key figureiscalculated by multiplying to exclude the relevant net balance of the DIVIDEND YIElD the number of shares issued by their share positive fair values on the asset side and the price. negative fair values on the liabilities side. Key figureportraying the dividend distribu- tion made by astock corporation as aper- centage of its shareprice.

162 MVV Energie 2008/09 MARKET RISK PREMIuM SuSTAINABIlITY VAluE SPREAD

Represents the additional returnwhich the Sustainability means using natural resources Principal key figureused in our value-based market as awhole or aspecific sharemust in such away that futuregenerations will company management. It is calculated by offer over and above the risk-free interest also be able to meet their needs. From a subtracting the weighted average cost of rate to rewardthe additional risk assumed company perspective, sustainable business capital (WACC) from the returnoncapital by the investor. activity involves taking due account of employed (ROCE). economic, ecological and social aspects. This is also referred to as corporate social PRICE /CASH FlOw (P/CF) RATIO responsibility (CSR). wACC

The price/cash flow ratio is calculated by Abbreviation for Weighted Average Cost dividing the shareprice by the cash flow per of Capital. This key figurerepresents the SwAPS (COMMODITY SwAPS) share. This ratio thus presents the multiple long-term minimum economic return by which the cash flow per shareisvalued Acommodity swap is an agreement govern- generated on operations based on the ratio on the stock market. ing the exchange of aseries of fixed com- of debt capital and equity.Equity costs are modity price payments (fixed amount) and calculated at the risk-free interest rate, arisk variable commodity price payments (market premium for market risk and the beta fac- PRICE /EARNINGS (P/E) RATIO price). This only involves an exchange of tor.Debt capital costs arecalculated using cash (settlement amount). the risk-free interest rate plus apremium for Also known as the P/E ratio. This key figure default risk. This key figuremay be calcu- places the earnings of acompany in relation lated both beforetaxes and after taxes. As to its current stock market valuation. An TAxRATE apre-tax figure, it represents the minimum important key figureinassessing the earn- economic ROCE. ings power of acompany compared with The tax rate corresponds to actual tax one or several other companies. expenses as aproportion of earnings before taxes. xETRA

RISK-FREE INTEREST RATE Abbreviation for Exchange Electronic TAxSHIElD Trading. This is the electronic stock market The returnwhich an investor can expect trading system for shares and options at on arisk-free investment, such as agovern- The tax shield designates the value of Deutsche Börse AG. It is characterised by ment bond. the tax benefit contributed by borrowing automatic order handling, an open order interest, debts or losses carried forwardto book, i.e. transparent to all market partici- the value of acompany.Ascompanies are pants, and equal access for all market par- ROCE permitted in most tax jurisdictions to deploy ticipants irrespective of their location. Due debts or losses to reduce their tax burdens, Abbreviation for ReturnonCapital to its high speed and low cost of executing these items raise the value of acompany Employed. This key figureshows how orders, it has largely replaced floor trading for potential buyers, as they can be offset effectively and profitably acompany uses on German stock exchanges. against profits at the acquirer.When a its capital. The ROCE presents operating company is correspondingly indebted or earnings beforeinterest, taxes on income carries forwardold losses in its balance and goodwill amortisation (EBITA) as a sheet, its market value is higher by precisely proportion of capital employed. this amount of tax benefit than that of a comparable company that is not indebted.

MVV Energie 2008/09 163 MVV EnErgiE Other Disclosures

Technical Glossary

BAlANCING ENERGY COGENERATION to VDI Guideline 4710, the calculation of degree day figures is based on the differ- In the electricity supply,balancing energy Simultaneous generation at acogeneration ence between an indoor room temperature is required to offset unforeseeable load plant of mechanical energy usually con- of 20 degrees Celsius and the average daily fluctuations and power plant outages. To verted directly into electricity and heating outdoor temperaturebelow the so-called ensurethe necessary volume of energy can energy useable for heating purposes (district heating threshold temperatureof15degrees be supplied immediately,output is reserved heating) or production processes (process Celsius. That is the average daily outdoor at easily controllable power plants. Throttled heat). This thereforeinvolves extracting temperaturebelow which heating is re- steam, water storage, pump water storage useful heat, particularly when generating quired according to the degree day method. and gas turbine power plants areused as electricity from combustible fuels. As the sources of balancing energy. total specific energy input in cogeneration systems is lower than that in separate EEG SETTlEMENT MECHANISM electricity generation (with no use of surplus BIOGAS heat behind the turbine) and standalone Refers to the transfer payment with which heating plants, cogeneration can contribute the EEG compensation received by plant As defined in the German Energy Industry towards achieving energy saving targets. operators subsidised under the Renewable Act (EnWG): biomethane, gas from biomass, Energies Act (EEG) is allocated via grid landfill gas, sewage gas and mine gas. operators and electricity suppliers to end COMMODITY customers. This EEG allocation must be paid by end customers (financial settlement). BIOMASS Designation for astandardised tradeable Physical settlement, which involves the good, such as electricity,gas, coal or CO Biomass includes all life forms, dead organ- 2 prorated transmission of EEG electricity rights. isms, organic metabolites and residual or- volumes to all customers, will be discon- ganic materials. Our biomass cogeneration tinued from 1January 2010. plants aremainly fuelled by timber (waste CONTRACTING timber,wood chips and pellets). This is taken to mean the construction or EFFICIENCY takeover and operation of an energy gen- Ratio of output yielded and absorbed upon CO EMISSIONS RIGHTS eration plant supplying utility energy,such 2 energy conversion. The efficiency figure as electricity,heating energy,cooling energy An environmental policy instrument aimed for thermal power plants indicates the or compressed air,byacontractor (external at cutting CO emissions at the lowest percentage of the thermal energy contained 2 thirdparty) on along-term contractual possible cost to the economy.Toachieve in the fuel which can be converted into basis. The aim is to achieve substantial eco- this goal, amarket is created for CO .The electricity.The higher the efficiency figure, 2 nomic and ecological benefits by optimising price signals emitted by this market provide the moreeffectively the energy content of processes. participating companies with an incen- the input fuel is used. Moderngas power plants attain efficiency levels of up to tive to reduce their CO2 emissions. Upon implementation, acap first has to be set 60%, while power plants fired with hard CONTROl AREA on apolitical level for specified emissions coal and brown coal reach 46%and 43% within aspecified area (regional, national, The German electricity grid is divided into respectively. international) in aspecified period (e.g. four control areas. The transmission grid calendar year) and for aspecified group operator responsible for each control of participants (e.g. energy industry,heavy area guarantees stable grid operations by ElECTRICITY GENERATION CAPACITY (GROSS BOTTlENECK CAPACITY) industry). Based on this cap, so-called CO2 correcting fluctuations in generation and rights entitling their holders to emit specific consumption by means of balancing energy. Installed electrical gross bottleneck capacity volumes of CO arethen issued. Thereare 2 at entireelectricity generation plant in MW . penalties for any emissions not covered e The generation unit‘s gross bottleneck by emissions rights. By lowering the cap DEGREE DAYFIGuRES capacity is the output yielded at the genera- step by step, the incentive to save CO can 2 Degree day figures areaweather indicator tor clamp. gradually be increased. used to assess temperature-dependent heating energy requirements. According

164 MVV Energie 2008/09 eLectricity net bottLeneck caPacity h-gas reneWabLe energies act (eeg)

Output in MW yielded to the supply Hisshort for high. H-gas designates gas Law dated 29 March 2000 which accords e system (transmission grid, distribution grid with high calorific value (natural gas). priority to renewable energies, most re- or consumers). Calculated by deducting cently amended as of 1January 2009 (EEG average own electricity consumption from 2009). Key component of German climate gross bottleneck capacity. L-gas protection strategy.Under EEG, the shareof electricity generated from renewable ener- Lisshort for low.L-gas designates gas with gies is to be increased to above 30%by low calorific value. energy systeM Losses 2020. Renewable energies include biomass, the biogenic shareofwaste (50%), photo- Energy required to offset grid losses caused voltaics, hydroelectricity and wind energy. by physical factors. Market Design in the energy Market

Detailed definitions of “market rules” sMartgriDs energy traDing DeriVatiVes governing the interaction between the By working with the latest technologies and Energy trading derivatives arefutures trans- regulated value chain stage of grid opera- developments, smart grids offer extended actions (structured as fixed or options trans- tion and the competitive value chain stages possibilities of actively and flexibly adjusting actions) whose price directly or indirectly of generation, trading and sales. generation, grid control, storage and con- depends on the exchange or market price sumption to the constantly changing needs of areference value. Such instruments are of the energy markets. characterised by their futuredate of per- Market faciLitators formance (hence the designation as futures) Ideal underlying anew understanding of and their dependence of the derivative price the role to be played by grid operators, who sMartMetering on an exchange or market price. We trade then see themselves as promoters of com- in derivatives in the primary fuels of gas and Asmart meter is an electronic meter en- petition on the energy markets. The market coal and the energy product of electricity. abling consumption data for electricity,gas, facilitator bases its actions on the needs of district heating and water to be recorded its customers (sales businesses, traders, gen- and automatically read and processed by erators) and provides efficient infrastructure gas-steaM PoWer PLant energy suppliers in future. The latest smart and services to meet these needs. metering technology provides customers Acombined gas-steam power plant is a with detailed information on their current power plant wherethe principles of agas consumption and costs. turbine power plant arecombined with net eLectricity outPut those of asteam power plant. The generation unit’soutput to the supply system (transmission grid, distribution grid WhisPergen or consumers). This figureiscalculated by griD fees House energy plant powered by natural gas. deducting own consumption at the plant This uses aStirling motor to simultaneously In the liberalised energy market, grid fees, from the gross electricity output. produce heating energy and electricity for also known as grid utilisation fees, arethe detached and semidetached houses. It is fees collected by electricity and gas grid operated on adecentralised basis –and operators as consideration for grid use or rDf thus without conduction losses –and works grid transmission by the various users. Abbreviation for refuse-derived fuels on the principle of cogeneration. produced from high-calorific household, industrial and commercial waste. RDF is gross eLectricity outPut already partly substituted for coal, natural The gross electricity output of ageneration gas and heating oil at conventional power unit refers to the electricity output produced plants and cement factories. at the generator clamps in MWh/a. DisClOsurEs

MVV Energie 2008/09 165 OthEr MVV EnErgiE Other Disclosures

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This Annual Report has been printed carbon-neutrally.The Pefc certified greenhouse gas emissions caused by the production and dis- The paper used for this Annual Report comes from sustainably tribution of this publication have been offset by investments managed forests and certfied sources. in ahigh-quality climate protection project.

166 MVV Energie 2008/09 MVV EnErgiE Energising the Future

FinancialCalendar

27. 1. 2010 Annual Results Press Conference and Analysts‘ Conference

15. 2. 2010 Financial Report 1st Quarter of 2009/10

12. 3. 2010 Annual General Meeting

15. 3. 2010 Payment of Dividend

14. 5. 2010 Financial Report 2nd Quarter of 2009/10

14. 5. 2010 Press Conference and Analysts‘ Conference 2nd Quarter of 2009/10

13. 8. 2010 Financial Report 3rd Quarter of 2009/10

13. 8. 2010 Analysts‘ Conference 3rd Quarter of 2009/10

30.12. 2010 2009/10 Annual Report MVV EnErgiE Energising the Future

Imprint

Editorial responsibility Conception, design and project management MVV Energie AG Scheufele Hesse Eigler Wilfried Schwannecke Kommunikationsagentur GmbH Tel: +49 (0) 621 290-2392 Frankfurt am Main Fax: +49 (0) 621 290-3075 [email protected] translation

Editing and project coordination Daniel Clark Business Communication Services Bettina von Rebenstock Berlin Tel: +49 (0) 621 290-3614 Fax: +49 (0) 621 290-3075 [email protected] photography

Petra Wandernoth Stephan Minx Tel: +49 (0) 621 290-3417 Fürth Fax: +49 (0) 621 290-3075 Ingo Boddenberg [email protected] Düsseldorf (Executive Board on Page 22)

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published by Contact Investor Relations MVV Energie AG Luisenring 49 Marcus Jentsch D-68159 Mannheim Head of Group Department Investor Relations Postal address Tel: +49 (0) 621 290-2292 D-68142 Mannheim Fax: +49 (0) 621 290-3075 Tel: +49 (0) 621 290-0 [email protected] Fax: +49 (0) 621 290-2324 www.mvv-energie.de Contact [email protected] Investor Relations Tel: +49 (0) 621 290-3708 Contact Fax: +49 (0) 621 290-3075 Annual Report www.mvv-investor.de [email protected] Wilfried Schwannecke Tel: +49 (0) 621 290-2392 Fax: +49 (0) 621 290-3075 [email protected]

Frank Nagel Tel: +49 (0) 621 290-2692 Fax: +49 (0) 621 290-3075 [email protected]

This Annual Report was published on the internet on 30 December 2009.

All financial reports of the MVV Energie Group can be downloaded from our internet site. The German and English editions of this Annual Report can also be accessed as interactive online reports. www.mvv-investor.de