UK Business Performance. Graham Bartlett, Chief Financial Officer, E.ON UK E.ON Capital Market Day UK. June 29, 2005

Transcription

1 UK Business Performance Graham Bartlett, Chief Financial Officer, E.ON UK E.ON Capital Market Day UK June 29, 2005

2 Topics for today 1 Financial Performance 2 Integration 3 Risk Management Framework 2

3 E.ON UK has significantly boosted its financial performance over the last year E.ON UK Key financial figures in million /- % Sales 8,490 7, Adjusted EBITDA 1) 1,592 1, Adjusted EBIT 1, Cashflow 2) ROCE (in %) 3) ) Cost of Capital (in %) ) 1) Non-GAAP financial measure; reconciliation to consolidated net income see 2004 Annual Report, p. 25 and p ) Cash provided by operating activities. 3) Non-GAAP financial measure; see derivation in the 2004 Annual Report, p ) Change in percentage points. 3

4 This strong performance is supported by both the regulated and the non-regulated business Adjusted EBIT m % 35 % 1, % 42 % Non-regulated Business Regulated Business

5 E.ON UK demonstrated excellent integration skills after two business transforming acquisitions The acquisition of TXU made E.ON UK a market leader in Retail and a balanced integrated player: From Number 7 to Number 2 in terms of customer accounts The acquisition of Midlands significantly improved E.ON UK s market position in Distribution: From Number 5 to Number 2 in terms of customer connections From Number 6 to Number 3 in terms of Regulated Asset Value 5

6 TXU Acquisition What we promised Earnings enhancing from the first full year of ownership The return on capital is above our cost of capital Deliver 64m 1) p.a. of synergies Deliver a headcount reduction of 1,000 and what we have achieved Substantially earnings enhancing from the beginning Substantially value enhancing Delivered cost savings of 120m 2) p.a. by the end of 2004, on track to deliver further cost savings from the Vertex replatforming of 20m 3) p.a. in 2005 Reduction in headcount by more than 1,200 1) Please refer to Q1/2003 analyst presentation of Dr Paul Golby; Equates to Net Income savings of 45m. 2) Equates to 161m cost savings in Adjusted EBIT; please refer to 2003 Form 20F, p. 127 ( 70m) and 2004 Form 20F, p. 144 ( 91m). 3) Non-GAAP financial measure; equivalent to an increase in net income of 14m per annum. 6

7 Midlands Acquisition What we promised Enhance Adjusted EBIT of Market Unit UK significantly from the first full year by 144m 1) after Purchase Price Allocation Deliver 50m p.a. 2) of synergies Deliver a stand-alone ROCE considerably above our cost of capital and exceed our overall Group 2006 ROCE target of 10.5% 3) from the first year onwards and what we have achieved Adjusted EBIT enhancing to Market Unit UK from the first year by more than 150m Well on track to deliver the announced synergies of 50m p.a. 2) through identified headcount savings (700 staff) and site closures Substantially value enhancing with ROCE in 2004 and in the next 5 years expected to be over the on.top target of 10.5% 3) 1) Equivalent to an IOP of 80m as stated in the original acquisition equity story. 2) Non-GAAP financial measure; equivalent to an increase in net income of 35m per annum. 3) Non-GAAP financial measure, equivalent to total assets in 2006e of 110 billion and net income in 2006e of 3.4 billion. 7

8 E.ON UK has taken further steps to improve its market position recently In May 2005, we acquired the highly efficient CCGT at Enfield adding 392 MW to our flexible portfolio of coal and gas generation On June 17, 2005, we completed the acquisition of Economy Power with more than 40,000 SME customers - reinforcing our position as one of the UK s leading business energy suppliers Both acquisitions fulfill E.ON s strict criteria: earnings enhancing from the first full year and value enhancing from the third year onwards 8

9 Sustainable financial performance relies upon robust Control and Governance rules Business Strategy Commodity Delegations of Authority Empowerment and Limits Risk Management Framework Risk Management Standards Risk Guidelines Credit Risk Guidelines Organization and Monitoring Regulatory Compliance FSA, UK Legislation & Sarbanes-Oxley Control Environment Independent Review Audit 9

10 Risk Management Framework: E.ON UK s approach Risk Management Framework Risk Management Policy Credit Policy Authority To Trade Compliance Programme Segregation Of Duties System & Data Security Operating Processes and Procedures Reporting Robust Control and Governance delivers flexibility of operation within controlled environment 10

11 Summary Strategic transformation over the last 3 years into a leading integrated power and gas company Strong financial performance with over 1 billion Adjusted EBIT We deliver on what we promise now and in the future 11

12 This presentation may contain forward-looking statements based on current assumptions and forecasts made by E.ON Group management. 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 given here. These factors include those discussed in our public reports filed with the Frankfurt Stock Exchange and with the U.S. Securities and Exchange Commission (including our Annual Report on Form 20-F). The company 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 US-GAAP measure or target, either in this presentation or on the website under 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 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 12