Dear Sir or Madam,
Dear Shareholders, Employees and Friends of EnBW,
The developments over the past year have given the Energiewende an even greater impetus. The expansion of renewable energies in Germany is continuing with undiminished vigour. Global investment also reached record levels of over 300 billion euros. At the same time, pressure on conventional generation is increasing: firstly, due to the CO₂ targets agreed at the Climate Change Conference that are endorsed by EnBW, and secondly, due to the reaction of the capital market – with an increasing number of investors withdrawing from fossil fuels. The low wholesale prices on the German electricity exchanges, which have fallen even more significantly recently, have made it almost impossible to operate power plants economically. Current discussions demonstrate that the energy policy conditions for energy companies will not improve.
These facts emphasise that we will only be able to position our company to face up to the Energiewende, with its great challenges but also great opportunities, under our own steam. Neither the market nor the political environment will help us do it.
It was with this attitude that we developed our 2020 strategy in the middle of 2013, which we have rigorously implemented since then and can honestly say today: We believe that all of the developments on the market and amongst the competition have so far proved that this is the right strategy. From the very beginning, we expected a radical fall in earnings from conventional generation of 80 per cent by 2020. We aim to fully compensate for this decline in earnings through the expansion of renewable energies, the grid business and our sales business by 2020. And we want to achieve this as ONE company and ONE team, which will successfully achieve this transformation together.
Important steps achieved in the implementation of the strategy
In the 2015 financial year, we came a great deal closer to achieving the goals of our EnBW 2020 strategy. Although we were not able to acquire the wind energy company Prokon, we have successfully pushed forward the expansion of renewable energies under our own steam: Our second offshore wind farm EnBW Baltic 2 was fully connected to the grid in September. The onshore wind farm Harthäuser Wald has also been placed into operation and is the largest wind farm in Baden-Württemberg to date.
A very important strategic step in the restructuring of the company, and the largest transaction in the history of EnBW, is the exchange of our minority shareholding in EWE for a majority shareholding in the gas company VNG-Verbundnetz Gas Aktiengesellschaft (VNG). This means we will double our gas business and become the third largest gas supplier on the German market. At the same time, we will be strengthened our regulated grid business because VNG generates more than 50 per cent of its earnings from gas transport and gas distribution.
We were able to significantly improve our operating result, above all in the area of renewable energies. As a result, we were able to maintain the operating result of the EnBW Group at an almost stable level at 2.1 billion euros, despite an extremely difficult economic environment. We owe this stability to the success of our growth initiatives and our improvements in efficiency. The positive developments in our non-financial goals that are supporting us during our transformation have also been pleasing: The satisfaction of our customers improved markedly in 2015 and we were also able to record a significant improvement in our employee commitment.
In the near and distant future, we do not anticipate any improvement in conditions despite historically low electricity prices. Therefore, we also had to recognise high impairment losses on our power plants in 2015 and were forced to increase provisions for onerous contracts for electricity procurement agreements. These items had a negative impact of 950 million euros on our result. In contrast to the previous year, we were nevertheless able to report a Group net profit attributable to the shareholders of EnBW AG of 125 million euros.
We’re making it happen
We will push forward with the restructuring of our company with even greater commitment in 2016 and further develop our projects in the areas of onshore and offshore wind power. Alongside the expansion of renewable energies, we will define measures to significantly improve our competitiveness in our sales business. In the grids sector, the focus will be on extensive investment in the distribution grids for the expansion and upgrading of our existing grids. After the approval of the antitrust authorities for the acquisition of VNG, the further development of our gas business will become another key area of focus. In view of the renewed deterioration of the framework conditions, we will of course resolutely pursue our measures for improving efficiency. Due to the wholesale prices for electricity, which are not only consistently low but also continuing to fall, our operating result in 2016 will once again be below that achieved in the previous year.
The Board of Management, management personnel and employees are ONE EnBW team that will continue the restructuring of the company in 2016 with undiminished energy and by taking courageous steps. Based on a stable economic and political environment, we have resolved to set the wheels in motion to improve our earnings performance and thus achieve our goals for 2020. We will fulfil our promise.
Dr. Frank Mastiaux
Chairman of the Board of Management