3 S teps to long-term value (as of April 2013)
Forward Looking Statement This presentation contains certain forward-looking statements within the meaning of the US federal securities laws. Especially all of the following statements: > Projections of revenues, income, earnings per share, capital expenditures, dividends, capital structure or other financial items; > Statements of plans or objectives for future operations or of future competitive position; > Expectations of future economic performance; and > Statements of assumptions underlying several of the foregoing types of statements are forward- looking statements. Also words such as “anticipate”, “believe”, “estimate”, “intend”, “may”, “will”, “expect”, “plan”, “project” “should” and similar expressions are intended to identify forward -looking statements. The forward-looking statements reflect the judgement of RWE’s management based on factors currently known to it. No assurances can be given that these forward -looking statements will prove accurate and correct, or that anticipated, projected future results will be achieved. All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Such risks and uncertainties include, but are not limited to, changes in general economic and social environment, business, political and legal conditions, fluctuating currency exchange rates and interest rates, price and sales risks associated with a market environment in the throes of deregulation and subject to intense competition, changes in the price and availability of raw materials, risks associated with energy trading (e.g. risks of loss in the case of unexpected, extreme market price fluctuations and credit risks resulting in the event that trading partners do not meet their contractual obligations), actions by competitors, application of new or changed accounting standards or other government agency regulations, changes in, or the failure to comply with, laws or regulations, particularly those affecting the environment and water quality (e.g. introduction of a price regulation system for the use of power grid, creating a regulation agency for electricity and gas or introduction of trading in greenhouse gas emissions), changing governmental policies and regulatory actions with respect to the acquisition, disposal, depreciation and amortisation of assets and facilities, operation and construction of plant facilities, production disruption or interruption due to accidents or other unforeseen events, delays in the construction of facilities, the inability to obtain or to obtain on acceptable terms necessary regulatory approvals regarding future transactions, the inability to integrate successfully new companies within the RWE Group to realise synergies from such integration and finally potential liability for remedial actions under existing or future environmental regulations and potential liability resulting from pending or future litigation. Any forward-looking statement speaks only as of the date on which it is made. RWE neither intends to nor assumes any obligation to update these forward-looking statements. For additional information regarding risks, investors are referred to RWE’s latest annual report and to other most recent reports filed with Frankfurt Stock Exchange and to all additional information published on RWE's Internet Web site. 1
RWE – an attractive value proposition Stable financials Attractive portfolio > Leading market position and > Progress in strengthening balance regionally focused strategy sheet > Pure utility play – exit of upstream > Streamlined and disciplined activities investment approach > Balanced asset portfolio > Cash flows from operating activities to cover investments and dividends > Highly cost-efficient and modernised by 2015 power plant portfolio by 2013/14 > Further efficiency enhancements > CO 2 neutral position and operational excellence > Successful structural changes to long-term gas supply contracts Outlook for 2013 confirmed: EBITDA c. € 9 bn; operating result c. € 5.9 bn; recurrent net income c. € 2.4 bn 2
Milestones of 2012 Financial performance in line with upgraded guidance from November 2012: EBITDA +10%, operating result +10%, recurrent net income in line with 2011 Disposal of assets for a combined value of € 2.1 bn Successful renegotiation of all but one long-term oil-indexed gas supply contracts Successful conclusion of 2012 efficiency enhancement programme; first results from new € 1 bn programme Outlook for 2013 confirmed 3
Generation earnings are coming under severe pressure Operating result in € bn 6.4 Conventional generation 3.3 > Lower outright power prices > Full auctioning of CO 2 certificates > Pressure on spreads and load factors Other businesses > Expanding renewables > Growing upstream business 3.1 > Stable to slightly growing distribution & retail earnings > Normalisation of earnings profile for Trading/Gas Midstream division … 2012 4
Strategic cornerstones remain, but targets adjusted to changing market conditions Sustainable > Streamlined investments in renewables > Development of innovative products for energy market transformation (e.g. distributed energy solutions) Robust > Focus on cost efficiency, especially in conventional power generation > Increase financial flexibility and maintain excellent access to capital markets International > Maintain leading positions in core markets in Northwest and CE and SE Europe > Integrate businesses and support functions to enhance cross-border efficiencies 5
Implementation of strategy based on 3 steps to create long-term value S weat the assets S elective capex S trategic repositioning 6
S trategic repositioning Portfolio considerations > Sale of NET4GAS; closing envisaged for H2 2013 Disposals > Further disposals will be opportunistic with focus on portfolio optimisation and value enhancement > Value enhancing growth over volume expansion, Focused especially in renewables growth > Concentration on asset-light projects with attractive return and short payback periods > Review concluded limited rationale to own RWE Dea upstream business > Evaluation of options and potential exit route currently underway 7
S trategic repositioning Excellent access to debt capital market is key Leverage factor mid-term target: ≤ 3.0x Net debt in € bn ‘In the order of 2012’ 2.8x 3.5x 3.5x ‘In the order 29.0 29.9 33.0 of 2012’ 19.9 16.9 16.2 13.0 13.1 12.8 2010 2011 2012 2013e Leverage factor (Net debt/EBITDA) Net financial debt incl. 50% of hybrids Pension, mining and nuclear provisions > Current market environment allows us a higher gearing temporarily > Aspiration to bring down leverage factor to 3.0x medium term unchanged > Focus on additional efficiency enhancements and lower capex > Short-term changes in discount rates for long-term provisions will not drive deleveraging strategy 8
S trategic repositioning Positive cash balance provides ability to drive down debt Cash flows from operating activities to cover investments and dividends by 2015 € bn Further reductions 9.3 in capex levels 8.8 Additional efficiency 7.1 enhancements post 5.5 5.5 2014 initiated 4.4 Pay-out ratio of 50% – 60% ≤ of recurrent net income 2010 2011 2012 2015e Capex in property, plant & equipment and financial assets (according to cash flow statement) Dividends (incl. minority payments; year of payment) Cash flows from operating activities 9
S elective capex Financial discipline and flexibility at forefront in new investment plan Approx. € 13 bn capex programme € bn for 2013 – 2015 ~ 6.7 Day-to-day of which 3.1 for electricity and gas grids Completion of conventional ~ 2.3 Renewable projects power generation programme ~ 1.9 Upstream gas & oil projects in 2013/14 ~13 ~ 1.8 Completing conventional power plants Committed capex (including day-to-day, approx.) ~ 0.3 Other 2013 2014 2015 c. 95% c. 85% c. 75% 6.4 6.4 5.1 ~ 5 ~ 4.5 ~ 3.5 Sustainable long-term capex level of € 3 – € 4 bn p.a. of which day-to- day capex c. € 2 to € 2.5 bn p.a. Further growth projects have to be financed debt-neutral, for example by the disposal of other assets or partnering solutions. 10
S elective capex Moderate and disciplined growth in German and CEE/SEE downstream markets Germany (examples) CEE/SEE (examples) Build on current downstream market Energy services capex ( € million) positions and expand in new markets, 60 regions, and commodities 40 Continue to build electricity down- stream position from currently 2% to ~5% – 7% in 2015 Seek electricity customers beyond 2011 2012 2013+ region of Warsaw and enter gas Investments of up to € 100 million supply market per annum in Target further increase of market > Contracting solutions (at IRR of ~8%) share and value of customer portfolio (heating, cooling, cogeneration, compressed air) > Consulting services Establish electricity retail position with (energy controlling, thermography) focus on B2B segment > Special products (virtual power plant etc.) 11
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