EnBW: Revenue and profits developed well despite growing challenges

Karlsruhe. In the first six months of 2008 EnBW Energie Baden-Württemberg AG raised both revenue and operating profit. Group revenue increased in the first six months of 2008 by 9.4 percent to € 8.071 million. Earnings before interest, taxes, depreciation and amortisation (EBITDA) rose by 1.8 percent to € 1,424 million. Earnings before interest and taxes (EBIT) dropped by 4.8 percent, to € 975 million. The drop in EBIT is due to the impairment loss charged on the gas grid. The impairment was caused by the reduction in network user charges by the Federal Network Agency.

Adjusted for extraordinary effects, the adjusted EBITDA rose by 9.5 percent to € 1,404 million and adjusted EBIT by 12.0 percent to € 1,017 million.

In the first six months of 2008, group net profit in terms of the profit attributable to the equity holders of EnBW AG amounts to € 632 million, adjusted for extraordinary effects € 637 million.

First six months of 2008 by segment

At € 6,381 million, EnBW generated 79.1 percent of its revenue in the electricity segment. In the electricity segment, EBIT adjusted for non-recurring effects rose by 15.9 percent to € 953 million compared to the comparable six-month period. Improved margins in generation and trade had a positive effect on the development of earnings. This was, however, counterbalanced by higher costs for the procurement of electricity, fuels and CO2 allowances. Margins in sales dropped as it was not possible to charge on higher wholesale prices and burdens from the Renewable Energies Act in full.

Within the regulatory framework, the further reduction in network user charges imposed by the Federal Network Agency placed a burden on results. Reduced expenses from the feed-in of wind energy, on the other hand, had a positive effect.

At € 1,351 million, EnBW generated 16.7 percent of its revenue in the gas segment. The adjusted EBIT in the gas segment rose 3.0 percent to € 99 million. The colder winter compared to the prior-year period had a positive effect on results.

The energy and environmental services division accounted for around 4 percent of total group revenue contributing around € 340 million. Due to the lower income relating to other periods and the drop in earnings for other energy services, the adjusted EBIT in this segment dropped 30.4 percent to € 43 million.

Hans-Peter Villis, CEO of EnBW: “In light of the growing challenges, particularly in the regulatory environment but also on the procurement side, overall earnings performance in the first half-year 2008 was good. The 12 percent increase in adjusted EBIT to € 1,017 million shows that the results of operations of EnBW is good, thus offering a good foundation for our growth investments."

EnBW’s capital expenditures in the first six months came to € 414 million. That is 26.8 percent more than a year ago. Some 70 percent of these capital expenditures was made in the electricity segment. Investment focused on distribution plants and power plants as well as the construction of the state-of-the-art hard coal power plant in Karlsruhe as well as the commencement of the development of four offshore wind farms on the German North Sea and Baltic Coasts.

Despite the dramatic increase in spending, the free cash flow rose by 29.0 percent to € 531 million. This improvement is largely a result of the significant increase in cash flow from operating activities of 30.4 percent (€ 902 million). This increase is due above all to the drop in income tax compared to the prior-year period. In the first six months of 2007, additional tax payments had had to be made following tax field audits.