2011 Annual Report - OTCIQ.com

Energy Prices
Four main factors drove electricity and natural gas markets
in Europe and the electricity market in Russia in 2011:
• international commodity prices (especially oil, gas, coal,
and carbon-allowance prices)
• macroeconomic and political developments
• weather and natural disasters
• the availability of hydroelectricity in Scandinavia.
In the first half of the year, energy markets were driven largely
by the unrest in North Africa and the Middle East and by the
earthquake and tsunami in Japan. In the second half, Europe’s
debt crisis and worse prospects for global economic growth
became increasingly tangible factors, in part because initiatives
by European governments to combat the crisis remained
largely ineffectual and because the United States’ fundamental
budget and trade-balance problems remained unsolved.
Wholesale Electricity Price Movements
in E.ON’s Core Markets
U.K. baseload Nord Pool baseload
€/MWh1 Spain EEX baseload
60
50
40
30
20
10
1/1/10 4/1/10 7/1/10 10/1/10 1/1/11 4/1/11 7/1/11 10/1/11
1For next-year delivery.
After starting the year at well under $100 per barrel, oil prices
at times exceeded $125 in the second quarter due to the
unrest in North Africa. In the third quarter, oil prices began a
steady decline, albeit with intermittent sharp fluctuations,
amid uncertainty on equity and commodity markets. Prices
briefly dipped below $100 in the fourth quarter and finished
the year at about $106 per barrel.
CEO Letter
E.ON Stock
Combined Group Management Report
Consolidated Financial Statements
Corporate Governance Report
Supervisory Board and Board of Management
Tables and Explanations
Prices on Europe’s coal market (as measured by the API#2
index) began the year with a dramatic rise and in early April
reached a high of $134 per metric ton for next-year delivery.
After this, prices trended continually lower and finished 2011
at $113 per metric ton, which was actually slightly below the
level at the start of the year. The main reasons for the decline
were lower oil prices and lower demand due to the uncertain
economic outlook. By contrast, global demand for coal for
power generation was robust, increasing by an estimated 5 to
6 percent compared with the prior-year figure. Largely responsible
for the increase was India, whose coal consumption
rose by nearly 40 percent year on year. The freight market benefited
somewhat from China’s increased demand for iron ore
but otherwise remained weak because of ongoing oversupply.
After recovering strongly in the first quarter and remaining
largely stable in the second, European forward gas prices
declined sharply in the second half of the year, particularly in
the fourth quarter. The main factors were Europe’s extremely
mild weather and higher-than-anticipated availability of gas,
particularly from Norway but also on the LNG market. The
Asian LNG market, on the other hand, remained tight, chiefly
because of the situation in Japan, where most nuclear power
stations remain out of service. The market’s sensitivity to the
availability of LNG in Asia became apparent in August, when
Qatar’s announcement that it would withdraw several liquefaction
plants from service for scheduled maintenance briefly
sent prices sharply higher. On the U.K. market, gas prices for
next-year delivery finished the year at about €23 per MWh.
After rising significantly in March, the December carbon
contract for next-year delivery of EU allowances under the
European Emissions Trading Scheme came under considerable
pressure throughout the rest of 2011, finishing the year
at about €7 per metric ton. Europe’s debt crisis and worse
prospects for global economic growth led to lower industrial
production and consequently to lower demand for power,
which resulted in an oversupply of allowances. This trend was
enhanced by the announcement of emission-reduction measures,
including measures to increase energy efficiency.
17