EnBW’s CEO Villis: FOKUS and investments paying off – results slightly higher than expected

Karlsruhe. EnBW Energie Baden-Württemberg AG’s operating result showed a slight positive development in the first six months of 2012 and was above expectations overall. For example, EnBW’s revenue in the first six months of the year increased by 2.9% to € 9.7 billion. In this regard, revenue increased to € 5.9 billion in the electricity grid and sales segment (up 11%), € 1.4 billion in the gas segment (up 33%) and € 400 million in the energy and environmental services segment (up 11.8%) and more than compensated for the fall in revenue to almost € 2 billion in the electricity generation and trading segment (down 26.3%). The fall in revenue in the electricity generation and trading segment is attributable to the considerable decline in unit sales and the associated decrease in trading activities in comparison to the prior-year period as a result of having shut down two nuclear power plants in spring 2011. The increase in revenue in the other segments is primarily due to the rise in network user charges, price effects, a 21.9% increase in gas unit sales as well as the volume growth seen in the contracting business.

Adjusted EBITDA – earnings before interest, taxes, depreciation and amortisation adjusted for non-operating effects – rose by 13.9% to € 1.5 billion. A considerable share of this increase, however, is due to the different timing at which the nuclear fuel rod tax was paid in 2011 and 2012. While the nuclear fuel rod tax was paid in the first half of the prior year, it is due to be paid in the second half of 2012. After eliminating this effect, adjusted EBITDA increases by 3.1%.

Hans-Peter Villis, CEO of EnBW: “Since 2011, the new energy concept has caused conditions to change significantly. This is leading to decisive consequences for the operating business of EnBW as well as financial burdens for the group. However, it is also opening up business opportunities. In light of this, I am pleased to report that EnBW’s business model is proving to be robust and that our business portfolio is well-balanced in terms of opportunity and risk. It is particularly pleasing that the most recent investments in our gas storage facility in Etzel and also in renewable energies, to name a few, are already paying off.”

By expanding the gas midstream business, for example, EnBW was able to increase its trading activities and sell 4.3 billion kWh more of gas than in the prior-year period. EnBW aims to foster this positive development and, in recently concluding a long-term gas supply agreement, has satisfied another important prerequisite in this regard.

Adjusted group net profit in terms of the profit shares attributable to the equity holders of EnBW AG amounted to € 611 million in the first half of the year, up 34.9% on the comparable prior-year figure. On account of the group net profit, the equity ratio as of 30 June 2012 climbed to 17.6%. In comparison to year-end 2011, adjusted net debt increased by 3% as of 30 June 2012 to € 9 billion.

Cash flow from operating activities relating to the first half of 2012 amounted to € 619.5 million, down 33.4% in comparison to the first six months of the prior year. This decrease was mainly attributable to receivables and liabilities from operating activities, primarily due to a currently insufficient level of cost allocations under the German Renewable Energies Act (EEG) which will be offset in the fiscal year 2013.

The “FOKUS” efficiency programme initiated by EnBW also made a positive contribution to earnings.
“The “FOKUS” programme is worth the effort being put into it and is also making a noticeable contribution to earnings faster than expected. As of 2015, EnBW’s “FOKUS” programme will achieve a sustainable improvement in EBIT of € 750 million a year,” says EnBW’s CFO, Thomas Kusterer.

EnBW successfully completed its planned capital measures aimed at strengthening financial stability.
By issuing a hybrid bond with a total volume of € 1 billion, EnBW increased its capital considerably at the beginning of July 2012. The gross issue proceeds from the capital increase amounted to approximately € 822 million, thereby strengthening EnBW’s financial stability and credit standing. This will give EnBW the financial headroom to further implement its strategy, such as the expansion of renewable energies as well as local energy generation. Model projects include the partnership with Vorarlberger Illwerke in expanding the pumped storage power station Obervermunt II as well as the “sustainable town of Ehingen” project.

Overall, development of the group’s result has exceeded previous expectations. At the beginning of the year, EnBW anticipated the fiscal year 2012 would bring a fall in adjusted EBITDA of between 10% and 15% in comparison to 2011. We now expect adjusted EBITDA for 2012 as a whole to be down some 5% on the prior-year level.