E.ON SE Press Teleconference. Düsseldorf, September 10, Statement by: Dr. Johannes Teyssen, CEO, EON SE. Michael Sen, CFO, E.

Transcription

1 E.ON SE Press Teleconference Düsseldorf, September 10, 2015 Statement by: Dr. Johannes Teyssen, CEO, EON SE Michael Sen, CFO, E.ON SE Please check against delivery.

2 2 [Speaker: Johannes Teyssen] Good morning, everyone. First of all, I d like thank you for making it to our telephone conference on short notice. At this time, our project plan called for us to inform you that we d taken the main steps for Uniper s businesses to operate independently from the start of the new year. Although we did achieve this, there was one modification, to which yesterday evening, on the Management Board s recommendation, our Supervisory Board unanimously agreed: our nuclear power business in Germany will not be transferred to Uniper and instead will remain at E.ON. We remain firmly convinced that in the future the challenges of the energy industry will require a significantly sharper focus on one of two very different energy worlds. The future E.ON and Uniper will begin operations on January 1. Their setup will reflect 95 percent of the operating functions and employees foreseen in our original plan. This means that our strategic transformation will be realized to a very large degree. Although our strategy has met with a generally positive response from German policymakers, our nuclear power business has remained a sensitive subject in the many discussions we ve held with all levels of government. These discussions recently acquired a new dimension. The coalition leadership s White Paper of July 1 containing the announcement of a nuclear energy commission, the stress tests that have been under way for several weeks, and above all the draft of a new Liability Law that surfaced last week create considerable uncertainty about the future legal treatment of the liability for nuclear asset-retirement obligations. The main purpose of the legislative initiative that the German federal cabinet is supposed to adopt on September 23 is to require E.ON to accept perpetual and unlimited liability for a business over which E.ON, after the spinoff, would have no operational control. This despite the fact that the provisions are and will remain fully covered. We d therefore have to assume that in this case E.ON would not only have to transfer to Uniper considerable financial resources and fixed assets to cover our Group s nuclear asset-retirement and waste-management obligations in Germany but would also indirectly share the economic risk for these obligations. Yet E.ON would have no ability to influence the operations of the nuclear power business or the dismantling process, which would be under Uniper s operational control. As a result, the risks would ve been decoupled from the control of the assets. We believe that this scenario which would make us perpetually liable for liabilities for which we ve provided substantial financial resources but over which we have no operational control is unacceptable to our shareholders. Let s be clear about what this law would mean for us: nowhere in the world is there a comparable precedent for separating asset ownership from liability

3 3 and for making this liability unlimited in duration and scope and therefore encompassing new costs that are largely driven by policymaking decisions. The political slogan parents are liable for their children is incorrect, since the parent of numerous nuclear power stations is Germany itself or, in some cases, one of its states. Nevertheless, Germany seems determined to adopt this singular approach. Whether such a liability law is compatible with Germany s constitution and whether it accords with the fundamental right to property, freedom of occupation, and equal protection before the law is highly doubtful. In fact, I m convinced that such a law wouldn t survive scrutiny by Germany s Federal Constitutional Court. But that wouldn t prevent the law from being enacted and taking effect. In that case, our only option would be to take legal action against it. But litigation in Germany typically takes a long time to be resolved. We don t have that kind of time. The markets won t wait for us. And we need to transform our company if we want to be remain successful in the future. Consequently, we had to decide whether in these circumstances it would be responsible to transfer our nuclear power business in Germany to Uniper. We had to decide now. Our operating entities must be assigned to either E.ON or Uniper now because the necessary legal preparations must be made now. Otherwise, we d be unable to meet our timetable, which calls for the two companies to begin operations under their new setup in January The result would be a period of prolonged uncertainty for our employees, customers, shareholders, and other stakeholders. And we d very probably lose the head start over our competitors. After thoroughly analyzing our policy and regulatory environment which since this summer has been dramatically altered and all alternative courses of action, we decided that under our new setup our nuclear power business in Germany will remain at E.ON. This business consists of three operational nuclear power stations, five decommissioned ones, and minority stakes a number of others; in other words, we re talking about three generating units out of our fleet of 180 conventional units that together account for about 8 percent of E.ON s total installed generating capacity. This necessary modification leaves the essence our new setup intact. It should also render void the objection raised by some that by spinning off our nuclear power business in Germany we somehow intended to shirk our nuclear assetretirement obligations. This was never true. Our proactive decision demonstrates this conclusively. Obviously, it would ve made more business sense for our nuclear power business in Germany to have been part of Uniper. But the transfer of this business was never a key driver of our strategy. In this context, it wasn t an easy decision, but it also wasn t an extremely difficult one either. It was a necessary decision and keeps the ambitious timetable for implementing our strategy on schedule. That s why we made it.

4 4 Consequently, the fact that our nuclear power business in Germany is staying at E.ON won t affect E.ON s fundamental strategy. We re going to focus on the new energy world. For several years now, the nuclear power business in Germany hasn t been of strategic significance to us. It won t be under our new setup either. The nuclear power business in Germany will continue to be based in Hanover and operate largely independently of the rest of E.ON. Its operations are being phased out. The last of our three operational nuclear power stations will be decommissioned in The dismantling of those already decommissioned has been or will be initiated according to plan. Our nuclear power business in Germany will operate as PreussenElektra. This reintroduces an earlier company brand: our predecessor entity VEBA built and operated nuclear power stations under the name PreussenElektra. PreussenElektra will not be integrated into the future E.ON s organizational structure to any significant degree. In particular, E.ON will not offer any PreussenElektra products to our customers. PreussenElektra will operate our remaining three nuclear operation stations in Germany competently and responsibly and fully meet our asset-retirement and waste-management obligations. As a result of our decision, around 2,300 employees about 4 percent of our total workforce won t be assigned to Uniper. Going forward, these employees will continue to devote all of their expertise and experience to meeting the serious responsibility of operating our remaining nuclear power stations in Germany and dismantling the others. This decision will enable the implementation of our strategy to maintain its swift pace. We ve already achieved a lot. I m truly proud of our employees and our project teams, whose hard work and dedication are shaping our company s future. Thanks in large part to them, we ve so far reached all of our milestones and we remain despite the enormous complexity of the task right on schedule: The most important personnel decisions have been made: we ve filled 350 leadership positions, encompassing the Management Boards and the next two levels of management below that. We re also making excellent progress assigning employees to the two companies and are conducting this process in close and constructive consultation with employee representatives. We ve decided on the locations for Germany and already begun planning to move about 3,600 employees and to assign office space in Düsseldorf und Essen. Around 1,300 entities have been assigned to E.ON or Uniper. We ve reached most of the 4,000 milestones toward our new setup and will achieve the rest in what will certainly be a tighter timetable. The new company has a name Uniper and has already begun to establish its own identity. It will soon have a logo that projects this

5 5 identity. The process of rebranding Uniper s future businesses is already well under way. Starting on January 1, 2016, Uniper will have an independent, distinctive identify. The assignment of individual entities to E.ON and Uniper is now completed; the legal prerequisites have been fulfilled. As part of this process, we assessed the current value of our assets. Michael Sen will say more about this in a moment. Our decision obviously doesn t end the policy debate about the right way to phase out nuclear energy in Germany. But now that we ve take action to help clarify the liability issue, it may be easier for policymakers to turn their attention to the key unresolved issues. From the start, the German state and energy companies have shared the responsibility for nuclear energy. It was the state that wanted Germany to make peaceful use of nuclear energy. In the wake of the oil crisis in the early 1970s, it was the state that urged the construction of more nuclear power stations and, in 1977, enacted legislation giving itself responsibility for building and operating a final storage facility. The operators responsibility is to dismantle the nuclear power stations, to bear the costs needed to build the final storage facility, and to record provisions for these two purposes. In the future, E.ON will continue to meet these obligations fully. Germany s peaceful use of nuclear energy began as a joint endeavor between the state and energy companies. Now they share the responsibility for ending it in an orderly manner. The commission has been given the assignment and the opportunity to definitively clarify the issues surrounding Germany s phaseout of nuclear energy. We re ready to offer the commission our constructive support. Whether they produce energy or automobiles, companies need a stable and reliable policy and regulatory environment for their strategies. If this isn t the case or is so only to a very limited degree, the decisions that companies make will be attended by risks that can be quite substantial. In the interests of our shareholders and employees, we decided to minimize the risks of political and other uncertainties. That s why our nuclear power business in Germany will remain at E.ON. We don t know what decisions the German federal government will make regarding nuclear energy or when it will make them. But we know only too well that we can t lose any time. We intend to carry out our strategy. And to do so according to the timetable we announced. We ll deliver. Our shareholders, our employees, our customers, and our business partners can count on it. With that I ll hand things over to Michael Sen, who will talk to you about some of the facts and figures relating to our new setup.

6 6 [Speaker: Michael Sen] Johannes Teyssen explained the changes to our target setup. Our three remaining operational nuclear power stations in Germany wouldn t have been strategically significant for Uniper. The same applies for the future E.ON. To start off, I d like to confirm that we re standing by our earnings outlook and our proposed dividend of 50 cents per share for the current financial year. This decision demonstrates our company s ability to take swift and decisive action and to systematically implement our strategy, even in a difficult environment. Although the changed parameters are quite new, I d now like to briefly outline the main implications of our decision for the future financial structure of both companies. The most obvious implication involves the much-discussed issue of the provisions for our nuclear asset-retirement and waste-management obligations in Germany. These provisions and the nuclear assets themselves will remain at E.ON. At year-end 2014 the provisions for our nuclear power business in Germany totaled 16.6 billion. A firm working on behalf of the German Federal Ministry for Economic Affairs and Energy is currently conducting a so-called stress test to assess whether the amount of these provisions is adequate. I anticipate that the amount I just named is indeed adequate, since this is precisely what independent auditors have repeatedly confirmed in previous years. E.ON will retain most of the Group s liquid funds and securities as part of our financial resources to cover these obligations. This wasn t our original plan. That said, there are no changes regarding the Group s existing financial liabilities, nearly all of which will remain at E.ON; this includes all bonds. We already announced this back in December. Nevertheless, Uniper will now also have to bear some liabilities. Uniper will no longer start as was originally planned with a positive net financial position. Instead, at the time of the spinoff it will take on a moderate amount of debt, an amount commensurate with our intention for Uniper to have a comfortable investment-grade rating. Uniper will therefore have a relatively normal balance sheet. I d also like emphasize that our aim remains for E.ON s rating not to dip below BBB+/Baa1. Our provisions for pensions will be allocated to the two companies based on their respective workforce structure. We anticipate that the future E.ON will have about 43,000 employees, Uniper just under 14,000, reflecting a slight shift toward E.ON relative to our prior estimates.

7 7 After the spinoff, E.ON will obviously record the earnings and cash flow from our nuclear power business in Germany until the last of these power stations is decommissioned. But it s important to point out that these amounts will decline going forward in tandem with the downward movement in achieved and future achieved prices on the forward market. In addition, Grafenrheinfeld, one of our largest remaining nuclear power stations in Germany, was decommissioned this past June, which has reduced our total output. E.ON will make the ongoing expenditures to dismantle our decommissioned nuclear power stations. Along with our new target organizational structure, yesterday we announced preliminary impairment charges in the higher single-digit billion euro range. These impairment charges will be recorded at businesses whose economic performance depends to a considerable degree on commodity prices. The impairment charges mainly reflect updated assumptions regarding the development of electricity and fuel prices and about the insufficient policy and regulatory environment. In the past, the process of defining our assumptions regarding the future development of our markets took place in the fourth quarter of each year, most recently in the autumn of This year, because of the ambitious timetable of our transformation project, we moved our forecasts up to the third quarter. Consequently, we moved the impairment tests, which are in part based on these forecasts, up as well. This explains the early timing of our announcement. What are the drivers of our altered assumptions? Since year-end 2014, significant and in some cases structural changes have taken place on global energy markets and in our policy and regulatory environment. These changes have been accompanied by a sharp decline in commodity and energy prices. In response to these long-term price trends, the leading economic forecasting institutes have revised their predictions downward, in some cases quite significantly. Their predictions are reflected in our own assumptions, which we base on market fundaments and verify against forecasts from outside our company. The changes in our long-term assumptions necessitated the impairment charges on goodwill and fixed assets I mentioned a moment ago. Yesterday s decision demonstrates that we intend to implement our strategy decisively and reach our milestones on schedule. The timetable for transforming our company is tight but, from today s perspective, feasible. We re making good progress and retaining control over the execution of our strategy. I ll now hand things over to Guido Knott. 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

8 8 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.