2011 Annual Report - OTCIQ.com

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24 Earnings Situation Business Performance At the end of the 2011 financial year, the E.ON Group’s business performance was in line with our expectations. Sales rose by 22 percent year on year to roughly €113 billion. But our EBITDA declined by 30 percent to roughly €9.3 billion. The adverse factors include the early shutdown of a number of nuclear power stations in Germany, Germany’s nuclear-fuel tax, and continued margin pressure in our gas wholesale business. By contrast, a number of our growth businesses—renewables, upstream gas, and power generation in Russia—increased their earnings. These results are in line with our adjusted forecast for 2011. Our EBITDA was between €9.1 and €9.3 billion and our underlying net income was between €2.3 and €2.5 billion. We adjusted our forecast at the time of our half-year earnings release because—in addition to the adverse impact of the shutdown of several of our nuclear power stations and the nuclear-fuel tax—the economic environment remained difficult in most of the European markets where we operate. Furthermore, it was nearly impossible to quantify the risks of international economic and financial developments. We executed the following significant transactions in 2011. Acquisitions, Disposals, and Discontinued Operations in 2011 Note 4 to the Consolidated Financial Statements contains detailed information about these transactions. Disposal Groups and Assets Held for Sale In line with our strategy, which includes divesting €15 billion of assets by the end of 2013, we sold our U.K. power distribution system to PPL Corporation of the United States effective April 1, 2011. In mid-December 2010, contractual agreements were concluded to sell 100 percent of the shares of E.ON Rete, which operates a gas distribution network in Italy, to a consortium. We reclassified these operations as a disposal group effective December 31, 2010. The transaction closed in early April 2011. After the disposal of the Thüga Group, our stakes in Stadtwerke Karlsruhe and Stadtwerke Duisburg were reclassified as assets held for sale effective December 31, 2010. The transactions closed in early 2011 and in July 2011, respectively. Furthermore, in the third quarter of 2010 a concrete stage was reached in the negotiations to sell our 40-percent stake in HEAG Südhessische Energie AG. The sales agreement for the disposal of this stake was signed in February 2012. The closing of the transaction, which is subject to approval by various municipal entities of the city of Darmstadt and by the Supervisory Board of E.ON Ruhrgas AG, is expected to take place in the first half of 2012. In a portfolio-streamlining measure, E.ON sold most of its stake in Gazprom. The remaining stake was reclassified as an asset held for sale. It was sold in the first quarter of 2011. In December 2011, E.ON signed a contract to sell its wholly owned subsidiary E.ON Bulgaria to Energo-Pro of the Czech Republic. These disposals resulted in cash-effective items totaling €5,987 million in 2011 (prior year: €9,601 million).
Sales Our sales rose by 22 percent year on year to €113 billion. All our reporting segments recorded higher sales and generally had a higher share of external sales, particularly Trading. Sales € in millions 2011 2010 +/- % Generation 14,979 14,741 +2 Renewables 2,439 1,943 +26 Gas 23,012 21,348 +8 Trading 70,463 47,948 +47 Germany 37,244 36,403 +2 Other EU Countries 23,032 22,654 +2 Russia Group Management/ 1,615 1,252 +29 Consolidation -59,830 -53,426 – Total 112,954 92,863 +22 Generation The Generation global unit increased its sales by €238 million relative to the prior-year figure. Sales € in millions 2011 2010 +/- % Nuclear 4,944 5,066 -2 Fossil 9,811 9,639 +2 Other/Consolidation 224 36 +522 Generation 14,979 14,741 +2 The Nuclear reporting unit’s sales declined by €122 million due to the German federal government’s nuclear-energy moratorium and the shutdown of Unterweser and Isar 1 nuclear power stations. By contrast, higher market-based transfer prices for deliveries to our Trading unit in Germany had a positive impact on sales. Generally, our internal transfer prices are derived from the forward prices that are current in the marketplace three years prior to delivery. The resulting transfer 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, which our Trading unit pays our generating units for their output, were higher in 2011 than the prices for the 2010 delivery period. In Sweden, Nuclear’s sales were positively impacted by higher sales volume, higher average transfer prices, and positive currency-translation effects. The Fossil reporting unit grew sales by €172 million, mainly due to higher market-based transfer prices for deliveries to our Trading unit in Germany, the United Kingdom, and the Netherlands. The commissioning of new gas-fired generating units in Germany and the United Kingdom was another positive factor. Sales declined significantly in Italy, mainly due to lower sales volume. Renewables Sales at Renewables rose by €496 million. Sales € in millions 2011 2010 +/- % Hydro 1,453 1,277 +14 Wind/Solar/Other 986 666 +48 Renewables 2,439 1,943 +26 The €176 million increase in sales recorded at the Hydro reporting unit is mainly attributable to higher market-based transfer prices for deliveries to our Trading unit in Germany and Sweden. Lower output had a negative impact on sales. The primary reason for the €320 million increase in Wind/ Solar/Other’s sales was a considerable increase in generating capacity, particularly in the United Kingdom, Denmark, and the United States. 25
Page 1 and 2: 2011 Annual Report
Page 3 and 4: Contents 2 CEO Letter 4 E.ON Stock
Page 5 and 6: Europe’s energy markets are conso
Page 7 and 8: Dividend At the 2012 Annual Shareho
Page 9 and 10: Global Units We manage all our oper
Page 11 and 12: How will we achieve all this? The f
Page 13 and 14: Top performance requires efficient
Page 15 and 16: The Energy Roadmap 2050 adopts a sc
Page 17 and 18: Macroeconomic Environment In 2011,
Page 19 and 20: Energy Prices Four main factors dro
Page 21 and 22: Attributable Generating Capacity Th
Page 23 and 24: The Russia unit generated about 94
Page 25: Gas Sales On a consolidated basis,
Page 29 and 30: Sales at the UK regional unit decli
Page 31 and 32: E.ON generates a significant portio
Page 33 and 34: Distribution Networks’ EBITDA dec
Page 35 and 36: and coal-fired power stations. Of t
Page 37 and 38: Analyzing Value Creation by Means o
Page 39 and 40: Cash Flow and Financial Position E.
Page 41 and 42: In addition to our DIP, we have a
Page 43 and 44: E.ON AG’s Earnings, Financial, an
Page 45 and 46: Employees HR Strategy The knowledge
Page 47 and 48: Workforce Figures At year-end 2011,
Page 49 and 50: Technology and Innovation In 2011,
Page 51 and 52: The ERC was founded in 2006. Its mi
Page 53 and 54: Risk Management and Insurance E.ON
Page 55 and 56: Strategic Risks Our business strate
Page 57 and 58: E.ON is building a hard-coal-fired
Page 59 and 60: waste.” The draft legislation men
Page 61 and 62: In 2012, Sweden will introduce a ne
Page 63 and 64: Due to lower commodity prices and u
Page 65 and 66: We anticipate Renewables’ earning
Page 67 and 68: Opportunities We conduct a bottom-u
Page 69 and 70: Audit Opinion According to § 322 A
Page 71 and 72: CEO Letter E.ON Stock Combined Grou
Page 73 and 74: CEO Letter E.ON Stock Combined Grou
Page 75 and 76: Additional information on the State
Page 77 and 78:
CEO Letter E.ON Stock Combined Grou
Page 79 and 80:
Business Combinations Business comb
Page 81 and 82:
Newly created goodwill is allocated
Page 83 and 84:
Subsequent costs arising, for examp
Page 85 and 86:
Instruments commonly used are forei
Page 87 and 88:
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
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The gains on the disposal of invest
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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
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The fees for financial statement au
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Of this total, an amount of €160
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(15) Companies Accounted for under
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The individual impaired receivables
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(20) Additional Paid-in Capital As
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Description of the Benefit Obligati
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Description of Plan Assets Defined
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Taking into account periodic additi
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(25) Miscellaneous Provisions The f
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Advance payments made to other wast
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At year-end 2011, the following EIF
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Construction grants of €2,857 mil
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In Sweden, owners of nuclear facili
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Competition in the gas market and i
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Pursuant to the information availab
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The fair value of shareholdings in
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The following two tables illustrate
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Risk Management Principles The pres
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A sensitivity analysis was performe
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Virtually all of the investments in
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Under IAS 24, compensation paid to
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Net book gains in 2011 decreased by
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(34) Compensation of Supervisory Bo
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Notes (36) List of Shareholdings Pu
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In addition to the Company’s peri
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The Supervisory Board has establish
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and the Consolidated Financial Stat
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Compensation of the Members of the
Page 185 and 186:
The Supervisory Board, at its discr
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the E.ON Group’s ROCE and prior-y
Page 189 and 190:
Compensation of the Members of the
Page 191 and 192:
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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