RWE Company presentation As of July 2017
Disclaimer This document contains forward-looking statements. These statements are based on the current views, expectations, assumptions and information of the management, and are based on infor- mation currently available to the management. Forward-looking statements shall not be construed as a promise for the materialisation of future results and developments and involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those described in such statements due to, among other things, changes in the general economic and competitive environment, risks associated with capital markets, currency exchange rate fluctuations, changes in international and national laws and regulations, in particular with respect to tax laws and regulations, affecting the Company, and other factors. Neither the Company nor any of its affiliates assumes any obligations to update any forward-looking statements. RWE AG | Company presentation | July 2017 2
Investment highlights Leading integrated European generation and trading business ✔ Strong track record of operational excellence and commercial optimisation ✔ Well placed to benefit from fundamental changes in energy markets ✔ Solid financial position and focus on cash flow generation ✔ Committed to value creation and sustainable dividend with upside potential ✔ RWE AG | Company presentation | July 2017 3
Strategic outlook RWE AG | Company presentation | July 2017 4
Strategic focus on evolution of existing business portfolio Optimise Enhance Tap into evolving existing operations portfolio opportunities Lignite & Nuclear/ European Power > Explore technologies European Power suitable to provide > Develop portfolio security of supply > Manage cost base for future market > Invest selectively into requirements > Apply capital allocation new technologies discipline > Participate in opportu- (e.g. batteries) nistic asset consoli- > Actively manage dation (core markets) portfolio Supply & Trading Supply & Trading > Expand organically > Restore profitability RWE AG | Company presentation | July 2017 5
Expected tightening due to decline of firm capacity Demand-supply balance at peak load in Germany 1 (GW) > Conventional capacity 120 expected to shrink Expected > Reduction driven by nuclear 100 tightening phase-out and recently announced hard coal closures 80 > No corresponding amount 60 of capacity currently under construction or planned 40 20 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Nuclear Lignite Hard coal Gas Oil 2 Hydro Other Wind Peak load 1 Calculated without reserve, mothballed power plants and interconnectors. Derating factors as of ‘ Leistungsbilanzbericht 2014’ of German TSOs, including 1% and 0% availability for wind and solar respectively | 2 Peak load calculated from ENTSO-E hourly load, scaled up to total German demand Source: BNetzA power plant list, BNetzA list of plant additions and shut-downs, KWSAL, own calculations RWE AG | Company presentation | July 2017 6
Capacity tightness already seen in certain situations German generation capacity on 24 January 2017 > Low contribution from Resulting High (GW) ( € /MWh) renewables capacity gap 1 contribution 80 250 from nuclear – Wind: common high 225 70 pressure situation in 200 winter 60 175 – PV: shorter daytime 50 hours accompanied 150 by fog 40 125 > Highest annual load in Significant 100 30 winter (heating, lighting) price spikes 75 > Significant current capacity 20 50 from nuclear power plants 10 25 0 0 1 2 3 4 5 6 7 8 9 101112131415161718192021222324 (hour) Load Hourly spot price Average spot price (Jan 2017) Nuclear generation Renewables generation Conventional generation (excl. nuclear) Note: Renewables includes hydro, wind and PV; other generation includes nuclear, lignite, hard coal, gas, biomass and other | 1 Imports and unreported generation | Source: Entso-E Transparency Platform RWE AG | Company presentation | July 2017 7
Generation: Ongoing cost reduction and active portfolio measures Operational cash cost development 1 Active portfolio measures ( € bn) Conventional power generation Since 2012 (GW) 11.5 1.4 4.3 3.0 4.0 3.8 3.7 3.4 3.1 3.9 3.2 Shut- Moth- Contract Lignite 2012 2013 2014 2015 2016 Target Total 2019 down balled termination stand-by reserve > Focus on total cash costs (opex and capex) > Systematic cash flow analysis on plant-by-plant level > Additional measures being implemented > Disciplined decision making process (watch list) – Organisational optimisations > PPAs re-negotiated to reduce cash burden – Continuous process optimisations – Reduced service levels 1 Opex and capex excluding large projects RWE AG | Company presentation | July 2017 8
Generation: Further positive cash contribution from operations Generation output in Germany (TWh) 1 Cash contribution 3 > Rule-of-thumb: Transfer of 5 blocks to stand-by reserve Breakeven at power prices minus CO 2 costs of ~74 ~ € 22/MWh including additional planned 69-71 69 64-66 Lignite 62-65 efficiency measures > Example: Base load price of € 28/MWh and CO 2 price of € 6/MWh (equivalent to ~ € 5.5/t at an emissions 2016 2017 2018 2019 2020 factor of 1.1) Generation output (TWh) 2 Cash contribution 3 25 > Breakeven at base load prices of above ~24 ~ € 20/MWh, including additional planned 16-18 16-18 16-18 16-18 efficiency measures Nuclear 7-8 > Although cost base already largely optimised, further efficiency measures in implementation 0 2016 2017 2018 2019 2020 2021 2022 2023 1 Excluding Mátra; gross generation, not including ~3 TWh of own consumption | 2 RWE economic share, excluding EPZ | 3 Adj. EBITDA minus capex (before changes in provisions) RWE AG | Company presentation | July 2017 9
Hedging – Fully hedged position for 2018 and implicit fuel hedge for 2019 and 2020 increased Expected positions and hedge status as of 31 March 2017 ~31 ~27 ~26 ~27 Outright (Lignite & 85 – 90 TWh 80 – 85 TWh 80 – 85 TWh ~100 TWh Nuclear) >90% >90% >80% >70% 2017E 2018E 2019E 2020E Open position Fully hedged position Implicit fuel hedge Average hedge price ( € /MWh) ~70 TWh 1 Spread 50 – 70 TWh 1 50 – 70 TWh 1 50 – 70 TWh 1 (Euro- pean >90% <10% <10% Power) >60% 2017E 2018E 2019E 2020E Open position Hedged position (%) 1 Total in-the-money spread RWE AG | Company presentation | July 2017 10
Generation: Changes in hedging rates can add significant value Development of German fuel spreads 1 Development of German base load prices ( € /MWh) ( € /MWh) 5.0 40 4.0 35 3.0 2017 Ø hedged price 2.0 30 1.0 2018 Ø hedged price 0.0 25 (1.0) 2019 Ø hedged price (2.0) 20 (3.0) 35 33 31 29 27 25 23 21 19 17 15 13 11 9 7 5 3 1 15 Jan 2014 Jan 2015 Jan 2016 Jan 2017 Months to delivery Cal 2017 Cal 2018 Cal 2019 Cal 16 Cal 17 Cal 18 Cal 19 > High volatility over last 18 months driven by coal > Spreads increased nearer to delivery in recent prices years > Hedging approach limited downside risk from very > Decelerated hedging added significant value low outright prices in early 2016 > Hedging can be accelerated, depending on market views 1 Fuel spread defined as: Power price – (pass-through-factor carbon × EUA price + pass-through-factor coal × coal price + pass-through-factor gas × gas price) Source: Bloomberg as of 31 st December 2016 RWE AG | Company presentation | July 2017 11
Lignite: Significant CO 2 reduction in line with broader European and national roadmap 2020 2030 Planned Stand-by reserve End of Inden mine capacity de- 2 x 300 MW Frimmersdorf 2 x 300 MW Weisweiler 1 2017 2021 ~2030 crease 2 x 600 MW Weisweiler 1 2 x 300 MW Niederaußem 2018 2022 1 x 300 MW Neurath 2019 2023 By 2020 By 2030 CO 2 reduc- -15% tion vs. 2015 -40 % ‒ -50% > Transfer of 1.5 GW into stand-by reserve > Shut-down of adjacent plant site Weisweiler > Final shut-down after 4 years in reserve > Additional CO 2 reduction measures and options (efficiency enhancement, reduction of full-load hours, lower capacity utilisation) 2 1 When Inden mine’s supply comes to an end | 2 Depending on expansion of renewable energy sources RWE AG | Company presentation | July 2017 12
Nuclear: Clear separation of responsibilities between nuclear operators and state RWE’s responsibility State’s responsibility RWE’s remaining nuclear provisions RWE’s contribution to state fund 1 (31 Dec 2016) (1 July 2017) € 7.0 bn € 5.7 bn 1.8 Risk surcharge Materials 30 – 40% and waste Nuclear energy treatment fund (KFK 2 ) 5.2 20 – 30% Dismantling base amount including interest Basic site 35 – 45% management Decommissioning Storage & disposal Storage & disposal Clear regulatory framework Finite financial contribution for decommissioning activities to state fund without further liabilities 1 Figures reflect the consolidated view, including minority interest of E.ON in the Emsland nuclear power plant. RWE’s economic share is € 5.0 bn for the base amount including interest until 30 June 2017 and € 1.8 bn for the risk premium (in total € 6.8 bn) | 2 Kommission zur Überprüfung der Finanzierung des Kernenergieausstiegs RWE AG | Company presentation | July 2017 13
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