Presentation by: Dr. Wulf H. Bernotat Chairman of the E.ON AG Board of Management and CEO

Transcription

1 E.ON AG Annual Results Press Conference March 6, 2008 Presentation by: Dr. Wulf H. Bernotat Chairman of the E.ON AG Board of Management and CEO Please check against delivery

2 E.ON AG, Annual Results Press Conference, March 6, 2008 Page 2 of 13 Ladies and gentlemen, before we turn to the actual topics of our annual results press conference, I d like to make a few preliminary remarks. Last Thursday, we announced publicly that we ve held discussions with the European Commission regarding structural measures to promote competition in the German electricity market. These measures relate mainly to the sale of our transport network and the disposal of 4,800 megawatts (MW) of generating capacity that, ideally, we d like to swap for capacity in other European markets. Some people have criticized the timing of the announcement of these measures. I d like to take this opportunity to emphasize that the timing was out of our hands. We didn t choose it and we had no intention of irritating anyone Our discussions with the Commission were leaked, so we had to respond. The measures we ve agreed to are designed to end, in a constructive way, the electricity-market issues between E.ON and the Commission, issues that relate entirely to the past. Our aim is to focus our attention on the future and on the challenges ahead: making Europe s energy supply secure, climate-friendly, and competitive and achieving further growth for our company in European markets. As we ve said repeatedly, the unbundling of power generation from network operations must be a business decision. And now we ve made this decision. After weighing the advantages and disadvantages, we believe that it s the best solution for our company, employers, and shareholders. Please understand that today we re unable to provide you with any additional details. It s far too early to say anything about which generation assets may be involved, about the possible creation of privately owned transmission system operator in Germany, or about any interested buyers. The Commission will conduct a market test and then make a legally binding decision. We should wait for this process

3 E.ON AG, Annual Results Press Conference, March 6, 2008 Page 3 of 13 to be completed. When the time comes, we ll inform you immediately. But as I ve said, today we re unable to say anything else about this matter. Energy has to be secure, climate friendly, and affordable. These are the three imperatives of today s energy world. They reflect consumers wishes as well as their concerns. These imperatives aren t irreconcilable, although they do often conflict with each other. Climate protection isn t free. Cheap electricity isn t necessarily emission free. These contradictions are the sources of the major technological and energy-policy challenges of our time. In what type of power plant electricity is generated and how much it costs are increasingly determined by a complex interplay of factors on global energy markets and by energy policy scenarios. It s therefore important for an energy company like E.ON to operate responsibly but also to make consumers aware of the realities and possibilities of the energy market without arousing their fears and concerns. This is the only way we ll be able to convince people in their own interest that we need to design a balanced strategy for a sustainable energy supply. This means, for example, that Europe, Germany, and other regions around the world need to intensify their efforts to expand renewables capacity. E.ON is investing billions of euros in renewables, putting us in the vanguard of this market. I ll come back to renewables in a moment. But it also means that Germany can t simultaneously phase out nuclear power and coal-fired generation without, over the long term, endangering the high reliability of our electricity supply and risking an electricity shortage. I share this concern with a number of responsibly minded policymakers, including Chancellor Angela Merkel, Economics Minister Michael Glos, and Environment Minister Sigmar Gabriel. Technologically advanced coal-fired power stations like the combined heat and power plant we re building in Datteln,

4 E.ON AG, Annual Results Press Conference, March 6, 2008 Page 4 of 13 Germany generate electricity economically and emit 20 percent less CO 2. These technologies shouldn t be opposed, they should be deployed around the world. That would represent a quantum leap for climate protection. As for nuclear power, it s the cheapest form of climate protection. For this reason alone it makes environmental and economic sense to extend the operating lives of Germany s nuclear power stations. For some, these are inconvenient truths, but that doesn t make them any less true. Similarly, Germany can t continue to promote and subsidize wind power but at the same, on the local level, block the expansion of the electricity networks necessary to transport it. The French political theorist Montesquieu said: Rational arguments are almost never what make people see reason. It would be regrettable if Montesquieu were still right today and there will have to be supply bottlenecks before there s a change in attitudes. An industrial country like Germany can t afford to have supply bottlenecks. We need a fundamental public consensus that investments in new power plants and network infrastructure are necessary. We need to bridge the gap, in a technological and business sense, between global energy and climate developments on the one hand and our customers lives and needs on the other. But we also need to bridge this gap in an emotional sense. We need to do an even better job explaining to people that companies like E.ON precisely because of their international presence, size, technological potential, and financial strength are partners people can trust and rely on. Our size and financial strength enable us to spur the development of new technologies like carbon capture for coal-fired power plants, wind power, biomethane, and solar power. They enable us to carry out projects highly efficiently and on a commercial scale. This is important for the breakthrough and ultimate success of renewables technologies and will help keep electricity affordable for consumers,

5 E.ON AG, Annual Results Press Conference, March 6, 2008 Page 5 of 13 which is one of the things that guide our actions. Affordable electricity was also the idea behind the creation of E WIE EINFACH ( E as in Easy ). After just one year, our retail subsidiary in Germany has acquired about 700,000 customer accounts. This demonstrates that customers are increasingly willing to switch suppliers and that this trend is accelerating. Our extensive experience with all generation technologies enables us to deploy a broad and balanced energy mix. E.ON has set itself the objective of reducing its specific carbon emissions in other words, the amount of CO 2 emitted per kilowatt-hour of electricity generated to 360 grams of CO 2 per kilowatt-hour, half the figure for By 2030, we expect half of our generation to be emission free and half to have significantly lower emissions. Renewables will play a big role in helping us meet this objective. Last but not least, our strong position in power and gas gives us possibilities that hardly any other energy company has. For example, we can distribute biomethane via our gas pipeline system and ensure that the climate-protection potential of this promising technology is fully realized. It makes a difference whether biogas is burned to generate electricity in units that have a thermal efficiency of 25 percent or whether it s upgraded to biomethane and used in highefficiency natural gas heat pumps which are more than 100 percent energy efficient. This is a perfect example of how in today s energy world small isn t beautiful. Global energy policy and global climate policy also call for companies that have the necessary size in terms of performance, expertise, and capital. For companies like this to be successful, the energy industry must eliminate any doubts about its transparency and integrity. This, in turn, will require further initiatives to spur competition and to provide

6 E.ON AG, Annual Results Press Conference, March 6, 2008 Page 6 of 13 customers with new choices, as we ve already begun to do with E WIE EINFACH and our new electricity products. And it s certainly true that we need to work together more as an industry in order to close ranks with policymakers and to build more public trust. Everyone involved is trying to make this happen, and I m confident that we ll make progress. The responsibility for Germany and Europe s energy supply can t be parceled or delegated. When we talk about investments, projects, and markets in a few moments, we re not just talking about positive developments for E.ON but also about the responsibility and actions we take for Germany and Europe s economy and consumers was a successful financial year for E.ON, as our numbers will show in a moment. And it was a year in which we made important strategic decisions and important strategic progress. In several decisive respects, we paved the way for our company s positive development going forward. Among them are: 1. The agreement we reached with Enel and Acciona in April of Although we didn t succeed in acquiring 100 percent of Spain s Endesa, the agreement will enable us to enter new, interesting, and important European markets (Spain and France) and significantly strengthen our market position in Italy. Our acquisition of Viesgo and Endesa assets will give us a broad platform for more growth in Europe that no other energy company has. 2. The investment program that we announced last May and that is unique in Europe. Initially, we said we were planning to invest 60 million through This figure included about 6 billion for projects for which the preparatory work will be done during the next three years but for which the actual capital expenditures will come after Under our current medium-term plan, we ve

7 E.ON AG, Annual Results Press Conference, March 6, 2008 Page 7 of 13 expanded our original investment program for I ll say more about this in a moment. Our investment program focuses predominantly on organic growth but also includes selective acquisitions. We began implementing it immediately and have made rapid progress. Our success is readily apparent. E.ON operates in almost 30 countries and has the biggest European footprint of any energy company. In many countries we either have a strong market position or a solid platform from which to build a strong market position. In view of the progress our company has made and in view of the rapid pace of commercial and technological change in international energy markets, we ve decided to again increase our investments. We now intend to invest an additional 9 billion to fortify and expand our market positions. This increase encompasses the acquisition of Statkraft s stake in E.ON Sverige, additional investments in generation assets in Russia, and above all higher investments in renewables. I ll say more about our these projects in a moment. If we don t include the 6 billion for projects initiated prior to 2010 that I just mentioned, our capital expenditures for will total about 63 billion. We invested 13 billion of this figure in This means that we ll invest about 50 billion during , of which approximately 36 billion or 72 percent is for growth. The remaining 14 billion is earmarked for maintenance and replacement. Through our investment program, we re focusing E.ON even more systematically on Europe s converging energy markets. We re also targeting new adjacent markets, primarily Russia. Our growth strategy and the rapid way we re implementing it have also impressed the capital markets. E.ON stock ended the year 42 percent higher, after increasing by 16 percent in This clear vote

8 E.ON AG, Annual Results Press Conference, March 6, 2008 Page 8 of 13 of confidence from investors confirms to us that we re on the right course. I d like to say a few words about where we stand now. We successfully entered Russia s fast-growing electricity market by acquiring a majority stake in OGK-4, a Russian power producer. OGK-4 operates four gas-fired power stations and one coal-fired power station with an aggregate capacity of about 8,600 MW, giving it one of the most powerful and efficient asset portfolios in Russia. Over the next few years, we intend to add four technologically advanced generating units with a total capacity of 2,400 MW for which we ll invest another 2 billion. Our agreement to acquire Viesgo and Endesa assets will strengthen our position in Southern Europe. Last year, we reached an agreement with Statkraft to acquire all of its shares in E.ON Sverige. In return, Statkraft will receive stakes in E.ON power stations in Germany and E.ON stock totaling just over 2 percent of our equity. The transaction will give us full control of our Nordic business and, from a structural standpoint, decisively strengthen our position in Northern Europe. It will give us sole responsibility for this business, enabling us to develop it rapidly and ensure that it has better prospects for the future. We also took a big step forward with our gas procurement. In October, we acquired a stake in Skarv and Idun gas fields in the northern Norwegian Sea. Together with other promising satellite fields, the area ranks among Norway s largest and most attractive undeveloped gas fields. We ve also been very successful at building our global renewables business. In just a short time, we combined all of our existing renewables activities and employees in a single company, E.ON Climate & Renewables, which began operations on January 1, 2008,

9 E.ON AG, Annual Results Press Conference, March 6, 2008 Page 9 of 13 and at the same time expanded our renewable-source generating capacity. The creation of a new market unit underscores the significance renewables have for our business. Renewables not only constitute one of the most interesting growth markets of the future. They re also often an important key to gain entry to emerging markets in places like Asia and North Africa. Investments in renewables are taking place worldwide because renewables are indispensable for an energy supply that s more climate friendly and that conserves resources. We therefore intend to operate our renewables business on a global basis and use our advantages of scale to help promising technologies become commercially viable. This is in the interest of consumers, who expect energy to be affordable. Our objective is to rank among the world s leading renewables companies. In view of this objective and our success so far, we ve decided to double our renewables investments to at least 6 billion through What have we achieved so far? In August, we bought ENERGI E2 Renovables Ibéricas, which has wind-power operations in Spain and Portugal. We followed this up in October with the acquisition of Airtricity in the United States and Canada, which marked our successful entry into the world s most attractive renewables market. In addition to the capacity we acquired that was already operational, a number of new wind farms entered service. In the United States, 330 MW of new wind capacity has come online in the last ten days alone. Since May 2007, our renewable-source generating capacity has tripled from 420 MW to 1,350 MW. We re already the world s seventhlargest wind-power operator. For example, we rank among the leading wind-farm operators in Sweden and Denmark. We already operate 21 wind farms onshore and

10 E.ON AG, Annual Results Press Conference, March 6, 2008 Page 10 of 13 offshore in the United Kingdom, with additional projects in planning. Among them, we re partners in building what will be the world s largest offshore wind farm, a 1,000 MW facility to be located in the approaches of the Thames. E.ON continues to be involved in a number of ambitious wind-power projects off Germany s North Sea and Baltic Sea coasts, including the country s first large-scale offshore wind farm, to be sited off the North Sea island of Borkum. In addition, our Climate & Renewables market unit has a variety of onshore windpower projects in a planning in Spain, Portugal, and the United States. This expansion will require investments totaling around 4 billion from now through 2010, at which time we expect to have just under 4 gigawatts (GW) of wind-power capacity. Our objective is to have 10 GW of renewable-source generating capacity not counting hydroelectricity by Including hydro, this would give us about 17 GW of renewables capacity by That s 19 percent of our total installed capacity. Wind power isn t the only renewables technology where we ve added capacity. We recently commissioned Germany s largest biomethane production plant. The 10-MW plant, located in Schwandorf in southeast Germany, upgrades biogas to biomethane and injects it into our natural gas pipeline system, so that more efficient use can be made of this regenerative energy source. We plan to build another MW biomethane plants by In Steven s Croft near Lockerbie in the Scottish borders, we ve built the United Kingdom s second-largest dedicated biomass power plant. The 44 MW plant, which is now starting commercial operation, will displace the emission of 140,000 metric tons of CO 2 each year. In Germany, we operate three 20 MW biomass power plants. Although we ve initially concentrated our efforts on the most mature and economical renewables technologies (wind power, biomethane,

11 E.ON AG, Annual Results Press Conference, March 6, 2008 Page 11 of 13 and biomass), we re also gathering expertise in all types of renewables in order to position our company for the future. We re partnering with Schüco to develop and produce ultra-thin photovoltaic cells, a very promising technology that will make solar energy more versatile and speed its development towards economic viability. We re also working systematically to develop marine energy (wave and tidal-stream energy) and plan to have pilot plants operational off the U.K. coast in the next few years. In other technologies, one of the departments at the E.ON Energy Research Center at RWTH Aachen University focuses on geothermal energy. Through 2010, E.ON will invest around 38 billion in power generation and supply in Europe, Russia, and the United States. We re pursuing 17 projects to build new coal-fired and gas-fired generating units in Europe and Russia. Our domestic investments will total approximately 11 billion in , a clear demonstration of our strong commitment to Germany. We aim to increase the E.ON Group s generating capacity by 50 percent to 90 GW by We re also investing around 6 billion to secure and expand the supply of natural gas. Our upstream objective remains to source 10 billion cubic meters of natural gas each year from our own production assets. Our massive investments and our market initiatives not only strengthen Europe s energy supply system. They also accelerate the integration of, and exchanges between, Europe s national energy markets. Our investment program is therefore not only a strategy for growing our business in Europe and beyond but also a strategy for securing Europe s energy supply, an energy supply that helps: 1. avoid CO 2 emissions to the degree that this is technologically possible and economically sensible

12 E.ON AG, Annual Results Press Conference, March 6, 2008 Page 12 of foster economic growth and prosperity in Europe 3. minimize Europe s dependence on energy imports. Our investments create jobs. According to a study conducted by the Bremen Energy Institute, E.ON construction projects have created 15,000 jobs in Germany directly and indirectly. The figure for Europe is 30,000 jobs. If you add together the construction projects of the energy industry as whole it becomes clear what an impressive jobcreating machine our industry is. I d like to add that E.ON hired 8,900 new employees across Europe in 2007, 2,800 of them in Germany. E.ON is committed to Europe and takes action to support Europe. The main energy and climate policy issues are no longer amenable to isolated, national solutions. Only when the internal market for energy becomes a reality will Europe be able to establish the strong and secure energy structures it needs to compete successfully for global energy resources. Europe has made a lot of progress towards an internal energy market in the ten years since liberalization began. Nevertheless, Europe remains a patchwork of different market structures and regulatory regimes. The European Commission has recognized correctly that it must seize the initiative to move the market forward. E.ON supports the Commission s efforts. Investments need to be made in a variety of areas for the internal market to be truly effective. These include the expansion and integration of Europe s energy infrastructure, the creation of central, European energy exchanges, and, last but not least, systematic privatization in all European energy markets. Above all, EU-wide rules need to be adopted for climate protection. This applies to CO 2 emission allowance trading and to the harmonization of the 27 different national subsidy systems for

13 E.ON AG, Annual Results Press Conference, March 6, 2008 Page 13 of 13 renewables, for example, by means of a quota system with tradable certificates green power. If we are to achieve a balance between the three overriding objectives of energy supply cost-effectiveness, security of supply, and environmental and climate protection we need comprehensive energy policies. For these to become reality, Europe above all needs companies that can make investments on this scale. As an energy company with a particularly broad European presence, E.ON aims to be an industry pacesetter. Our investments will help positively shape and secure Europe s energy future. 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 given here. E.ON AG 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.