Karlsruhe. The financial year 2013 was again characterised by a difficult market situation and by special burdens ensuing from the regulatory framework for the energy industry. Against this backdrop, EnBW Energie Baden-Württemberg AG initiated a profound strategic and structural realignment in 2013 while, at the same time, stepping up its endeavours to enhance efficiency. These measures served to cushion a considerable part of the negative effects emanating from the environment and enabled the company to achieve an operating profit (adjusted EBITDA) of around € 2.22 billion. This result fell 5.3 percent short of the previous year's figure, but nonetheless remained within the upper range of the forecast corridor. The adjusted consolidated net income of approximately € 463 million declined by 29.0 percent. A proposal will be put to the Annual General Meeting of EnBW that dividend of € 0.69 per share be distributed from the unappropriated retained earnings of EnBW AG.
Efficiency is a prerequisite for the ability to act
A key prerequisite for EnBW's ability to act is anchored in a high level of efficiency and a sharp competitive edge. Frank Mastiaux, Chief Executive Officer of EnBW, placed emphasis on the following at the Annual General Meeting in Karlsruhe: "Our "Fokus" efficiency programme makes a decisive contribution to this. We have consistently implemented and accelerated this programme in 2013, which enabled us to achieve a sustainable improvement in performance worth €624 million in the same year. In the current year 2014 the efficiency programme will take full effect, which is therefore one year earlier than originally planned, thereby achieving even more than its original target of €750 million. To put it plainly: Without this "tour de force" which has taken several years, we would already be in deep water."
Mastiaux commented further: "Against the backdrop of the persistently difficult situation, we will be keeping on track with further efficiency enhancements in 2014 which concentrate on four areas of activity: We will be using the new structure to slim down our organisation considerably, we will continue to optimise our power plants fleet, we will focus our sales activities more strongly, and wherever we can simplify and improve on things we will do so. We are currently in the process of working on concrete measures in these areas of activity and, by 2020, aim to realise efficiency improvements in a clear triple-digit million amount each year.
Clear commitment to the Energiewende
EnBW made a clear commitment to the Energiewende and intends to contribute to its success. Mastiaux: "In times of change what counts is taking matters into one's own hand. We must go on the offensive. EnBW needs to play a stronger role in shaping the Energiewende. We need the courage to initiate radical change which goes to the roots of the business model we had before as well as the way we are organised internally.
The discussion on which direction the Energiewende should take has recently been the subject of controversy. On one thing, however, we have clarity: more than 80,000 megawatts of installed capacity of solar energy and wind power has meanwhile become reality in Germany. The Energiewende train left the station long ago. With our strategy, we have paved the way to stay ahead of the taillights of this train rather than trail behind", stated Mastiaux.
Clear direction targeted for EnBW 2020
The Energiewende poses a huge challenge for energy supply companies. At the same time, however, it opens up huge opportunities for new markets. "Our strategy, approved in 2013, reflects the shifts in value added triggered by the Energiewende. Where old business models have become obsolete new opportunities arise in the same breath and in an even greater scope.
The EnBW strategy for the Energiewende is built on two approaches: The first is the engine room of the Energiewende. This is concerned with an industrial, state-of-the-art and, above all, reliable structure of energy supply of the kind an industrial nation such as Germany requires. At the same time, we will be concentrating on developing completely new business models for our customers in a targeted way. Customer proximity therefore forms the second pillar of our strategy, one that we will now be developing with elan."
As part of its new strategy, EnBW assumes that the contribution to profit by conventional energy generation is set to decline by 80 percent through to 2020. This downturn is to be fully compensated by sharp growth in the segment of Renewable Energies (250 percent), Grids (25 percent) and Decentralised Sales (100 percent). The target for the company is to have achieved a sustainable, future-oriented and a dividend-eligible earnings level of at least € 2.4 billion (adjusted EBITDA) by 2020 again. Just under half of EnBW's future business will then be conducted in the growth markets of the new energy world. At the same time, the company will attain greater stability as three quarters of its business in regulated areas will be discontinued.
"We have derived a clear picture for EnBW targeted for the year 2020 and have consistently formulated binding contributions to earnings and goals for each individual segment to have achieved by 2020. We know exactly where we want to go", stated Mastiaux.
The year 2014 will be one of implementation
With a view to moving towards the picture targeted for 2020, the company will forge full power ahead in 2014 with the realignment already initiated. Activities which are part of the "engine room of the Energiewende" will focus on expanding the wind power business. In the onshore wind business, doubling "operational wind farms" to 360 megawatts and expanding the secure project development pipeline to 1,000 megawatts have been envisaged. Significant growth has been planned in Turkey. In the offshore wind business, the gradual commissioning of EnBW Baltic 2, the Baltic Sea's largest wind farm to date, is on the agenda. In conventional energy generation, RDK 8 in Karlsruhe which ranks as one of Europe's most modern coal-fired power stations is to go online.
In the rather more decentralised "customer proximity" business, activities are to be expanded to encompass the entire range of e-mobility throughout Germany. A broad-based market launch and an extended application have been planned for the Smart Home product. In collaboration with municipalities, EnBW will be continuing to build on concepts and investment models based on partnerships. Sustainable cities and the new partnerships in Stuttgart and Heilbronn are benchmarks in this business. In addition, the promising energy contracting and efficiency consultancy business is to be considerably stepped up
Frank Mastiaux: "Achieving this goal means that we must change EnBW inside out. Setbacks cannot be entirely discounted in the process – this is no sprint, it is a marathon! We have taken the first step by radically simplifying the corporate structure, which has allowed complexity to be significantly reduced, along with many decision-making bodies and protracted processes of reconciliation. Management must be able to concentrate fully on the business and our customers."
Financial outlook in 2014
Owing to the full effect of efficiency improvements already implemented as part of "Fokus", EnBW also assumes that it will be able to compensate a large part of negative influences in the environment in 2014 as well. Adjusted EBITDA at Group level is likely to lie within a range of between 0 and -5 percent below that of 2013.
The Sales Segment anticipates a positive profit trend (+10 to +20 percent) on the back of a slight upturn in gas sales volumes and a streamlined customer portfolio in electricity sales. Adjusted EBITDA in the Grids Segment is set to decline (-5 to -15 percent), as one-of effects from the first regulation period in the distribution grid no longer apply. The result achieved by the Renewable Energy Segment is expected to rise, boosted by the expansion of wind power in the onshore and offshore business (+5 to +15 percent). EnBW anticipates a marginal decrease (0 to -5 percent) in the Generation and Trading Segment owing to declining prices and spreads.