Growth Focus Discipline
Creating the future of energy
H1 2019 Results 7th August 2019 On track to deliver FY 2019 outlook E.ON H1 2019 results
Highlights Key Financials1
€ m € bn • EBIT down 12%, Adj. Net Income down 16% as 1,942
expected, compared to high base in H1 2018 1,717 20.2 • Economic Net Debt up €3.6 bn as a result of adoption of IFRS 16 and lower interest rates 16.6 • Full year 2019 outlook confirmed 1,052 885 • Preparation of innogy takeover fully on track • Unfavorable regulatory developments in Sweden and Germany to be addressed
EBIT Adj. Net Income Economic Net Debt2
H1 2018 H1 2019 2 1. Adjusted for non operating effects 2. Economic Net Debt as per 30 Jun 2019 and 31 Dec 2018 Update on regulatory returns E.ON H1 2019 results
Germany Nominal return • Lower returns reflect lower bond on equity (RoE) yields post trade tax1 • RFR2: 3.80% • RFR2: 2.49% 3 9.05% 3 • E.ON also benefitting from lower • MRP : 4.55% 6.91% • MRP : 3.80% • Beta: 0.38 • Beta: 0.40 re-financing costs over time • Regulatory return ≠ achieved return due to outperformance elements Reg. Period Reg. Period 2013/14 – 2017/18 2018/19 – 2022/23 CAPM4: RoE = RFR + Beta*MRP • Regulatory model has to incentivize long term investments Sweden • Constant and constructive dialogue Real WACC pre tax • RFR2: 4.00% with regulators and politicians to • MRP3: 5.00% ensure adequate return 5.85% • Beta: 0.39 • RFR2: 0.90% environment 5 • Extra RP : 0.5% • MRP3: 6.70% 2.16% • Beta: 0.29 • E.ON is prepared to challenge the regulator in court if necessary Reg. period Reg. period 2016-2019 2020-2023 1. RoE for new assets only 2. Risk-free rate 3. Market risk premium 4. Simplified CAPM model disregarding taxes or leverage 3 5. Additional risk premium, omitted in regulatory period 2020-2023 Improving and stabilizing retail business E.ON H1 2019 results
Customer numbers Growing customer base outside UK Performance programs on track • More than 100,000 additional ~22m ~22m customers in Germany and growth Cost ~€120m impact in Other driven by Italy with 30,000 additional customers Impact ~£150m impact Germany >100k Situation in UK retail business remains tough Other • Clear management goal to be free >60k cash flow positive in 2021 (E.ON stand-alone) • Customer losses stopped in July UK ~400k • Preparation regarding npower 20182019 2020 >2020 ongoing FY 2018 H1 2019 Programs in Germany and UK with target to offset margin pressure
4 First tranche of production rights for PreussenElektra E.ON H1 2019 results secured – terms to be challenged
E.ON Vattenfall
Nuclear power plant 10 TWh Krümmel1 88 TWh of ~€27.8/MWh PreussenElektra remaining production rights Preliminary price
10 TWh
Remaining October ’19 April ’20 June ’20 production rights until2
Plant Grohnde Brokdorf Isar II ∑ Required production rights2 15-20 TWh 10-15 TWh 20-25 TWh 45-60 TWh
1. Krümmel is a joint venture between E.ON and Vattenfall, each party owning 50% equity share 5 2. Volumes shown before any transfers/purchases and excluding minority stakes (16.7% minorities in Grohnde, 20% in Brokdorf and 25% in Isar II) Transaction update E.ON H1 2019 results
Remedies offered to speed up transaction process • Decision by anti-trust authorities expected Czech Republic: in September 2019 • Divestment of innogy’s retail business • EBIT impact: low triple digit million • Integration project ongoing Germany: - First phase of senior management • Divestment of ca. 360,000 electricity accounts • Discontinuation of operatorship for certain EV selection process completed motorway charging stations - Second phase to be finalized at closing • EBIT impact: low to mid double digit million1
Hungary: • Target of €600-800m of net synergies • Divestment of E.ON’s commercial electricity retail re-confirmed business • EBIT impact: mid single digit million
6 1. Effect expected to be partly mitigated over the medium term Transaction steps E.ON H1 2019 results
1st Closing (within 1-2 weeks after anti-trust approval) 2nd Closing – (a) 2nd Closing – (b)
• Transfer of innogy shares from RWE to E.ON Transfer of E.ON’s Transfer of innogy’s renewables assets renewables assets, Anti-trust • Capital increase at E.ON (RWE becomes 16.67% shareholder) and nuclear Kelag participation approval • €1.5 bn payment from RWE to E.ON • PTO closing and payment by E.ON of consideration1 for tendered innogy minority partici- and gas storage shares pations2 assets • Closing 1 triggers change in accounting treatment of E.ON and innogy transfer assets
Integration & synergies
1. Consideration including any necessary adjustments 7 2. E.ON minority shares in the two RWE-operated nuclear power plants Gundremmingen (25% stake) and Emsland (12.5% stake) Technical adjustments in E.ON’s guidance after closing E.ON H1 2019 results
EBIT Adj. Net Income €2.9-3.1 bn
Depreciation of Purchase Price Proportional Allocation (PPA) EBIT of innogy excluding EBIT of E.ON renewables, renewables & Kelag & gas PEL assets1 storage Technical adjustments2 €1.4-1.6 bn
Existing guidance Schematic illustration New guidance Existing guidance New guidance FY 2019 FY 2019 FY 2019 FY 2019
8 1. PEL assets include participations in power plants Gundremmingen C and Emsland 2. Aligning E.ON and innogy accounting practices EBIT development in line with expectations E.ON H1 2019 results
EBIT1 H1 2019 vs. H1 2018 Key H1 Effects € m Energy +/•– Germany: new regulatory period power, H1 2018 1,942 Networks one-off effect in Q2 2018 +/•– Sweden: power tariff increase, adverse FX Energy -31 development Networks Customer +•– Germany: timing effect from higher grid fees Customer -237 Solutions and gas procurement costs Solutions –•– UK: regulatory effects (i.e. SVT price cap), competitive dynamics Renewables +39 -225 Renewables • Onshore: capacity additions (US) Corp. Functions + & Other, -17 •– Onshore: support scheme expiries Consolidation •+ Offshore: capacity additions (Germany & UK)
Non-Core +21 Non-Core +/•– Preussen Elektra: higher achieved prices, plant outages, higher depreciation, absence of H1 2019 1,717 2018 one-offs •+ Turkey: oper. improvements (mainly hydro) 9 1. Adjusted for non operating effects Adj. Net Income reflecting EBIT development E.ON H1 2019 results
H1 2019 € m
Group EBIT1 1,717
Interest on Unchanged yoy: refinancing benefits compensated by fin. assets/ -292 higher interest charges following IFRS 16 adoption liabilities2 Other interest -43 expenses
Profit before 1,382 Taxes1
Income Taxes -345 Stable tax rate of 25%
Minorities -152
Adjusted 885 Net Income1 €0.41 EPS (€ per share) 10 1. Adjusted for non operating effects 2. Without interest accretion of nuclear provisions END impacted by technical and seasonal effects E.ON H1 2019 results
END1 H1 2019 vs. FY 2018 € bn -3.6
-10.3 AROs -10.3 Pension provisions Net financial position -3.3 Plan assets +€0.9bn Initial adoption of IFRS 16 DBO2 - €1.8bn leading to technical increase -4.0 Other +€0.2bn of Economic Net Debt -3.0 +0.5
-16.6 -5.9 -1.3 +0.1 -1.1 0.0 -0.7 -0.8 -0.2 -20.2 END FY 2018 OCF InvestmentsDividend Divestments AROsPensions IFRS 16 Other END H1 2019
1. Economic net debt definition takes into account the decommissioning provisions calculated with a real discount rate of 0.0% as opposed to IFRS AROs 11 2. Defined Benefit Obligation: Actuarial interest rates for German pensions down 70bps to 1.3%, for UK pensions down 60bps to 2.3% (30 June 2019 vs 31 Dec 2018) FY 2019 outlook confirmed E.ON H1 2019 results
Outlook 2019 Effects for the remainder of 2019
€2.9–3.1 bn Energy Networks Customer Solutions 1 •+ Germany: new regulatory period power •+ Germany: impact of price adjustments
EBIT •+ Sweden: power tariff increases •+ Germany & UK: restructuring charges (already implemented) in 2018 €1.4–1.6 bn •– UK: regulatory interventions (i.e. SVT cap) 1
Adj. NI Renewables Non-Core
2 +/–• Onshore: capacity additions, support +/–• PEL3: increased wholesale prices, higher €0.46 scheme expiries depreciation, one-offs in 2018, purchase •+ Offshore: capacity additions (Arkona, of production volumes
Dividend Rampion) 12 1. Adjusted for non operating effects 2. Fixed dividend per share proposal to AGM to be paid in 2020 3. Preussen Elektra Growth Focus Discipline
H1 2019 – Financial Appendix E.ON standalone Financial Highlights E.ON H1 2019 results
€m H1 2018 H1 2019 % YoY
Sales 15,356 16,089 +5
EBITDA 1 2,799 2,710 -3 EBIT 1 1,942 1,717 -12 Adjusted Net Income 1 1,052 885 -16 OCF bIT 2,068 1,467 -29 Investments 1,414 1,319 -7 Economic Net Debt ² -16,580 -20,201 -22
1. Adjusted for non operating effects, 2. Economic net debt as per 30 Jun 2019 and 14 31 Dec 2018; Economic net debt definition takes into account the decommissioning provisions calculated with a real discount rate of 0.0% as opposed to IFRS AROs Seasonally low Cash Conversion Rate2 E.ON H1 2019 results
H1 2019 € bn 54% 2.7
-0.1
1.5 -1.1 -0.4 0.5 -0.6
-1.3 -0.8 EBITDA1 Cash Change in WC OCF bIT Interest Tax Payments OCF Capex FCF Adjustments3 Payments
1. Adjusted for non operating effects, 2. Cash Conversion Rate: OCF bIT ÷ EBITDA, 3. Net non cash effective EBITDA items incl. provision utilizations and payments related to 15 non operating earnings Segments: Energy Networks E.ON H1 2019 results
Energy Networks Highlights
1 • Germany EBIT € m -3% +/–+ New regulatory period for power 1,070 1,039 + Regulatory effects in 2018 – One-off effect in Q2 2018 Germany 565 543 • Sweden + Power tariff increase Sweden 254 262 – Adverse FX development CEE & Turkey 251 234 – Disposal of gas network in Q2 2018 H1 2018 H1 2019 – Costs for storm “Alfrida” in Q1 2019
€m Germany Sweden CEE & Turkey Total H1 2018 H1 2019 % YoY H1 2018 H1 2019 % YoY H1 2018 H1 2019 % YoY H1 2018 H1 2019 % YoY Revenue 3,079 3,161 +3 511 512 +0 776 815 +5 4,366 4,488 +3 EBITDA 1 848 849 +0 331 340 +3 368 350 -5 1,547 1,539 -1 EBIT 1 565 543 -4 254 262 +3 251 234 -7 1,070 1,039 -3
Details thereof Equity-method earnings 33 32 -3 0 0 - 68 53 -22 101 85 -16 OCFbIT 580 280 -52 421 323 -23 404 403 -0 1,405 1,006 -28 Investments 231 346 +50 163 136 -17 186 161 -13 580 643 +11
16 1. Adjusted for non operating effects Segments: Customer Solutions E.ON H1 2019 results
Customer Solutions Highlights
EBIT1 € m • Germany Sales -50% – Timing effect from delayed pass-on of higher grid fees 477 – Higher procurement costs for gas Germany Sales 135 • UK – Regulatory effects, mainly SVT2 price cap 240 UK 202 – Competitive dynamics 76 71 Other 140 93 H1 2018 H1 2019
€m Germany SalesUK Other Total H1 2018 H1 2019 % YoY H1 2018 H1 2019 % YoY H1 2018 H1 2019 % YoY H1 2018 H1 2019 % YoY Revenue 3,555 3,814 +7 3,981 3,903 -2 3,943 4,392 +11 11,479 12,109 +5 EBITDA 1 150 97 -35 244 132 -46 225 188 -16 619 417 -33 EBIT 1 135 76 -44 202 71 -65 140 93 -34 477 240 -50
Details thereof Equity-method earnings 0 0 - 0 0 - 4 6 +50 4 6 +50 OCFbIT -112 -171 -53 20 56 +180 231 191 -17 139 76 -45 Investments 10 24 +140 92 94 +2 107 225 +110 209 343 +64
17 1. Adjusted for non operating effects, 2. Standard Variable Tariff Segments: Renewables E.ON H1 2019 results
Renewables Highlights
1 EBIT € m +17% • Offshore/Other + GE: Capacity additions (Arkona) 275 + UK: Capacity additions (Rampion) 236 • Onshore/Solar + US: Capacity additions (Stella) Offshore/Other 163 215 – Support scheme expiries – Price effects Onshore/Solar 73 60 H1 2018 H1 2019
€m Onshore Wind / Solar Offshore Wind / Others Total H1 2018 H1 2019 % YoY H1 2018 H1 2019 % YoY H1 2018 H1 2019 % YoY Revenue 452 497 +10 289 310 +7 741 807 +9 EBITDA 1 151 150 -1 245 316 +29 396 466 +18 EBIT 1 73 60 -18 163 215 +32 236 275 +17
Details thereof Equity-method earnings 17 58 +241 OCFbit 387 407 +5 Investments 449 293 -35
18 1. Adjusted for non operating effects Non-Core business E.ON H1 2019 results
Non-Core Highlights
EBIT1 € m • PreussenElektra +9% + Higher achieved power prices – Higher depreciation 224 245 – Plant outages in 2019 – One-off effects in 2018 Preussen 182 244 • Generation Turkey Elektra + Operational improvements, mainly higher hydro volumes 63 Generation -20 Turkey H1 2018 H1 2019 PreussenElektra: Hedged Prices (€/MWh) as of 30 June 2019
€m PreussenElektra Generation Turkey Total H1 2018 H1 2019 % YoY H1 2018 H1 2019 % YoY H1 2018 H1 2019 % YoY 2018 100% 26 Revenue 601 573 -5 0 0 - 601 573 -5 EBITDA 1 294 283 -4 -20 63 - 274 346 +26 2019 91% 31 EBIT 1 244 182 -25 -20 63 - 224 245 +9
Details thereof Equity-method earnings 29 28 -3 -20 63 - 9 91 - 2020 62% 46 OCFbIT 129 158 +22 0 0 - 129 158 +22 Investments 9 4 -56 154 0 -100 163 4 -98 2021 36% 46
19 1. Adjusted for non operating effects Adjusted Net Income E.ON H1 2019 results
€m H1 2018 H1 2019 % YoY
EBITDA 1 2,799 2,710 -3 Depreciation/amortization -857 -993 -16
EBIT 1 1,942 1,717 -12 Economic interest expense (net) -330 -335 -2
EBT 1 1,612 1,382 -14 Income Taxes on EBT 1 -402 -345 +14 % of EBT 1 -25% -25% - Non-controlling interests -158 -152 +4
Adjusted Net Income 1 1,052 885 -16
20 1. Adjusted for non operating effects Reconciliation of EBIT E.ON H1 2019 results to IFRS Net Income €m H1 2018 H1 2019 % YoY
EBITDA 1 2,799 2,710 -3 Depreciation/Amortization/Impairments -857 -993 -16
EBIT 1 1,942 1,717 -12 Reclassified businesses of Renewables -227 -266 -17 Interest result -294 -435 -48 Net book gains 855 19 -98 Restructuring -26 -90 -246 Mark-to-market valuation of derivatives 840 -336 -140 Impairments (net) 0 0 - Other non-operating earnings -75 -30 +60 Income/Loss from continuing operations before income taxes 3,015 579 -81 Income taxes -203 -244 -20 Income/loss from continuing operations 2,812 335 -88 Income/loss from discontinued operations, net 96 209 +118 Net income/loss 2,908 544 -81
21 1. Adjusted for non operating effects Cash effective investments E.ON H1 2019 results
€m H1 2018 H1 2019 % YoY
Energy Networks 580 643 +11 Customer Solutions 209 343 +64 Renewables 449 293 -35 Corporate Functions & Other 16 37 +131 Consolidation -3 -1 +67 Non-Core 163 4 -98 Investments 1,414 1,319 -7
22 Economic Net Debt1 E.ON H1 2019 results
€m 31 Dec 2018 30 Jun 2019
Liquid funds 5,423 2,659 Non-current securities 2,295 2,680 Financial liabilities -10,721 -11,336 Adjustment FX hedging ² -28 62 Net financial position -3,031 -5,935
Provisions for pensions -3,261 -3,958 Asset retirement obligations -10,288 -10,308 Economic Net Debt -16,580 -20,201
1. Economic net debt definition takes into account the decommissioning provisions calculated with a real discount rate of 0.0% as opposed to IFRS AROs, 2. Net figure; 23 does not include transactions relating to our operating business or asset management Economic interest expense (net) E.ON H1 2019 results
Difference €m H1 2018 H1 2019 (in € m) Interest from financial assets/liabilities -293 -292 +1 Interest cost from provisions for pensions and similar provisions -31 -30 +1 Accretion of provisions for retirement obligation and similar provisions -40 -32 +8 Construction period interests¹ 12 8 -4 Others 22 11 -11 Net interest result -330 -335 -5
1. Borrowing cost that are directly attributable to the acquisition, construction or production of a qualified asset. Borrowing cost are interest costs incurred by an entity in connection with the borrowing of funds (Interest rate: 24 5.37%). Financial Liabilities E.ON H1 2019 results
Liquidity Sources (as of H1 2019) Maturity profile (as of end H1 2019)2 € bn € bn 4.8 Liquid funds1 ~2.6 Non-current securities ~2.7 Total ~5.3
Syndicated loan (undrawn) 2.75 1.4 0.9 € / $ Commercial Paper 0.8 10 / 10 0.6 programs (undrawn) 0.4 0.1 0.0 Acquisition facility 1.75 (undrawn) 2019 20202021 2022 20232024 2025 ≥2026 EUR GBPUSD JPY Other
1. Balance sheet value (IFRS) considering discontinued operations 25 2. Bonds issued by E.ON SE and E.ON International Finance B.V. (fully guaranteed by E.ON SE) Funding plan to include green bonds E.ON H1 2019 results
E.ON’s Green Bond Framework Financing considerations recently established • Estimated future funding needs: We strive to implement Green Bonds in €2-4 billion annually our funding mix going forward • €1.75 billion undrawn acquisition (estimated volume of €0.5 – 1.0 bn annually1) facility available • Intention to start bond financing soon Approx. €1.5 bn green project volume identified2
eon.com/greenbond eon.com/sustainability
26 1. Energy Networks and Customer Solutions projects (E.ON stand-alone), 2. 2017/2018 green project volume E.ON Investor Relations contacts
Dr. Stephan Schönefuß T +49 (201) 184 28 22 Interim Head of Investor Relations [email protected]
Martina Burger T +49 (201) 184 28 07 Manager Investor Relations [email protected]
Sebastian Gaßner T +49 (201) 184 28 05 Manager Investor Relations [email protected]
Conny Ripphahn T +49 (201) 184 28 34 Manager Investor Relations [email protected]
T +49 (201) 184 2806 Andreas Thielen T +49 (201) 184 28 15 [email protected] Manager Investor Relations [email protected] 27 Financial calendar & important links
Financial calendar
November 13, 2019 Quarterly Statement: January – September 2019
March 25, 2020 Annual Report 2019
May 12, 2020 Quarterly Statement: January – March 2020
May 13, 2020 2020 Annual Shareholders Meeting
August 12, 2020 Half-Year Financial Report: January – June 2020 Important links
Presentations https://www.eon.com/en/investor-relations/presentations.html
Facts & Figures 2019 https://www.eon.com/content/.../presentations/facts-and-figures-2019.pdf
Annual Reports https://www.eon.com/en/investor-relations/financial-publications/annual-report.html
Interim Reports https://www.eon.com/en/investor-relations/financial-publications/interim-report.html
Shareholder Meeting https://www.eon.com/en/investor-relations/shareholders-meeting.html
Green Bond Framework https://www.eon.com/en/investor-relations/bonds/green-bonds.html
Transaction Website: http://www.energyfortomorrow.eu/
28 Disclaimer
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