E.ON International Finance B.V Annual Report. Rotterdam, The Netherlands

Transcription

1 E.ON International Finance B.V Annual Report Rotterdam, The Netherlands

2 Content Company Board and Management Report from the Supervisory Board... 3 Adoption by the Annual General Meeting of Shareholders... 4 Report of the Board of Management... 5 Financial Statements of E.ON International Finance B.V. Balance Sheet (before profit appropriation)... 9 Income Statement Cash flow Statement Notes Additional Information 28 Auditors report 29

3 Financial Statements of E.ON International Finance B.V. 3 Report from the Supervisory Board At the end of 2013 the Supervisory Board comprised the following members: Mrs. V. Volpert Mrs. C. Mencke Mr. S.W. Hloch The composition of the members of the Board did not change during the reporting year. The Supervisory Board met once on March 26, During this meeting the Board of Management presented the business results for the year 2012 which were discussed and approved by the Supervisory Board. Also, the planned activities for 2013 were discussed. In 2013 E.ON International Finance B.V. issued no new bonds into the international capital markets due to the ongoing strong liquidity situation of the E.ON Group. Nevertheless E.ON International Finance B.V. continued to be an important liquidity provider and financing hub within the E.ON Group and is constantly prepared to act in the debt capital markets if deemed appropriate. The financial statements 2013 have been audited and were given an unqualified report by the auditors of PricewaterhouseCoopers. The auditor s report is included in this report. The Income Statement for the year 2013 discloses a Net Profit of 28.6 million. The Supervisory Board approves the proposal made by the Board of Management to add this amount to the Other reserves. The Supervisory Board recommends that the General Meeting of Shareholders adopts the financial statements for the year The Supervisory Board takes this opportunity to express its appreciation for the performance of the management during the past year. Rotterdam, March 26, 2014 Mrs. V. Volpert Mrs. C. Mencke Mr. S.W. Hloch

4 Financial Statements of E.ON International Finance B.V. 4 Adoption by the Annual General Meeting of Shareholders In accordance with Article 20(8) of the Articles of Association, the Annual General Meeting of Shareholders has adopted the 2013 financial statements of E.ON International Finance B.V. The Income Statement discloses a Net Profit of 28.6 million. The entire amount of 28.6 million will be added to the Other reserves. Rotterdam, March 26, 2014 E.ON SE

5 Financial Statements of E.ON International Finance B.V. 5 Report of the Board of Management General information Composition of the Board of Management At the end of 2013 the Board of Management comprised the following members: Mr. J. Trapman Mr. J. Otto Mr. M.A.S. Bokelmann Mr. R. Toering The composition of the members of the Board did change during the reporting year. Mr. Toering joint the Board of Management of E.ON International Finance B.V. in May The ratio between men and women in the Board of Management does not comply with the required minimum ratio according to the Act Governance and Supervision ( Wet Bestuur en Toezicht ). Company objectives and core activities According to article 3 of the Articles of Association of E.ON International Finance B.V., the objectives of E.ON International Finance B.V. are: to borrow, to lend and to raise funds, including the issue of bonds, promissory notes or other securities or evidence of indebtedness as well as to enter into agreements in connection with aforementioned activities; to participate in any way whatsoever in, to manage, to incorporate and to supervise businesses and companies; to perform any and all activities of a commercial or financial nature; and to do all that is connected therewith or may be conductive thereto, all to be interpreted in the broadest sense. The principal activity of E.ON International Finance B.V. is the financing of E.ON Group entities mainly via the issuance of bonds or other securities, or by taking deposits or intra-group loans. Composition of the Group E.ON International Finance B.V., a corporation with limited liability, having its statutory seat in Rotterdam, the Netherlands, considers E.ON SE, Düsseldorf, Germany to be its ultimate parent company. The financial information of E.ON International Finance B.V. is included in the consolidated financial statements of E.ON SE, Germany. Copies of the consolidated financial statements of E.ON SE can be obtained from E.ON SE in Düsseldorf. Internal organisation At the end of 2013 E.ON International Finance B.V. had no own employees (2012: 0). All personnel is either seconded from other E.ON Group companies or employed by E.ON Benelux N.V. under a service level agreement. Market review In 2013 the international capital markets continued the positive trends started in 2012 following the unlimited support announcement by the European Central Bank. As such, the positive market sentiment allowed most of the peripheral European countries to successfully return to the markets despite the financial concerns and the growth prospects not being entirely solved. On the foreign exchange markets volatility also reduced, with all the major currencies however weakening against the Euro, especially the U.S. Dollar and the Japanese Yen. Interest rates both long term and short term also stabilized during the year, with long term rates however in the first half of 2013

6 Financial Statements of E.ON International Finance B.V. 6 first establishing another historic low before in the second half of 2013 starting to rise to early 2012 levels. Short term rates stayed the whole of 2013 on slightly improved but still very low levels. Credit spreads continued their positive trends started towards the end of 2012 with spreads for peripheral European sovereign issuers returning to almost pre-crisis levels. Spreads for core European sovereign issuers remained stable at albeit still significantly lower levels compared to its peripheral peers. Corporate credit spreads experienced a differentiated development in 2013, with spreads of lower rated issuer still being able to continue to tighten, whereas spreads of high quality issuer remained stable or even widened slightly. Overall, corporate issuers credit spreads still remained strongly depending on their respective country spread in addition to their own industry and company developments. Utility spreads specifically underlined this trend with companies domiciled in peripheral European countries still having wider spreads compared to their peers, but experiencing also significant tightening during As to issuance volumes, the Euro Corporate Bond market issuance activity in 2013 again increased compared to the previous year, with corporate investment grade issuance levels as well as utility issuance activities being also well above 2012 levels. Business review In 2013 E.ON International Finance B.V. did not conclude any new capital market transaction due to the continued strong liquidity position of the E.ON Group. Bond maturities amounted to 2.1 billion in Together with foreign exchange effects the total amount of notes outstanding as of December 31, 2013 decreased to 18.0 billion. At year end 2012 E.ON International Finance B.V. had 20.5 billion of bonds outstanding. The above mentioned market developments only had a limited impact on E.ON International Finance B.V. s bond business. Throughout 2013 E.ON secondary bond spreads mostly tightened, revealing the continued investor confidence in the E.ON credit. In terms of the intra-group financing business, in 2013 E.ON International Finance B.V. continued taking up intra-group loans or E.ON SE guaranteed short term deposits to fund lending activities to other E.ON Group companies. Following the significant volume increase at the end of 2012, E.ON International Finance B.V. managed to maintain this high level almost for the entire year As of December 31, 2013 the total short term loan portfolio amounted to 5.4 billion compared to a portfolio of 5.9 billion as of year-end Additionally, E.ON International Finance B.V. held liquidity amounting to 0.1 billion as of December 31, As a result of the above, the total asset base decreased from 27.4 billion at year-end 2012 to 24.3 billion as of December 31, Furthermore, E.ON International Finance B.V. s net profit increased from 20.2 million to 28.6 million. Major reasons were the on-average substantially higher lending volumes within the treasury activities which even overcompensated the reduction in margin income resulting from the reduced volumes in the bond business due to scheduled loan repayments and bond maturities during the reporting period. In April 2013, E.ON s Debt Issuance Programme was extended for another year. The Debt Issuance Programme enables both E.ON SE and E.ON International Finance B.V. to issue debt to investors in public and private placements. The total programme volume is unchanged at 35 billion. Except for the US Dollar benchmark bonds issued in 2008, all other notes outstanding are issued under this programme. In November 2013 E.ON entered into a new 5 billion Syndicated Dual Currency Credit Facility Agreement which early replaced the old 6 billion syndicated credit facility. The new facility has a tenure of 5 years plus two extension options of each one year and can therefore be in place until Due to the early refinancing E.ON benefits from the positive market environment and was able to obtain attractive pricing terms. During 2013 no drawings were made under both facilities. Additionally, E.ON International Finance B.V. continues to be a potential issuer under the 10 billion Multi-Currency Commercial Paper Programme, which has been updated in November During 2013 also no drawings were made on behalf of E.ON International Finance B.V. under the 10 billion Multi-Currency Commercial Paper Programme. E.ON has credit ratings assigned from both Standard & Poor s ( S&P ) and Moody s. Standard & Poor s long-term credit rating is A- with a stable outlook. Moody s long-term credit rating is A3 with

7 Financial Statements of E.ON International Finance B.V. 7 a negative outlook. The short-term ratings are A-2 (S&P) and P-2 (Moody s). In June 2013, Moody s lowered the outlook from stable to negative. As all bonds issued are guaranteed by E.ON SE, the ratings continue to be a significant support of the bond business of E.ON International Finance B.V. Financial information Financial performance E.ON International Finance B.V. closed the financial year 2013 with a profit from ordinary activities before taxes of 38.2 million, compared to 27.0 million in This increase is due to on average higher short term lending volumes. Risk Management E.ON International Finance B.V. manages its risks with the procedures and systems used within the E.ON Group. The Board is of the opinion that these procedures and systems provide an adequate risk management for E.ON International Finance B.V. Cash flows and financing needs E.ON International Finance B.V. s financing needs are directly related to funding requests of other E.ON Group companies. Financial instruments Financial risk factors E.ON International Finance B.V. s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. E.ON International Finance B.V. s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on E.ON International Finance B.V. s financial performance. Market risk Market risk is defined as the risk of a loss due to a negative change of market prices. Due to the international nature of its business activities, E.ON International Finance B.V. is exposed to exchange risks related to income, expenses, receivables and liabilities denominated in foreign currencies. E.ON International Finance B.V. s exposure results mainly from transactions in U.S. dollars, British Pounds and Swedish Krona. According to the risk management policy set up by management, E.ON International Finance B.V. is required to hedge its foreign exchange rate risk. To minimize its foreign exchange risk arising from future transactions and recognized assets and liabilities E.ON International Finance B.V. uses cross-currency swaps, transacted with E.ON SE. E.ON International Finance B.V. s interest rate risk arises from assets and liabilities having either a different interest rate base (fixed vs. variable) or different tenures (short term vs. long term). Bonds and loans issued at variable rates expose E.ON International Finance B.V. to cash flow interest rate risk. Bonds and loans issued at fixed rates expose E.ON International Finance B.V. to fair value interest rate risk. E.ON International Finance B.V. s policy is to mitigate the interest rate risk using interest or cross currency interest swaps, transacted with E.ON SE or interest rate matching transactions wherever economically viable. However, depending on the transaction as well as on its individual market assessment E.ON International Finance B.V. may also be prepared to accept interest rate risks. Any such remaining interest rate risks are monitored closely and steered actively.

8 Financial Statements of E.ON International Finance B.V. 8 Credit risk Credit risk is the risk of loss due to a counterparty s non-payment of a loan or other receivable. Following the purpose of E.ON International Finance B.V., its main counterparties for loans and receivables are all related parties and hence members of the E.ON Group. Liquidity risk Liquidity risk is the risk that liabilities cannot be met when they fall due. Also a substantial and / or a simultaneous withdrawal of deposits fall into such risks. E.ON International Finance B.V. addresses such risk by matching the cash flows resulting from assets and liabilities wherever economically viable but also by maintaining a wide range of financing possibilities. As such E.ON International Finance B.V. has short term deposits readily available with E.ON SE, but also continues to be an issuer under the 10 billion Multi-Currency Commercial Paper Programme and counterparty to the new 5 billion Syndicated Dual Currency Revolving Credit Facility. Recent developments There have been no recent developments since the balance sheet date. Prospects For 2014 E.ON International Finance B.V. continues to anticipate a positive liquidity situation for the E.ON Group which again may result in a reduction of bonds outstanding together with a corresponding reduction in the on-lending volumes. The intra-group financing activities will be continued by E.ON International Finance B.V. in 2014 with actual volumes not being predictable but a highly likelihood of a reduction due to the historically high average lending volumes in Furthermore, also changes in the interest rate environment and the credit spreads may have a direct impact on the financial results of E.ON International Finance B.V. Overall E.ON International Finance B.V. anticipates for 2014 lower results comparable to this year s reporting period. Statement from the Board of Management The Board of Management state that to the best of their knowledge, the financial statements of 2013 is prepared in accordance with the statutory provisions of Part 9, Book 2, of the Netherlands Civil Code and the firm pronouncements in the Guidelines for Annual Reporting in the Netherlands as issued by the Dutch Accounting Standards Board give a true and fair view of the assets, liabilities, financial position and profit or loss of E.ON International Finance B.V. and that the management report includes a fair review of the development and performance of the business and the position of the E.ON International Finance B.V., together with a description of the principal risks and uncertainties that it faces. Rotterdam, March 26, 2014 E.ON International Finance B.V. Board of Management Mr. M.A.S. Bokelmann Mr. J. Otto Mr. R. Toering Mr. J. Trapman

9 Financial Statements of E.ON International Finance B.V. 9 Balance Sheet (before profit appropriation) in thousands Note Dec 31, 2013 Dec 31, 2012 Financial fixed assets Loans to shareholder 3 11,540,786 14,453,763 Loans to group entities 4 3,401,204 3,851,266 14,941,990 18,305,029 Current assets Amounts due from shareholder 5 3,340,890 2,880,918 Amounts due from group entities 6 5,890,506 6,040,594 9,231,396 8,921,512 Cash 7 100, ,920 Total assets 24,274,382 27,384,461 Shareholders equity Issued share capital Share premium reserve 36,992 36,992 Other reserves 172, ,242 Undistributed profit 28,638 20, , ,654 Provisions Provision for loss making contracts 9 50,580 64,379 Provision for deferred taxes ,872 64,756 Borrowings Bonds 11 14,717,560 18,289,559 Current liabilities Amounts due to shareholder 12 1,956,351 2,466,467 Amounts due to group entities 13 3,215,712 3,255,804 Amounts due to associated companies , ,019 Amounts due to others 15 3,771,782 2,756,268 Amounts due to tax authorities 3,747 1,934 9,267,658 8,820,492 Total equity and liabilities 24,274,382 27,384,461

10 Financial Statements of E.ON International Finance B.V. 10 Income Statement Year ended December 31 in thousands Note Interest and similar income 18 1,252,407 1,442,008 Exchange rate difference gains 467, ,302 Financial income 1,720,055 1,888,310 Interest and similar expenses 19 (1,213,453) (1,414,990) Exchange rate difference losses (468,049) (445,798) Financial expenses (1,681,502) (1,860,788) Total financial result 38,553 27,522 Operating expenses 20 (327) (562) Total operating expenses (327) (562) Result on ordinary activities before corporate income tax 38,226 26,960 Corporate income taxes 22 (9,589) (6,740) Net Profit 28,637 20,220

11 Financial Statements of E.ON International Finance B.V. 11 Cash Flow Statement Year ended December 31 in thousands Note Interest paid (1,238,726) (1,406,592) Interest received 1,305,438 1,442,364 Expenses paid (675) (903) Income tax paid (7,883) (9,892) Cash flows from operating activities 58,154 24,977 Loans granted to related parties (17,889,777) (15,954,336) Loan repayments received from related parties 20,396,269 13,356,516 Cash flows from investing activities 2,506,492 (2,597,820) Proceeds from borrowings 14,465,000 22,586,900 Repayments of borrowings (17,086,570) (21,044,134) Cash flows from financing activities (2,621,570) 1,542,766 Net increase (decrease) in cash (56,924) (1,030,077) Cash at beginning of the year 157,920 1,187,997 Cash at end of the year 7 100, ,920

12 Financial Statements of E.ON International Finance B.V. 12 Notes (1) General information The activities of E.ON International Finance B.V. mainly comprise the financing of E.ON Group companies. E.ON International Finance B.V., a corporation with limited liability, having a statutory seat in Rotterdam, the Netherlands, considers E.ON SE, Düsseldorf, Germany to be its ultimate parent company. The financial information of E.ON International Finance B.V. is included in the consolidated financial statements of E.ON SE, Germany. Copies of the consolidated financial statements of E.ON SE can be obtained from E.ON SE in Düsseldorf. The statutory seat and the office of E.ON International Finance B.V. is Capelseweg 400 in Rotterdam. These financial statements were authorized for issue by the Board of Management on March 26, (2) Summary of significant accounting policies Basis of preparation The financial statements have been prepared in accordance with the statutory provisions of Part 9, Book 2, of the Netherlands Civil Code and the firm pronouncements in the Guidelines for Annual Reporting in the Netherlands as issued by the Dutch Accounting Standards Board. Unless stated otherwise in the principles set forth below, assets and liabilities are stated at the amounts at which they were acquired or incurred. Profit is determined on the basis of historical cost. The Balance Sheet, the Income Statement and the Cash flow Statement include references to the notes. Comparison with prior year The basis used for the valuation and result definition has remained unchanged with respect to the previous year. Cash Flow Statement The Cash Flow Statement was prepared according to the direct method. The funds included in the Cash Flow Statement consist of cash at banks and the inhouse banking account with E.ON SE. Cash flows in foreign currencies have been translated at the exchange rates existing on the day of settlement. Related parties In relation to its activities, E.ON International Finance B.V. has several transactions with both its shareholder E.ON SE, E.ON Group companies and non-consolidated E.ON companies. The interest which E.ON International Finance B.V. charges to related parties is based on market rates and includes a borrower specific credit margin. All bonds issued by E.ON International Finance B.V. under the 35 billion Debt Issuance Programme as well as under stand-alone documentations are guaranteed by E.ON SE. In return, E.ON International Finance B.V. pays a market based guarantee fee to E.ON SE. E.ON International Finance B.V. conducts derivative transactions as hedging instruments. To that extent E.ON International Finance B.V. uses interest rate swaps and cross-currency swaps. Such transactions are exclusively concluded with E.ON SE as counterparty.

13 Financial Statements of E.ON International Finance B.V. 13 E.ON International Finance B.V. acts as an intra-group financing company. The deposits generated from E.ON companies are sourced to finance additional lending operations. All such deposits are guaranteed by E.ON SE and a guarantee fee is paid accordingly. The assets and liabilities with related parties comprise: loans, interest and guarantee fee on such loans; interest on concluded swaps; intra-group financings, interest and guarantee fee on such intra-group financing. The interest and similar income mainly comprises: the interest on loans issued to related parties; amortization of the corresponding discounts on these loans; interest on swaps concluded with E.ON SE and the interest on the intra-group financings to related parties. The interest and similar expenses are mainly paid to third parties, with the exception of the interest on swaps concluded with E.ON SE, the interest on deposits or loans from related parties, both used for intra-group financing to related parties and the guarantee fee. All personnel is either seconded from other E.ON Group companies or employed by E.ON Benelux N.V. under a service level agreement. Within the Balance Sheet and the Income Statement the transactions with related parties are broken down into transactions with the shareholder, transactions with E.ON Group companies and transactions with associated companies. If material, the transactions with E.ON entities are specified in the notes to the financial statements. Foreign currency translation The functional currency as well as the reporting currency of E.ON International Finance B.V, is the Euro ( ). The financial statements are presented in Euro. Transactions denominated in foreign currencies are translated at the exchange rate at the date of the transaction. Monetary foreign currency items are adjusted to the exchange rate at each balance sheet date; any gains or losses resulting from fluctuations in the relevant currencies are included in the financial income and expenses, respectively. Settled transactions in foreign currencies during the reporting period have been incorporated in the financial statements at the rate of settlement. The following table shows the movements in exchange rates of the relevant foreign currencies for the period indicated: ISO code Dec 31, 2013 Dec 31, 2012 British Pound EUR/GBP U.S. Dollar EUR/USD Swiss Franc EUR/CHF Japanese Yen EUR/JPY Swedish Krona EUR/SEK Czech Koruna EUR/CZK Norwegian Krone EUR/NOK Hong Kong Dollar EUR/HKD

14 Financial Statements of E.ON International Finance B.V. 14 Financial assets Currently all non-derivative financial assets of E.ON International Finance B.V. are classified in the category loans and receivables. They are included in non-current assets, except for maturities less than 12 months after the balance sheet date. These are classified as current assets. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are initially recognized at fair value plus transaction costs. Loans and receivables are subsequently stated at amortized cost. The premiums, discounts and transaction costs are depreciated on the straight-line method (on the basis of historical costs), based on the lifecycle of each of the items involved. This method of calculation does not lead to material differences in comparison with the calculation based on the effective interest method. Current assets Current assets are carried at the fair value of the consideration, usually amortized costs. Any difference to the nominal value is due to any premium or discount and any transaction costs associated to such assets. Unless stated otherwise, the maturity is less than one year. Prepaid expenses are recognized if the period in which expenses are paid differs to the period to which they are attributable. Cash Cash and cash equivalents are stated at face value. Cash and cash equivalents include all highly liquid financial instruments with original maturities of three months or less. This includes bank balances and the inhouse banking account with E.ON SE. Bank overdrafts are shown within borrowings in current liabilities on the Balance Sheet. Provisions Provisions are recognized for legally enforceable or constructive obligations existing at the balance sheet date, the settlement of which is probable to require an outflow of resources whose extent can be reliably estimated. Provisions are measured on the basis of the best estimate of the amounts required to settle the obligations at the balance sheet date. Unless indicated otherwise, provisions are stated at the present value of the expenditure expected to be required to settle the obligations. Provisions for loss making contracts are established for contracts in which a loss is anticipated. The provision is created to level interest rate differences between refinanced loans compared to new loans over the remaining live of the refinancing. These provisions are included at face value and released on a pro rata basis. Provisions for deferred taxes are recognized in respect of timing differences between valuation of assets and liabilities according to fiscal provisions and the valuation principles as used in these annual accounts. Deferred taxes are determined using the applicable tax rates as at year-end or future applicable rates and laws that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled. Borrowings Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost. Any difference to the nominal value is due to any premium or discount and any transaction costs associated to such liabilities. Any difference between the proceeds (net of transaction costs) and the redemption value are taken into the Income Statement on the straight-line method (on the basis of historical costs), based on the lifecycle of each of the items involved. This method of calculation does not lead to material differences in comparison with the calculation based on the effective interest method. Borrowings are classified as non-current liabilities unless their maturity is less than 12 months after the balance sheet date. These are classified as current liabilities.

15 Financial Statements of E.ON International Finance B.V. 15 Current liabilities Liabilities are carried at the fair value of the consideration, usually amortized costs, Any difference to the nominal value is due to any premium or discount and any transaction costs associated to such liabilities. Unless stated otherwise, the maturity is less than one year. Interest paid and received Interest paid and received is recognised on a time-weighted basis, taking account of the effective interest rate of the assets and liabilities concerned. When recognising interest paid, allowance is made for transaction costs on loans received as part of the calculation of effective interest. Current income tax The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted on the balance sheet date. Income tax is calculated on the profit/loss before tax in the income statement, taking into account i.a. tax-exempt items, and non-deductible expenses. Account is also taken of changes in deferred income tax assets and liabilities owing to changes in the applicable tax rates. Financial instruments E.ON International Finance B.V. conducts derivative transactions as hedging instruments. To that extent E.ON International Finance B.V. uses interest rate swaps and cross-currency swaps. These are concluded with E.ON SE as counterparty. The foreign currency elements on the cross-currency swaps are translated into Euro at the rates of exchange prevailing on the balance sheet date. Resulting net gains or losses from translation of foreign currencies on the cross-currency swaps are immediately taken to the Income Statement. E.ON International Finance B.V. applies cost price hedge accounting mainly on all of its derivative financial instruments. E.ON International Finance B.V. uses interest rate swaps to hedge the interest risk on bonds and cross currency swaps for its currency risk on bonds and intra-group financing. The results of the hedging instrument are recorded as profit or loss at the same moment as the hedged item. E.ON International Finance B.V. documents at the inception of the transaction the relationship between hedging instruments and hedged items. E.ON International Finance B.V. also tests its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. Cost price hedge In applying cost price hedge accounting, the initial recognition of, and the accounting policies for, the hedging instrument are dependent on the hedged item, which has the following implications: if the hedged item is recognized at cost in the Balance Sheet, the derivate instrument is also stated at cost; as long as the hedged item is not yet recognized in the Balance Sheet, the hedging instrument is not re-measured. This applies, for instance, to hedging currency risks on future transactions; if the hedged item qualifies as a monetary item denominated in a foreign currency, the derivative instrument, where it has currency elements, is also stated at the spot rate prevailing on the balance sheet date. Resulting net gains or losses from translation of foreign currencies on the cross-currency swaps are immediately taken to the Income Statement. If the derivate instrument has currency elements, the difference between the spot rate on the date the derivate instrument is contracted and the forward rate at which it will be settled is spread over the maturity of the derivative instrument; any ineffective portion of a hedge relation is recognized directly in profit or loss.

16 Financial Statements of E.ON International Finance B.V. 16 The gain or loss relating to the ineffective portion is recognized in the Income Statement within financial income or financial expenses. Recognition of income The result represents the difference between the value of the consideration rendered and the costs and other charges for the year. The results on transactions are recognized in the year they are realized. Losses are taken as soon as they are foreseeable. Costs are recognized on the historical cost convention and are allocated to the reporting year to which they relate. Interest income and expenses are recognized on a time-proportion basis using the effective interest method. Critical accounting estimates and judgments The preparation of the financial statements requires management to make estimates and assumptions. It also requires management to exercise its judgment in the process of applying E.ON International Finance B.V. s accounting policies. Estimates and judgments are based on past experience and on additional knowledge obtained on transactions to be reported and are reviewed on an ongoing basis. E.ON International Finance B.V. makes estimates and assumptions concerning future events. Actual events may differ from expectations and actual results will, by definition, seldom equal the accounting estimates. Financial risk factors E.ON International Finance B.V. s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. E.ON International Finance B.V. s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on E.ON International Finance B.V. s financial performance. Market risk Market risk is defined as the risk of a loss due to a negative change of market prices. Due to the international nature of its business activities, E.ON International Finance B.V. is exposed to exchange risks related to income, expenses, receivables and liabilities denominated in foreign currencies. E.ON International Finance B.V. s exposure results mainly from transactions in U.S. dollars, British Pounds and Swedish Krona. According to the risk management policy set up by management, E.ON International Finance B.V. is required to hedge its foreign exchange rate risk. To minimize its foreign exchange risk arising from future transactions and recognized assets and liabilities E.ON International Finance B.V. uses cross-currency swaps, transacted with E.ON SE. E.ON International Finance B.V. s interest rate risk arises from assets and liabilities having either a different interest rate base (fixed vs. variable) or different tenures (short term vs. long term). Bonds and loans issued at variable rates expose E.ON International Finance B.V. to cash flow interest rate risk. Bonds and loans issued at fixed rates expose E.ON International Finance B.V. to fair value interest rate risk. E.ON International Finance B.V. s policy is to mitigate the interest rate risk using interest or cross currency interest swaps, transacted with E.ON SE or interest rate matching transactions wherever economically viable. However, depending on the transaction as well as on its individual market assessment E.ON International Finance B.V. may also be prepared to accept interest rate risks. Any such remaining interest rate risks are monitored closely and steered actively. Credit risk Credit risk is the risk of loss due to a counterparty s non-payment of a loan or other receivable. Following the purpose of E.ON International Finance B.V., its main counterparties for loans and receivables are all related parties and hence members of the E.ON Group.

17 Financial Statements of E.ON International Finance B.V. 17 Liquidity risk Liquidity risk is the risk that liabilities cannot be met when they fall due. Also a substantial and or a simultaneous withdrawal of deposits falls into such risks. E.ON International Finance B.V. addresses such risk by matching the cash flows resulting from assets and liabilities wherever economically viable but also by maintaining a wide range of financing possibilities. As such E.ON International Finance B.V. has short term deposits readily available with E.ON SE, but also continues to be an issuer under the 10 Billion Multi-Currency Commercial Paper Programme and counterparty to the 5 Billion Syndicated Dual Currency Revolving Credit Facility. Fair value estimation E.ON International Finance B.V. tested the financial instruments on impairment. The test did not lead to impairments of any financial instruments. The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by E.ON International Finance B.V. is the current bid price. The fair value of financial instruments that are not traded in an active market (for example, overthe-counter derivatives) is determined by using valuation techniques. E.ON International Finance B.V. uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date. Quoted market prices or dealer quotes for similar instruments are used for long-term debt. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments. The fair value of interest rate, crosscurrency and cross-currency interest rate swaps is calculated as the present value of the estimated future cash flows. (3) Loans to shareholder Movement schedule loans to shareholder At January 1 14,453,763 16,506,193 - Amortization 8,362 9,212 - Exchange differences (139,550) (450) - Current maturity (2,781,789) (2,061,192) At December 31 11,540,786 14,453,763 During 2013 E.ON International Finance B.V. did not issue any new long-term loans to shareholder. The reduction in the total loan amount is mostly due to scheduled upcoming loan maturities. Additionally the strengthening of the Euro resulted also in a reduction of the total amount of loans outstanding, with the U.S. Dollar and British Pound denominated loans accounting for this effect.

18 Financial Statements of E.ON International Finance B.V. 18 The following table shows a detailed breakdown of the currency split: Carrying amounts of loans in currencies to shareholder Dec 31 Dec 31 EUR 10,274,127 12,329,631 GBP 1,884,560 1,924,418 USD 2,163,888 2,260,906 Other - Total loans to shareholder 14,322,575 16,514,955 Reclassification to current assets 2,781,789 2,061,192 Total long term loans in currencies to shareholder 11,540,786 14,453,763 At the end of the reporting period the vast majority of total loans to shareholder continue to be denominated in Euro. The reduction in Euro denominated loans is due to scheduled loan repayments in With respect to the non-euro denominated loans, the Euro value reduction in GBP denominated loans is solely due to the weakening of the British Pound against the Euro. The reduction in U.S. Dollar denominated loans is also solely due to the weakening of the currency against the Euro. In general the currency structure of the loan portfolio to the shareholder did not change compared to the previous year. Maturities of loans at nominal value to shareholder Dec 31 Dec 31 6 months or less 2,645,603 2,011, months 136,670 49, years 1,250,000 2,782, years 1,650,000 1,250, years 2,375,000 1,650, years 1,485,724 2,375,000 Over 5 years 4,812,773 6,437,669 Total loans to shareholder 14,355,770 16,556,512 Reclassification to current assets 2,782,273 2,061,570 Total long term loans in maturities to shareholder 11,573,497 14,494,942 The maturity structure of the loan portfolio to shareholder continues to be well balanced. At maturity all loans are repaid at nominal value. The total nominal value of outstanding loans to shareholder amounts to 11.6 billion. The difference to book values lies in net discounts of 32.7 million. The amounts of discount and premium on the loans are amortized over the period of the underlying asset on a straight-line basis. The market values of the loans to shareholder per December 31, 2013 is 17.1 billion (December 31, 2012: 20.6 billion).

19 Financial Statements of E.ON International Finance B.V. 19 (4) Loans to group entities Movement schedule loans to group entities At January 1 3,851,266 3,786,110 - Amortization Exchange differences (66,704) 64,486 - Current maturity (384,027) - At December 31 3,401,204 3,851,266 During 2013 E.ON International Finance B.V. did not issue any new long-term loans to group entities. The reduction in the total loan amount is mostly due to scheduled upcoming loan maturities. Additionally the strengthening of the Euro also contributed to the reduction of the total amount of loans outstanding, with mostly British Pound denominated loans accounting for this effect. The following table shows a detailed breakdown of the currency split: Carrying amounts of loans in currencies to group entities Dec 31 Dec 31 EUR 1,194,240 1,194,226 GBP 2,501,383 2,555,062 Other 89, ,978 Total loans to group entities 3,785,231 3,851,266 Reclassification to current assets 384,027 - Total long term loans in currencies to group entities 3,401,204 3,851,266 The currency split of loans to group entities was effected mainly by the Euro value of British Pounds denominated loans which reduced due to the weakening of the currency against the Euro. The same effect resulted in the Euro value reduction of the Other currency denominated loans. However, in summary the overall structure of the loan portfolio to group entities remained fairly unchanged compared to Maturities of loans at nominal value to group entities Dec 31 Dec 31 6 months or less 299, months 84, years - 390, years years 1,110, years - 1,110,000 Over 5 years 2,308,704 2,368,943 Total loans to group entities 3,802,761 3,869,466 Reclassification to current assets 384,057 - Total long term loans in maturities to group entities 3,418,704 3,869,466 Loans to group entities mainly comprise loans maturing in three years and after five years and longer. At maturity all loans are repaid at nominal value. The total nominal value of outstanding loans to group entities amounts to 3,4 billion. The difference to book values lies in net discounts of 17.5 million. The amounts of discount and premium on the loans are amortized over the period of the underlying asset on a straight-line basis.

20 Financial Statements of E.ON International Finance B.V. 20 The market values of the loans to group entities per December 31, 2013 is 5.1 billion (December 31, 2012: 5.6 billion). (5) Amounts due from shareholder Specification amounts due from shareholder Dec 31 Dec 31 Current receivable from shareholder 2,781,789 2,061,192 Interest receivable from shareholder 419, ,814 Cross-currency swaps 133, ,464 Other 6,169 6,448 Total amounts due from shareholder 3,340,890 2,880,918 Current receivables from shareholder This item consists of loans maturing within one year of the balance sheet date. The current maturity of the loans outstanding includes the discount/premium on these loans until December 31, Interest receivables from shareholder This item consists of interest receivables on loans as well as interest receivables on interest rate swaps and on cross-currency swaps. The interest receivables account for the amount of accrued interest. The reduction in the interest receivables from shareholder is mainly due to loan repayments. Besides, a part of the interest receivables on swaps is also attributable to transactions which E.ON International Finance B.V. entered into in past years and which it continued in Cross-currency swaps The foreign currency element on the cross-currency swaps is translated into Euro at the exchange rates prevailing at balance sheet date. Resulting net gains or losses from translation of foreign currencies on the cross-currency swaps are immediately taken to the Income Statement. Total exchange rate differences from cross-currency swaps decreased to 133 million which is due to the maturity of several long term swap transactions. (6) Amounts due from group entities Specification amounts due from group entities Dec 31 Dec 31 Current receivable from group entities 5,753,608 5,893,008 Interest receivable from group entities 136, ,586 Total amounts due from group entities 5,890,506 6,040,594 Current receivables from group entities This item consists of loans maturing within one year of the balance sheet date. Current receivables from group entities as of year-end 2013 are mainly short term loans from treasury operations within the intra-group financing business. Interest receivables from group entities Interest receivables refers to interest on loans outstanding and accounts for the amount of accrued interest. The reduced amount is mainly a consequence of the reduced short term interest rates with the treasury operations compared to 2012.

21 Financial Statements of E.ON International Finance B.V. 21 (7) Cash Specification of cash Dec 31 Dec 31 Cash and cash equivalents Inhouse banking account at shareholder 100, ,902 Cash 100, ,920 Total cash mainly includes the inhouse banking account at E.ON SE. Having such an inhouse banking account at E.ON SE is common practice within the E.ON Group. The total cash is at free disposal of E.ON International Finance B.V. and is to a large degree denominated in Euro. (8) Shareholders equity The total authorized number of ordinary shares is 9,000 (2012: 9,000) with a par value of 100 per share. The number of issued shares is 2,000 (2012: 2,000). All issued shares are fully paid in. The share premium results exclusively from additional paid in capital. Movement schedule equity in thousands Issued capital Share premium reserve Other reserves Undistributed profit Total At January 1, , ,242 20, ,654 Appropriation of undistributed profit ,220 (20,220) - Profit for the year ended Dec 31, ,638 28,638 At December 31, , ,462 28, ,292 Total equity of E.ON International B.V. increased to million due to a Net Profit of 28.6 million achieved in (9) Provision for loss making contracts Based on the strict direct relationship of the nominal value, currency, interest and maturity date the in 2002 issued 900 and 4,250 million bonds have become loss making contracts at the moment the receivable loans from E.ON SE were repaid as the market interest rate (at that moment) for the new loans to E.ON UK Holding Co. Ltd. was lower than the interest rate on the bonds involved. A provision is created to level these interest differences over the years. The provision is calculated on the nominal amount of the repaid loans ( 900 million, 2,850 million and 1,400 million) and exclusive of the percentage for risk/costs and guarantee fee. The release is based on the term of the loans, starting from May 2003 for the loan issued in 2003, from November 2004 for the loan issued in 2004 and from February 2005 for the loan issued in As of year-end 2013 the provisions relate only to the 900 million bond and the respective loan which both have a tenure until Hence, this provision qualifies mainly as long-term. The short term part of the provision is 14 million. Movement schedule provision for loss making contracts At January 1 64,379 77,581 - Addition interest 2,909 3,506 - Release (16,708) (16,708) At December 31 50,580 64,379 The release of the provision is included in interest and similar income and the interest addition is included in interest and similar expenses.

22 Financial Statements of E.ON International Finance B.V. 22 (10) Provision for deferred taxes Due to different treatment on the tax balance sheet compared to the valuation in these financial statements, a provision for deferred tax liabilities has been taken into account. Movement schedule provision deferred taxes At January Realization temporary differences to income statement (85) (85) At December Provisions for deferred taxes decreased to 291 thousand as a result of the realization of temporary differences to the income statement. Specification current / non- current Dec 31 Dec 31 - current non-current Total deferred tax (11) Bonds Movement schedule bonds At January 1 18,289,559 20,488,696 - Amortization 9,162 9,985 - Exchange differences (310,285) (19,412) - Current maturity (3,270,876) (2,189,710) At December 31 14,717,560 18,289,559 In 2013 E.ON International Finance B.V. did not engage into any transaction in the debt capital markets. As such, the reduction in the amount of long term bonds is mainly attributable to scheduled bond maturities. In addition the strengthening of the Euro resulted in a reduction of the Euro value of non-euro denominated bonds also reducing the total Euro amounts of bonds outstanding. At year-end 2013 the total amount of long term bonds outstanding reduced to 14.7 billion compared to 18.3 billion at year-end The developments are shown in more detail in the following tables. The carrying amounts of the bonds are denominated in the following currencies: Carrying amounts of bonds in currencies Dec 31 Dec 31 EUR 10,320,166 11,959,365 GBP 4,381,264 4,474,652 USD 2,164,090 2,261,129 CHF 610, ,284 JPY 326, ,032 Other currencies 185, ,807 Total bonds 17,988,436 20,479,269 Reclassification current liabilities 3,270,876 2,189,710 Total long term bonds 14,717,560 18,289,559

23 Financial Statements of E.ON International Finance B.V. 23 Scheduled bond maturities in 2013 resulted in reduction of Euro, Japanese Yen and Swiss Franc denominated bonds outstanding. The reductions in the Euro value of British Pound, U.S. Dollar and Other currencies denominated bonds are solely due to the strengthening of the Euro against these currencies. The majority of bonds continued to be Euro denominated followed by British Pound, U.S. Dollar and Swiss Francs. Maturities of bonds at nominal value Dec 31 Dec 31 6 months or less 3,008,824 2,119, months 262,748 70, years 1,250,000 3,329, years 1,650,000 1,250, years 3,275,000 1,650, years 1,491,681 3,275,000 Over 5 years 7,106,827 8,851,494 Total bonds 18,045,080 20,545,631 Reclassification to current liabilities 3,271,572 2,190,094 Total long term bonds 14,773,508 18,355,537 At year end 2013 the maturity profile of E.ON International Finance B.V. s outstanding bonds continues to be well balanced. More than half of all outstanding bonds have a maturity of three years or longer, with no single maturity representing substantially more than 1.5 billion. At maturity all bonds are repaid at nominal value. Total nominal value of bonds at year-end 2013 amounts to 18,0 billion. The difference to book values lies mainly in net discounts of 56.6 million. The amounts of discount, premium and issue expenses are amortized over the life-time of the underlying liability on a straight-line basis. The weighted average interest rate (including use of interest derivatives) over all outstanding bonds amounts to 5.1% in 2013 (2012: 5.2%). The market values of the bonds per December 31, 2013 is 21,4 billion (December 31, 2012: 25.1 billion). (12) Amounts due to shareholder Specification amounts due to shareholder Dec 31 Dec 31 Current payables to shareholder 1,900,000 2,400,000 Guarantee fees payables 23,497 27,762 Interest payables to shareholder 32,854 38,705 Total amounts due to shareholder 1,956,351 2,466,467 Current payables to shareholder This item consists of short term loans from the shareholder maturing within one year following the balance sheet date. The proceeds have been used in the intra-group financing business and as such the reduction reflects the development of the lending volume mainly during the second half of Guarantee fee All Bonds issued by E.ON International Finance B.V. under the 35 billion Debt Issuance Programme as well as under stand-alone documentations are guaranteed by E.ON SE. Additionally all deposits generated from E.ON companies are also guaranteed by E.ON SE. The guarantee fee is charged by E.ON SE starting from the date of issuance.