Dr. Frank Mastiaux ,Chairman of the Board of Management
Dear Sir or Madam,
Dear Shareholders, Employees and Friends of EnBW,
In 2013, we began to profoundly restructure EnBW setting clear targets for 2020. This restructuring process had two main approaches from the very beginning: improving efficiency on the one hand and orientating our activities to the growth markets of the Energiewende on the other. We have had to battle against permanently deteriorating conditions, especially rapidly falling electricity prices, during this process. In the past financial year, we also had to deal with the financial consequences of the law of reorganisation responsibility for nuclear waste management. It has led to especially high extraordinary effects, which were reflected in a Group net loss of 1.8 billion euros. Nevertheless, we can see today that the rigorous implementation of our 2020 strategy is paying off. We once again achieved an operating result that was within our expectations in 2016, which in view of the at times dramatic deterioration in the general conditions was “only” 8 percent below the figure in the previous year. The Grids, Renewable Energies and Sales segments now account for up to 80 percent of the Group operating result. This shows the success of the restructuring of our company. Something that is even more important is the fact that we expect to turn the corner in terms of earnings in 2017. We want to at least maintain our operating result at a stable level for the first time in four years and have the ambition to achieve an increase in operating earnings of up to 5 percent. From 2017 onwards, we will thus also be on course for 2020 regarding our earnings performance, and are confident that we will achieve the strategic and operational targets that we set ourselves for this time period.
Implementation of the EnBW 2020 strategy is well on track
The efficiency measures that have been implemented and set in motion since 2012 to make savings of 1.4 billion euros up to 2020 are not the only thing that will make a contribution in this area. Major projects such as our third offshore wind farm EnBW Hohe See, which we will construct in the North Sea by 2019, and also the further expansion of our grids business, as well as numerous new products and business opportunities in sales through to promising partnerships in the area of electromobility, will ensure that we will successfully conclude our restructuring by 2020 and achieve the envisaged operating result of between 2.3 and 2.5 billion euros. Our company and our employees have demonstrated over the past few years that they can recognise and adapt to changes at an early stage. We want to increasingly build on this ability, which will be a decisive factor for success in future competition. Therefore, we have already looked very closely early on at market developments and trends for the years after 2020.
The pace of change in our sector continues to increase. Reasons for this include, for example, advancing digitalisation, decentralisation and urbanisation. Customer expectations are also moving in a clear direction: Our customers expect tailored solutions that are delivered immediately and not just standard products and services. Digital intelligence will link the supply of electricity, gas and heating to a much greater extent in the future. Electromobility is connecting the energy and transport sectors, while private households with their own generating capacity and a desire for autonomy are joining together in communities to share their energy and thus form virtual power plants. As we all know sharing is the new having.
The climate conferences in Paris and Marrakesh clearly advocated global decarbonisation. And this will also accelerate the Energiewende, which has now become an irreversible global process on a number of levels. The international capital markets are beginning to adapt to these changes. The international Task Force on Climate-related Financial Disclosures is, for example, developing regulations for climate-related financial reporting. I am delighted that EnBW is represented on this task force by my colleague on the Board of Management Thomas Kusterer.
An infrastructure partner with digital system competence
The digital convergence of individual energy systems and energy infrastructures requires the overarching ability to safely control, operate and sustainably develop complex systems and infrastructures both individually and as a whole. It is precisely here that our core expertise gained over many decades lies. Therefore, we are prepared to take on a pivotal position in the energy world of tomorrow. Other sectors beyond the energy industry will also require this knowledge in future – such as broadband, transport or safety. Strategically, we will significantly boost our standing as a competent and reliable infrastructure partner for customers, citizens and local authorities.
Special situation in 2016 – turning point in 2017
The operating result of EnBW – as described at the beginning and as expected – fell once again. However, we anticipate that the operating result will stabilise or show the first signs of improvement in 2017. We were able to already improve some important non-financial goal dimensions. For example, the Reputation Index of EnBW – our standing in the eyes of important stakeholder groups and the wider public – increased in 2016. We added this important indicator for the first time as a key performance indicator in 2016. The way we conduct our corporate activities in future will be even more strongly influenced by the bearing they have on our reputation.
Due to the law of reorganisation responsibility for nuclear waste management, we were pushed to the very limits of our company's financial capabilities in 2016. Nevertheless, we expressly welcome the fact that clear and binding regulations with respect to the responsibilities for the dismantling, disposal and final storage of nuclear power plants now apply. We will benefit from this development in future years because the risks facing our business model have reduced decisively.
It is our goal over the next few years to once again progressively move from a phase of restructuring and saving to one of growth. This is not only supported by my colleagues and I on the Board of Management but also the entire team at EnBW.
Dr. Frank Mastiaux
Chairman of the Board of Management