2011 Annual Report - OTCIQ.com

Europe’s energy markets are consolidating. The growth opportunities are primarily elsewhere. We’re already very successful in
two markets outside Europe: onshore wind in North America and conventional power generation in Russia. In North America,
we’re building what is already our seventeenth wind farm, and our 2.2 gigawatts (“GW”) of installed capacity ranks us among
the top-five wind-power players in the United States. In Russia, we commissioned three technologically advanced gas-fired
generating units with a total capacity of 1.2 GW through year-end 2011, and all of them offer attractive returns on our investment.
Many other parts of the world face the challenge of producing enough electricity to power their robust economic growth. Our
intention to forge a strategic partnership with Brazil’s MPX represents our first step. Together, we plan to build roughly 20 GW
of conventional and renewable-source generating capacity in this booming region. We’re currently also talking to potential
partners in Turkey and India about opportunities for cooperation. We expect concrete results in the course of 2012.
In view of the business challenges we face in Europe in the next several years, however, we need to adopt a different strategy
for our growth investments. We need to create more value with less capital. This means, for example, that we’ll no longer
necessarily be both operator and sole owner of wind farms. Instead, we’ll create value through wind-farm design, planning,
construction, and operation. But our business remains capital intensive. E.ON 2.0, our efficiency-enhancement program, is
making good progress. In mid-January, we reached an agreement with two trade unions (ver.di and IGBCE) on a collective-bargaining
contract for the implementation of E.ON 2.0 in Germany. The contract establishes binding mechanisms and a socially
responsible framework for the staff reductions that are necessary at E.ON. It lays the groundwork for employees to transition
to a job elsewhere and for us to implement E.ON 2.0 as planned. This will enable us to reduce our controllable costs from
roughly €11 billion in 2011 to not more than €9.5 billion anually by 2015 and give us flexibility for our investments in the future.
I’d like to add that E.ON’s business performance is clearly reflected in the Board of Management’s compensation, which will
be significantly lower than in the prior year and is also below average among DAX 30 companies.
In line with our strategy, in 2011 we also worked systematically to improve E.ON’s financial strength and flexibility. By the end
of the year, we had reduced E.ON’s net debt to about €36.4 billion and our net financial position to about -€18 billion. The
main driver was the implementation of our divestment program. For example, in 2011 we sold Central Networks in the United
Kingdom. Since November 2010, we’ve divested businesses worth approximately €9.2 billion.
Policy decisions and massive changes in our markets are presenting us with unprecedented challenges. Our clear strategy gives
us the answers for our business. We’re systematically reorganizing our business in Europe and in fast-growing markets elsewhere,
achieving substantial cost reductions, and boosting our performance. Renewables, new markets like Russia, and gas production
will already be mainstays of our business and earnings by 2013. We know that the companies that remain successful in the new
energy world will do more than adapt. They’ll set off in new directions. Just like E.ON is doing.
Best wishes,
Dr. Johannes Teyssen
CEO Letter
E.ON Stock
Combined Group Management Report
Consolidated Financial Statements
Corporate Governance Report
Supervisory Board and Board of Management
Tables and Explanations
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