Press Conference on the Release of E.ON SE s Interim Report for the First Nine Months of 2015

Transcription

1 Press Conference on the Release of E.ON SE s Interim Report for the First Nine Months of 2015 Düsseldorf, November 11, 2015 Statement by: Michael Sen, CFO, E.ON SE Please check against delivery.

2 Statement by Michael Sen, 3Q15 Press Conference; November 11, Thanks, Guido Knott. Good morning, everyone, and welcome to the telephone press conference for our nine-month results for The third quarter was very eventful. In Germany there were discussions about corporate liability and then the developments surrounding the report on the stress tests for nuclear-energy provisions. This kept us busy as well. But above all it left its mark on the price of E.ON stock, which at times was highly volatile. Many market participants were rattled. As we know, capital is skittish. At all times our company remained and remains fully functional. We continued to work resolutely and systematically to implement our new setup. Today I m pleased to provide you with a brief overview of where we stand. We reached a number of important milestones. The two companies organizations and teams are in place. Starting in January, Uniper will be a sort of company within a company. Its operations will focus on the conventional energy world, and it will develop its businesses independently initially, of course, as part, and under the oversight, of E.ON SE. Until our shareholders make a decision at the general meeting next June, E.ON will continue to report the quarterly and annual results of the combined entity. However, the publication of the spinoff report will provide you with separate, pro forma numbers for E.ON and Uniper. Although the year is not yet over, Uniper is already taking tangible shape in some regions and businesses. In October, for instance, its conventional generation companies in the United Kingdom and Germany adopted the Uniper name. The preparations for the separation of our operations and for Uniper s independent identity are entering the final phase. From today s perspective, we ll be able to stay on our timetable. Amid the many important achievements of our transformation project, we can t forget that our more than 50,000 employees work every day to supply people in many countries with energy and heat. And we have good news and noteworthy successes to report here as well. Amrumbank West and Humber Gateway wind farms in the North Sea are now fully operational and, I m pleased to say, were completed on schedule and on budget. They have an aggregated capacity of just over 500 megawatts, which is enough to provide electricity to about 500,000 households. Berezov 3, our new 800-megawatt coal-fired generating unit outside Krasnoyarsk in Russia, is also fully operational. The compensation provided by Russia s capacity market is reliable and attractive. The two wind farms will be part of E.ON, Berezov 3 part of Uniper. This means that both companies have received profitable new assets that support their respective strategies operationally as well as financially. Our agreement in mid-october to sell our exploration and production business in Norway to DEA Deutsche Erdoel AG yielded to judge from the market s response a decent price. This is also important for strengthening our overall financial situation. Our model of partnering with other companies

3 Statement by Michael Sen, 3Q15 Press Conference; November 11, to take on big capital projects has also proven its worth again. Just a few days ago we brought on board Enbridge, an energy company based in Canada, which has taken a 24.9 percent stake in Rampion, an E.ON wind farm project in the English Channel. We achieved our nine-month results despite strong headwinds, which came primarily from our policy and economic environment. I think we performed pretty well. Our economic environment became increasingly difficult owing principally to the development of European power prices, oil and gas prices, and also exchange rates. In this difficult environment we delivered an operating performance that was in line with the expectations we communicated at the start of the year. Our forecast for full-year 2015 is therefore unchanged: we continue to expect our EBITDA to be between 7 and 7.6 billion and our underlying net income to be between 1.4 and 1.8 billion. Our proposed dividend of 50 cents per share for the 2015 financial year is unchanged as well. At its low point at the end of September, our stock had lost about half of its value relative to the start of the year. I infer from my many discussions with investors that this dramatic development was due in part to the market s uncertainty in the face of Germany s protracted debate about nuclear-energy issues such as stress tests and the extended liability law. In September we decided that our nuclear energy business in Germany will remain at E.ON. It was the right decision at the right time. Since then, the German federal cabinet has approved the extended liability law. At the same time, the German federal government decided to establish a commission to look for a long-term solution for the financing of nuclear energy obligations, a solution that doesn t endanger the nuclear operators economic viability. The commission is supposed to present its plan by the end of February. For us it s clear that nuclear energy is an issue for German society as a whole. The German state and the nuclear operators share the responsibility for phasing out nuclear energy. E.ON will bear its share of this responsibility. Unfortunately, this uncertainty particularly among market participants regarding Germany s policy, regulatory, and investment environment will remain until the industry and policymakers find a viable solution. I m cautiously optimistic that this will happen because all sides have an interest in it. I ll now say a few words about the headwinds from our economic environment. As we were planning for 2015, we already anticipated a difficult environment in our markets, particularly in our European power business and with regard to oil and gas prices.

4 Statement by Michael Sen, 3Q15 Press Conference; November 11, It s normal in the energy industry for external factors to affect earnings. But this year we ve seen particularly wide fluctuations and, in some cases, historic lows. Wholesale power prices in Central Europe sank to a ten-year low in September and are currently trading below 30 per megawatt-hour for next-year delivery. We also faced exchange-rate fluctuations whose magnitude we couldn t have foreseen at the start of the year. The extremely low price of North Sea oil left its mark on our oil and gas production business. In August, Brent crude was trading well below $50 a barrel, its lowest level since the global financial and economic crisis of With a slight delay, low oil prices are also putting downward pressure on the market prices for gas, which we began to see in the third quarter. Finally, exchange rates: in particular, the weakness of the ruble relative to the prior-year period had a substantial adverse effect on our earnings in Russia. About half of the decline in our EBITDA there is attributable to currency-translation effects. These developments are projected forward our long-term expectations as well. The sharp decline in commodity and energy prices has resulted mainly from substantial and in some cases structural changes on global energy markets and in regulatory regimes. Based on the analyses of leading economic forecasting institutes and our own assessments, we had to revise downward our expectations for long-term price developments, in some cases quite significantly. As we announced and explained in September, this necessitated impairment charges of 8.3 billion, primarily on intangible assets or, more precisely, goodwill and other assets. We recorded these charges principally at our Generation and Exploration & Production segments. We accounted for most of the impairment charges in the third quarter, resulting in a net loss of 5.7 billion for the first nine months of the year. I ll now turn to several of the main aspects of what I consider to be the stable performance of our operating business. I ll start with our key figures. We recorded EBITDA of 5.4 billion and underlying net income of 962 million. Both are well below the respective prior-year figures but are, as I mentioned a moment ago, in line with our expectations for the year as a whole. At 5.7 billion, our nine-month operating cash flow remained very high. We reduced our economic net debt substantially by roughly 5.3 billion to 28.1 billion. This is another area in which we re making good progress. The just over 1 billion decline in our EBITDA is mainly attributable to the decommissioning of power plants in Germany, the sale of operations in Spain and Italy, and low oil prices on the output from our fields in the North Sea. Since June our EBITDA no longer includes earnings streams from Grafenrheinfeld nuclear power station.

5 Statement by Michael Sen, 3Q15 Press Conference; November 11, Our retail businesses performed well despite keen competition. Thanks to our increased focus on our retail business, the earnings performance of this business in Germany and in most other EU markets was stable to positive. This was doubtless due in part to the solid earnings of our gas business in the cold winter months. The earnings performance of our Renewables segment was satisfactory. The decline in EBITDA at our Wind/Solar/Other reporting unit is entirely attributable to the significant proceeds we recorded in the prior year on the sale of operations under our build-and-sell strategy. Renewables accounted for about 14 percent of E.ON s owned generation in the first three quarters of Amrumbank West and Humber Gateway, two large wind farms in the North Sea, recently added 500 megawatts of capacity, which will further increase renewables share of our output. We also made progress in divesting non-strategic assets. For example, we sold our oil and gas production business in Norway to DEA Deutsche Erdoel AG. The agreement was communicated in mid-october, and the disposal scheduled for Q4 will then have an additional positive effect on our economic net debt. I already mentioned that since the end of last year we ve reduced our economic net debt by 5.3 billion. One factor was the 1 billion reduction in our provisions for pensions, which resulted in part from the recent increase in the actuarial interest rate in Germany. But the main factors were our high operating cash flow of 5.7 billion and the proceeds from our divestments. In summation, we face very stiff headwinds, and under these circumstances our operating performance was quite respectable. Our fourth-quarter performance will need to be much stronger than it was last year. We re working hard to make this happen. Our new setup two companies, each focusing systematically on its respective energy world will be in place in a couple of months. I m convinced that this will enable us to do a much better job of bringing our operating strengths to bear. Our new setup represents our strategic response to the far-reaching structural changes in our markets. The implementation of the spinoff is right on schedule. These are some of the reasons why I m already looking forward to the exciting time ahead. At E.ON SE s annual results press conference this coming March, we ll see and talk to each other in person for the first time. I look forward to it and hope you ll be there. Guido Knott will now moderate the Q&A session. This presentation may contain forward-looking statements based on current assumptions and forecasts made by E.ON Group Management and other information currently available to E.ON. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of the company and the estimates

6 Statement by Michael Sen, 3Q15 Press Conference; November 11, given here. E.ON SE does not intend, and does not assume any liability whatsoever, to update these forward-looking statements or to conform them to future events or developments.