ANNUAL REPORT 2013 SHAPING THE FUTURE T 2013 R L REPO A ANNU RWE TimeTable ideA 2013 KEY FIGURES AT A GLANCE • Operating result: €5.9 billion • Net income: −€2.8 billion • Recurrent net income: €2.3 billion • Dividend proposal: €1 per share • Cash flows from operating activities: €5.8 billion • Leverage factor: 3.5 (unchanged) RWE Group 2013 2012 + /− % Electricity production billion kWh 216.7 227.1 − 4.6 External electricity sales volume billion kWh 270.9 277.8 − 2.5 External gas sales volume billion kWh 335.0 306.8 9.2 External revenue € million 54,070 53,227 1.6 EBITDA € million 8,762 9,314 − 5.9 Operating result € million 5,881 6,416 − 8.3 Income before tax € million − 1,487 2,230 – Net income/RWE AG shareholders' share in income € million − 2,757 1,306 – Recurrent net income € million 2,314 2,457 − 5.8 Return on capital employed (ROCE) % 10.8 12.0 – Weighted average cost of capital (WACC) before tax % 9.0 9.0 – Value added € million 990 1,589 − 37.7 Capital employed € million 54,345 53,637 1.3 Cash flows from operating activities € million 5,755 4,395 30.9 Capital expenditure € million 4,624 5,544 − 16.6 Property, plant and equipment and intangible assets € million 4,494 5,081 − 11.6 Financial assets € million 130 463 − 71.9 Free cash flow € million 1,267 − 686 – Number of shares outstanding (average) thousands 614,745 614,480 – Earnings per share € − 4.49 2.13 – Recurrent net income per share € 3.76 4.00 − 6.0 Dividend per share € 1.001 2.00 – 31 Dec 2013 31 Dec 2012 Net debt of the RWE Group € million 30,666 33,015 − 7.1 Workforce2 66,341 70,208 − 5.5 1 Dividend proposal for RWE AG's 2013 fiscal year, subject to the passing of a resolution by the 16 April 2014 Annual General Meeting. 2 Converted to full-time positions. WHAT WE DO RWE is one of Europe’s five leading electricity and gas companies. Through our expertise in oil, gas and lignite production, in electricity generation from gas, coal, nuclear and renewables, and in energy trading as well as electricity and gas distribution and supply, we are active at all stages of the energy value chain. Around 66,000 employees supply over 16 million electricity customers and more than seven million gas customers with energy, both reliably and at fair prices. In fiscal 2013, we recorded approximately €54 billion in revenue. Europe is our market: in terms of sales, we are No. 3 in electricity and No. 5 in gas. In Germany, the Netherlands and the United Kingdom, we are among the largest suppliers of both fuels. In the Czech Republic, we are No. 1 in the gas business. We also have leading positions in other markets in Central Eastern Europe. The European energy sector is undergoing fundamental changes. Political intervention is making our business challenging. In addition, the subsidised expansion of renewables in Germany is causing the margins and utilisation of conventional power stations to decline. All of this is having a significant effect on our earnings. To succeed in this environment, we launched the ‘RWE 2015’ programme. It includes comprehensive measures to reduce costs and increase revenue. We are also adjusting our organisational structure to cope with the challenges. By decreasing investment and reducing debt, we want to improve our financial flexibility. Despite difficult framework conditions, we want to play our part in the continued development of the European energy system, proving that we are trustworthy and high performing. Our strategy is to invest in renewable energy and a modern network infrastructure. In addition, we take advantage of opportunities in the market which arise due to new customer demands by offering a wide range of innovative energy products and services. 2 RWE Annual Report 2013 OVER 66,000 PeoPLE ReadY to SHAPE THE FUTURE. Every day, at RWE, we make sure that the economy has the energy to keep running. This is anything but routine. The people who handle this task are both reliable and innovative. By making contributions large and small, they enable us to play our part in shaping the energy world of tomorrow. We would like to introduce you to some of our visionaries. They all have one thing in common: they are specialists in their fields. Their identification with our company, our customers and our goal of sustainable energy supply has enabled them to do more than just their job. They have made a difference. We promote this mindset and are proud of having so many innovators in our ranks. We want to understand what’s on our customers’ minds. The ‘Me and My Energy’ programme enabled us to get IT´S GOOD to know our UK customers better. We wanted to find out what energy-related matters are especially important to TO TALK them. Our goal is to do an even better job of fulfilling their wishes and to strengthen their trust in us. We’ve put energy savings on the timetable. Thanks to a new timetable-based heat controller for schools, the only classrooms that are heated at any given time are the ones in which lessons are being held. This is done fully automatically and allows cities and communities to cut down on heating costs, while always ensuring a warm learning environment. 3 OVER 66,000 PeoPLE ReadY to SHAPE THE FUTURE. We help people capture the energy of the sun. ‘Sun on the Euroborg’ enables Dutch households which do not own the roof over their head to make a contribution to protecting the climate. They can do this by generating electricity with their very own solar panel, which is installed on the roof of the Groningen football stadium. Participants can earn an annual ‘return on the sun’ of up to 4.4 percent. IT´S GOOD TO TALK We keep our feet on the ground achieving success more safely.- What looks like a UFO to the layman is extremely useful to our experts at Westnetz: the hexacopter. The aircraft has a diameter of slightly more than one metre, is radio controlled and makes visual recordings of pylons, wind turbines and photovoltaic installations for inspections. This saves both time and costs. The fun of flying a hexacopter is an added bonus. 4 RWE Annual Report 2013 WE waNT to UNdeRStaND what’s ON OUR CUStoMERs’ mINDS. Be it charging our mobile phones, using electric toothbrushes or turning up the heat in the winter, having energy at our disposal whenever we need it is par for the course. And we expect this to continue. But what other concerns do our customers have with respect to energy? How can we do a better job of fulfilling their wishes and meeting their expectations of us? This is precisely what Rosemary Hadden wanted to find out. Rosemary works in the marketing department of our UK supply subsidiary RWE npower. In 2013, she came up with the concept of ‘Me and My Energy,’ a programme seeking to identify the aspects of energy supply that are particularly important to our customers, what it’s like to be one of our customers, and how we can make their lives easier. Rosemary and her colleagues spent six months talking to people from all walks of life. In addition, a ‘Customer Closeness Day’ was held, on which customers visited the company and shared ideas and opinions with senior members of the Executive Team. This exchange was further deepened in a rather unusual manner: our senior executives paid the customers a return visit and spent time in their homes. ‘Me and My Energy’ has become a model: further Customer Closeness activity is being planned. The initial results are already in: we have got to know the people we supply with electricity every day. And they know us better, too. simple bill usability iPad friendly LINKS TO ENERGY MONITOR IT´S GOOD TO TALK 5 Brainstorming: Face to face: Taking note: What our customers really Paul Massara, CEO of RWE npower, A host of ideas on care about having a conversation with customers Customer Closeness Day Being close to the customer is the key to our success. What matters to us is the wishes of our customers. Through ‘Me and My Energy,’ we demonstrate how serious we are about this. Rosemary Hadden RWE npower, Solihull, United Kingdom Moving house is easy Rosemary Hadden 6 RWE Annual Report 2013 WE’vE PUT ENERGY SAVINGS ON THE TIMetaBLE. It all began with an idea submitted in RWE’s 2011 pupil contest called ‘Energie mit Köpfchen’ (‘Clever Energy’): young scientists at St. Michael’s Grammar School in Bad Münstereifel developed software which automatically ensures that, at any given time, only rooms in which classes are being held are heated. Potential savings for their school alone amount to 12,000 euros – every year. The concept was so convincing that it won the ‘Special Environmental Award’ in the regional ‘Young Scientists’ competition. Dr. Nicolas Burkhardt from RWE Effizienz took the idea on board and got together with a developer team to find a way to Start in 2011 connect the software designed by the young inventors to the RWE SmartHome intelligent home controller. What remained to be done after that was to find sponsors so that the solution could be implemented. This led to the creation of the ‘RWE Idea Marketplace,’ a virtual auction platform on which subsidiaries of RWE Deutschland can invest in convincing ideas. The timetable software generated so much positive feedback that it didn’t take long for the necessary funds to be raised.