E.ON Nordic: Steady Value Growth

Transcription

1 E.ON Nordic: Steady Value Growth Lars Frithiof Chief Executive Officer, E.ON Nordic E.ON Capital Market Day Nordic Stockholm, July 3, 2006

2 Topics for the day Introduction to E.ON Nordic Our achievements Market and growth opportunities Political challenges and benefits Conclusions Page 1

3 Key facts & figures about the Nordic region 1 Sweden Denmark Finland Norway Size (sq km) 449,964 43, , ,145 Population (million) GDP est. (billion USD) Power consumption/ per capita (MWh) Main Industry iron, steel, pulp & paper, transport equipment, timber food processing, shipbuilding, windmills, transport equipment metals, pulp & paper, chemicals, technology oil & gas, pulp & paper, timber, fishing 1 Excluding Iceland Source: CIA World Fact book, Nordel Annual Report 2005 Page 2

4 The Nordic power market is dominated by hydropower Power generation: 395 TWh 1 Consumption grows approximately 1% per annum 23% 13% (Other/Thermal) 1% 0% 0% % 33% 31% 56% 27% 0% 99% % 2% 6% 47% 20% 16% Generation based on Hydro Nuclear Thermal 73% 34 Renewables 1 Excluding Iceland Source: Nordel Annual Report 2005 and E.ON estimates Page 3

5 Nordic market characteristics are unique in a European context Market Characteristics Liquid joint wholesale market Separate national retail markets Different degrees of fragmentation and mainly state-owned players Different national agendas on energy policy and privatization Strategic Implications Optimization of generation activities irrespective of location in the Nordic region Separate retail organizations and approaches in all countries Consolidation opportunities but differing willingness to privatize Uneven playing field for energy players in different countries Page 4

6 The market unit Nordic is a significant part of the E.ON Group Pan-European Gas No. 3 in gas supply Nordic No. 4 in power generation and No. 3 in power/gas retail UK No. 2 in power generation and power/gas retail U.S. Midwest No. 1 in power generation and power/gas retail Central Europe No. 2 in power generation and No. 2 in power/gas retail Source: E.ON Page 5

7 We contributed 11% to E.ON s overall 2005 operating result Adjusted EBIT by market unit in million 2005 Central Europe 3,930 Pan-European Gas 1,536 U.K. 963 Nordic 806 U.S. Midwest 365 Corporate Center -399 Core Energy Business 7,201 Other Activities Adjusted EBIT 3 7, ,602 1,344 1, , ,787 E.ON Nordic Key financial figures in million Sales Adjusted EBITDA 4 Adjusted EBIT Cashflow ,471 1, ,347 1, Adjusted for discontinued operations. 2 This segment consists of Degussa, which is accounted for using the equity method. 3 Non-GAAP financial measure; reconciliation to consolidated net income see Annual Report 2005, p Non-GAAP financial measure; reconciliation to consolidated net income see Annual Report 2005, p. 37 and p. 174/ Cash provided by operating activities. Page 6

8 We have developed into a leading regional player E.ON Nordic Milestones E.ON Energie obtains a majority holding in Sydkraft AB in Main growth drivers were targeted acquisitions in the Nordic market. Acquisition of a majority stake in Espoo Säkho (E.ON Finland). E.ON Nordic now Excellent performance through a well-rounded portfolio of assets. Increased investments in the network to ensure security of supply in our coverage area. Building up market brand and increased focus on retail sales. Transfer of the Sydkraft holding to E.ON AG and formation of the market unit Nordic with Sydkraft and E.ON Finland. Rebranding of Sydkraft to E.ON Sverige in Committed to providing the best possible service to our customers throughout the business areas we serve. E.ON Finland shareholding sold to Fortum (2006). E.ON Nordic is now a leading Nordic integrated power and gas player Page 7

9 E.ON Nordic substantial growth in adjusted EBIT over the last years Key Performance Factors EBIT Growth Flexible and low-cost generation base 1 48 % nuclear 45 % hydro Stable and transparent energy environment through the Nordpool marketplace and merit order Flexible business model, adapted to the challenges of an open and transparent market EUR Fundamental market trends show that we are well placed to deliver long term increased value figures. 2 Pro forma figures. Page 8

10 E.ON Nordic has strong positions in several business areas Business areas Power generation Trading Heat Distribution Sales Services Power generation in Nordic (mainly Sweden) 7.6 GW capacity 34 TWh generation (48% nuclear, 45% hydro, 7% other) Trading in Nord Pool Heat sales in Sweden, Denmark, Finland, and Poland 7.7 TWh Power distribution in Sweden 1,000,000 customers Power, heat sales in Sweden, Denmark, Finland plus gas sales in Sweden and Denmark 1,000,000 customers Operation & Maintenance Broadband (Divesting 2006) Nordic 1 market position #4 #3 #3 #3 #3 #3-4 Source: E.ON 1 Sweden, Finland, Norway, and Denmark excluding E.ON Finland. Page 9

11 Our business model reflects requirements of a liquid and transparent market Generation Power Trading/Optimization Strategic Value creation/ protection Market Gas Tactical Cost efficiency Availability Flexible position Taker Group portfolio optimizer Customer focused sales- and marketing organization Infrastructure businesses are operated separately with limited interfaces to the commodity business Page 10

12 Steady growth over the coming years Our business strategy is geared to grow steadily over the coming years especially in generation and heat Generation Heat Ringhals (29.6%) 510 MW nuclear upgrade Forsmark (9.8%) 540 MW nuclear upgrade programs Offshore Wind 1 up to 1,000 MW new build Investments in smallscale systems Organic and acquisition growth opportunities being analyzed Malmö, Öresundsverket MWel, 250 MWth Newbuild, gas 1 Project in planning stage. OKG Oskarshamn (54.5%) up to 480 MW nuclear upgrade Page 11

13 Investment plan shows importance of E.ON Nordic in the overall E.ON growth and asset improvement strategy Allocation of growth investments (Total: 0.9 bn ) Allocation of maintenance investments (Total 1.5 bn ) Nuclear Upgrades 38% Thermal 30% Wind District Heating Plants and Grid 1% 11% Power Grid 62% Thermal Hydro 2% 6% Gas Grid 10% Wind 22% Nuclear 18% Page 12

14 Political environment in Sweden poses challenges to our value growth ambitions Slightly improved regulatory environment. Political focus on security of supply and environmental impact. New common energy platform from the four political parties known as the Alliansen. Increased public support for nuclear still unchanged political position. Higher taxes on low cost generation capacity further discussions related to high profitability in the sector. Governmental desire to reduce Sweden s oil dependency can lead to stronger pressure on natural gas/ competition for biomass resources. Page 13

15 The Finnish market continues to be attractive for E.ON E.ON s current position in Finland Kainuun Energia Oy, 50.5% subsidiary of E.ON Sverige Karhu Voima Oy, 100% subsidiary of E.ON Sverige Small ownership in Finland 5 nuclear reactor Kainuun Energia Oy E.ON Suomi, newly formed 100% subsidiary of E.ON Nordic Searching for cooperation with city-owned utilities Service customers with power. Finnish customers will benefit from E.ON s presence in the market Invest in power plant capacity in Finland E.ON Suomi Oy Helsinki Karhu Voima Page 14

16 E.ON Nordic s long term strategic agenda Active in all Nordic markets with an integrated power, heat, and gas business In our existing business, strive to continuously earn returns above cost of capital Grow power and heat asset base through a balanced mix of investments in nuclear, gas, biofuel, and wind assets Grow our power and heat activities through - re-establishing a market position in Finland - expanding our Danish and Swedish heat positions - re-establishing a Norwegian market presence Grow gas activities organically through the development of the mid-sweden gas market if market conditions permit Page 15

17 Conclusions We have demonstrated the ability to significantly grow value for the Group. We have the business model and the expertise to succeed in liquid and competitive markets. We have opportunities to grow both organically and through incremental acquisitions. Fundamental market trends and our achieved position enable us to deliver long term value growth to the E.ON Group. Page 16

18 This presentation do not constitute an invitation to sell or an offer to buy any securities or a solicitation of any vote or approval. Endesa investors and security holders are urged to read the tender offer prospectus from E.ON regarding the proposed tender offer for Endesa when it becomes available, because it will contain important information. The tender offer prospectus and certain complementary documentation will be filed in Spain with the Spanish Comisión Nacional del Mercado de Valores (the CNMV ). Likewise, a tender offer statement, which will incorporate the prospectus by reference, will be filed in the United States with the U.S. Securities and Exchange Commission (the SEC ). Investors and security holders may obtain a free copy of the tender offer prospectus (when it is available) and its complementary documentation in the central offices of E.ON, Endesa, the four Spanish Stock Exchanges, and Santander Investment Bolsa SV SA. The prospectus will also be available on the websites of the CNMV ( and E.ON ( Likewise, investors and security holders may obtain a free copy of the U.S. tender offer statement (when it is available) and other documents filed by E.ON with the SEC on the SEC s web site at The tender offer statement and these other documents may also be obtained for free from E.ON, when they become available, by directing a request to E.ON AG, External Communications, phone This presentation may contain forward-looking statements. 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 E.ON and Endesa and the estimates given here. These factors include the inability to obtain necessary regulatory approvals or to obtain them on acceptable terms; the inability to integrate successfully Endesa within the E.ON Group or to realize synergies from such integration; costs related to the acquisition of Endesa; the economic environment of the industries in which E.ON and Endesa operate; and other risk factors discussed in E.ON s public reports filed with the Frankfurt Stock Exchange and with the SEC (including E.ON s Annual Report on Form 20-F) and in Endesa s public reports filed with the CNMV and with the SEC (including Endesa s Annual Report on Form 20-F). E.ON assumes no liability whatsoever to update these forward-looking statements or to conform them to future events or developments. E.ON prepares its consolidated financial statements in accordance with generally accepted accounting principles in the United States ("U.S. GAAP"). This presentation may contain references to certain financial measures (including forward looking measures) that are not calculated in accordance with U.S. GAAP and are therefore considered "non-gaap financial measures" within the meaning of the U.S. federal securities laws. E.ON presents a reconciliation of these non-gaap financial measures to the most comparable U.S. GAAP measure or target, either in this presentation, in its Annual Report, or on its website at Management believes that the non-gaap financial measures used by E.ON, when considered in conjunction with (but not in lieu of) other measures that are computed in U.S. GAAP, enhance an understanding of E.ON's results of operations. A number of these non-gaap financial measures are also commonly used by securities analysts, credit rating agencies, and investors to evaluate and compare the periodic and future operating performance and value of E.ON and other companies with which E.ON competes. These non-gaap financial measures should not be considered in isolation as a measure of E.ON's profitability or liquidity, and should be considered in addition to, rather than as a substitute for, net income, cash flow provided by operating activities, and the other income or cash flow data prepared in accordance with U.S. GAAP. The non-gaap financial measures used by E.ON may differ from, and not be comparable to, similarly titled measures used by other companies. Page 17