Financial Report 2019 Combined Management Report 2 Business and background 12 Current situation in the EWE Group 20 Group non-financial statement 21 Report on anticipated development and significant opportunities and risks 36 Current situation of EWE Aktiengesellschaft Consolidated Financial Statements 40 Consolidated income statement of the EWE Group 41 Consolidated statement of comprehensive income of the EWE Group 42 Consolidated statement of financial position of the EWE Group 44 Consolidated statement of changes in equity of the EWE Group 46 Consolidated statement of cash flows of the EWE Group 48 Notes to the consolidated financial statements of EWE Aktiengesellschaft Further Information 148 Responsibility statement 149 Independent auditor’s report 155 Supervisory Board report EWE Financial Report 2019 1 Business and background The EWE Group rural areas of northwestern Germany. Furthermore, we operate several drinking water networks and, as an energy Organization and basis of reporting group with strong regional roots, we also operate in the waste water business. In the reporting year, the total We are an energy group with core activities in the fields of volume of waste water purified was 16.1 million cubic energy, telecommunications and information technology meters (previous year: 16.1 million cubic meters). (IT). In accordance with International Financial Reporting Standards (IFRS), we have presented our business activi- In the Gas Storage business area, we construct, acquire ties in Turkey as discontinued operations until their sale in and operate systems to store as well as inject and with- the first half of 2019. We operate energy grids, are active draw gaseous and liquid fuels, such as high-pressure natu- in renewable energies and tap the joint potential of ener- ral gas, hydrogen, liquefied petroleum gas and com- gy, telecommunications and IT. The EWE Group comprises pressed air, and provide all corresponding services. In this EWE Aktiengesellschaft (“EWE AG”), a stock corporation business area, we operate a total of 38 underground under German law, and its subsidiaries. Our Company’s chambers in locations throughout northern Germany, such headquarters are located in Germany with group head- as in Rüdersdorf near Berlin, and sell storage capacity to quarters being located in Oldenburg. In fiscal year 2019, internal and external customers. With a total storage the Group (excluding Turkey) had an average of capacity of 2.0 billion cubic meters, we are one of the 8,831 employees (previous year: 8,508 employees). largest operators of gas storage chambers in the German- European natural gas market. Description of business activities Sales, Services and Trading segment Renewables, Grids and Gas Storage segment The Energy and Telecommunications business area com- In the Renewables business area, we plan, build and oper- bines the sale of energy and telecommunications prod- ate wind farms to generate renewable power, often under ucts. The focus of telecommunications sales lies primarily investment and partner models. We market our expertise in northwestern Germany, parts of Brandenburg, on the in the construction and operation of offshore wind farms island of Rügen and the region of East Westphalia-Lippe. internationally. We increased power generation capacities We support commercial customers nationwide. Through (including our share in capacities from investments the establishment of additional business activities, such as accounted for using the equity method) from 338.1 mega- power storage, light contracting and energy audits, we are watts to 507.0 megawatts in the fiscal year. currently transitioning into a service provider which – in addition to the conventional products of power, gas, heat In the Grids business area, we operate power grids and and telecommunications – can provide customer-specific natural gas networks in the Ems-Weser-Elbe region of services and solutions, thereby creating new business Germany as well as natural gas networks in Brandenburg, opportunities. on the island of Rügen and in North Western Pomerania with a grid length totaling 140.0 thousand kilometers We are also working on numerous innovations currently at (previous year: 139.1 thousand kilometers). Thanks to varying degrees of maturity to develop a portfolio of new very low susceptibility to failure, our distribution grids are business models with a sharp digital focus and are pene- some of the safest in Europe: compared with power out- trating new target groups and markets with new offerings ages of an average of 14 minutes per customer in Germa- that go beyond our current business segments. These ny in 2018, outages at EWE NETZ GmbH, Oldenburg (EWE activities pertain to areas such as mobility, distributed NETZ), average just 4 minutes. We also operate a wide generation and storage, and highly data-driven business telecommunications network of 51.9 thousand kilometers models in the platform economy. They are rounded off (previous year: 41.3 thousand kilometers). The Company is with investments in start-ups, from which both sides continuously striving to expand broadband access in the derive mutual strength thanks to close cooperation. 2 EWE Financial Report 2019 Combined Management Report The Information Technology business area includes IT Internal management system consulting services with an integrated approach, particu- larly for the energy and telecommunications industries, The EWE Group uses a multilevel management system the public sector, industrial companies and service pro- which makes it possible to decentralize corporate respon- viders. Our key areas of expertise lie in consulting, system sibility. The internal management system differentiates integration, and applications and system management. In between the Group and the segment level. The operative this context, we place a focus on energy-related software segments Renewables, Grids and Gas Storage; Sales, Ser- products. vices and Trading; International; and swb form the basis of the internal reporting structures and external reporting The Trading business area encompasses a variety of ser- (segment reporting). Internal and external reporting are vices related to procurement and sales of power and gas. based on the same management information system. This Furthermore, the Trading business area optimizes the technological platform enables the use of a uniform data- entire energy portfolio of the EWE Group and offers its base for a variety of reporting needs and ensures that customers and partners a broad range of portfolio and information is consistent between reporting levels and balancing group management services. The Trading busi- within one reporting level. ness area also supports operators of wind and solar farms nationwide in directly marketing their electricity. More- As the parent company, EWE AG has defined target values over, the Trading business serves to provide market access for measuring and controlling company performance to to our Group’s sales and generation activities. safeguard the long-term success of the company. Integral components of this overarching objective include long- International segment term value creation, ensuring adequate financing and In Poland, the distribution and sale of natural gas is a key stabilizing the Company’s external rating. The EWE component of our business activities. Until its sale in the Group's target values are represented by corresponding first half of 2019, the Turkish business was reported as a key figures. discontinued operation and is therefore not included in the International segment. Earnings before interest and taxes is of key importance, represented by the leading key performance indicator swb segment operating EBIT. Operating EBIT represents earnings before This segment essentially encompasses our activities in the interest and taxes adjusted for special effects such as cities of Bremen and Bremerhaven. swb and its subsidiar- valuation effects from financial instruments, impairments ies are active in the fields of power, natural gas, heating, and reversals and special effects resulting from changes in drinking water and telecommunications. This segment the basis of consolidation as well as those resulting from also encompasses the Conventional Generation and Dis- restructuring measures and from irregularly recurring posal business unit which is contained exclusively within matters affecting comparability. the swb segment. At the level of operative segments, the main key perfor- Group Central Division mance indicator operating EBIT is complemented by spe- EWE AG manages the EWE Group as its holding company. cific metrics. Furthermore, capital expenditure and their Its duties lie in the strategic and cross-market develop- distribution across the segments represent a further focus ment of the business areas as well as strategic planning of Group management. and ensuring the Group’s financing. In addition, EWE AG performs centralized corporate services for the Group’s Internal and external group reporting is continuously companies. adjusted to meet the operating requirements of managing the EWE Group as well as current legal requirements. EWE Financial Report 2019 Combined Management Report 3 Research and development Most of the energy required will be locally generated. The quarter design, called “energetic neighborhoods,” brings Project enera “Smart Energy Showcases – Digital Agenda together generators and consumers that are located in for the Energy Transition” pursues a systemic approach to close