Investor Conference Call FY 2016 29 March 2017 » Thomas Kusterer, Chief Financial Officer Ingo Peter Voigt, Head of Finance, M&A and Investor Relations
Relevant external factors 2016 Law initiated by KFK Low interest rate environment Further reduction of discount rate, especially Transfer of intermediate and final storage of for pension provisions radioactive waste to the federal state Nuclear power plant operators will transfer Valuation effect leading to significant increase financial funds (17.4bn € plus 35% risk Investor Conference Call 29 March 2017 of pension provisions premium) Significant revaluation of nuclear liabilities due Non-cash effect with negative impact on net to shorter maturities for remaining nuclear debt provisions 2
2016 Operating performance on track Revenue Adjusted EBITDA Group profit/loss 1 in € million in € million in € million 21,167 2,110 19,368 1,939 -9 % -8 % 158 Investor Conference Call 29 March 2017 2016 2015 2016 2015 2016 2015 -1,797 1 Profit/loss shares attributable to the shareholders of EnBW AG 3
Sales Slight operating decrease in line with expectations Sales volume Electricity in TWh Gas 47.0 43.2 80.4 B2C 10.5 15.5 B2C 15.0 52.3 -8 % -38 % 10.8 B2B 31.5 B2B 69.9 28.2 41.5 2015 2016 2015 2016 Investor Conference Call 29 March 2017 Adjusted EBITDA in € million + 250 255 First positive effects from withdrawal from the unprofitable EnBW and Watt B2B commodity business -2 % - Sale of EnBW Propower GmbH plant as of 31.12.2015 2015 2016 4
Grids Significant increase as expected Sales volume Electricity in TWh Gas 64.5 33.0 65.3 27.9 -1 % +18 % 2015 2016 2015 2016 Investor Conference Call 29 March 2017 Adjusted EBITDA in € million 1,004 + 747 Non-recurring negative one-off effects in 2015 +34 % + Increased revenue for electricity and gas grids primarily due to higher pension provisions 2015 2016 5
Renewable Energies Moderate growth only Generation volume in TWh Renewables generation mix in TWh 1 6.9 6.4 Onshore 6% Offshore 19% +8 % 2015 2016 Run-of-river 74% Investor Conference Call 29 March 2017 Adjusted EBITDA in € million 295 287 + Full year earnings contribution of Baltic 2, but - +3 % Wind strength did not reach expected long-term average - Decreased margins for run-of-river power plants 2015 2016 due to the declined electricity prices 1 Includes long-term procurement agreements and generation from partly owned power stations; the figures indicated are taken from the segments; segment excludes generation from pump storage 6 plants that is associated in the generation and trading segment. Divergence from 100 percent possible due to rounding effects.
Generation and Trading Substantial drop as scheduled Conventional generation mix in TWh 1 Generation volume in TWh Other 14% 48.9 45.6 -7 % Lignite 13% Nuclear 46% 2015 2016 Investor Conference Call 29 March 2017 Adjusted EBITDA in € million Hard coal 28% 777 - Lower wholesale market electricity prices and spreads in earlier periods for delivery in 2016 337 -57 % - Expired electricity procurement agreement in the nuclear sector 2015 2016 1 Includes long-term procurement agreements and generation from partly owned power stations; the figures indicated are taken from the segments. Segment includes pump storage plants. 7 Divergence from 100 percent possible due to rounding effects.
Sufficient financial assets even after externalisation In € billion Including a 35% risk 16.3 Externalisation of premium 4.7 Provisions 11.6 10.0 Provisions Financial Investor Conference Call 29 March 2017 assets 5.3 61% Coverage Financial ratio assets ~45% Coverage ratio 2016 1 July 2017 After externalisation 8
Law initiated by KFK has a negative impact in 2016… … but will have a positive impact as of 2017ff Impact on EnBW’s EBT 2016 Financial result will improve by ~ 200m € p.a. 1 … in € billion Risk-free interest rate of on average 0.5% Rate of increase of costs of ~1.4% Increase of Spread of around -0.9% as real interest rate decommissioning provisions Increase of remaining nuclear power provisions by -1.0 €1,045 million to € 6,214 million due to lower spread -2.4 Nominal amount of remaining nuclear provisions: Investor Conference Call 29 March 2017 €5,743 million 2 -1.4 Externalisation … but EBT will rise by ~100m € p.a. only effect (Mainly risk premium) Higher annual depreciation over remaining life time of nuclear power plants 1 Depending on future development of interest rate to be applied 9 2 The nominal amount (without taking into account the effects of the discount rate and rate of increase of costs).
Asset Liability Management model – EnBW remains prepared to timely cover nuclear and pension provisions EnBW’s CF-based model to manage cover funds 1 in Mio. € 100% Coverage NO 16.000 impact on Projected 2032 Provisions OCF 12.000 Financial assets 8.000 4.000 2040 800 Max. € 300 Investor Conference Call 29 March 2017 600 600 Million² impact on 400 400 OCF Asset OCF 200 200 contribution contribution 0 0 2015 2020 2025 2030 2035 2040 1 Assumptions: Discount rates: 1.9% pensions, 4.6% nuclear provisions in 2016 and 0.95% beyond 2016, Externalisation from cover funds assumed in 2017 10 10 ² Adjusted for inflation
Increase of provisions due to continuing low interest rate level Pension provisions 1 Nuclear provisions in € million in € million Share of interest rate effect Share of interest rate effect 1,842 991 excluding KFK 7,222 10,972 2,072 including real interest effect caused by law initiated by KFK 2 5,649 Investor Conference Call 29 March 2017 6,849 Discount 3.8% 3.75% 2.2% 2.3% 1.9% 5.4% 5.0% 4.8% 4.7% 0.5% 3 rate 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 1 Before deduction of Contractual Trust Agreement (CTA) 2 KFK: Commission to examine the financing of the phase-out of nuclear power 11 3 Average interest rate after implementation of law initiated by KFK
Significantly higher net debt due to decrease in discount rates for provisions and risk premium Net debt 2015 Net debt 2016 -1,176 FFO in € million in € million Working Capital 10,003 +658 Net investments +1,298 +49 % 6,736 Investor Conference Call 29 March 2017 Dividends paid +226 KFK effect +2,415 3,645 3,329 Financial Financial Other effects -153 net debt net debt 12
We stick to our conservative financial policy Asset Liability Management Model Operating business Management of net financial liabilities Timely coverage of pension and nuclear obligations Active management of corresponding Internal financing capability new key financial assets performance indicator Impact on operating cash flow of a Limitation of cash relevant net Investor Conference Call 29 March 2017 max. € 300 m p.a. investments to retained cash flow of an average € 1.3 bn p.a. adjusted for inflation Further implementation of strategy After full coverage no more funding can be executed by internal financial through operating cash flow ressources only 13
All stakeholder groups contribute to the company‘s future sustainability Efficiency programme 1 Dividend Payment of hybrid in € million/p.a. in € coupon 1,400 remains 0.85 250 unaffected 0.69 0.69 400 0.55 750 Investor Conference Call 29 March 2017 0.00 2012 2014 2016 2020 2012 2013 2014 2015 2016 › One controllable Euro out of three › Due to the net loss on EnBW AG Employees has already been saved level no dividend payment and Shareholder › Salary cut of 6.3% for Management for fiscal year 2016 management and employees 1 2012, 2014 and 2016 Start of different efficiency programmes; 2020 Ramp-up of all efficiency programmes achieved on a sustainable basis 14
Outlook 15
Outlook operating performance 2017 Turnaround expected Renewable Generation and Sales Grids Group Energies Trading Adj. EBITDA 250 1,004 295 337 1,939 2016 in € million Investor Conference Call 29 March 2017 Forecast 0 to -5 to +5 to -10 to +15 to 2017 +5 +5 +15 +25 -20 in % 16
Strategic Outlook In line with EnBW‘s strategy our portfolio restructuring is progressing as planned Adjusted EBITDA 1 10% 15% 15% 17% 30% Sales 2016 ² 48% 2012 15% 2020 13% Grids 33% Renewable Investor Conference Call 29 March 2017 Energies Generation & 52% Trading 10% 40% 2.4 1.9 2.4 € billion € billion € billion 1 In 2012 divergence from 100 percent possible due to rounding effects 17 2 3% of the Adjusted EBITDA in 2016 relates to others
Strategic Outlook What to expect from the future utilities environment? Phase 1 Phase 2 Increasing market driven process leading to Mostly driven by energy politics cost degression, innovation, new customer needs and regulation and new competition Expansion of renewable Increasing competitiveness and energies market integration of renewable energies Investor Conference Call 29 March 2017 Nuclear energy exit Business model redesign and technical innovation (storage, emobilty etc.) Reduced economic relevance of conventional generation Digitalisation and interconnectivity (smart grids, virtual power plants etc.) Expansion of electricity and gas grids Customer need individualisation 18
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