Securing flexible financing

Transcription

1 Securing flexible financing Markus Coenen Head of Group Finance, RWE AG RWE Credit Day London, 9 October 2012

2 2012 in financial terms so far H operating performance: EBITDA +9%, operating result +9%, recurrent net income on last year s level Confirmation of guidance for FY 2012 Completion of hybrid bond programme 2 billion in total volume (in several currencies) achieved Confirmation of A3 (negative outlook) by Moody s; downgrade to BBB+ (stable outlook) by Standard & Poor s Bond maturity in October 2012 ( 1.8 bn) will be repaid out of cash 18

3 Our main financial targets Targeting a healthy and efficient balance sheet > Securing access to money markets and capital markets at all times > Leverage factor (net debt to EBITDA mid term below or equal to 3.0) as an operational instrument > Mid-term target to cover investments and dividends by cash flow from operating activities Strong liquidity profile > Ample liquidity from strong operational cash flows and committed back-up line > Commercial Paper market can easily be accessed > Smooth maturity profile > Defined minimum liquidity to cover volatile trading business and collateralization Prudent financial policy > Long-term and fixed interest financing matching a long-term business > Conservative definition of net debt (including all major long-term provisions) > 73% of pension obligations funded by Contractual Trust Agreement (CTA) 19

4 Capital market debt maturities and sources of financing Capital market debt maturities 1 Strong sources of financing 1 in bn 2,5 20,0 2,0 20 MTN programme (up to 30 years) 16.2 bn ) 2 30 bn 16 1,5 1, Commercial paper (up to 1 year) 0.4 bn $ 5.0 bn 0,5 4 0, Maturities of debt issued Hybrids (first call dates) Accumulated outstanding debt (incl. hybrids) 0 Fully committed syndicated loan ( 4.0 bn up to Nov. 2016) 0.0 bn for liquidity back-up Balanced profile with limited maturities up to end of 2014 (~ 4.3 billion) 1 RWE AG and RWE Finance B.V., as of September 30, Bonds outstanding under the MTN-programme, i.e. excluding hybrid. Including hybrid: 20.0 bn 20

5 Following S&P s revision of the financial risk profile, RWE is now at BBB+ Financial risk profile Minimal Modest Intermediate Significant Aggressive Highly leveraged Excellent AAA AA A A- BBB -- Business risk profile Strong AA A A- BBB BB BB- Satisfactory A- BBB+ BBB BB+ BB- B+ Fair -- BBB- BB+ BB BB- B Weak BB BB- B+ B- Vulnerable B+ B CCC+ 21

6 Recent rating actions reflect S&P s and Moody s cautious view on the sector Company Date Agency Before Current 08/2012 S&P A-/stable A-/watch neg. 07/2012 S&P A-/stable A-/negative 07/2012 S&P A/negative A-/stable 07/2012 S&P A-/negative BBB+/stable 07/2012 Moody s A1/watch neg. A1/negative 05-06/2012 Moody s A3/negative Baa1/watch neg. 05/ /2012 Moody s S&P A3/stable A-/watch neg. Baa1/watch neg. BBB+/stable 03/2012 Moody s A2/stable A2/negative 02/ /2012 S&P Moody s BBB/watch neg. Baa3/negative BB+/negative Ba1/negative 02/2012 Moody s A2/stable A2/negative 22

7 RWE s CDS and peers > RWE s Credit Default Swap moved in line with the market after the downgrade Credit Default Swaps 26 July 2012 Last price before downgrade bps itraxx Industrials 5Y RWE CDS 5Y EnBW CDS 5Y E.ON CDS 5Y Vattenfall CDS 5Y

8 RWE s 2015 bond > RWE s 2015 bond (2 bn ) also did not show any reaction to the downgrade Rendite Yield of RWE s 2015er 2015 Anleihe bond % 1,3 26 July 2012 Last price before downgrade 1,1 0,9 RWE 5% ,7 0,

9 RWE s hybrid bonds > RWE s hybrid bonds were also unaffected by the downgrade Yield of RWE s hybrid bonds in EUR, GBP and USD % 7,0 6,5 RWE Hybride in EUR, GBP und USD 26 July 2012 Last price before downgrade 6,0 GBP (2019) USD (2017) 5,5 5,0 EUR (2015) 4,5 4,

10 Completion of capital measures to strengthen our balance sheet Equity measure of 2.1 bn in December 2011 > Accelerated bookbuilt offering with partial claw-back > Use of 28 million treasury shares with subscription rights > Use of authorised capital 52 million new shares without subscription rights > 14.3% of share capital issued at a price of 26 per share Completion of 2.0 bn hybrid programme (50% equity credit) > > > > > Volume Currency (mn) Volume (mn) CHF Nov GBP March USD April USD Tap July CHF July

11 Counterparty risk: banking sector is still affected by uncertainty and mistrust Observations at the credit market Development reference index* since Sep 2011 With the extension of the European sovereign crisis uncertainty and mistrust concerning the credit standing of banks reached new all time highs: > RWE s internal reference index* for bank CDS reached all time high end of 2011 > CDS spreads are extremely volatile and react nervous on market rumours > For several months especially CDS spreads of Spanish and Italian banks are under pressure > ECB's move to cut its deposit rate to zero led to negative short term deposit quotes > Banks with strong credit standing are reluctant to accept deposits from corporates * The reference index used is the average 5y CDS of 29 large banks which are systemically important financial institutions according to the Financial Stability Board (FSB). spread in bp in % reference index (average of system relevant banks) Money market rates negative in the short term 2,00 1,75 1,50 1,25 1,00 0,75 0,50 0,25 0,00-0,25 O/N 1W 2W 1M 2M 3M 4M 5M 6M 9M 1y EONIA ( ) EONIA ( ) money market curve ( ) money market curve ( ) 27

12 RWE adjusts bank limit allocation due to changing market conditions > RWE s internal base limit for the counterparty risk is derived from the amount of equity and the rating of the financial counterparty > Minimum rating of the three rating agencies S&P, Moody s and Fitch is considered. However, general rating downshift of banking sector has been considered by slight reduction of rating requirements for credit limits > Reference index has been changed from itraxx Senior Financials to the average 5y CDS of the 29 so called system relevant banks > The basis limit is reduced if the CDS of the counterparty is higher than the reference index > Bank exposures and limits are updated daily > O/N deposits are moved to banks with lower CDS levels or into money market funds invested in strong government securities CDS Rating Equity Credit indicators AA- A- BBB+ BBB 28