Group net profit in excess of one billion euros for the first time

Karlsruhe. The year 2006 was the best fiscal year that EnBW Energie Baden-Württemberg AG has seen to date. According to the consolidated financial statements presented today for the fiscal year 2006, EnBW increased its revenue by 22.8 percent to 13,219.4 million euros, raising all key earnings indicators once again and thus following on from the prior year with another record result. Earnings before interest, taxes, depreciation and amortisation (EBITDA) increased by 12.3 percent to 2,307.8 million euros in the fiscal year 2006 and earnings before taxes and interest (EBIT) rose by 10.2 percent to 1,470.2 million euros. Earnings before tax (EBT) improved by 8.8 percent, reaching 1,183.2 million euros. EBITDA, EBIT and EBT increased substantially in total as well as adjusted for income and expenses relating to other periods and extraordinary results, and also adjusted for consolidation effects. Buoyed by non-recurring tax effects resulting from the amendment of the German Corporate Income Tax Act, group net profit for the year exceeded the billion-euro threshold for the first time, reaching 1,003.4 million euros. This is an increase of 88.8 percent. This excellent development of earnings was based above all on the good earnings power, optimisation of the value added chain, enlargement of the consolidated group and the great success of EnBW’s internal TOP FIT cost-cutting programme, which has now been brought to a successful close.

“With the third record result in a row and implementation of the TOP FIT programme right down to the letter, we have created a foundation for the future – for a strong EnBW and an energy stronghold in Baden-Württemberg. The fruits of the EnBW team’s work over the past three years can and will provide a sound basis for a successful development of the company in the long term. That is why today is also an important day for our entire workforce – indeed for them especially. Against the backdrop of the success achieved, we can now focus on and redouble our strategic efforts. Maintaining the priorities Baden-Württemberg – Germany – international, EnBW’s future strategy will revolve around two key issues: ‘climate protection and growth’. Let me stress that this is not a contradiction in terms for us,” EnBW’s CEO Prof. Dr. Utz Claassen emphasises.

Commenting on the development of dividends, Claassen stated that: “In light of the positive business development, the Board of Management and the Supervisory Board will submit to the annual general meeting a proposal for a dividend distribution of 1.14 euro per share, which corresponds to an increase of around 30 percent. This means the dividend proposal will be higher than the target of 1.06 euro per share announced in the prior year.”

In 2006, EnBW generated 72.9 percent of its revenue in the electricity segment. In the same period, unit sales of electricity rose by 11.9 percent. The customer growth achieved at the EnBW subsidiary Yello Strom GmbH also contributed to this positive development. Incorporated in 1999, Yello has become the largest grid-independent energy company by far in Germany and today has some 1.3 million customers. “The consistent customer growth shows that Yello has not only made history in terms of competition on the German market for electricity, but continues to be a major competitive drive,” Dr. h.c. Detlef Schmidt, member of the Board of Management for marketing and sales, explained.

The gas segment accounted for 20.9 percent of the revenue generated in 2006. Unit sales of gas fell by 5.8 percent. On aggregate, EnBW sold 119.4 billion kilowatt-hours of electricity and 83.5 billion kilowatt-hours of gas in the reporting year 2006. Revenue in the energy and environmental services segment rose by 51 percent; adjusted for changes in the consolidated group, the growth rate was 12.3 percent. Burdens and risk provisioning in the disposal area however reduced the overall group earnings figures. The EBITDA in the energy and environmental services segment dropped by 62.9 percent to 58.7 million euros. The burdens in the disposal area were caused by decisions taken in the past and concern the mechanical-biological treatment plants and related disposal contracts.

In the fiscal year, EnBW spent 630.1 million euros on intangible assets and property, plant and equipment, 15.2 percent more than in the prior year. The electricity segment accounted for roughly two thirds of these capital expenditures with a focus on expansion of power plants and distribution facilities. Apart from that, EnBW now holds a 54.94 interest as the majority shareholder of Stadtwerke Düsseldorf AG after acquiring a further 25.05 percent share and also increased its shareholding in Energieversorgung Niederösterreich AG (EVN) to just under 36 percent.

Beyond that, EnBW was also very active in 2006 where innovation is concerned. “Our decision to construct a new state-of-the-art coal power plant at our Karlsruhe location marks an important milestone. The investments involved total over 1 billion euros, and will help to secure supply reliability within the state by generating electricity close to where it will be consumed. In addition, we have other power plant projects at analysis and planning stage,” Chief Operating Officer Pierre Lederer said.

“The EnBW City construction project in Stuttgart is one of the largest office building projects in Germany today. With innovative technologies such as window shading, ventilating and air conditioning, light domes and the use of geothermal heat, EnBW City aims to use energy intelligently and efficiently and even undercut the strict thresholds of the energy saving directive,” comments Dr. Bernhard Beck, member of the Board of Management and Chief Human Resources Officer at EnBW.

In the wake of the positive result, EnBW was able to improve its equity ratio once again. “As of year-end 2006, EnBW’s equity ratio came to 15.7 percent. This marks a further improvement in the ratio, and in relation to year-end 2004 an increase of 57 percent within the space of two years. Another positive factor was the development of cash flow from operating activities, up 10.3 percent to 1,466.6 million euros, while the free cash flow dropped marginally by 4.1 percent on account of the higher capital expenditure. The 9.4 percent increase in the group’s net financial debt was caused by expansion of the consolidated group. Without the expansion of the consolidated group, we could have reduced the group’s net financial debt again in 2006,” Dr. Christian Holzherr, CFO of EnBW, explains.

Regarding the increasing regulatory influence and sometimes dubious attempts by the regulatory authorities to intervene in the energy industry, Claassen called for continued caution and modesty: “In spite of our good performance, we have no reason to let up or lean back – on the contrary: we must continue to fight for every euro in the future. Individual political initiatives, for instance to tighten requirements on emissions trading, relating to antitrust law or grids, may in some cases have a serious impact on earnings, strategic issues and ownership rights. That is why we must and we will continue, with due modesty and entrepreneurial persistence, to do everything in our power to seize competitive opportunities and prevent or at least limit any damage in the interest of our shareholders, customers and staff.