2011 Annual Report - OTCIQ.com

28 Earnings Situation
Depreciation charges increased by €624 million to €7,081 million
(€6,457 million). In the fourth quarter of 2011, we recorded
a total of €3 billion in impairment charges on assets and
goodwill, mainly at generation businesses. Impairment charges
totaling approximately €1.9 billion were necessary in Spain
and Italy due to pessimistic forecasts for the long-term development
of power prices, regulatory intervention, and reduced
utilization of gas-fired and coal-fired power stations. Of these
charges, €1.6 billion related to conventional power generation,
€0.1 billion to renewable-source power generation, and
€0.2 billion to our regional business in Italy. Power output and
generation margins are also lower than anticipated in Hungary
and Slovakia, necessitating impairment charges of €0.3 billion
on power stations and €0.2 billion on our regional business in
Hungary. The remaining impairment charges total €0.6 billion,
of which €0.2 billion related to power stations and €0.2 billion
to our regional business in the Benelux countries. The main
reasons are that some older power stations were closed earlier
than had been planned and that unfavorable market developments
have led to lower earnings from heating plants and
district heating. In addition, the amendment of Germany’s
Nuclear Energy Act, which calls for the early, unplanned shutdown
of NPPs in Germany, made it necessary to record
impairment charges on assets (€219 million). The prior-year
figure primarily reflects impairment charges of €2.6 billion
on goodwill and other assets at operations in Italy, Spain, and
France acquired from Enel/Acciona and Endesa.
Other operating expenses rose by 30 percent, or €4,059 million,
to €17,656 million (€13,597 million). This is mainly attributable
to higher expenditures relating to currency differences of
€6,761 million (€4,936 million), higher expenditures relating to
derivative financial instruments of €5,685 million (€3,559 million),
which primarily affect commodity derivates, and losses
on the disposal of shareholdings and securities of €742 million
(€75 million). The latter item mainly reflects negative effects
from the reclassification of currency-translation effects in equity
in the wake of the simplification of E.ON’s organizational setup.
Income from companies accounted for under the equity
method declined to €512 million (€663 million), primarily
due to impairment charges resulting from the amendment
of Germany’s Nuclear Energy Act, which calls for the early,
unplanned shutdown of NPPs in Germany (€105 million).
EBITDA
Effective January 1, 2011, our key figure for purposes of internal
management control and as an indicator of our units’ long-term
earnings power is earnings before interest, taxes, depreciation,
and amortization (“EBITDA”), which we adjust to exclude certain
extraordinary items, mainly other income and expenses
of a non-recurring or rare nature. EBITDA is unaffected by
investment and depreciation cycles and also provides an indication
of our cash-effective earnings (see the commentary in
Note 33 to the Consolidated Financial Statements).
Our 2011 EBITDA was about €4.1 billion below the prior-year
figure. The main reasons were:
• the nuclear-energy moratorium in Germany, the amendment
of Germany’s Nuclear Energy Act which calls for
the early, unplanned shutdown of certain nuclear power
stations in Germany, and the nuclear-fuel tax (roughly
-€2.5 billion),
• among other factors, substantial pressure on margins in
our gas business (roughly -€0.7 billion)
• the disposal of our regulated network business in the
United Kingdom (roughly -€0.4 billion).
EBITDA1 € in millions 2011 2010 +/- %
Generation 2,114 3,757 -44
Renewables 1,459 1,207 +21
Gas 1,533 1,975 -22
Trading -631 1,205 –
Germany 2,421 2,463 -2
Other EU Countries 2,259 2,583 -13
Russia
Group Management/
553 377 +47
Consolidation -415 -221 –
Total 9,293 13,346 -30
1 Adjusted for extraordinary effects.