EnBW Energie
Baden-Württemberg AG
p
EnBW Group
€ millions1 1/1–
31/3/2013 31/3/20121/1– Variance % 31/12/20121/1–
Revenue
Generation and trading 1,556.9 1,176.5 32.3 4,344.2
Renewable energies 93.1 83.2 11.9 347.4
Grids 1,266.0 1,027.7 23.2 5,268.5
Sales 2,824.8 2,805.2 0.7 9,277.7
Other/consolidation 4.8 3.2 50.0 8.1
External revenue, total 5,745.6 5,095.8 12.8 19,245.9
Adjusted EBITDA 874.5 859.0 1.8 2,340.8
EBITDA 876.5 859.8 1.9 2,307.2
Adjusted EBIT 657.4 641.3 2.5 1,452.5
EBIT 659.4 642.1 2.7 1,289.3
Adjusted group net profit2 415.9 435.1 -4.4 651.8
Group net profit2 443.0 561.3 -21.1 484.2
Earnings per share from adjusted group net
profit2 in € 1.54 1.78 -13.5 2.53
Earnings per share from group net profit2 in € 1.64 2.30 -28.7 1.88
Cash flow from operating activities 298.1 334.1 -10.8 856.3
Free cash flow 255.8 223.5 14.5 205.8
Capital expenditures 143.0 146.8 -2.6 877.4
Energy sales of the EnBW Group
Billions of kWh 1/1–
31/3/2013 31/3/20121/1– Variance % 31/12/20121/1–
Electricity 33.5 34.7 -3.5 135.4
Gas 38.0 25.6 48.4 73.1
Employees of the EnBW Group
Number1, 3 31/3/2013 31/3/2012 Variance
% 31/12/2012
Employees 19,905 20,232 -1.6 19,998
1 The figures of the comparative periods have been restated.
2 In relation to the profit/loss shares attributable to the equity holders of EnBW AG. 3 Number of employees excluding apprentices/trainees and without inactive employees.
With revenues in excess of €
19 billion
in 2012 and
some 20,000 employees, EnBW Energie
Baden-Württemberg AG ranks among the largest energy
companies in Germany and Europe.
We generate, trade in, transport and sell energy. Decentralised
energy solutions, renewable energies and low carbon production
is what our business focuses on. With a balanced business
portfolio, we strive to achieve sustainable and profitable growth –
to the benefit of our partners, customers, employees and owners.
Our home market is Baden-Württemberg and Germany. We also
operate in other markets in Europe.
Table of contents
2 Significant financial developments Interim financial statements of the EnBW Group
3 Highlights January to March 2013 (unaudited)
4 EnBW on the capital market 28 Income statement
29 Statement of comprehensive income
Management report on the EnBW Group (unaudited) 30 Balance sheet
6 Business activity and economic environment 31 Cash flow statement
12 The EnBW Group 32 Statement of changes in equity
21 Employees
22 Research and development
33 Remarks and explanatory notes
23 Risk management Service
24 Significant events after the reporting date 43 Board of Management and Supervisory Board
25 Forecast 44 Important information
Disclaimer
This report was prepared purely for informative purposes. It does not constitute an offer or an investment recommendation. EnBW undertakes no obligation whatsoever to update the information and forward-looking statements in this report. More explanations are given on page 44.
>
Adjusted EBITDA posted €
874.5
million and was
thereby 1.8% higher than the year-earlier figure. This
figure comprises positive fair value effects on derivatives
which offset one another when the underlyings are
realised. Adjusted EBITDA excluding these effects stood
at € 774.0 million, down 9.9% compared with a year ago.
This development in the results lies within the range
predicted for the financial year 2013.
>
Adjusted group net profit came in at € 415.9 million
(-4.4%) and consolidated group net profit amounted to
€
443.0 million (-21.1%).
>
By the end of March, EnBW had invested € 143.0 million,
25.9% of which went into the expansion of renewable
energies.
>
Compared with year-end 2012, adjusted net debt had
declined by 3.6% to € 8.1 billion by 31 March 2013,
mainly due to the positive free cash flow.
and reputation, with a clearly defined roadmap as its starting point. The aim is to realign EnBW as a large energy supplier consistently orien-ted toward the customer.
March
EnBW’s fourth Municipal
Energy Day
Around 12,000 mayors, local and national poli-ticians, along with senior executives of utility companies in Baden-Württemberg, meet with experts from the energy industry and repre-sentatives of associations and science to dis-cuss the energy supply of the future. As the keynote speaker, Franz Untersteller, Minister for the Environment, affirms the plans of the state government to implement the new energy concept.
130 amphibian conservationists
at EnBW
Of Germany’s 20 amphibian species threatened by extinction, 19 live in Baden-Württem berg. With this in mind, EnBW and State Office for the Environment, Measurements and Nature Conservation of the Federal State of Baden-Württemberg (LUBW) hold the first nation-wide symposium for amphibian protection. Concrete examples of projects from the EnBW amphibian protection programme provide clear proof of the success of the measures promoted by EnBW.
January
Financing agreement signed on
EnBW Baltic 2
The European Investment Bank (EIB) is fi-nancing EnBW Baltic 2, the largest offshore wind farm so far in the German Baltic Sea, to the tune of € 500 million. EIB’s participa-tion puts the project on a sound financial foot-ing. The turbines of EnBW’s second offshore wind farm in the Baltic Sea are to be commis-sioned in 2014.
A look behind the scenes at EnBW
power stations
For decades, EnBW’s generation sites have been a magnet attracting the public. In 2012 as well, more than 45,000 visitors took advantage of EnBW’s offer of open dialogue, informing themselves at EnBW information centres which cover the topic of energy, and taking a look behind the scenes at EnBW’s power stations.
February
Programme “EnBW 2020” launches
the Group’s strategic realignment
In “EnBW 2020”, EnBW has launched a pro-gramme to accommodate the structural change in the energy industry, with significant changes in the energy market, by evolving as a company as well. The ambitious program-me takes account of the aspects of custoprogram-mer orientation, performance, portfolio, processes and structures, the Group’s business modelAutonomous hydrogen fueling
station inaugurated in Stuttgart
In the presence of Franz Untersteller, Baden-Württemberg’s Minister for the Environment, EnBW officially marks the start of the trial op-eration of southern Germany’s first hydrogen filling station which produces hydrogen directly on site for its customers. The research pro-ject, backed by the German Federal Ministry of Transport, is to demonstrate the everyday suitability of hydrogen as a fuel and investigate the options for storing electricity from renew-able energies.April
Annual General Meeting of EnBW
Dr. Frank Mastiaux, EnBW’s Chief Executive Officer, introduces the Group’s strategic re-alignment to the shareholders. The difficult environment in the energy industry is burden-ing group profit. EnBW has already initiated the first steps to secure its capacity to act, which were partly successfully implemented in 2012. In the course of the current year 2013, the “Fokus” efficiency programme is expected to deliver savings of around € 600 million, with the requisite impact on profit. Initiatives for the strategic realignment of the company are currently under way. In the process of realign-ment, EnBW will be focusing on the opportuni-ties arising from the new energy concept, as well as concentrating on tangible contributions to its success – while above all reinforcing the company’s stronger orientation towards the markets and its customers.EnBW is honing its corporate strategy with the aim of repositioning itself on the energy market of
the future. Beyond this, we continue to rigorously implement our extensive package of measures
to safeguard the financial stability and the creditworthiness of EnBW. We place emphasis on ongoing
and transparent communication with our target groups. The aim is to retain and foster the trust
vested by capital market participants in EnBW.
Established issuer on the debt capital market
We secure the financing of EnBW's business through our sound internal financing capabilities, by deploying the manifold instruments of short- and long-term borrowing as well as equity financing (> Management report > Financing > p. 16), thereby ensuring that we have flexible access to the capital markets. We continued to rigorously implement our extensive package of measures to safeguard our financial stability and creditworthiness in the financial year 2013. In their most recent rating assessments, the rating agencies confirmed EnBW's A rating (Standard & Poor's A-/outlook stable, Moody's A3/outlook negative and Fitch A-/outlook stable). Especially EnBW's sound financial profile and the reliable implementation of our package of measures were positively acknowledged by the agencies.
In addition to the key performance indicators the rating agencies employ, the dynamic gearing ratio (adjusted net debt/adjusted EBITDA) is another of EnBW's key financial performance indicators. We have set ourselves the objective of achieving a dynamic gearing ratio of 3.3.
Development of the five-year credit default swap
(CDS) for EnBW
Measured by the five-year CDS, the risk premium inherent in EnBW lending products has remained virtually unchanged in a year-on-year comparison. A comparison of the CDS premiums of Europe's 125 largest companies comprised by the iTRAXX Index shows a significantly lower level of fluctuation in EnBW CDS, which reflects the confidence of investors in EnBW's credit quality.
EnBW share price trend
The uptrend seen over the past year on Germany's leading DAX index held steady at the start of 2013 as well. It reached its highest level for the year so far of 8,015.07 points on 8 March 2013. As per reporting date on 28 March 2013, the DAX, which stood at 7,795.31 points, reported an increase of around 2% in comparison with year-end 2012. By contrast,
the share price trend of the DJ EURO STOXX UTILITY index which tracks the shares of leading European utility companies displayed much greater volatility. On the reporting date of 28 March 2013, the index closed at 218.5 points, down approximately 4% as against year-end 2012.
Performance of the credit default swaps April 2012 to March 2013 in %
180
CDS EnBW iTraxx Europe
Apr. May June July Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar.
140 120
100 160
80
Management report Interim financial statements Service
The EnBW share was trading at a virtually unchanged level, unaffected by the upbeat sentiment in the overall market, which was attributable, among other factors, to the low proportion of free float. The share shed a little of its value in
the first three months of 2013. On 28 March 2013, the EnBW share was trading at € 31.33, which is approximately 3.9% higher than at the end of 2012.
Shareholder structure
Since 6 July 2012, the federal state of Baden-Württemberg (indirectly via NECKARPRI-Beteiligungsgesellschaft mbH) and OEW Energie-Beteiligungs GmbH have each held 46.75% of EnBW AG's share capital. Gemeindeelektrizitätsverband Schwarzwald-Donau raised its stake in the share capital through the joining of more than 20 cities, municipalities and districts to 0.97% (31 December 2012: 0.87%). By con-trast, Landeselektrizitätsverband Württemberg, currently in liquidation, reduced its participating investment and no longer formed part of EnBW AG shareholder structure at the end of March 2013. Overall the shareholder structure as per 31 March 2013 breaks down as follows:
Shareholder composition in %1 OEW Energie-Beteiligungs GmbH 46.75 NECKARPRI-Beteiligungsgesellschaft mbH 46.75 Badische Energieaktionärs-Vereinigung 2.45 Gemeindeelektrizitätsverband Schwarzwald-Donau 0.97 Neckar-Elektrizitätsverband 0.63
EnBW Energie Baden-Württemberg AG 2.08
Free float 0.37
1 The figures do not add up to 100% due to rounding differences.
2013 Annual General Meeting approves dividend
of € 0.85 per share
The regular Annual General Meeting of EnBW Energie Baden-Württemberg AG took place on 25 April 2013 in Karlsruhe. Attendance corresponded to 97.31% of the voting rights. All items submitted to the Annual General Meeting for approval were adopted. In accordance with the proposal put forward by the Board of Management and the Supervisory Board, a dividend of €0.85 was disbursed for the financial year 2012 on 26 April 2013. In relation to the share price at the end of the first quarter of 2013, this is the equivalent of a dividend yield of 2.71%.
In dialogue with the capital market
EnBW maintains ongoing and open dialogue with investors, analysts and rating agencies. At the start of March 2013, we organised a telephone conference for analysts and investors on the release of the 2012 figures. In the context of our customary pan-European investor update in March 2013, we held numerous meetings with fixed income and equity investors in the form of group presentations and one-to-one discussions. The main topics were the current situation of the company and the sector, the realignment of the corporate strategy, the content and implementation of a package of measures to safeguard the future, the company's current financial policy and the outlook for the coming years. Our annual Bank Day will take place in mid-May. We will be updating the EnBW Factbook in the second half of 2013. We will be holding our Capital Market Day on 13 September 2013.
100 90
80
Performance of the EnBW share from April 2012 to March 2013 in %
130
120
DAX 30 EnBW
DJ EURO STOXX UTILITY 110
With strong roots in Baden-Württemberg, our company ranks among the top energy utilities and
energy service providers in Germany and Europe. In order to reinforce and build on this position,
we are currently refocusing our corporate strategy under which sustainability goals play a key role.
Macroeconomic trends in 2013 will not provide any stimulus for the development of our business,
and the political and regulatory framework conditions are constantly changing. In the early months
of 2013, the prices of primary energy sources, CO
2allowances and electricity on the wholesale
markets were in part considerably below the year-earlier levels.
Business activities
As an integrated energy supplier, the EnBW Group operates across the entire value chain, offering a broad-based business portfolio.
Starting with the quarterly financial report from January to March 2013, the EnBW Group will be changing its segment reporting against the backdrop of realigning our business model and restructuring the Group. To ensure compatibility, figures were restated to reflect the reference periods. The new segment structure is as follows:
›
Generation and trading segment›
Renewable energies segment›
Grids segment›
Sales segment›
Other/consolidationAlong with the production and trading of electricity, the generation and trading segment also comprises the gas midstream business (long-distance gas distribution) as well as recycling. The activities under the business of generating power from renewable energies are combined together in their own segment. The grids segment encompasses the following stages in the value chain: the transport and distribution of electricity and gas, the providing of grid-related services, operating grids for third parties and water supply services, for instance. The distribution of electricity and gas and providing energy-related services, examples being invoicing services or energy supply and energy saving contracting, together constitute the sales segment. Along with EnBW AG, the other/consolidation segment includes eliminations between the segments as well as other activities not allocable to the specific segments.
Heterogeneous market structures
EnBW operates on three different market levels. EnBW's activities in the competitive wholesale markets consist of electricity generation, procurement of primary energy sources and CO2 emission allowances as well as electricity
trading. A key success factor here is an efficient and flexible generation and procurement portfolio.
The regulated markets are characterised by political, legal and regulatory conditions. This applies to our grids and to renewable energies, above all wind power, biomass and photovoltaic generation.
On the end customer market, the Group advises and supplies a total of some 5.5 million business and retail customers. Customer-focused energy consultation and services relating to the use of energy and local energy systems are becoming increasingly important in these markets.
Corporate strategy
EnBW is striving to reinforce and expand its position as an important energy utility and service provider in Germany and Europe. Germany's energy environment is undergoing a sea change, which is also having a huge impact on energy policies and commercial framework conditions. EnBW is embracing this change in order to safeguard the company's competitive edge and its long-term future.
The changed environment requires the EnBW Group to refocus its corporate strategy more intensively: Consistent customer orientation, geared to customer needs and wishes, is the centrepiece of the realignment. With this aspect in mind, all our activities, business transactions and investments are being reassessed. Beyond this, modernising our organisation and enhancing the efficiency and
Business activity and economic environment
Management report
Business activity and economic environment‹ Interim financial statements
Service
sustainability of structures and processes form part of our objectives. Above all, we harness EnBW's long-standing and proven system competence to develop new business segments, taking special account of sustainable concepts such as the "sustainable city".
EnBW intends to secure its position as a low carbon generator and to establish itself as a supplier of local energy solutions in the market. In doing so, we are forging ahead with producing energy from renewable energies. We also view cooperation with municipalities and municipal utilities as playing a key role. Beyond this, we are endeavouring to raise the international share in EnBW's value creation in the long term in order to reduce the company's dependency on the energy policy framework in Germany and to seize select opportunities which will boost our growth and profitability. We are convinced that long-term economic success goes hand in hand with achieving ecological and social goals. Sustainable and responsible action is a core principle of EnBW. With this in mind, we are gradually dovetailing our corporate strategy with our sustainability strategy.
By implementing a package of measures early on, the Group is creating financial headroom for the future-oriented restructuring of the company without jeopardising EnBW's good credit standing. The package consists of the three components of enhancing efficiency, divestiture and capital measures. The "Fokus" efficiency programme provides for an improvement in EBIT of a targeted €750 million a year. Achieving the full effect of the measures is envisaged before the end of 2014, one year earlier than originally planned. The ramping up phase of the efficiency programme is progressing as planned. Along with scaling back its gross investment volume, EnBW is expanding its divestiture programme to a total of €2.6 billion for the period from 2012 to 2014 (including participation models). Around € 500 million has already been realised through the sale of the shares in Energiedienst Holding AG and in the Polish company Rybnik. EnBW successfully completed the planned capital measures in 2012. Besides raising the amount of the hybrid bond to a total of € 1 billion in April 2012, EnBW executed a capital increase of around € 822 million at the start of July 2012. No further capital measures have been planned for 2013.
Economic environment
The performance of EnBW is influenced by a wide range of external factors. The macroeconomic environment, the price trend in the markets for electricity, fuel and CO2 allowances,
as well as the political and regulatory decisions are factors exerting a decisive influence on EnBW's development.
Macroeconomic situation
Following the marked slowdown in global economic growth in 2012, the global economy has picked up a little momentum again in 2013. The downside risks are being increasingly mitigated by economic policy measures, above all in Europe and in the USA. In January 2013, the International Monetary Fund (IMF) revised its forecast for global economic growth in 2012 downwards again by 0.1 percentage point and now anticipates a global economic growth of 3.2%. According to the IMF, the development of the global economy hinges on progress made in solving the sovereign debt dilemma of a number of countries in the euro area as well as problems with the beleaguered budget and real estate market in the USA. Emerging markets, such as India and Brazil, are also affected by the ailing global economy, particularly by the deterioration in foreign trade and the downturn in domestic demand. Growth in these countries has been estimated at 5.1% in 2012 (2011: 6.2%). Expansion in the industrial nations is significantly weaker: In 2012, average GDP growth is likely to have amounted to 1.3% (2011: 1.6%). Development of gross domestic product (GDP) 2012 2011 World 3.2 3.9 Euro area -0.6 1.4 Germany 0.7 3.0 Czech Republic -1.1 1.9 Turkey 2.5 8.5
According to data provided by the European Union, economic output in the euro area declined by 0.6% in 2012; in the fourth quarter of 2012 as well, GDP fell by 0.6% quarter on quarter in the euro area. GDP change in the third quarter of 2012 stood at -0.1%. Preliminary estimates of the European Commission put the annual inflation rate in February 2012 at 1.8%, indicating a decline compared with 2.0% in January. A year ago inflation was running at 2.7%. GDP growth in the Czech Republic stood at -1.1% in 2012, down from +1.9% in 2011, due to weak domestic demand pressured by energy and food price hikes and modest wage growth. In Turkey as well, economic growth slowed considerably to 2.5% in 2012 compared with 8.5% the year before. Although domestic demand had recovered by the end of 2012 and exports reported swifter growth than expected, the decline in the inflation rate was only slight, namely 8.0% in 2012 down from 9.0% in 2011.
Germany's economy expanded by a mere 0.7% in 2012, following an increase of 3.0% the year before. In the first quarter of 2013, sentiment had brightened again according to the German Institute for Economic Research (DIW); GDP climbed by 0.5% compared with the previous quarter. This represents a significant acceleration in economic
development following a very weak closing quarter in 2012 when the German economy contracted by 0.6% in comparison with the preceding three months. Information from the German Federal Statistical Office shows that the annual inflation rate rose by 1.5% in February 2013, driven by above-average price hikes for energy and food, compared with the year-earlier period and by 0.6% against January 2013 (+1.7%).
In a year-on-year comparison, electricity consumption declined by 0.8% in 2012. Estimates by the Federal Association of the Energy and Water Industry (Bundesverband der Energie- und Wasserwirtschaft, BDEW) attribute the moderate consumption trend first and foremost to weaker industrial production, particularly in electricity-intensive sectors. According to the first surveys conducted by the BDEW, electricity consumption in January 2013 was 2.5% lower than in the year-earlier month. In contrast, gross electricity production climbed by a good 7%. Compared with the previous year, production increased by around 1% in 2012. The BDEW reported stronger demand from abroad, resulting in an export surplus of 23.1 billion kWh and 3.7 billion kWh both in the year 2012 and in January 2013 respectively, and thus a positive balance in the exchange of electricity. According to the preliminary forecast released by the Working Group on Energy Balances (AGEB), gross electricity consumption in 2012 fell by a little over 1% to 595 billion kWh. By contrast, energy consumption increased by 0.9% overall. Provisional calculations by the AGEB show that mineral oil consumption declined by 0.5% in 2012. In contrast, hard coal consumption climbed by more than 3%. The consumption of brown coal and natural gas rose by approximately 5% and 1.4% respectively. The strongest percentage increase was reported by renewable energies where consumption rose by a little over 8%. The proportion of renewable energies in the total energy consumption advanced to 11.6% in 2012 (2011: 10.8%). In contrast, the share of nuclear energy declined by approximately 8% to 8%. Around 32% of Germany's total energy consumption was covered by the domestic energy resources in the year ended, with brown coal and renewable energies making the largest contribution.
Market situation for primary energy sources, CO
2allowances and electricity
The overriding objective of EnBW's trading activities is to reduce the uncertainty in the generation margin which may arise from the price trends of primary sources of energy, CO2
allowances and electricity in the wholesale markets. EnBW
therefore uses the forward market not only to procure the quantities of primary energy sources and CO2 emission
allowances required for electricity generation, but also to sell the scheduled electricity production at the same time. This likewise applies to the quantities of electricity procured by the sales function on the forward market. The terms in the supply contracts concluded the year before are decisive for the costs and income in the first three months of 2013. The price developments seen on the forward market in the first three months of 2013 will have an effect on the results for 2014 and subsequent years. Similarly, this applies to the quantities of electricity procured by the sales function on the futures market.
Oil market: The oil prices continued to trend sideways until
the end of January 2013, mirroring the movement which dominated through to the close of the financial year 2012. Subsequently, prices rose until mid-February; the front month price at this time had almost reached 119 US$/bbl. The price hike was mainly attributable to economic and political developments in the USA. The US debt ceiling was suspended until May 2013, and the American real estate market recovered more swiftly than anticipated. As from mid-February, prices entered a downtrend again. This development was caused by fears of a premature restraint on America's expansionary monetary policy, the US government's unresolved dispute about the budget, along with the elections and problems in forming a government in Italy. At the end of March 2013, the oil price stood at 110.02 US$/bbl (front month) and 103.75 US$/bbl (front year).
Coal market: All in all, the average price level on the spot and futures markets for coal deliveries to the ARA region (Amsterdam, Rotterdam, Antwerp) in the first three months of 2013 was below the year-earlier level. The sustained excess supply in the European market in particular acted as a brake on prices. This was attributable to the increase in the export volume of US coal in 2012, triggered by a decline in demand for coal, ousted by the advantageous price of shale gas in the American domestic market. The surplus was exacerbated by the expansion in supply from Australia and Indonesia. Uncertainty about how the sovereign debt crisis would develop in a number of European countries dampened prices further. In contrast, consumption in Germany, the UK and Japan proved to be stable. The front year prices tracked the spot price trend and stood at 92.41 US$/t at the end of March 2013. The front month price was quoted at 78.38 US$/t.
Price development on the oil and coal markets Average
Q1 2013 Average Q1 2012 Average 2012
Crude oil (Brent) front month (daily quotes in US$/bbl) 112.64 118.45 111.68
Crude oil (Brent) annual price 2014 (daily quotes in US$/bbl) 103.81 104.29 101.59
Management report
Business activity and economic environment‹ Interim financial statements
Service
Gas market: Long-term gas import contracts generally form the basis of Germany's gas supply. Prices essentially track the oil price with a time lapse. The cross-border price index of the Federal Office of Economics and Export Control (BAFA) for natural gas, which is published on a monthly basis, also posted €29.02/MWh which is around 2% below the figure in December 2011 (€29.63/MWh).
The wholesale markets such as the Dutch Title Transfer Facility (TTF) and the trading hub of the NetConnect Germany (NCG) market territory are important sources of natural gas. In comparison to the year-earlier period, colder temperatures in the first quarter of 2013 resulted in spot prices rising to €28.24/MWh, corresponding to an increase
of approximately 18% as against the previous year's quarter. In addition, gas storage facilities were at a low level compared with the preceding years. In mid-March, the very low gas storage levels in the UK and the below average temperatures in particular sent spot prices on the TTF surging to more than €40/MWh in some cases.
The prices quoted on the futures market tracked the price trend on the spot market through to the end of February but subsequently only partially staged the price increases on the spot market. In the first quarter of 2013, they averaged €26.76/MWh, which is approximately 1% lower in a year-on-year comparison.
Development of prices for natural gas on the TTF (Dutch wholesale) in €/MWh
Average
Q1 2013 Average Q1 2012 Average 2012
Spot 28.24 23.94 22.65
Delivery 2014 26.76 26.91 26.79
CO2 emission allowances: Under the European emissions trading system, the requisite number of emission allowances have to be evidenced for the amount of CO2
emissions from power stations. At the beginning of 2013, the price level of emission allowances (EU Allowances – EUA) for delivery in December 2013 (EUA-13) initially declined significantly. The downturn was attributable to the premature start of the third EU emissions trading period in December 2012, which caused excess supply in the market. The EU Commission's proposal to amend the emissions trading directive, which met with rejection by the EU Parliament at the end of January 2013, specifically on the issue of keeping strategic reserves for emission allowances, gained a majority in parliament's Committee on the Environment. As a result, the price level recovered slightly in February. The persistent surplus triggered another
down-trend in the price of allowances in March. The price level of EUA-13 allowances stood at € 4.78/tCO2 between January and
March 2013 and was therefore 39% lower than in the previous year's period, falling 36% short of the average price in the financial year 2012.
The price curve for certified emission reduction (CER) allowances usually parallels the development of EUA-13 allowances. However, the prices of CER allowances tend to be lower due to the limited trading possibilities in the EU emissions trading system. Since the end of 2012, CER allowance prices have stagnated significantly below the € 1/tCO2 mark. The extremely low price level, impacted first
and foremost by slack demand, caused the spread between the price curve of EUA-13 and CER-13 allowances to widen.
Development of prices for emission allowances/daily quotes in €/t CO2
Average
Q1 2013 Average Q1 2012 Average 2012
EUA-12/EUA-13 4.78 7.87 7.51
CER-12/CER-13 0.35 4.07 2.96
Electricity wholesale market: At €42.27/MWh, the average
price for immediate delivery of electricity on the spot market of the European Energy Exchange (EEX) in 2012 was around €3 which is 6% lower than the prior-year figure. The background to this price development was, among other factors, the better availability of power stations compared with the year before. Fuel prices also pushed prices down.
On the EEX futures market, prices for deliveries in 2014 averaged € 42.17/MWh (base load product), down approxi-mately € 10, equivalent to 19%, against levels seen a year ago and 15% below the average price in the financial year 2012. The sustained downtrend in the price curve was determined first and foremost by the lower prices of coal and CO2
allowances compared with the previous year. The swift expansion of renewable energies also caused wholesale electricity prices to fall.
Development of prices for electricity (EEX) base load product in €/MWh Average Q1 2013 Average Q1 2012 Average 2012 Spot 42.27 45.11 42.60 Delivery 2014 42.17 52.31 49.67
Electricity and gas prices for retail and industrial customers: According to the most recent BDEW estimates (as per March 2013), the monthly electricity bill for an average household with an annual consumption of 3,500 kWh amounted to € 83.13 in 2013 (2012: € 75.51). At the start of 2013, electricity prices for household customers had risen by an average of 10% according to BDEW data. The price increase was mainly attributable to the substantial increase in the German Renewable Energies Act (EEG) levy, higher network charges across the board, as well as the offshore liability levy introduced by the German government to promote offshore wind power. The average household needed to find around € 15 (2012: € 10) a month for promoting renewable energies. According to the BDEW, industrial customers currently pay an average of 13.57 ct/kWh for electricity (excluding electricity tax).
Political framework conditions
European energy policy
Emissions trading: In order to combat the substantial decline in emission allowances prices, proposals of the EU Commission aimed at achieving a temporary shortfall in fungible allowances are currently being negotiated. This measure is to provide price support. Following the most recent vote in the European Parliament, the success of these proposals is very questionable. The structural reforms discussed as a separate issue for emissions trading are therefore all the more important.
Energy and climate policy targets through to 2030: The EU Commission is striving to achieve longer term planning reliability and has therefore put forward options for medium-term targets through to 2013 for lowering emissions, expanding renewable energies and enhancing energy efficiency.
Infrastructure: The EU Parliament and EU Council have passed a directive which can enter into force in April to accelerate prioritised European infrastructure projects. Based on this directive, important infrastructure projects are to be identified from 2014 onwards, swiftly implemented and especially promoted.
Financial services legislation: The EU Commission's negotiations in the process of legislation on the Markets in Financial Instruments Directive (MiFID) is ongoing. However, detailed rules for the application of the directive on regulating OTC derivatives trading (European Markets Infrastructure Regulation, EMIR for short) were adopted, and
the European Securities and Market Authority is now addressing their implementation.
Energy policy in Germany
New energy concept: The main topic of debate in the first quarter of 2013 was the electricity price brake introduced by Peter Altmaier, Germany's Federal Minister for the Environment, Nature Conservation and Nuclear Safety and Philipp Rösler, the Federal Minister of Economics and Technology. Under this measure, electricity price hikes in general and the EEG levy in particular are to be reduced. According to current statements by the German federal government, no changes are apparently to be made in the feed-in tariffs for existing projects and and those already bindingly planned. Together with Chancellery Minister Ronald Pofalla and the federal states, ministers are to seek other options for curbing the increase in electricity prices. The bill of the Federal Ministry of Economics and Technology on amending various energy directives entails involving energy intensive industries more strongly again in paying grid charges. Similarly, the operators of renewable energies plants are to make a financial contribution to system security through participating in the grid fees levied. The directives are due for adoption before the summer break.
In addition, a Ministerial Draft prepared by the Federal Ministry of Economics and Technology was announced in mid-March. This directive is intended to systemise and codify the practice in use since 2011/2012 of the contractual binding of reserve power stations and the handling of the planned decommissioning of system-relevant power stations.
Ultimate storage: The German government, the federal states and political parties reached an agreement at the start of April 2013 that the open issue of permanently storing highly radioactive waste be solved by deploying an impartial enquete commission. A bill on site selection legislation is to be submitted and approved by the Bundestag before parliament's summer recess.
Emission control: In March, the Bundestag approved an amendment to the 26th German Federal Emissions Control Act (BImSchV) aimed at improving protection against electromagnetic fields. In contrast to the regulation in force to date, this directive encompasses not only commercially operated radio equipment but also radio stations operated by private and sovereign providers. Moreover, the proposed regulation takes account of the recommended limits for
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electromagnetic fields revised by the International Commission on Radiological Protection in 2010. Approval by the Bundesrat is still pending.
Regulation of the electricity and gas markets
Federal Requirements Plan Act: The foundations for accelerating the planning and approval procedures in the transmission grid were laid through the Grid Expansion Acceleration Act (NABEG), adopted in mid-2011, and its amendment on 20 December 2012.
On 19 December 2012, the Federal Cabinet passed the Federal Requirements Plan Act. This act was underpinned by the electricity network development plan confirmed by the Federal Network Agency and submitted on 26 November 2012 as a draft for a federal requirements plan. As part of this process, the Federal Network Agency scaled back the number of projects, from a total of 75 projects under the draft of the network development plan presented by the German transmission network operators to 51. The act is intended to facilitate the identification of the energy industry necessities and the key priorities of the network expansion projects comprised under the federal requirements plan. In particular, federal and cross-border network expansion projects to which the Grid Expansion Acceleration Act applies are to be identified. The German Bundestag referred the draft of this Federal Requirements Plan Act to the committees after a first reading on 14 March 2013. Adoption is not anticipated before April or May 2013. Approval by the German Federal Council is not required although it can raise an objection.
Electricity network development plan 2013 and offshore network development plan 2013: Following the initial drafting of the network requirements plan in 2012, the four German transmission network operators published their draft of the network development plan 2013 on 2 March 2013. This plan is based on three different energy-related scenarios drawn up in a consultation process and approved by the Federal Network Agency. In this context, these network operators also presented their draft of an offshore network development plan for the first time.
The network development plan 2013 outlines the requisite network expansion on land over the next ten to 20 years from the standpoint of the transmission network operators. Compared with the network development plan 2012, they see a necessity of further network measures. This assumption is based on the increase anticipated in offshore wind generation capacity in the north of Germany and a reduction in unwanted physical flows of electricity via Poland and the Czech Republic to Austria. Moreover, according to the transmission network operators' cal-culations, there will be a change in the balance of trade. All in all, a stretch of 4,700 km of existing routes will need to be optimised and the network expanded by 4,000 km for lines in new routes.
The offshore network expansion plan consists of the transmission network operators' plan for extending the connection lines of wind farms in the North Sea and the Baltic in the coming ten years. The line construction measures for an offshore network total 2,150 km in length, of which 1,720 km is accounted for by the North Sea and 430 km by the Baltic Sea.
The drafts of the two network expansion plans were accessible to the public for comment until 14 April 2013. They will be subsequently revised to include the comments submitted during the consultation procedure. The second drafts of the network expansion plan and the offshore network expansion plan will be released in the summer of 2013 and remitted to the Federal Network Agency for reviewing, a process flanked by another consultation phase.
Gas network developmentplan2013: Similar to electricity, the network development plan for gas was also drawn up by the German long-distance network operators for the first time in 2012. The gas network development plan became binding on 10 March 2013 and incorporates the changes required by the Federal Network Agency in its decision of 10 December 2012. For the first time there is now a vital instrument at hand capable of designating requirements in Germany's gas grids.
On 18 February 2013, the long-distance network operators released the draft of the gas network requirements plan 2013 covering the period from 2014 to 2023. It is based on the scenario framework confirmed by the Federal Network Agency on 18 October 2012. The gas network requirements plan 2013 was made available to the public for comment within a short three-week window. The various options for storage and power plant connection played a role that was just as important as the modelling variations used to estimate the amount of investment anticipated. The long-distance network operators participating proposed a model that provides for network expansion measures through to 2023 funded by an investment volume of around € 1.5 billion. Aside from this, the draft of the gas network requirements plan also includes a first-time proposal of how – given the decline in domestic L gas production – the conversion of low calorific gas (L gas) to high calorific gas (H gas) can gradually take place. In accordance with regulatory rules, the gas network requirements plan, including the results from the consultation phase, was submitted to the Federal Network Agency on 1 April. This will initiate a second consultation procedure on the part of the authority over the course of the second quarter.
Adjusted EBITDA was lifted to € 874.5 million, which is 1.8% higher year on year. This figure comprises
positive fair value adjustments on derivatives that offset one another when the underlyings are realised.
Adjusted EBITDA excluding these effects stood at € 774.0 million, thereby falling 9.9% short of the
year-earlier figure. EnBW’s earnings development was therefore in line with our expectations. Compared
with year-end 2012, adjusted net debt declined by 3.6% to € 8.1 billion as of 31 March 2013 owing to a
positive free cash flow.
Results of operations
Unit sales and revenue
Electricity sales of the EnBW Group 1/1–31/3/2013
in billions of kWh
Generation and
trading Renewable energies Grids Sales Total
Retail customers (B2C) 0.0 0.0 0.0 5.4 5.4
Industry and redistributors (B2B) 0.4 0.1 0.0 8.9 9.4
Trade 15.9 0.8 1.9 0.1 18.7
Total 16.3 0.9 1.9 14.4 33.5
Electricity sales of the EnBW Group 1/1–31/3/2012 in billions of kWh
Generation and
trading Renewable energies Grids Sales Total
Retail customers (B2C) 0.0 0.0 0.0 5.8 5.8
Industry and redistributors (B2B) 0.6 0.0 0.0 10.6 11.2
Trade 14.5 0.7 2.4 0.1 17.7
Total 15.1 0.7 2.4 16.5 34.7
In the first three months of 2013, the EnBW Group's electricity sales stood at 33.5 billion kWh, which is 3.5% lower than in the previous year's period. Unit sales to retail customers and industry fell due to consistently fierce competition. Unit sales
in the B2C and the B2B businesses declined by 6.9% to 5.4 billion kWh and by 16.1% to 9.4 billion kWh respectively. Electricity sales in Trade came in at 1.0 billion kWh, down 5.6% from a year ago.
Gas sales of the EnBW Group 1/1–31/3/2013 in billions of kWh
Generation and
trading Sales Total
Retail customers (B2C) 0.0 4.2 4.2
Industry and redistributors (B2B) 0.0 19.9 19.9
Trade 13.8 0.1 13.9
Total 13.8 24.2 38.0
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Gas sales of the EnBW Group 1/1–31/3/2012 in billions of kWh
Generation and
trading Sales Total
Retail customers (B2C) 0.0 4.4 4.4
Industry and redistributors (B2B) 0.0 19.0 19.0
Trade 2.0 0.2 2.2
Total 2.0 23.6 25.6
In the first three months of 2013, the EnBW Group's gas sales climbed by 48.4% to 38.0 billion kWh over the prior-year period. In comparison with the first three months of 2012, unit sales to retail customers dropped by 0.2 billion kWh, the equivalent of 4.5%, pressured by the competition. Lower temperatures had a positive effect in a year-on-year
comparison. In the industrial customers and redistributors business, unit sales increased by 0.9 billion KWh, up to 4.7% in a year-on-year comparison. In the first quarter of 2013, as a result of expansion in the gas midstream business, trading activities grew by 11.7 billion kWh to 13.9 billion kWh compared with the prior-year period.
External revenue of the EnBW Group by segment in € millions1, 2
1/1–
31/3/2013 31/3/2013 1/1– Variance % 31/12/20121/1–
Generation and trading 1,556.9 1,176.5 32.3 4,344.2
Renewable energies 93.1 83.2 11.9 347.4
Grids 1,266.0 1,027.7 23.2 5,268.5
Sales 2,824.8 2,805.2 0.7 9,277.7
Other/consolidation 4.8 3.2 50.0 8.1
Total 5,745.6 5,095.8 12.8 19,245.9
1 The figures of the comparative period have been restated. 2 After deducting electricity and energy taxes.
The EnBW Group's external revenue, including electricity and energy taxes, stood at € 5,993.5 million in the first quarter of 2013. Net of electricity and energy taxes, it amounted to €5,745.6 million, representing an increase of 12.8% in comparison with 2012.
Generation and trading: Revenue in the generation and trading segment rose by 32.3% to € 1,556.9 million as against the year-earlier period. This development was attributable to growth in EnBW's trading activities, especially in the gas business. The segment's share in the Group's total revenue climbed to 27.1%, up from 23.1% a year ago.
Renewable energies: In the first three months of 2013, the revenues generated by the renewable energies segment advanced by 11.9% to € 93.1 million against the first quarter of 2012, which was, among other factors, attributable to a rise in sales. The segment's share in total group revenue amounted to 1.6%, unchanged from the previous year.
Grids: Revenue growth of 23.2% to € 1,266.0 million in the grids segment is attributable to an increase in EEG revenue, among other factors. In relation to total group revenue, the segment's share rose from 20.2% in the first three months of 2012 to 22.0% in 2013.
Sales: Revenue of the Sales segment rose marginally by 0.7% to € 2,824.8 million in the first three months of 2013 compared with the year-earlier period. The segment's share in total group revenue amounted to 49.2% which is around 6% lower year on year.
Material developments in the income statement
The balance of other operating income and other operating expenses posted € 64.7 million in the reporting period, up € 124.7 million compared with the previous year's figure of € -60.0 million, primarily as a result of positive fair value adjustments on derivatives. In the first three months of 2013, the cost of materials rose substantially by 19.9% to € 4,559.4 million compared with in the first quarter of 2012. The disproportionate increase in the cost of materials measured against revenue is attributable firstly to the downtrend in prices and spreads for electricity generation, and secondly to the necessity of purchasing CO2 emission
allowances since the start of 2013 as opposed to year-end 2012 when allocation was free of charge. The investment result fell to € 114.3 million, down by € 83.4 million (previous year: € 197.7 million). The decline was mainly due to the fact that income from the disposal of our Polish investment was included in the prior-year period. The financial result dropped by € 38.5 million to € -133.0 million. With finance costs largely unchanged against the previous year, the decline in the financial result was caused mainly by lower finance revenue.
Once again, the year-earlier period comprised disposal gains from the divestiture programme. Overall, earnings before tax (EBT) amount to € 640.7 million compared with the previous year's figure of € 745.3 million. In the reporting period, income taxes of € 165.1 million settled around the level of the year before.
Earnings
EnBW reported a considerable group net profit of € 443.0 million in terms of the proportion of the result attributable to the shareholders of EnBW AG, corresponding to a decline of € 118.3 million compared with the year earlier
period (€ 561.3 million). After the first three months of 2013, earnings per share stood at €1.64 (previous year: € 2.30).
Adjusted earnings and non-operating result
The sustainable earnings power of operating activities is of particular importance for the internal management and external communication of EnBW's current and future development of earnings. For this reason, we use adjusted EBITDA – earnings before interest, tax, amortisation and depreciation adjusted for non-operating effects – as a key reporting indicator.
Adjusted EBITDA of the EnBW Group by segment in € millions1
1/1–
31/3/2013 31/3/20121/1– Variance % 31/3/20121/1–
Generation and trading 488.4 509.6 -4.2 1,125.2
Renewable energies 53.7 53.4 0.6 238.7
Grids 314.6 267.0 17.8 773.4
Sales 24.9 25.2 -1.2 240.7
Other/consolidation -7.1 3.8 - -37.2
Total 874.5 859.0 1.8 2,340.8
1 The figures of the comparative periods have been restated.
In the reporting period, the EnBW Group generated adjusted EBITDA of €874.5 million, up 1.8% on the prior-year level (€ 859.0 million). This figure comprises positive fair value adjustments on derivatives that offset one another when the underlyings are realised. Adjusted EBITDA excluding these effects stood at € 774.0 million, thereby falling 9.9% short of the year-earlier figure. EnBW's earnings development was therefore in line with our forecast for the financial year 2013. The adjusted EBITDA of the generation and trading seg-ment dropped by 4.2% to € 488.4 million (previous year: € 509.6 million). Adjusted for positive fair value effects on derivatives, earnings declined by approximately 25%, impac-ted first and foremost by lower prices and spreads for electricity production. This was compounded by a burdening effect from the full auctioning of CO2 emission allowances
since the start of 2013.
The renewable energies segment saw adjusted EBITDA rise marginally to € 53.7 million in the first quarter of 2013, up from the year-earlier figure of € 53.4 million. The unfavourable weather conditions had a negative impact here. Electricity generation from wind energy and
photovoltaic facilities fell across the entire sector compared with the first three months of 2012. Electricity production from hydro-electric power stations developed better than expected and remained at the high level of the year before. The falling electricity prices had a braking effect on the hydro-electric business, reducing the profitability of our hydro-electric power stations.
The grids segment's adjusted EBITDA increased significantly by 17.8% to € 314.6 million (previous year: € 267.0 million). This positive performance is chiefly due to higher grid charges and lower overheads.
In the period under review, adjusted EBITDA declined marginally to € 24.9 million in the sales segment, down from € 25.2 million in the prior-year period. Adjusted for fair value effect on derivatives in the gas business, earnings rose by around 22% in the reporting period.
Other/consolidation reported a negative adjusted EBITDA of € 7.1 million compared with the positive contribution of € 3.8 million made in the first quarter of 2012.
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Adjusted earnings indicators of the EnBW Group in € millions1
1/1–
31/3/2013 31/3/2012 1/1– Variance % 31/12/20121/1–
Adjusted EBITDA 874.5 859.0 1.8 2,340.8
Amortisation and depreciation -217.1 -217.7 -0.3 -888.3
Adjusted EBIT 657.4 641.3 2.5 1,452.5
Adjusted investment result 86.6 101.7 -14.8 186.8
Adjusted financial result -132.7 -124.7 -6.4 -664.2
Adjusted income taxes -164.4 -154.2 -6.6 -232.5
Adjusted group net profit 446.9 464.1 -3.7 742.6
of which profit/loss shares attributable to non-controlling
interests (31.0) (29.0) 6.9 (90.8)
of which profit/loss shares attributable to the equity holders
of EnBW AG (415.9) (435.1) -4.4 (651.8)
1 The figures of the comparative periods have been restated.
The decline in the adjusted investment result of 14.8% to € 86.6 million (previous year: € 101.7 million) is chiefly due to lower earnings generated by entities accounted for using the equity method. The loss in the adjusted financial result increased by 6.4% to € 132.7 million (previous year: € -124.7 million) in a year-on-year comparison owing to lower fair value adjustments.
Adjusted income taxes amounted to € 164.4 million in the period under review, up from € 154.2 million the year before. All in all, adjusted group net profit in terms of the proportion of the result attributable to the shareholders of EnBW AG fell by 4.4% to € 415.9 million (previous year: € 435.1 million).
Non-operating result of the EnBW Group in € millions1
1/1–
31/3/2013 31/3/2012 1/1– Variance %
Income/expenses relating to nuclear power -10.1 -4.5 -124.4
Income from the reversal of other provisions 7.1 0.2
-Disposal gains 6.9 10.1 -31.7
Other non-operating result -1.9 -5.0 62.0
Non-operating EBITDA 2.0 0.8
-Impairment losses 0.0 0.0
-Non-operating EBIT 2.0 0.8
-Non-operating investment result 27.7 96.0 -71.1
Non-operating financial result -0.3 30.2
-Non-operating income taxes -0.7 -0.2
-Non-operating group net profit 28.7 126.8 -77.4
of which profit/loss shares attributable to non-controlling interests (1.6) (0.6)
-of which pr-ofit/loss shares attributable to the equity holders -of EnBW AG (27.1) (126.2) -78.5
1 The figures of the comparative period have been restated.
Non-operating EBITDA returned a profit of €2.0 million in the reporting period, up from €0.8 million in the first three months of 2012. As no impairment losses were incurred in the first quarter of 2013 or in the year-earlier quarter, non-operating EBIT corresponds to non-operating EBITDA in both these periods. In the first quarter of 2013, the non-operating investment result declined by € 68.3 million to € 27.7 million compared with the year-earlier period which included disposal gains from the sale of our investment in Poland as part of our divestiture programme.
The non-operating financial result dropped to €-0.3 million in the period under review, down from the positive result of € 30.2 million reported in the first quarter of 2012, which was originating from disposal gains.
Non-operating income taxes stood at € 0.7 million in the first quarter of 2013 compared with € 0.2 million in the prior-year period. Overall, non-operating group net profit in terms of the proportion of result attributable to the shareholders of EnBW AG declined by 78.5% to € 27.1 million.
Financial position
Financing
A core element of EnBW's financing is its cash flow from operating activities, which amounted to €298.1 million in the first three months of 2013.
In terms of external financing, the company has various instruments at its disposal, of which some have not been utilised to date:
›
Commercial paper (CP) programme for a total of €2.0 billion (undrawn as of 31 March 2013)›
Syndicated line of credit for €2.0 billion (undrawn as of 31 March 2013)›
Bilateral short-term lines of credit (€512 million, undrawn as of 31 March 2013)›
Euro Medium Term Note (EMTN) programme with a limit of €7.0 billion (€4.0 billion utilised as of 31 March 2013)The capital market instruments maturing total around € 1.0 billion in the financial year 2013, an amount which we succeeded in reducing back in January 2013 through the repayment of a bond of approximately CHF 300 million. The repayment was made without fresh borrowing. The CHF bond served as collateral for EnBW's activities in Switzerland. With this in mind, we are considering another refinancing in CHF. In the current financial year, other bonds falling due amount to around € 750 million. Aside from possible interim financing, we will fund these bonds entirely from the cash flow. EnBW will be endeavouring to reduce net debt further. EnBW bonds present a balanced maturity profile seen in terms of the next few years.
1.8 – – -78.5 1.9 2.5 -4.4 2.7 -21.1
Financial performance of the EnBW Group in € millions1
1 The figures of the comparative period have been restated.
2 In relation to the profit/loss share attributable to the equity holders of EnBW AG.
1/1–31/3/2013 1/1–31/3/2012 Variance % 874.5 2.0 876.5 657.4 2.0 415.9 659.4 27.1 443.0 859.0 0.8 859.8 641.3 0.8 435.1 642.1 126.2 561.3 Adjusted EBITDA Non-operating EBITDA EBITDA Adjusted EBIT Non-operating EBIT EBIT Adjusted group net profit2
Non-operating group net profit2
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Capital expenditure and acquisitions
In the first three months of 2013, the EnBW Group invested € 143.0 million, down 2.6% and therefore slightly below the year-earlier figure (€ 146.8 million). Investments in intangible assets and property, plant and equipment totalling € 141.7 million (previous year: € 142.9 million) went chiefly towards network expansion and the major RDK 8 and EnBW Baltic 2 projects. The financial investments amounted to € 1.3 million in the first three months of 2013, down from € 3.9 million in the previous year's period. Minus divestitures totalling € 36.2 million, primarily from the disposal of non-current assets, and including construction cost subsidies, net capital expenditure stood at € 106.8 million compared with the year-earlier figure of € -148.8 million. This year-earlier figure resulted from the high level of divestiture amounting to € 295.6 million which was principally generated by the disposal of our Polish investment and overcompensated the gross capital expenditure of € 146.8 million.
The proportion of investments in replacement and renewal measures stood at around 38% in the first quarter of 2013 and was earmarked for the expansion and maintenance of existing power stations and grid infrastructure. The share of capital expenditure in growth projects reached approxi-mately 62%, serving principally to fund the realisation of the second offshore wind farm EnBW Baltic 2 and the construction of the RDK 8 hard coal power station.
The large majority of investments in intangible assets and property, plant and equipment, namely 50.7% and equivalent to € 71.9 million, was accounted for by the grids segment. These activities concentrated on the expansion and upgrading of our grids and the connection of facilities for the generation of renewable energies. The renewable energies segment received funds of € 37.1 million, corres-ponding to 26.2% of capital expenditure. A total of € 24.2 million, which makes up 17.1% of the EnBW Group's total capital expenditure, was invested in projects in the generation and trading segment in the period under review. In addition, € 8.5 million, or around 6.0%, went mainly towards bolstering the sales force.
Net cash investments of the EnBW Group in € millions1
1/1–
31/3/2013 31/3/2012 1/1– Variance % 31/12/20121/1–
Generation and trading 24.2 50.6 -52.2 237.6
Renewable energies 37.1 32.0 15.9 121.6
Grids 71.9 50.2 43.2 390.8
Sales 7.3 6.7 9.0 53.3
Other/consolidation 1.2 3.4 -64.7 13.5
Total capital expenditures on intangible assets and property, plant
and equipment 141.7 142.9 -0.8 816.8
Cash paid for the acquisition of subsidiaries and entities accounted
for using the equity method 0.6 1.3 -53.8 38.8
Cash paid for the acquisition of investments2 0.7 2.6 -73.1 20.7
Cash paid for changes in ownership interest without loss of control 0.0 0.0 - 1.1
Total investments 143.0 146.8 -2.6 877.4
Cash received from disposals of intangible assets and property,
plant and equipment -13.0 -20.4 -36.3 -89.8
Cash received from construction cost and investment subsidies -21.2 -14.7 44.2 -66.2
Cash received from the sale of subsidiaries and entities accounted
for using the equity method 0.0 -257.1 - -258.1
Cash received from the sale of investments2 -2.0 -3.4 -41.2 -15.7
Total divestitures -36.2 -295.6 -87.8 -429.8
Net (cash) investments 106.8 -148.8 - 447.6
1 The figures of the comparative period have been restated. 2 Without investments held as financial assets.
Liquidity analysis
Free cash flow of the EnBW Group in € millions1
1/1–
31/3/2013 31/3/20121/1– Variance % 31/12/20121/1–
Cash flow from operating activities 298.1 334.1 -10.8 856.3
Change in assets and liabilities from operating activities 430.5 381.3 12.9 915.1
Interest and dividends received 83.9 93.8 -10.6 346.2
Interest paid for financing activities -18.7 -96.6 -80.6 -335.9
Funds from operations (FFO) 793.8 712.6 11.4 1,781.7
Change in assets and liabilities from operating activities -430.5 -381.3 12.9 -915.1
Capital expenditures on intangible assets and property, plant and
equipment -141.7 -142.9 -0.8 -816.8
Cash received from disposals of intangible assets and property,
plant and equipment 13.0 20.4 -36.3 89.8
Cash received from construction cost and investment subsidies 21.2 14.7 44.2 66.2
Free cash flow 255.8 223.5 14.5 205.8
1 The figures of the comparative period have been restated.
In the first quarter of 2013, the operating cash flow posted € 298.1 million, down 10.8% on the year-earlier figure of € 334.1 million. Funds from operations (FFO) amounted to € 793.8 million, which is 11.4% higher than the previous year's figure of € 712.6 million. The increase is mainly attributable to lower interest payments resulting from the repayment of bonds maturing of € 1 billion in the first quarter of 2012. In a year-on-year comparison, the balance of assets and liabilities from operating activities rose by
€ 49.2 million, mainly owing to the increase in derivatives in the reporting period. A countereffect was constituted by the decline in the balance of trade receivables and payables. Capital expenditure in intangible assets and property, plant and equipment remained unchanged from the year-earlier level, resulting in a free cash flow of € 255.8 million, which corresponds to an increase of € 32.3 million, the equivalent of 14.5%.
Cash flow statement of the EnBW Group in € millions1
1/1–
31/3/2013 31/3/20121/1– Variance % 31/12/20121/1–
Cash flow from operating activities 298.1 334.1 -10.8 856.3
Cash flow from investing activities -259.7 74.7 - -274.3
Cash flow from financing activities -269.1 -1,167.5 -77.0 -730.8
Net change in cash and cash equivalents -230.7 -758.7 -69.6 -148.8
Net foreign exchange difference -0.6 1.6 - -0.2
Change in cash and cash equivalents -231.3 -757.1 -69.4 -149.0
1 The figures of the comparative period have been restated.
A cash outflow of € 259.7 million was reported under the cash flow from investing activities in the first quarter of 2013. In the previous year's period, this item saw a cash inflow of € 74.7 million from the disposal of our investment in Poland. In the first quarter of 2013, the cash outflow of € 269.1 million under the cash flow from financing activities was substantially lower in a year-on-year comparison. The decline was mainly due to the repayment of a bond maturing in an amount of € 1 billion in February 2012. The Group's cash and cash equivalents contracted by € 231.3 million in the reporting period.
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Net assets
As of 31 March 2013, the EnBW Group's total assets amounted to € 38,519.0 million, representing an increase of 4.8% compared with year-end 2012. Non-current assets rose by € 338.7 million, which was primarily attributable to an increase in securities as part of other financial assets resulting from a portfolio reallocation and higher market value. Current assets reported seasonally induced growth of € 372.7 million to € 4,292.0 million in trade receivables on the one hand. On the other, the marking to market of derivatives caused other current assets to rise by € 1,442.0 million. These items were offset by reduced inventories and a lower level of cash and cash equivalents.
The increase in equity of € 392.0 million, corresponding to 6.1%, to € 6,771.7 million as of 31 March 2013 resulted mainly from the group profit generated in the first quarter of 2013. The equity ratio climbed marginally to 17.6%, up from 17.4%, as per the reporting date of 31 March 2013. The increase of € 117.9 million in non-current liabilities was due first and foremost to higher provisioning. Two counteracting effects impacted current liabilities which rose by € 1,243.4 million in total: other liabilities and subsidies climbed by € 1,646.6 million, chiefly on the back of the marking to market of derivatives. By contrast, the financial liabilities declined by € 215.3 million, primarily through the repayment of a bond.
Balance sheet structure of the EnBW Group in € millions1
31/3/2013 31/12/2012 Variance %
Non-current assets 25,475.3 25,136.6 1.3
Current assets 12,351.5 10,948.0 12.8
Assets held for sale 692.2 681.1 1.6
Assets 38,519.0 36,765.7 4.8
Equity 6,771.7 6,379.7 6.1
Non-current liabilities 21,230.9 21,113.0 0.6
Current liabilities 10,515.8 9,272.4 13.4
Liabilities directly associated with assets held for sale 0.6 0.6
-Equity and liabilities 38,519.0 36,765.7 4.8
1 The figures of the comparative period have been restated.
Adjusted net debt
As of 31 March 2013, adjusted net debt fell by 3.6% to €8,112.6 million compared with year-end 2012. Financial liabilities decreased by 4.1% to €6,487.2 million, mainly owing to bonds of CHF 300 million falling due and being repaid in February 2013. Repayment was covered by the company's liquidity position. Reallocations in the
invest-ment portfolio caused by changes in the capital market environment led to cash and cash equivalents of the special funds being invested in non-current investments. An increase in the market values of non-current securities and the positive free cash flow reduced adjusted net debt in the first quarter of 2013.
Adjusted net debt of the EnBW Group in € millions1
31/3/2013 31/12/2012 Variance %
Cash and cash equivalents -3,052.3 -3,341.2 -8.6
Cash and cash equivalents of the special funds and short-term investments to cover
the pension and nuclear power provisions 816.1 1,075.3 -24.1
Adjusted cash and cash equivalents -2,236.2 -2,265.9 -1.3
Bonds 5,100.9 5,380.7 -5.2
Liabilities to banks 1,008.4 971.7 3.8
Other financial liabilities 377.9 408.8 -7.6
Financial liabilities 6,487.2 6,761.2 -4.1
Recognised net financial liabilities2 4,251.0 4,495.3 -5.4
Pension and nuclear power provisions 12,389.4 12,342.5 0.4
Long-term investments and loans3 -6,322.3 -5,902.3 7.1
Cash and cash equivalents of the special funds and short-term investments to cover
the pension and nuclear power provisions -816.1 -1,075.3 -24.1
Other -74.7 -75.7 -1.3
Recognised net debt3 9,427.3 9,784.5 -3.7
Market value of emission allowances purchased for planned future electricity
generation -116.2 -154.4 -24.7
Non-current receivables associated with nuclear power provisions -555.1 -555.5 -0.1
Valuation effects from interest-induced hedging transactions -143.4 -159.0 -9.8
Restatement of 50% of the nominal amount of the hybrid bond4 -500.0 -500.0
-Recognised net debt3 8,112.6 8,415.6 -3.6
1 The figures of the comparative period have been restated.
2 Adjusted for valuation effects from interest-induced hedging transactions and 50% of the nominal amount of the hybrid bond, net financial liabilities amount to €3,607.6 million (31/12/2012: €3,836.3 million).
3 Includes investments held as financial assets.
4 The structural characteristics of our hybrid bond meet the criteria for half of it to be classified as equity and the other half as debt by the rating agencies Moody’s and Standard & Poor’s.
Related parties
Transactions with related parties are disclosed in the notes and explanations contained in the interim consolidated financial statements.
