“EnBW operations continue to perform well”

Karlsruhe. EnBW Energie Baden-Württemberg AG has reinforced its position as Germany’s third-largest energy supplier. According to the preliminary business figures for 2008 published in Karlsruhe today, the group’s revenue rose by 10.8 per cent to € 16,305.4 million in the reporting year. Earnings before interest, taxes, depreciation and amortisation adjusted for non-operating effects (adjusted EBITDA) rose by 11.5 per cent to € 2,595.6 million. Adjusted earnings before interest and taxes (adjusted EBIT) improved by 14.8 per cent, reaching € 1,793.9 million. Adjusted group net profit in terms of the profit shares attributable to the equity holders of EnBW AG grew by 32.9 per cent to € 1,091.3 million. Prior to adjustment for non-operating effects on earnings, the group net profit in terms of the profit shares attributable to the equity holders of EnBW AG fell by 36.1 per cent to € 871.8 million. While the figures for the prior year had included special non-recurring tax income, the current fiscal year was burdened by impairment losses recognised on electricity and gas grids and on financial assets in the wake of the financial crisis. The impairment losses were recorded on the electricity and gas grids to account for a further reduction in the network user charges imposed by the Federal Network Agency.

Overall development of segments satisfactory

Keener competition erodes sales margins

Profit burdened by grid regulation

Adjusted EBIT in the electricity segment rose 17.4 per cent to € 1,639.0 million. Positive profit drivers included an improved margin in the area of generation and trading as well as reimbursements of water supply fees as part of court composition proceedings. Negative effects arose from higher costs for the procurement of electricity, fuels and CO2 allowances. In addition, the intensifying competition led to a drop in sales margins. In the context of grid regulation, the further reduction in network user charges imposed by the Federal Network Agency placed a burden on earnings. In the gas segment, the colder winter compared to the prior year had a positive effect on earnings in 2008, increasing adjusted EBIT by 10.5 per cent to € 192.7 million. In the energy and environmental services segment, adjusted EBIT fell by 23.2 per cent to € 100.1 million in the reporting year. The main reasons were lower income relating to other periods and a decline in income from other energy services.

Prior to adjustment for non-operating effects, the group’s EBITDA increased by 8.7 per cent to € 2,540.1 million across all segments. Non-adjusted EBIT dropped by 5.8 per cent, to € 1,468.2 million. This development was attributable principally to changes in the nuclear power provisions and impairment losses on the electricity and gas grids. The impairment was caused by the further reduction in network user charges by the Federal Network Agency.

“We are on the right track. EnBW has a high earnings power and again displayed a positive operating performance in 2008. We successfully reached our ambitious earnings targets, we have intensified our selling activities and launched important future projects. Our sound financial position and net assets form the basis for further growth. Accordingly, we are planning to invest a total of € 7.7 billion by 2011, with our sights set firmly on profitable growth,” says Hans-Peter Villis, EnBW’s CEO.

EnBW sights firmly set on growth

Overall, EnBW believes that the position of its segments has been reinforced and that it is in a good competitive position. In order to secure its current business and seize opportunities for growth as they arise, EnBW plans to continue its investment programme launched in 2008. The programme provides for capital expenditures of € 7.7 billion for the period from 2009 to 2011. Financial investments account for around € 2.2 billion of this total, capital expenditures for € 5.5 billion. Of the capital expenditures, 82 per cent is earmarked for growth projects including new power stations.

In the fiscal year 2008, EnBW had already made capital expenditures of € 1,246.0 million. This is € 429.9 million or 52.7 per cent more than in the prior year. Approximately 75 per cent of the capital expenditures went on the electricity segment, 20 per cent on the energy and environmental services segment and around 5 per cent on the gas segment. Besides maintenance investments on the infrastructure, and thus on supply reliability, € 239.3 million was spent on the construction of the new RDK 8 hard coal power station in Karlsruhe, € 97.1 million on offshore wind power projects, € 35 million on the construction of the run-of-the-river power station in Rheinfelden, € 44.4 million on restructuring the extra-high voltage networks, € 93.0 million on the new EnBW City building in Stuttgart, € 22.1 million on the new ZEAG administrative building in Heilbronn and € 11.7 million on the new office centre in Biberach. Furthermore, EnBW acquired additional shares in 2008 in the Prague-based energy company Praská energetika a.s. and in Elektrownia Rybnik S.A. as well as a shareholding in Stadtwerke Hilden GmbH. Moreover, EnBW was the first energy supply company in Germany to launch an intelligent electricity meter on the market.

The acquisition of a shareholding of 26 per cent in EWE AG was arranged, but is still subject to the pending approval of the Federal Anti-Trust Office. The decision was adopted to expand the Iffezheim run-of-the-river power station by adding a fifth turbine, a memorandum of understanding signed for the acquisition of power station capacity in Lippendorf (446 MW) and Bexbach (79 MW), further progress made on plans for the Stade power station project and EnBW Gas Midstream GmbH incorporated.

Healthy composition of assets and equity and liabilities – investments financed by cash flow from operating activities

On account of the higher capital expenditures, the free cash flow fell by 51.3 per cent to € 415.1 million, but still remains clearly positive.

The 7 per cent reduction in equity to € 5,583.3 million arising from the lower level of unrealised gains in securities and the 15.8 per cent increase in total assets to € 32,925.1 million reduced the equity ratio by 4.1 percentage points to 17.0 per cent. The group’s net debt rose 15 per cent to € 6,833.5 million as of year-end 2008. This increase is attributable to a drop in the unrealised gains on securities resulting from falls in the capital market prices and the increases in pension and nuclear power provisions. The group’s cash and cash equivalents total € 2,368.7 million. Two bonds issued successfully in November 2008 with a total volume of € 1,500 million, together with a private placement of approximately € 170 million in December 2008, have added to EnBW’s financial strength. The bonds have a terms to maturity of 5 and 10 years, and the private placement has a 30-year term.

“We will finance most of our investment programme from cash flow. Net financial liabilities are expected to increase by no more than € 2 billion in the medium term. An A category rating remains our target,” says Dr. Rudolf Schulten, EnBW’s CFO.

In light of the positive business development, the Board of Management and the Supervisory Board will propose to the annual general meeting on 23 April 2009 a dividend distribution of € 2.01 per share.

In light of the current overall economic situation, EnBW cannot rule out the possibility that electricity and gas unit sales might experience a decline in 2009. Rising commodity prices and fiercer competition, along with pressure on margins in the field of electricity and gas could also impact EnBW’s economic situation. Despite a troubled economic outlook and an uncertain political framework, EnBW aims to achieve earnings in 2009 to match the prior-year level.