EnBW has been changing more profoundly than ever before since 2012. This is necessary to accomplish the goals in the 2020 strategy. The company already reached crucial milestones such as the turning point in earnings in 2017.
2012: Strategy defined for 2020
Group management did not develop the 2020 strategy on its own. Employees contributed their ideas in workshops and seminars.
The phasing out of nuclear power, tougher competition and climate change have caused upheaval in the energy sector. EnBW was one of the first energy companies that decided to undergo radical change. In cooperation with managers and employees selected from all areas of the company, the Board of Management developed the 2020 strategy and since then, EnBW has been reorganising its business portfolio and exploiting new growth opportunities. The strategy focuses above all on the expansion of renewable energies and the grids. In addition, it concentrates on the development of new products and services for customers.
2017: Financial trend reaches turning point
EnBW cleared an important strategic hurdle in 2017. The annual operating result rose again for the first time since 2010. An important intermediate goal of the strategy has thus been achieved because the cost of the Energiewende and the fall in electricity prices had caused the profits of EnBW to collapse. The Group countered these problems and radically simplified its structures so that today it can work more economically. EnBW spends €1 billion less per year than in 2012. This amount is set to rise to €1.4 billion per year by 2020. At the same time, increasing revenue and the expansion of renewable energies and the grids have supported the turnaround in earnings. They are making a growing contribution to the Group net profit – with, for example, the expansion of onshore wind power having a significant positive impact in 2017.
We are making every effort to further increase profits. EnBW is already earning more today through renewable energies and the grids than through gas and coal power plants. In addition, we are investing in innovative and digital products: We are developing modern storage systems, smart street lighting and virtual platforms for trading electricity and gas. But we are not travelling this road alone. We are also opening ourselves up to companies that are not from the energy industry. For example, we now have start-ups as important partners. EnBW identifies these companies outside of the Group or builds them up itself – such as at the Innovation Campus in Karlsruhe or the Company Builder in Stuttgart.
2020: Time is on our side
Development of adjusted EBITDA
We will do all we can to once again achieve earnings of €2.4 billion by 2020 and thus reach the same level as in 2012 – yet we will achieve this result under totally different conditions: renewable energies, grids and sales will contribute 85 % of the net profits. The share of the generation capacity accounted for by renewable energies will increase from the current figure of just under 26 % to 40 %. This period of radical change is likely to come to an end by 2020. We will then concentrate on growth and innovation to secure new markets.
2025: Prospects for growth
Alongside our existing growth fields of renewable energies, grids and sales, we have identified future growth fields in the area of critical infrastructure – i. e. systems that maintain important social functions. These are not only found in the energy sector but also in adjacent fields such as transport or telecommunications. EnBW can safely manage large, complex energy plants, extensive electricity and gas grids and highly complicated IT systems. We want to transfer this expertise to other sectors. The infrastructure market in Germany is highly attractive. In the next ten years alone, investment will increase by 50 percent to €150 billion – both within the energy system and also in adjacent sectors.
A look ahead to the future. Three questions for …
Why is the energy sector changing so profoundly?
An important reason is the trend towards decarbonisation due to climate protection. Technical developments mean that renewable energies are today often cheaper than conventional energy even without subsidies. Another driver of this change is digitalisation. Customers expect innovations from energy companies that are already commonplace in other sectors.
What challenges do companies still face?
Energy companies need to focus on future sectors in which they are highly proficient – such as offshore wind or energy-related services. This will enable them to succeed against strong and new competitors from other sectors and exploit important growth opportunities. This applies above all to the end-customer business but also to the areas of infrastructure or renewable energies.
How will the energy world look in the future?
An important trend is the coupling of various different sectors of the energy industry. Electric cars could be used as storage systems for the electricity grid, while the areas of electricity, heating and gas could be combined in sustainable residential districts. The energy industry will experience another period of profound change due to this type of networking.
Frank Klose is a Senior Partner and Managing Director of the strategy consultants The Boston Consulting Group (BCG). One of his specialist areas is the energy industry.
Energy companies need to focus on future sectors in which they are highly proficient.