2011 Annual Report - OTCIQ.com

Strategic Risks
Our business strategy involves acquisitions and investments
in our core business as well as disposals. This strategy depends
in part on our ability to successfully identify, acquire, and
integrate companies that enhance, on acceptable terms, our
energy business. In order to obtain the necessary approvals
for acquisitions, we may be required to divest other parts of
our business or to make concessions or undertakings that
materially affect our business. In addition, there can be no
assurance that we will be able to achieve the returns we
expect from any acquisition or investment. For example, we
may fail to retain key employees; may be unable to successfully
integrate new businesses with our existing businesses;
may incorrectly judge expected cost savings, operating profits,
or future market trends and regulatory changes; or may spend
more on the acquisition, integration, and operation of new
businesses than anticipated. Furthermore, investments and
acquisitions in new geographic areas or lines of business require
us to become familiar with new sales markets and competitors
and expose us to commercial and other risks.
We have comprehensive processes in place to manage potential
risks relating to acquisitions and investments. These
processes include, in addition to the relevant company guidelines
and manuals, comprehensive due diligence, legally
binding contracts, a multi-stage approvals process, and shareholding
and project controlling. Comprehensive post-acquisition
integration projects also contribute to successful integration.
In the case of planned disposals, E.ON faces the risk, which is
not assessable, of disposals not taking place or being delayed
and the risk that E.ON receives lower-than-anticipated disposal
proceeds. In such projects, it is not possible to determine
the likelihood of these risks. If planned disposals do not take
place or are significantly delayed, this would have a negative
impact on the planned development of our debt factor.
CEO Letter
E.ON Stock
Combined Group Management Report
Consolidated Financial Statements
Corporate Governance Report
Supervisory Board and Board of Management
Tables and Explanations
Operational and Environmental Risks
Technologically complex production facilities are used in the
production and distribution of energy. Germany’s Renewable
Energy Law and the transformation of the country’s energy
system are resulting in an increase in decentralized feed-in,
which creates the need for additional expansion of the distribution
network. On a regional level, the increase in decentralized
feed-in (primarily from renewables) has led to a shift
in load flows. In Germany, where power plants are located in
closer proximity to population centers than in many other
countries, the risk of blackouts is lower due to shorter transmission
paths and a strongly meshed network. Nevertheless,
our operations in and outside Germany could experience unanticipated
operational or other problems leading to a power
failure or shutdown. Operational failures or extended production
stoppages of facilities or components of facilities, including
new-build projects, could negatively impact our earnings.
We could also be subject to environmental liabilities associated
with our power generation operations that could materially
and adversely affect our business. In addition, new or amended
environmental laws and regulations may result in material
increases in our costs.
Climate change has become a central risk factor. For example,
E.ON’s operations could be adversely affected by the absence
of precipitation or above-average temperatures that reduce the
cooling efficiency of our generation assets and may make it
necessary to shut them down. Extreme weather or long-term
climatic change could also affect wind power generation.
Alongside risks to our energy production, there are also risks
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