Company Presentation
Contents Page Page General information Oil trading 16 - RWE Trading as an operating company 2 within the RWE Group Coal trading 18 - RWE Trading is RWE’s interface with the market 3 - RWE Trading’s role in the world of 19 - The trading floor as the central 4 coal trading information platform for wholesale market issues - Main drivers of the coal trading 20 - RWE’s power sales portfolio market and the respective 5 - Best in class – our history and our future challenges for RWE’s coal trading 6 business - RWE Trading – key figures (I) 7 - RWE Trading – key figures (II) 8 21 - RWE Trading – organisation Emissions trading 9 23 Power trading Our risk management 10 24 - Facts and figures for RWE Trading - Commodity Risk Governance 11 Structure 25 - Risk philosophy Gas trading 13 26 - Backup - Cooperation between RWE Trading and 15 RWE Gas Midstream 1
RWE Trading as an operating company within the RWE Group RWE AG (Group Centre) RWE RWE RWE RWE RWE RWE RWE Power Dea Gas Midstream Trading Energy npower Systems Upstream (Production) Gas Midstream Energy trading Supraregional Electricity and (commercial and regional gas supply optimisation of electricity and procurement, gas networks Electricity Gas and oil transport, storage) generation production Continental RWE RWE RWE RWE RWE Europe Power Dea Gas Midstream Trading Energy UK RWE RWE npower npower 2
RWE Trading is RWE‘s interface with the energy wholesale markets � RWE Trading implements the market- Retail customers/ industrial customers defined benchmarks for the RWE Group’s generation and supply activities. � RWE traders not only deal with STPM* sell commodities such as power, gas, coal and oil, they also actively trade physical and RWE Energy/ RWE Power/ npower RWE npower financial derivatives as well as environmental certificates. buy sell � The asset the based commodity positions of RWE Group are sold to or bought from RWE Trading at wholesale market prices. RWE Trading We consolidate these positions through proprietary trading. This hedging helps us buy/sell to manage the risks of having very large open positions in each of the physical Trading Market commodity markets. customers � This business model unites the natural Proprietary trading focus on obtaining the best potential value from the RWE Group’s physical assets with * STPM = Short-term position management the benefits of financial (proprietary) trading. 3
The trading floor as the central information platform for wholesale market issues Wholesale markets Dealers Markets Producers Grid operators Commodity trading Schedule Sales management Management STPM Production RWE Energy RWE npower sales Analysis Load distribution RWE Power RWE npower Back office Credit management Risk controlling Risk management Support functions 4
RWE’s power sales portfolio The wholesale markets set the benchmark RWE places its trust in the liquidity and reliability of the wholesale markets and sells a large part of its production directly into this pan-European market. Wholesale markets 56.5% 71.5 TWh Sales 92.8 TWh organisations 43.5% Of the 164.3 TWh produced by its own power plants in 2006, the RWE Group sold 92.8 TWh on the wholesale markets and 71.5 TWh through sales organisations. 5
Best in class – our history and our future Provider Joint short- Integrated of market term trading wholesale information/ and asset Best practice risk pool route to the Purely dispatch blueprint for and portfolio wholesale speculative function – risk control manager Hugo Stinnes trading markets STPM* 1998 2000 2002 2003 2005 ff. 1898 � We contribute to the commercial success of the RWE Group by applying our combined knowledge and skills in the best interests of the Group’s assets. � We continue to expand our proprietary trading activities based on fundamental analysis of the drivers of supply and demand, and therefore prices. � We continue to be a driver of liquidity in the power, gas, coal, oil and CO 2 markets. � We continue to be the preferred long-term partner for sustainable success in European energy markets, capable of delivering innovative energy commodity risk management solutions. 6 * Short-term position management
RWE Trading – key figures (I) � RWE Trading is one of the largest and RWE Trading in Europe most important European energy Trading floor commodity traders. Representative/agency office � With a workforce of over Traded markets 500 employees, RWE Trading Energy exchange operates trading floors in Essen, Swindon and London, as well as Oslo representative and agency offices across Europe. � RWE Trading is active on leading Amsterdam London international exchanges. Besides Brussels Warsaw Leipzig our activities in Europe, RWE Trading Swindon Essen Prague Kosice actively trades on the NYMEX and Graz Paris the global commodity markets. Ljubljana Bucharest Oil: USA, Europe, Asia, Middle East Coal: ARA, Newcastle, Richards Bay Madrid � RWE Trading currently forms the backbone of the European OTC power and gas trading business. 7
RWE Trading – key figures (II) Management accounts RWE Trading employees at year end** of RWE Trading 2006 Performance gross margin € 875.3 m 534 600 483* 504 Performance EBITDA € 690.3 m 500 Risk capital € 438.8 m 400 RORAC 98.2 % 300 192 176 Since 2005, RWE Trading profits have been 200 reported externally, together with the figures from the RWE Power generation 100 business, to reflect a higher degree of 0 integration with the asset business of the 2002 2003 2004 2005 2006 RWE Group. RWE Trading measures its performance * Figures for 2004 incorporate Innogy’s trading and asset management team after RWE takeover. on a pure mark-to-market basis, whereas **Year-end figures for RWE Trading GmbH, including apprentices. RWE discloses these results following the legal structure and according to the applicant rules of IAS/IFRIC. 8
RWE Trading – organisation Chief Executive Officer and Managing Director and Managing Director and Chief Commercial Officer (CCO) Member of the Group Business Chief Financial Officer (CFO) Committee Peter Terium Dr Bernhard Günther Dr Peter Kreuzberg � � Power Trading � Finance & Reporting (Global) Lobbying and Regulations (Continental Europe) (Global) � Short-Term Position Management � Project Controlling & Valuation (Continental Europe) � Legal & Communications (Global) � Power Trading (UK) � Back Office, IT & Business � Short-Term Position Management � Change Management (Global) Strategy Application & Asset (UK) Interface (Global) � Gas Trading (all Europe) � Integration & Organisation � Global Commodities Trading � Risk (Global) � Global Commodities Marketing & Logistics � Human Resources (Global) � Carbon Trading � Analysis for Global & Pan- European Commodities � Structure & Valuation (Global) 9
Power trading
RWE Trading – facts and figures Our power trading volumes have seen consistent growth in recent years. This is just one indication of RWE Trading’s successful market approach. The slight decline in 2006 was due to politically influenced market distortions in France and Spain. RWE Trading: power trading volumes Where we trade power TWh 1,400 1,200 Trend 1,000 800 1,250 1,316 1,315 1,055 600 799 400 200 0 2002 2003 2004 2005 2006 Power trading CE and power trading UK 11
RWE Trading has a multitude of trading partners � The German wholesale energy market Municipal utilities 3.7% is not a “members-only club”. German utilities � During the first eight months of 2006, 6.3% only 6% of RWE Trading’s total trading Spot markets volume had been generated by energy 14.1% trade with the other three major utilities operating in Germany. European Industry utility companies � The market is internationally oriented 0.1% (excl. Germany) and – except for the industrial 48.8% customers which are still “abstaining” – Banks intersectoral. 16.2% Oil companies 5.2% Proprietary traders 5.2% 12 * e.on, Vattenfall, ENBW
Gas trading
Gas trading � The growth in gas trading further European gas trading hubs strengthens the RWE Group’s position in the natural gas markets. � Trading volumes for natural gas have been stable in recent years and are expected to rise as the Continental European gas markets open and RWE’s gas assets and trading activities are further integrated. � By 2006, gas trading volumes for RWE Trading in Continental Europe and the UK were around 900 TWh. 14
Cooperation between RWE Trading and RWE Gas Midstream � RWE Gas Midstream will further strengthen RWE Group’s competitiveness in the increasingly liberalised European gas market. � RWE Gas Midstream bundles the non- regulated areas of the RWE Group’s gas business (purchase, transport and storage capacity rights). � RWE Trading and RWE Gas Midstream cooperate closely with each other in the gas business. � RWE Trading will continue to be an active trader at liquid gas trading points. This business is being integrated by RWE Gas Midstream as part of the commercial optimisation of the entire gas portfolio of the RWE Group, ranging from short-to long-term procurement and supply commitments. 15
Oil trading
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