Operational strength is the basis for investments in growth – extrinsic factors will, however, give rise to considerable financial burdens in the future

• EnBW raises revenue by to 12.5% to € 17.5 billion
• Adjusted EBIT increases by 7.7% to € 1.9 billion
• EnBW continues on course for growth with an investment volume of € 5.1 billion by 2013, down from the original € 7.9 billion

Karlsruhe. In the fiscal year 2010, EnBW Energie Baden-Württemberg AG increased its unit sales of electricity by 22.7% to 146.9 billion kilowatt-hours and its revenue by 12.5% to € 17.5 billion. Adjusted EBIT increased by 7.7% to € 1,932.6 million. Adjusted for special effects, group net profit in terms of the profit shares attributable to the equity holders of EnBW AG came to € 987.8 million, a rise of 12.4% in comparison to the prior year 2009.

Once again in 2010, the operational strength of EnBW was the basis for its investments in growth. In 2010, EnBW invested some € 2.3 billion in developing its fields of business.

EnBW is forced to scale back its investment plans for the coming years, however, on account of the changed political environment and associated significant financial burdens as well as the fall in wholesale prices, that are likely to remain at a low level for the foreseeable future, in conjunction with the associated market price risks.

"By reducing our investment volume for the period until 2013 from € 7.9 billion to € 5.1 billion gross, we are on the one hand taking account of future challenges and on the other we are putting ourselves into a position to be able to continue investing in EnBW’s future development. One of the most important focal points of our investment activities is on the development of our generation capacities, specifically the further expansion of renewable energies," says Hans-Peter Villis, EnBW’s CEO.

EnBW remains on track for growth – Investment planning adjusted to changes in energy policy

With the adjustments to its investment programme, EnBW is taking account of both its strategic growth targets and the changed energy policy framework and resulting financial burdens. For example, the nuclear fuel rod tax alone will give rise to payment obligations for EnBW that are expected to average € 440 million per annum over six years. On top of that, starting already in 2011 EnBW has to make payments into a fund to promote renewable energies for the new quantities arising from the extension of the working lives of nuclear power plants. In response, EnBW has adjusted its strategy and launched an efficiency programme ("Fokus"). The objective of this efficiency programme is to tap potential for new business segments and to achieve improvements in earnings by optimising processes. Following gradual introduction, a sustainable savings volume of € 300 million per annum is anticipated as of 2013. In addition, EnBW is planning divestitures totalling € 1.8 billion over the coming three years.

EnBW is investing in Baden-Württemberg, Germany and selected target markets – investments focus on renewable energies and energy efficiency

"Our strategy is to strengthen and expand EnBW’s position in Baden-Württemberg, Germany and selected foreign markets, while at the same time maintaining our sound financial position and net assets. Our investment plans are consequently based on strict financial criteria. We intend to finance our net investment from current cash flow and retain our A rating," says Villis.

The capital expenditures geared to growth focus on the fields of renewable energies and energy efficiency as well as the grids. In addition, EnBW intends to further expand its position in the Czech Republic by continuing to develop the Czech energy company Energieversorger Pražská energetika, a.s. (PRE), in which it holds a majority shareholding, into an integrated supply company. Since September last year, EnBW has held an overall shareholding of 69.6% in PRE. With some 745,000 customers, PRE is the third-largest electricity supply company in the Czech Republic, generating revenue of around € 800 million and an EBIT of around € 100 million in 2009.

As part of its course for growth, EnBW is currently realigning its portfolio of investments to strategic growth areas and is likewise investing in foreign target markets. In addition to the majority shareholding in PRE, EnBW also has equity investments in Switzerland, in Hungary, in Poland and in Austria. EnBW further has a share in a joint venture in Turkey, which it intends to use as a basis to build up generation capacities in Turkey, primarily in the field of renewable energies. The joint venture in Turkey currently has a 110 megawatts of wind and hydro-electric generation capacity in operation or under construction.

Over the past three years, EnBW has made considerable capital expenditures in Germany with the aim of strengthening its generation position and expanding renewable energies. Our aim over the coming years is to successfully complete our ongoing construction projects, the conventional power stations RDK 8 and GKM 9 in Karlsruhe and Mannheim, respectively, as well as the new run-of-the-river power station at Rheinfelden and the extension of the one at Iffezheim, and to invest in further wind power projects.

EnBW has made progress in expanding renewable energies

EnBW’s CEO Villis says, "Over the last three years we have made considerable investment into renewable energies. Construction work on the new run-of-the-river hydro-electric power station has virtually been completed, in a few weeks’ time EnBW will put Germany’s first commercial offshore wind farm, EnBW Baltic 1, into operation with an installed output of 48 megawatts and over the last two years we have increased our capacity in the area of onshore wind farms just about fivefold to around 150 megawatts. We will start to reap the first fruits of these investments before the end of this year. This shows that we are on the right track that we intend to continue along."

EnBW’s positive earnings development is proof of its operational strength

Robust operating results are the basis for the investments in growth. In the 2010 reporting period, the electricity generation and trading segment made the largest contribution, € 1,626.7 million (up 2.3%), to the result of operations before income taxes, financial result and investment result (adjusted EBIT). Positive effects arose from forward contracts concluded in electricity trading and the fact that the expenses incurred in 2009, the year of the economic crisis, from having to resell quantities not sold to industrial customers on account of the business climate were not repeated. In contrast, the smaller contribution margin due to GKN I nuclear power plant operating at reduced capacity in 2010 placed a burden on adjusted EBIT.

Within the electricity grid and sales segment, the economic upswing, among other factors, had a positive effect on the regulated grid business which enabled EnBW to significantly increase its adjusted EBIT from € 130.9 million in 2009 to € 265.8 million in the current reporting year.

Despite similar weather conditions to the prior year, adjusted EBIT in the gas segment fell by 47.3% to € 80.1 million. This was essentially the result of a decline in unit sales as a consequence of intense competition.

In contrast, earnings in the energy and environmental services segment grew by 29.1% to € 111.3 million.

In the reporting year 2010, the deconsolidation of GESO Beteiligungs- und Beratungs-AG and Pražská teplárenská a.s. (PT) was by far the most significant factor with an impact on non-operating result. All in all, non-operating EBITDA increased to € 442.0 million, thus significantly above the prior-year figure of € 132.9 million. The sale of GESO additionally led to a drop in unit sales of electricity and gas.

Sound financial position and net assets

The generally satisfactory development of earnings also had a positive impact on EnBW’s balance sheet structure. For example, EnBW increased its equity ratio, including non-controlling interests, from 18.5% (as of 31 December 2009) to 21.6% as of year-end 2010. In addition, EnBW succeeded in reducing adjusted net debt by € 474.8 million to € 8,139.8 million as of 31 December 2010.

Cash flow from operating activities came to € 2,560.9 million in 2010, which constitutes a rise of 4.8% on the comparable prior-year figure. On the other hand, free cash flow before financing fell from € 1,292.1 million in 2009 to € 1,060.1 million in the current reporting year 2010. This decline is due to capital expenditure on intangible assets and property, plant and equipment increasing by € 315.4 million in comparison to the prior year. In total, EnBW invested a net amount of € 1,356.1 million in the reporting year.

EnBW expects the dividend distribution to be at the same level as in the prior year. The dividend distributed per entitled share amounted to € 1.53 in the prior year.