2011 Annual Report - OTCIQ.com

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138 Notes Valuation of Derivative Instruments The fair value of derivative instruments is sensitive to movements in underlying market rates and other relevant variables. The Company assesses and monitors the fair value of deri vative instruments on a periodic basis. Fair values for each derivative financial instrument are determined as being equal to the price at which one party would assume the rights and duties of another party, and calculated using common market valuation methods with reference to available market data as of the balance sheet date. The following is a summary of the methods and assumptions for the valuation of utilized derivative financial instruments in the Consolidated Financial Statements. • Currency, electricity, gas, oil and coal forward contracts, swaps, and emissions-related derivatives are valued separately at their forward rates and prices as of the balance sheet date. Whenever possible, forward rates and prices are based on market quotations, with any applicable forward premiums and discounts taken into consideration. • Market prices for interest rate, electricity and gas options are valued using standard option pricing models commonly used in the market. The fair values of caps, floors and collars are determined on the basis of quoted market prices or on calculations based on option pricing models. • The fair values of existing instruments to hedge interest risk are determined by discounting future cash flows using market interest rates over the remaining term of the instrument. Discounted cash values are determined for interest rate, cross-currency and cross-currency interest rate swaps for each individual transaction as of the balance sheet date. Interest income is recognized in income at the date of payment or accrual. • Equity forwards are valued on the basis of the stock prices of the underlying equities, taking into consideration any timing components. • Exchange-traded futures and option contracts are valued individually at daily settlement prices determined on the futures markets that are published by their respective clearing houses. Paid initial margins are disclosed under other assets. Variation margins received or paid during the term of such contracts are stated under other liabilities or other assets, respectively. • Certain long-term energy contracts are valued with the aid of valuation models that use internal data if market prices are not available. A hypothetical ten-percent increase or decrease in these internal valuation parameters as of the balance sheet date would lead to a theo retical decrease in market values of €212 million or an increase of €44 million, respectively. At the beginning of 2011, a gain of €112 million from the initial measurement of derivatives was deferred. After the realization of €7 million in deferred gains and new additions of €3 million, the remainder is a deferred gain of €122 million at year-end, which will be recognized in income during subsequent periods as the contracts are settled. The following two tables include both derivatives that qualify for IAS 39 hedge accounting treatment and those for which it is not used.
CEO Letter E.ON Stock Combined Group Management Report Consolidated Financial Statements Corporate Governance Report Supervisory Board and Board of Management Tables and Explanations Total Volume of Foreign Currency, Interest Rate and Equity-Based Derivatives December 31, 2011 December 31, 2010 Nominal Nominal € in millions value Fair value value Fair value FX forward transactions 25,865.2 366.7 31,116.2 -87.4 Subtotal 25,865.2 366.7 31,116.2 -87.4 Cross-currency swaps 15,344.5 489.2 17,924.1 274.4 Cross-currency interest rate swaps 211.4 99.2 211.4 75.8 Subtotal 15,555.9 588.4 18,135.5 350.2 Interest rate swaps Fixed-rate payer 2,318.1 -359.7 2,468.0 -128.9 Fixed-rate receiver 1,284.8 153.9 1,115.8 110.8 Interest rate future 34.5 -0.6 133.8 1.4 Interest rate options 2,000.0 -61.5 2,000.0 71.3 Subtotal 5,637.4 -267.9 5,717.6 54.6 Other derivatives 9.1 2.2 1,083.0 -180.0 Subtotal 9.1 2.2 1,083.0 -180.0 Total 47,067.6 689.4 56,052.3 137.4 Total Volume of Electricity, Gas, Coal, Oil and Emissions-Related Derivatives December 31, 2011 December 31, 2010 Nominal Nominal € in millions value Fair value value Fair value Electricity forwards 77,818.5 -301.4 65,052.8 763.6 Exchange-traded electricity forwards 9,700.3 -5.6 11,411.0 -681.9 Electricity swaps 3,333.1 32.7 5,853.4 -52.9 Exchange-traded electricity options 270.4 27.8 44.7 18.9 Coal forwards and swaps 10,930.3 -18.5 8,316.2 300.7 Exchange-traded coal forwards 11,589.6 -63.8 8,830.7 36.0 Oil derivatives 11,203.0 13.3 13,700.9 175.2 Exchange-traded oil derivatives – – 40.8 35.7 Gas forwards 45,231.1 125.1 28,070.8 938.5 Gas swaps 601.5 25.4 5,074.0 11.4 Gas options 199.3 13.9 864.1 31.4 Exchange-traded gas forwards 21,948.2 57.4 1,585.2 51.0 Emissions-related derivatives 147.8 0.3 424.4 -0.4 Exchange-traded emissions-related derivatives 6,121.9 -451.7 4,811.9 2.4 Other derivatives 59.9 63.5 68.8 7.4 Other exchange-traded derivatives – – 46.6 -0.4 Total 199,154.9 -481.6 154,196.3 1,636.6 139
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2011 Annual Report
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Contents 2 CEO Letter 4 E.ON Stock
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Europe’s energy markets are conso
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Dividend At the 2012 Annual Shareho
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Global Units We manage all our oper
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How will we achieve all this? The f
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Top performance requires efficient
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The Energy Roadmap 2050 adopts a sc
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Macroeconomic Environment In 2011,
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Energy Prices Four main factors dro
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Attributable Generating Capacity Th
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The Russia unit generated about 94
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Gas Sales On a consolidated basis,
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Sales Our sales rose by 22 percent
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Sales at the UK regional unit decli
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E.ON generates a significant portio
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Distribution Networks’ EBITDA dec
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and coal-fired power stations. Of t
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Analyzing Value Creation by Means o
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Cash Flow and Financial Position E.
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In addition to our DIP, we have a
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E.ON AG’s Earnings, Financial, an
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Employees HR Strategy The knowledge
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Workforce Figures At year-end 2011,
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Technology and Innovation In 2011,
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The ERC was founded in 2006. Its mi
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Risk Management and Insurance E.ON
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Strategic Risks Our business strate
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E.ON is building a hard-coal-fired
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waste.” The draft legislation men
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In 2012, Sweden will introduce a ne
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Due to lower commodity prices and u
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We anticipate Renewables’ earning
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Opportunities We conduct a bottom-u
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Audit Opinion According to § 322 A
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CEO Letter E.ON Stock Combined Grou
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Additional information on the State
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Business Combinations Business comb
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Newly created goodwill is allocated
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Subsequent costs arising, for examp
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Instruments commonly used are forei
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future exercise price. This amount
Page 89 and 90: Contingent liabilities are possible
Page 91 and 92: (2) New Standards and Interpretatio
Page 93 and 94: and joint operations. The provision
Page 95 and 96: The amended standard also contains
Page 97 and 98: Russian Federation. The proceeds fr
Page 99 and 100: The gains on the disposal of invest
Page 101 and 102: The decrease in tax expense by €3
Page 103 and 104: Of the deferred taxes reported, a t
Page 105 and 106: Stock Appreciation Rights of E.ON A
Page 107 and 108: The fees for financial statement au
Page 109 and 110: CEO Letter E.ON Stock Combined Grou
Page 113 and 114: Of this total, an amount of €160
Page 115 and 116: (15) Companies Accounted for under
Page 117 and 118: The individual impaired receivables
Page 119 and 120: (20) Additional Paid-in Capital As
Page 121 and 122: Description of the Benefit Obligati
Page 123 and 124: Description of Plan Assets Defined
Page 125 and 126: Taking into account periodic additi
Page 127 and 128: (25) Miscellaneous Provisions The f
Page 129 and 130: Advance payments made to other wast
Page 131 and 132: At year-end 2011, the following EIF
Page 133 and 134: Construction grants of €2,857 mil
Page 135 and 136: In Sweden, owners of nuclear facili
Page 137 and 138: Competition in the gas market and i
Page 139: Pursuant to the information availab
Page 143 and 144: The fair value of shareholdings in
Page 145 and 146: The following two tables illustrate
Page 147 and 148: Risk Management Principles The pres
Page 149 and 150: A sensitivity analysis was performe
Page 151 and 152: Virtually all of the investments in
Page 153 and 154: Under IAS 24, compensation paid to
Page 155 and 156: Net book gains in 2011 decreased by
Page 159 and 160: (34) Compensation of Supervisory Bo
Page 161 and 162: Notes (36) List of Shareholdings Pu
Page 177 and 178: In addition to the Company’s peri
Page 179 and 180: The Supervisory Board has establish
Page 181 and 182: and the Consolidated Financial Stat
Page 183 and 184: Compensation of the Members of the
Page 185 and 186: The Supervisory Board, at its discr
Page 187 and 188: the E.ON Group’s ROCE and prior-y
Page 189 and 190: Compensation of the Members of the
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The remaining other compensation of
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In addition, the Board of Managemen
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We examined the Board of Management
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Klaus Dieter Raschke Chairman of th
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At the Board of Management’s disc
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Further information about financial
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Assessment After companies have doc
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Glossary of Financial Terms Actuari
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Prepayments and accrued income Line
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Financial Calendar May 3, 2012 2012
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2011 Annual Report - OTCIQ.com

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