Growth Focus Discipline Creating the future of energy - PowerPoint PPT Presentation

Growth Focus Discipline Creating the future of energy http://www.energyfortomorrow.eu/ June 2018

Creating the future of energy EBIT (€ bn) EBIT (€ bn)  • Focus: Europe’s first energy player with exclusive downstream focus ~5 1  • Unique downstream footprint : RAB and customer numbers rise >60% 1  Enel 2 Future Engie 2 Nat. Grid 2 Iberdrola 2 • Earnings quality: network EBIT share rises to ~80% 1 E.ON  Regulated Asset Base (RAB € bn) Regulated Asset Base (RAB € bn) • Strong synergies: fading nuclear earnings overcompensated by €600- ~37 1, 3 800m synergies  • Attractive dividends: aiming to deliver absolute annual dividend growth Future Nat. Grid Enel Iberdrola Engie  E.ON • EPS accretion: from second year after closing Customer Numbers (m) Customer Numbers (m)  ~50 1 • Solid capital structure: high commitment to strong BBB rating  • Limited cash impact : acquisition of RWE‘s 76.8% in innogy via asset exchange; attractive offer to minority shareholders Future Enel Engie Iberdrola E.ON 2 1. Future E.ON pro-forma EBIT 2017 (innogy data based on public information), 2. Bloomberg Data, 3. RABs from different regulatory regimes are not directly comparable due to significant methodical differences.

Creating two focused energy companies Structure today Structure today ~77% ~77% RWE RWE E.ON E.ON innogy innogy Target structure Target structure RWE RWE Future E.ON Future E.ON 16.67% 3

Acquisition of innogy via innovative asset exchange innogy Total equity value: ~€22bn Asset exchange (limited cash impact) 16.67% Stake in Future E.ON 1. Acquisition of RWE‘s 76.8% stake in innogy via asset (~€3.7bn) exchange 2. RWE to get in exchange: E.ON & innogy Renewables • 16.67% in new E.ON via 20% capital increase against Renewables & contribution in kind (authorized capital) 76.8% 11x EV/EBITDA Other Assets (RWE) • E.ON‘s and innogy‘s renewables businesses 4 (~€13.5bn) 1 • Additional assets: E.ON’s minority stakes in two RWE operated nuclear power plants 2 , innogy’s gas storage business and minority participation in Kelag Innogy dividends (~€1.4bn) 3. RWE receives innogy dividends for 2017 and 2018 Cash payment to E.ON (- €1.5bn) 4. Net cash payment from RWE to E.ON of €1.5bn 3 Cash element 23.2% 5. Attractive cash offer to minority shareholder in innogy Offer price and innogy dividend for (Min. share- with total value of €40.00 per share (offer price (€36.76) 2017 and ’18 (~€5.2bn) holders) plus FY 2017 dividend of €1.60 per share, plus expected dividend of €1.64 per share for FY 2018) 1. Equity value for transfer perimeter, 2. Gundremmingen C (25% stake) and Emsland (12.5% stake), 3. Payment to balance asset valuation, 4. Excludes 20% in Rampion and 4 certain onshore capacity indirectly held by E.ON and innogy.

Transacting from a position of strength E.ON today E.ON today (’17) Future E.ON (’17) Group EBITDA  EBIT EBIT Upper end of guidance €3.1bn 1 €3.1bn 1 ~€8bn 2 €5bn 1  ANI ANI +58% YoY €1.4bn 1 €1.4bn 1  Energy Networks END END Leverage target of 3.9x achieved €19.2bn 1 €19.2bn 1 before monetization of Uniper ~€37bn ~€23bn  RAB 2, 4 RAB 1, 4 Payout ratio increased 2x since Dividend Dividend start of new E.ON Customer Solutions  Mid-term Mid-term 3-4% EBIT CAGR 3 E.ON Growth Growth 5-10% EPS CAGR 3 ~50m >31m standalone Customers 2 Customers 1 Regulated Non-regulated 1. E.ON standalone 2017 reported, 2. Future E.ON pro-forma 2017 (innogy data based on public information), 5 3. 2018-2020 based on existing portfolio (E.ON standalone), 4. RABs from different regulatory regimes are not directly comparable due to significant methodical differences.

Unique downstream position across Europe Excludes npower UK customers subject to transaction with SSE Energy Networks (RAB) Sweden 1 Customer Solutions (number of customers) UK ~€4bn ~1m - ~7m 1 NL/BE CEE 3 - ~4m 2 ~€11bn 4 ~13m Germany 3 Turkey 1 ~€20bn ~14m ~€1bn ~9m 1. E.ON 2017 reported, 2. innogy 2017 reported, 3. Future E.ON pro- forma 2017 (innogy data based on Southern Europe public information), 4. RABs from different regulatory regimes are not - ~1m 3 6 directly comparable due to significant methodical differences.

Focus, scale and efficiency pre-requisite for success Mega trends accelerate and reinforce each other Mega trends accelerate and reinforce each other Empowered • Future E.ON’s unique downstream positioning fully customers captures benefits of energy mega trends Focus, scale and efficiency needed Focus, scale and efficiency needed Digitization in New Energy World in New Energy World New culture & Electrification capabilities • Creating markets for customers through our products, services, technologies • “Go to” partner for politicians and regulators in designing the energy transition De- • Combining innovation power to enhance carbonization development of state-of-the-art products • Synergies improve cost position and roll-out speed • Innovative services levered on significantly higher customer number 7

Acceleration of strategy execution Unique strategic position Unique strategic position • Focus on high-performance • Focus on high-performance regulated networks and regulated networks and state-of-the-art customer state-of-the-art customer solutions solutions Position of strength Position of strength • Reduction of portfolio • Reduction of portfolio complexity complexity • Enhanced earnings quality: • Enhanced earnings quality: ~80% of EBIT 1 is regulated ~80% of EBIT 1 is regulated • Aiming to deliver absolute • Aiming to deliver absolute  • Robust portfolio Transition year Transition year annual dividend growth annual dividend growth  • Strong financial & operational delivery Spin-off Uniper   • Balance sheet headroom & reset of E.ON 2016 2020 and beyond 2018 8 1. Future E.ON pro-forma 2017 (innogy data based on public information).

Value creation for shareholders Potential for Potential for Realization of valuation premium 12 premium premium 11 valuation valuation Renewables innogy acquisition at ~10x 11x EV/EBITDA EV/EBITDA 10 9 8 Platform Platform Instant Shareholder for high for high redeployment of 7 value Synergies Synergies capital creation 6 (€600-800m) (€600-800m) 5 4 3 Renewables 1 9 1. Enterprise value (schematic)

Integration of innogy provides for strong synergy potential Estimated synergies (€ m) 2 Estimated synergies (€ m) 2 Synergy focus 1, 2 Synergy focus 1, 2 Corporate Functions & IT Energy Sales & Customer €600-800m Solutions ~100% Energy Networks ~55% • Strong synergy potential of €600-800m • Strong synergy potential of €600-800m ~25% • 10-15% of controllable costs • 10-15% of controllable costs ~5% • ~5000 FTEs affected (~7% of employee • ~5000 FTEs affected (~7% of employee base) base) 2019 2020 2021 2022 10 1. Synergy split (€ million), 2. Future E.ON pro-forma 2017 (innogy data based on public information).

Attractive earnings & dividend profile secured long-term EBIT development 3 Synergies to over-compensate Synergies to over-compensate Share of regulated network earnings (EBIT) Share of regulated network earnings (EBIT) fading nuclear earnings fading nuclear earnings 6 Future E.ON E.ON today 5 4 ~65% 1 3 ~80% 2 2 1 0 2018 2019 2020 2021 2022 Regulated Non-regulated E.ON stand-alone Enlarged E.ON 11 1. E.ON 2017 reported, 2. Future E.ON pro-forma 2017 (innogy data based on public information), 3. Schematic illustration.

Future E.ON‘s key financials EBITDA EBITDA ~€8bn 1 Energy Networks ~80% Customer Solutions regulated 2 Non-Core EBIT EBIT ~€5bn 1 EPS EPS EPS accretion from second year after completion Aiming to deliver absolute annual dividend growth Dividend Dividend (fixed dividend for 2018: €0.43 3 ) 12 1. Future E.ON pro-forma 2017 (innogy data based on public information), 2. Future E.ON pro-forma EBIT 2017 (innogy data based on public information), pie chart does not account for corporate functions & others, 3. Fixed for FY2018 (paid in 2019).

Pro forma economic net debt E.ON today 1 (€ bn) Future E.ON 2, 3 (€ bn) Includes: ~35 • Acquisition of 23.2% minority shares • €1.5bn cash payment from RWE ~€2.8bn debt ~€2.8bn debt Further deleveraging measures ~19.2 to be realized in ‘18 (€ bn) ( ) transferred to RWE transferred to RWE ~5.0 + Monetization of Uniper shares • Nuclear provisions: ~€0.9bn ~5 ~3.6 + Transfer of NS1 4 into CTA • AROs (Renewables): ~€0.9bn • Tax equity liabilities ~10.6 (Renewables): ~€0.6bn • Pension provisions (Renewables): ~€0.4bn Economic Net Economic Net Debt 2017 Debt 2017 Net financial position Provisions for pensions Asset-retirement obligations 13 1. E.ON 2017 reported, 2. Future E.ON pro-forma 2017 (innogy data based on public information), 3. E.ON will address structural subordination post closing, 4. Nord Stream I stake.

Investor agreement with RWE ensures equal treatment of shareholders Preamble • RWE to act purely as financial investor Corporate • Right to nominate one Supervisory Board member Governance • Not allowed to increase stake above 16.67% Shareholder structure and rights • Not allowed to sell to an E.ON competitor 14