Financial strategy

Financial management

Foundations

Management of financial transactions within the Group finance department in order to minimise risk, optimise costs and increase transparency
Deployment of derivates in the operating business generally for hedging purposes only: for example, for forward contracts for electricity and primary energy source trading
Interest rate risk management for managing and monitoring interest-sensitive assets and liabilities / Interest rate risk strategy to limit the risk of interest rate changes for the Group
Currency management system to monitor foreign exchange risks

Objectives

Payment obligations can be fulfilled without restriction
Balanced financing structure
Solid balance sheet ratios
Solid investment-grade ratings

Positive creditworthiness of high importance

To maintain the future viability of the company, EnBW aims to hold solid investment-grade ratings, in order to

ensure unrestricted access to capital markets
offer reliable opportunities for financing partners
be regarded as a dependable business partner in our trading activities
achieve the lowest possible capital costs
implement an appropriate number of investment projects

Further Information

Key performance indicator for creditworthiness management

The central goal of the EnBW 2025 strategy is to increase adjusted EBITDA to €3.2 bn. As it will not be possible to exclusively finance this growth phase using funds from our internal financing capability, we will manage the financial profile from 2021 using the debt repayment potential.

2021 to 2025: Debt repayment potential¹

≥ 0 %

Controlled growth during the further development into an infrastructure partner

Retained Cashflow / Net debt

¹ To maintain solid investment-grade ratings, EnBW regularly checks the 2025 target value for the debt repayment potential for managing its financial profile.

Financing strategy

Management of financing needs of operating activities separately from the Group’s pension and nuclear obligations

Managing financing needs of operating activities
- Constant assessment of capital market trends with regard to
  - current interest rate environment
  - any potentially favourable refinancing costs
Coverage of pension and nuclear obligations using asset liability management model

Alongside the internal financing capability, we have various financing instruments at our disposal:

Financing instruments as of 31.03.2023

Programme	Value⁰Rounded figures
Programme Debt Issuance Programme (DIP)	Value⁰Rounded figures €10 bn, thereof €6.9 billion utilised
Programme US Private Placement	Value⁰Rounded figures €0.9 bn⁰Issued 9 November 2022; €860.95 m equivalent (€400 m, US$270 m, £168 m, converted as of the reference date of 9 November 2022)
Programme Subordinated bonds	Value⁰Rounded figures €2.5 bn
Programme Commercial Paper Programme	Value⁰Rounded figures €2 bn, thereof €0.1 billion utilised
Programme Promissory notes	Value⁰Rounded figures €0.5 bn
Programme Sustainable syndicated creditline	Value⁰Rounded figures €1.5 bn, undrawn; maturity date: 2027⁰Term until the end of June 2027 after exercise of the second extension option for a further year.
Programme Commited bilateral credit lines⁰Includes amongst others €660 m loan agreement of VNG with KfW (until April 2023) as of 5 April 2022. The credit line was terminated early as of 7 February 2023.	Value⁰Rounded figures €3.5 bn, thereof €0.2 billion utilised
Programme Uncommited bilateral credit lines	Value⁰Rounded figures €1.4 bn, undrawn

Other sources

Project financing and EIB loans, including a €0.6 bn EIB loan to finance our He Dreiht offshore wind farm
In addition, subsidiaries have other financing activities in the form of bank loans and promissory notes

Maturities of EnBW’s bonds

Overview of EnBW’s bonds

Asset Liability Management Model

Management of financing needs for pension and nuclear obligations
as of 30 June 2022

Objectives

Ensuring timely coverage of the pension and nuclear obligations
Coverage of long-term provisions by corresponding financial assets within an economically reasonable period

Core concept of the model

Cash flow based model
Determining the effects on the cash flow statement and balance sheet over the next 30 years taking into account
- Anticipated return on financial assets
- Sector-specific appraisals by external experts on costs for nuclear decommissioning and disposal
- Actuarial reports on pension provisions
Limiting the impact of payments for the pension and nuclear obligations on the operating business to €360 million a year (plus an inflation supplement) by taking funds from the financial assets
After fully coverage of the considered provisions by the financial assets, no further funds will be taken from the cash flow from operating activities

Investment targets

Portfolio strategy considers planned withdrawal of funds from the financial assets
Broad diversification of the asset classes
Risk-optimised performance in line with market trends
Reduction of costs and simplification of administrative processes

Alongside the internal financing capability, we have various financing instruments at our disposal:

Financing instruments as of 31.03.2023

Programme	Value⁰Rounded figures
Programme Debt Issuance Programme (DIP)	Value⁰Rounded figures €10 bn, thereof €6.9 billion utilised
Programme US Private Placement	Value⁰Rounded figures €0.9 bn⁰Issued 9 November 2022; €860.95 m equivalent (€400 m, US$270 m, £168 m, converted as of the reference date of 9 November 2022)
Programme Subordinated bonds	Value⁰Rounded figures €2.5 bn
Programme Commercial Paper Programme	Value⁰Rounded figures €2 bn, thereof €0.1 billion utilised
Programme Promissory notes	Value⁰Rounded figures €0.5 bn
Programme Sustainable syndicated creditline	Value⁰Rounded figures €1.5 bn, undrawn; maturity date: 2027⁰Term until the end of June 2027 after exercise of the second extension option for a further year.
Programme Commited bilateral credit lines⁰Includes amongst others €660 m loan agreement of VNG with KfW (until April 2023) as of 5 April 2022. The credit line was terminated early as of 7 February 2023.	Value⁰Rounded figures €3.5 bn, thereof €0.2 billion utilised
Programme Uncommited bilateral credit lines	Value⁰Rounded figures €1.4 bn, undrawn

Other sources

Project financing and EIB loans, including a €0.6 bn EIB loan to finance our He Dreiht offshore wind farm
In addition, subsidiaries have other financing activities in the form of bank loans and promissory notes

Maturities of EnBW’s bonds

Overview of EnBW’s bonds

Asset Liability Management Model

Management of financing needs for pension and nuclear obligations
as of 30 June 2022

Objectives

Ensuring timely coverage of the pension and nuclear obligations
Coverage of long-term provisions by corresponding financial assets within an economically reasonable period

Core concept of the model

Cash flow based model
Determining the effects on the cash flow statement and balance sheet over the next 30 years taking into account
- Anticipated return on financial assets
- Sector-specific appraisals by external experts on costs for nuclear decommissioning and disposal
- Actuarial reports on pension provisions
Limiting the impact of payments for the pension and nuclear obligations on the operating business to €360 million a year (plus an inflation supplement) by taking funds from the financial assets
After fully coverage of the considered provisions by the financial assets, no further funds will be taken from the cash flow from operating activities

Investment targets

Portfolio strategy considers planned withdrawal of funds from the financial assets
Broad diversification of the asset classes
Risk-optimised performance in line with market trends
Reduction of costs and simplification of administrative processes

Corporate strategy

Sustainable infrastructure partner

Our business portfolio is positioned in three segments:

System Critical Infrastructure
Sustainable Generation Infrastructure
Smart Infrastructure for Customers

The main goal of our EnBW 2025 strategy is to develop a balanced and diversified business portfolio along the entire value added chain via these three growth fields. Our portfolio is also characterized by a high proportion of stable, regulated business and an attractive risk-return profile.

As part of the EnBW 2025 strategy, adjusted EBITDA was planned to increase to €3.2 billion by 2025. Adjusted EBITDA was already €3.3 billion in fiscal year 2022. In line with our current planning, we also expect to exceed the earnings target.

Total investments 2023-2025

Capital expenditure 2021-2025:

We plan total capital expenditure of some €12 billion. 80% of this will be on growth projects. The expenditure is to be financed out of retained cash flow and also, if necessary, by borrowing. We continue to aim for a balanced financing structure, a solid financial profile and therefore solid investment grade rating.

Main focuses:

Grid expansion
Key projects include the SuedLink and ULTRANET transport networks that are critical for Germany’s future energy supply, and investment in electricity distribution grids to upgrade them and prepare them for the needs of electric mobility.
Expansion of renewables
Including completion of the EnBW He Dreiht offshore wind farm by 2025
Further evolution of smart infrastructure for customers
Including broadband, telecommunications and electric mobility

Click here for further information on our Corporate strategy.

Climate neutrality by 2035

By 2035, we will reduce the company's CO₂ emissions to net zero. In doing so, EnBW will stick to the requirements and targets of the Paris Climate Agreement.

SBTi EnBW CO₂ reduction targets approved. Further information: www.sciencebasedtargets.org

2020-2030

2030-2035

Ab 2035

Phase-out of coal/fuel switch:

We intend to fully phase out coal-fired power generation by 2028. Some of our power plants will be switched over initially to natural gas and then to green gases – especially hydrogen – from the middle of the 2030s. As a result of this fuel switch from coal to natural gas at our power plants, we will be able to reduce specific carbon emissions by up to 60 percent and guarantee the security of the electricity and district heating supplies. In addition, these fuel switch projects will contribute significantly to preserving existing power plant sites and associated jobs.

Climate-neutral gases and hydrogen:

While we are initially planning a fuel switch to more climate-friendly gas, we then aim to switch over in a second stage to climate-neutral gases such as biogas or hydrogen. We anticipate that the switch to these climate-neutral gases will be possible by the middle of the 2030s as they become widely available.

Using green electricity:

Using green electricity will be especially relevant for offsetting the line losses in Scope 2. These are physical energy losses in the electricity grid during the transmission and distribution of electricity.

Offsetting:

We fundamentally support the principle of reducing emissions rather than offsetting them. We plan to offset any unavoidable residual emissions with the support of climate change mitigation projects (excluding the supply chain) that are carried out according to the highest standards, such as those defined by the Gold Standard Foundation.

Other instruments:

A series of measures to avoid smaller carbon emissions (e.g., in canteens, buildings) are also planned. However, these emissions only account for around 2 percent of the total emissions at EnBW.