Karlsruhe. In the previous financial year, EnBW concentrated its efforts on the implementation of its EnBW 2020 strategy and made good progress. This was emphasised by Chief Executive Officer Frank Mastiaux at the company's Annual General Meeting this year. “The challenges posed by the Energiewende are fundamental for a company like EnBW and it is not possible to make light of them. The strategy being followed by EnBW – also in the sense of exploiting opportunities – has been in place since the middle of 2013. There are no longer discussions around the coffee machine about where we want to go. We have set clear, measurable goals, which is something that has not yet been achieved by any other energy company. To us this means: perform and deliver, while focussing on efficiency and growth, in a lean new structure and with a new corporate culture. We are placing high demands on our own dedication and willingness to change, while at the same time placing the emphasis above all on transparency, dialogue and solidarity.”
Efficiency improvements are being continued in a persistently difficult environment
The conditions in the energy industry and the energy policy environment continued to be diffi-cult in the 2014 financial year. This is why efficiency measures were made a priority. Due to the “Fokus” efficiency programme, we were able to realise yearly cost savings of 750 million euros in 2014. At the end of the “Fokus” programme, we identified four areas for action in order to achieve a further 400 million euros in savings by 2020. The first measures have already been implemented. For example, EnBW AG has been merged with five subsidiaries to form ONE EnBW and a fifth of all organisational units have been removed since 2012 as a result. Mastiaux: “We have become more modern and significantly leaner as a result and have eliminated many structural barriers and bureaucratic hurdles.”
In the area of power generation, EnBW has given up 1,700 MW of output due to the decision to decommission six uneconomical power plant units and through the sale of its shares in the Bexbath power plant. This represents 25 percent of the capacity from conventional power generation. This should make a noticeable contribution towards stabilising earnings from conventional power generation. Further related structural improvements were started in 2015.
Growth as an important pillar of the corporate strategy – first successes in 2014
“Efficiency is a necessary and ongoing task for every company whose markets are changing and who are faced with fierce competition. However, it is not possible to create future pro-spects through efficiency measures alone. Therefore, growth forms an important pillar of our strategy.”
Success with this growth initiative can be seen, above all, in the area of wind power. It was possible to significantly expand our project pipelines for onshore business in both Germany and Turkey. In the offshore sector, EnBW is, in particular, examining new projects in the North Sea following the offshore wind farm Baltic 2. In addition, the company has acquired the Albatros wind farm project. EnBW is now the leading offshore developer in Germany with a portfolio of 1,900 MW.
Progress has also been made with the expansion of the gas business through the acquisition of shares in terranets and GVS from the Italian company ENI. Grids business with local authorities has been strengthened, in particular through partnership models with Stuttgart and Heilbronn. In the sales/operations area, the new third-party market business for services in the area of processing developed very promisingly.
Operating result only slightly below the previous year thanks to the efficiency measures
It was primarily due to the implementation of the efficiency measures in 2014 that it was possible to mitigate a considerable part of the burden faced by the sector. Therefore, the operating result (adjusted EBITDA) was only 2.6 percent below the previous year at 2.17 billion euros. As a result of expectations of a continued fall in electricity prices, it was however necessary to make significant write-downs on the EnBW power plant portfolio and electricity supply contracts. This led to a Group net loss of 451 million euros. The EnBW CEO thus made a distinction when commenting on the result: “Due to our efficiency measures, we were able to achieve a respectable operating result despite the difficult conditions. However, this was overshadowed by the high write-downs on our power plant portfolio and the resulting Group net loss. In addition, we see room for improvement in the implementation of some of our growth projects, especially those in the areas of sales and renewable energies. We will take action to remedy this situation.”
2015 will be characterised by key energy policy themes
EnBW is expecting continued difficult conditions for the current financial year. Furthermore, energy policy decisions are expected that could have an impact on business performance. These primarily include the clarification of the future role of conventional generation and clarification of important issues relating to phasing out nuclear power and the expansion of the transmission grids.
According to Mastiaux, EnBW is ready to use its expertise to contribute to finding a solution to these issues. But the company also has clear expectations. “The large energy companies were certainly not the pioneers of the German Energiewende but I can now clearly state that at EnBW we have been doing our homework. We have adapted our strategy, our structure, our culture and our budget to the Energiewende and its requirements. We are ready and willing to act. It is now up to the politicians to catch up and to deliver on their task: Making clear decisions and defining a reliable framework in which we can operate.”
Outlook for 2015: Results corridor of 0 to -5 percent – stronger growth for renewables
Despite the renewed burdens on the energy sector and the uncertainties surrounding energy policy, EnBW also aims to achieve an operating result of 0 to -5 percent below the previous year in 2015. In the process, the company will focus, amongst other things, on the rapid expansion of wind power. As a result of the commissioning of the offshore wind farm Baltic 2 and a number of onshore projects, the installed wind power will more than double in 2015 by 455 megawatts to 790 megawatts. The result in the area of renewable energies is set to improve by at least 20 percent.
The area of sales will also be strengthened with a new structure and will benefit from new products and business models, according to the CEO. This should be reflected in an increase in earnings of between 10 and 20 percent. In the regulated and largely stable grids business, the level of investment will be increased to over 560 million euros. The Generation and Trading segment is anticipated to decline by between 15 percent and 25 percent due to continued falling wholesale prices.
“Our goals are ambitious”, underlined Mastiaux in conclusion, “and the market will not give anything away for free. Therefore, we will also fully concentrate on the implementation of our strategy in 2015. When it comes to the restructuring of EnBW, we are well on course but there is still a long way to go. And until we get there our motto remains: perform and deliver.”