The restructuring of EnBW is progressing despite the difficult conditions

Karlsruhe. In the 2014 financial year, conditions within the energy industry have continued to deteriorate appreciably. Nevertheless, EnBW was able to achieve an operating result in line with its expectations and slightly below the previous year figure. As a result of extraordinary impairment losses on power plants, there was, however, a high Group net loss. “We have worked rigorously on the implementation of our EnBW 2020 strategy in 2014, and made good progress despite the difficult conditions. A contribution has also been made in this area by our new significantly simplified Group structure,” emphasised EnBW CEO Frank Mastiaux. “As a result of both our efficiency measures and also the first successes in our growth projects, we were able to offset a substantial part of the burdens faced in the sector.”

Business performance in 2014 and dividend proposal

In the 2014 financial year, EnBW achieved slightly higher revenue of around 21 billion euros (+2.2 percent) compared to the previous year with a workforce of 20,092 employees. The operating result adjusted for extraordinary items (adjusted EBITDA) stood at 2,167 million euros, which was 2.6 percent down on the previous year and thus within the target corridor (0 to -5 percent). “In view of the difficult conditions, this relatively small decrease can be considered a success. Our “Fokus” efficiency programme made a decisive contribution here by delivering cost savings of more than 750 million euros,” underlined Thomas Kusterer, EnBW Chief Financial Officer.

In the Sales segment, the adjusted EBITDA stood at 230.6 million euros and was thus 1.5 percent higher than the previous year. The adjusted EBITDA in the Grids segment fell in the reporting period by 7.8 percent to 886.3 million euros. The Renewable Energies segment achieved an adjusted EBITDA of 191.4 million euros, which represented a fall of 13.1 percent. In the Generation and Trading segment, the adjusted EBITDA rose by 7.2 percent to 899.5 million euros.

The impairment losses on power plants and significantly increased provisions for onerous contracts for electricity procurement agreements which no longer cover costs, which were already communicated in the first half of 2014, led to a Group net loss attributable to the shareholders of EnBW AG of around 451 million euros. The Group net profit adjusted for extraordinary items (adjusted Group net profit) attributable to the shareholders of EnBW AG stood at around 479 million euros (+3.7 percent) in the reporting period. Thomas Kusterer states: “We are putting forward a proposal to the Annual General Meetingthat a dividend of 0.69 euros per share be distributed, as in the previous year. This corresponds to a dividend payout ratio of 39 percent. Our proposal takes into account the interests of equity and debt holders and, at the same time, makes a contribution to strengthening the financial position of the company.”

Investments in intangible assets and property, plant and equipment have increased as part of the implementation of the EnBW 2020 strategy by around 61 percent to around 1.7 billion euros. “We have invested a good 77 percent of this sum in growth projects. This underlines how seriously we are taking the implementation of our EnBW 2020 strategy. This can be seen especially in the area of renewable energies, where we have doubled our investment to 611 million euros. This segment accounted for the highest proportion of investment in intangible assets and property, plant and equipment at 36 percent,” adds Thomas Kusterer.

Focus in 2014: pushing forward our growth projects

“In the past financial year, we made those projects that focus on the future growth of EnBW our highest priority,” states EnBW CEO Frank Mastiaux. Progress was made, in particular, in the area of renewable energies. “Through the significant expansion in 2014 of our portfolio of existing wind farms, as well as those projects in both the planning and approval stages, we are well on course to achieve our renewable energy targets for 2020,” he added.

There was also progress made in the gas sector. As a result of the acquisition of 50 percent of the shares in terranets and GVS from the Italian company ENI, EnBW strengthened its gas grid and gas distribution business.

In the electricity sector, the grids business was shaped in 2014 by the award of large concessions in Stuttgart and Heilbronn. Netze BW was able to win both concessions with new partnership models. In addition, it was possible to establish a new business segment in the area of broadband technology. First successes on the market attest to the good prospects for growth.

Other business opportunities opened up in the area of sales and operations in the newly launched third-party market business. It was already possible to secure service contracts with total revenue of 150 million euros in the first year.

Other targeted efficiency measures: 400 million euros in savings by 2020

“Efficiency and operative discipline will also co-determine our actions in the future,” emphasised Frank Mastiaux. “We aim to save another 400 million euros up until 2020.” To achieve this goal, four areas for action were identified and the first measures implemented in 2014. “Following the merger of Group companies into ONE ENBW, we have started to further streamline our organisation. We have scaled down the size of the Board of Management, reduced the number of administrative units by more than half and aligned our activities more strongly to our operative business.” In the area of conventional generation, output capacity will be reduced by 1,700 MW, or around 25 percent, due to the sales of a 75 percent share in the Bexbach power station, the already completed transfer of four plants and the imminently planned transfer of a further two plants to operate as reserve power plants (in accordance with the Ordinance on Back up Power Plants (ResKV)).

Outlook for 2015: Operating result 0 to 5 percent below the previous year – strong growth in renewable energies

EnBW expects continued difficult conditions in the current financial year. Nevertheless, a relatively stable operating result (adjusted EBITDA) of between 0 and 5 percent below the previous year is anticipated. The result for Renewable Energies will increase considerably by at least 20 percent. Due to the commissioning of Baltic 2 and other projects, the installed output from wind power plants will more than double by 455 MW to 790 MW. In the Sales segment, an increase of between 10 and 20 percent is expected. New products and new business models will contribute to this development. In the Grids segment, EnBW anticipates an operating result between 0 and 10 percent lower than in the previous year. The grid infrastructure in the gas and electricity sectors will be expanded through increased investment of around 560 million euros. The operating result in the Generation and Trading segment is set to fall by between 15 and 25 percent due to further decreases in wholesale market prices. “We cannot influence the market or the political environment. Therefore, we will also concentrate to an even greater extent in 2015 on those aspects that lie in our own hands,” underlined Frank Mastiaux. “We want to follow on from the progress made in 2014 and continue to implement our strategy rigorously and at a high tempo. Despite all of the difficult conditions faced in the sector, our confidence that we can achieve our goals has grown in the previous year. The restructuring process that began in the middle of 2013 is on course and will also remain on course in 2015.”