EnBW’s traditional business model under continued pressure

Karlsruhe. The overall difficult framework conditions for the energy industry also shaped the fiscal year 2012 of EnBW Energie Baden-Württemberg AG. As expected, earnings before interest, taxes, depreciation and amortisation adjusted for non-operating effects (adjusted EBITDA) fell by 4.3% to € 2,343.1 million. At 135.4 billion kilowatt-hours (kWh), unit sales of electricity at EnBW were down 12.8% on the prior-year figure in the reporting year 2012. The decrease was primarily attributable to the fall in trading activities, among other things due to the shutdown of two nuclear power plants. Unit sales of electricity to retail customers as well as industry and redistributors fell due to the continuing intense competition. Unit sales of gas supplied by the EnBW group increased by 15.7 billion kWh (up 27.4%) to 73.1 billion kWh in 2012. Most of this increase was attributable to trading activities which saw a 12.8 billion kWh increase in unit sales on account of the expansion of the gas midstream business. External revenue increased slightly by 2.6% to € 19,245.9 million.

The decrease in adjusted EBITDA was essentially due to the sharp fall in earnings in the electricity generation and trading segment (down 18%) to € 1,319.7 million, primarily as a result of falling electricity prices on wholesale markets and the loss of earnings due to the permanent shutdown of two nuclear power plants. In contrast, earnings in the electricity grid and sales segment improved significantly by 42.4% to € 685.7 million. This increase in earnings was above all thanks to higher network user charges as well as lower expenses for balancing energy. In addition, lower sales overheads had a positive effect on earnings in the reporting year. The gas segment contributed a total of € 159.4 million to adjusted EBITDA. By contrast, adjusted EBITDA in the energy and environmental services segment dropped by 12.8% to € 309.6 million in the reporting year. This decrease was mostly due to non-recurring effects from the prior year.

At € 652.4 million, the total adjusted group net profit in terms of the profit/loss shares attributable to the equity holders of EnBW Energie Baden-Württemberg AG roughly matched the prior-year level (up 0.7%).

“The past fiscal year was not an easy one. Nevertheless, EnBW created the necessary financial headroom in 2012 to realign its business model while maintaining its sound financial position,” says EnBW’s CFO, Thomas Kusterer.

To further secure the company’s ability to act and its future sustainability, EnBW adopted a package of measures at an early stage. The planned capital measures were successfully completed in 2012. At the beginning of April 2012, the hybrid bond issued with a volume of € 750 million in October 2011 was increased by a further € 250 million. Until the first maturity date in April 2017 the rating agencies will recognise half of this amount as equity. In addition to this there was the successful capital increase of around € 822 million made at the beginning of July 2012. These two measures have considerably improved EnBW’s balance sheet structure.

The group’s internal “Fokus” efficiency programme also developed well in 2012. “We already achieved a sustainable improvement in EBIT of more than € 300 million in 2012. In response to the continued difficult market situation, we resolved to accelerate the programme and will achieve the target of sustainably increasing EBIT by € 750 million by the end of 2014, one year earlier than envisaged,” says Kusterer.

The divestiture programme for our non-strategic investments has a total volume of € 1.5 billion until 2015. Some € 500 million has already been realised through the sale of shares in Energiedienst Holding AG at the end of 2011 and the sale of the Polish operations at the beginning of 2012. EnBW is therefore still targeting divestitures of non-strategic investments with a total volume of around € 1 billion for the planning period from 2013 to 2015.

“The balance sheet for 2012 shows that EnBW’s traditional business model remains under considerable pressure. This has structural causes and is not merely a temporary phenomenon. Even in the next few years we will see these negative effects having a considerable impact as we cannot assume that the market in its current state will recover substantially,” says EnBW’s CEO, Dr. Frank Mastiaux. He continues: “For me it means having to adjust EnBW’s focus so that it is consistently on the market and customer – in terms of structure, efficiency and strategy.”