• Difficult earnings situation in electricity generation
• Efficiency-enhancement programme progressing faster than expected
• 2013 results in line with forecast
• Outlook for 2014 confirmed

The difficult earnings situation in conventional electricity generation in Europe is clearly reflected in RWE AG’s financial results for fiscal 2013. For the first time since the Federal Republic of Germany was established, in other words, in more than 60 years, the Essen-based energy provider has posted a net loss amounting to –EUR 2.8 billion. This is attributable to impairment losses of some EUR 4.8 billion, which RWE had to recognise for the full year, mainly in respect of its power plant fleet.

One-off effects such as these impairment losses are not taken into account when calculating recurrent net income, which fell by 6% to EUR 2.3 billion. As expected, EBITDA was down 6%, to EUR 8.8 billion, and the operating result was down 8%, to EUR 5.9 billion. External revenue increased slightly, to EUR 54.1 billion.

Two counteracting effects mitigated these burdens in fiscal 2013. On the one hand, the positive outcome of the arbitration proceedings with Gazprom, which resulted in high compensation payments, and on the other hand the company’s efficiency and savings targets, which were achieved earlier than expected. The objective of achieving a lasting effect of EUR 1 billion on the operating result by the end of 2014 by reducing costs and increasing revenues was already achieved in 2013. RWE also assumes that it will achieve its overall objective of at least EUR 1.5 billion in 2016, which is a year earlier than planned.

In view of the difficult financial conditions, the Executive Board and Supervisory Board announced in September 2013 that they would propose a dividend of EUR 1 per share to the Annual General Meeting in April 2014. This represents around 27% of recurrent net income, which is the basis for calculating the dividend. For the financial years from 2014 onwards dividend proposals will be in line with a dividend payout ratio of 40 to 50% of recurrent net income.

Generation and supply of electricity and gas

The RWE Group’s electricity generation fell by 5% to 216.7 billion kilowatt hours (kWh) in 2013. This was mainly the result of the reduction in conventional generation capacity. However, RWE produced more electricity from renewables than in 2012. Electricity sales declined by 2% to 270.9 billion kWh.

Weather conditions caused a 9% increase in gas sales, to 335.0 billion kWh. Customer acquisitions were recorded Group-wide among industrial and commercial enterprises as well as distributors.

Conventional Power Generation Division

After establishing RWE Generation on 1 January 2013, the Group is publishing the first full-year figures on the Conventional Power Generation Division. The operating result fell by 58% to EUR 1.4 billion. In addition to the decline in prices for forward electricity trading in continental Europe, this mainly reflects the end of the free allocation of CO ₂ emission allowances, which still provided relief of around EUR 1.2 billion during the previous year. The division did, however, also benefit from efficiency-improvement measures.

Supply/Distribution Networks Germany Division

The operating result for the division, which includes the Group’s German supply and distribution networks businesses, was in the same order of magnitude as the previous year, at EUR 1.6 billion. Factors such as the weather-induced increase in gas sales had a positive effect on earnings. A counteracting effect was felt from the fact that the Koblenz regional utility Kevag and Berlinwasser waterworks no longer belong to the Group.

Supply Netherlands/Belgium Division

One-off balance-sheet effects were largely responsible for a 46% increase in the division’s operating result, to EUR 278 million. The increase in gas sales also helped to bolster the division’s results.

Supply UK Division

Increased expenditure for state-ordered measures to improve energy efficiency among residential customers and increased network usage fees had a constraining effect on the result. Tariff increases combined with positive effects of the efficiency-enhancement programme in particular had an offsetting effect, bringing the operating result in the UK to EUR 290 million (up 6% net of currency effects), which was just above the value for the previous year.

Central Eastern and South Eastern Europe Division

The main reason for the decline in the operating result to EUR 1 billion was the sale of NET4GAS in August. Excluding this effect and adjusted for currency fluctuations, the result was up 15%. A positive effect resulted from derivative transactions to limit currency risks. Improved distribution network and supply margins in the Group’s Czech gas and Polish electricity business, however, contrasted with the state-ordered reduction in network fees and residential tariffs in Hungary.

Renewables Division

The operating result for RWE Innogy was up 7% to EUR 196 million. The main drivers were the expansion in generation capacity (e.g. the Greater Gabbard offshore wind farm) and higher capacity utilisation of German hydro-electric power stations.

Upstream Gas & Oil Division

The operating result for RWE Dea fell by 24% to EUR 521 million, mainly due to the lower oil price and a weaker dollar. Furthermore, exploration costs were higher than expected during 2013.

Trading/Gas Midstream Division

As expected, RWE Supply & Trading increased its operating result substantially, by EUR 1.4 billion, to EUR 831 million. The arbitral ruling on the gas procurement agreement with Gazprom at the end of June was a major contributing factor here. However, the division was not able to match the performance posted in energy trading in the previous year.

Cash Flow

Cash flows from operating activities amounted to EUR 5.8 billion, a 31% increase year on year. Cash flows from operating activities, less capital expenditure on property, plant and equipment and intangible assets, result in free cash flow. At EUR 1.3 billion, it was substantially higher than in the previous year (minus EUR 686 million).

Capital expenditure

Capital expenditure was down 17% to EUR 4.6 billion. The bulk of capital expenditure on property, plant and equipment of a total of EUR 4.5 billion was earmarked for the expansion of conventional and renewable generation capacities and the maintenance and modernisation of network infrastructure.

Headcount

As at 31 December 2013, RWE employed 66,341 staff (expressed as full-time equivalent positions), down just under 3,900 or 6% on the closing figure for 2012. This decline is the result of operational job cuts and the sale of stakes in companies. The Group continues to provide vocational training well in excess of its own staffing needs. Some 2,715 young people were receiving vocational training at RWE at the end of 2013.

Outlook

As announced in November 2013, RWE expects to experience a further substantial decrease in earnings in 2014. The Group currently expects an EBITDA of between EUR 7.6 and EUR 8.1 billion for this year, an operating result of EUR 4.5 to EUR 4.9 billion and recurrent net income of EUR 1.3 to EUR 1.5 billion.

Forward-looking statements
This press release contains forward-looking statements regarding the future development of the RWE Group and its companies as well as economic and political developments. These statements are assessments that RWE has made based on information available to the company at the time this document was prepared. In the event that the underlying assumptions do not materialise or additional risks arise, actual performance can deviate from the performance expected at present. Therefore, RWE cannot assume responsibility for the accuracy of these statements.

Contact:

Peter Heinacher
RWE AG
Head of Corporate Affairs
T: +49 201 12-15996

Annett Urbaczka
RWE AG
Head of Group Media Relations
T +49 201 12-17441