2011 Annual Report - OTCIQ.com

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64 Forecast Planned Investments Our medium-term plan calls for investments of €7 billion in 2012. This figure also does not factor in the announced portfolio measures. About one fifth of our planned investments will go towards maintaining our existing assets, the rest towards expansion or organic growth. The main geographic focus of our investments will continue to be Germany, where we will make substantial investments to maintain and expand our conventional generation portfolio and our power and gas infrastructure. Investments: 2012 Plan € in billions Percentages Generation 1.6 23 Renewables 1.6 23 Optimization & Trading 0.6 9 Exploration & Production 0.6 9 Germany 1.1 15 Other EU Countries 1.1 15 Russia 0.4 6 Total 7.0 100 We plan to invest €1.6 billion in 2012 to expand and to replace and maintain Generation’s portfolio of hard-coal, gas, and nuclear assets. These plans include fossil new-build projects (such as Maasvlakte 3 und Datteln 4) and measures to extend asset operating lives (such as Ratcliffe, a 2 GW hard-coal-fired power station in the United Kingdom). We plan to invest about €1.6 billion in our Renewables segment (E.ON Climate & Renewables and our hydroelectric stations) in 2012. The main focus will be on offshore wind farms (such as London Array) and onshore farms in Europe and onshore farms in the United States. Optimization & Trading will invest approximately €0.6 billion, mainly in gas transport and storage infrastructure. Most of Exploration & Production’s investments of €0.6 billion will go towards developing gas and oil fields. Our investments of €1.1 billion at the Germany segment consist in particular of numerous individual investments to expand our intermediate- and low-voltage networks, switching equipment, and metering and control technology as well as other investments to ensure the reliable and uninterrupted transmission and distribution of electricity. About one sixth of our investments are earmarked for the Other EU Countries segment and will consist primarily of maintenance investments in our regional energy networks in Sweden and investments to expand infrastructure in Hungary and Czechia. We plan to invest about €0.4 billion in our Russia segment in 2012, mainly to continue ongoing projects to build new generating units, particularly at Berezovskaya power station. The E.ON Group’s planned investments for 2013 total about €5.7 billion. Our Generation and Other EU Countries segments will each account for about one fifth of investments. Slightly more than one quarter will go towards expanding our renewables operations. The remainder is earmarked, in particular, for the Germany segment and our power generation business in Russia.
Opportunities We conduct a bottom-up process at half-yearly intervals (at the end of the second and fourth quarters) in which the lead companies of our units as well as certain E.ON AG departments follow Group-wide guidelines to identify and report opportu nities that they deem sufficiently concrete and substantial. An opportunity is substantial within the meaning of our guidelines if it could have a significantly positive effect on the asset, financial, or earnings situation of a unit or one of its segments. Changes in our regulatory environment could create opportunities. Market developments could also have a positive impact on our business. Such factors include wholesale and retail price developments and higher customer churn rates. The internal EU energy market is supposed to be completed by 2014 and serve as the first step towards a long-term European energy strategy. Nevertheless, many member states pursue their own agenda, aspects of which are not compatible with EU policy objectives. An example of this is the different approaches member states are taking with regard to capacity markets. We believe that an interconnected European market and nationally oriented markets will develop in parallel. This could lead to a situation in which E.ON, which operates across Europe, will have to look for opportunities in a fragmented regulatory environment Positive developments in foreign-currency rates and market prices for commodities (electricity, natural gas, coal, oil, and carbon) can create opportunities for our business. These include the opportunity to procure natural gas under favorable terms by participating in the gas-release program that ENI of Italy is required to conduct in the wake of a regulatory decision. CEO Letter E.ON Stock Combined Group Management Report Consolidated Financial Statements Corporate Governance Report Supervisory Board and Board of Management Tables and Explanations Combining our European trading operations at the start of 2008 enables us to seize opportunities created by the increasing integration of European power and gas markets and of commodity markets, which are already global in scope. In view of market developments in the United Kingdom and Continental Europe, trading at European gas hubs can create additional sales and procurement opportunities. In addition, the ongoing optimization of gas transport and storage rights and of the availability and utilization of our power and gas facilities (shorter project timelines or shorter facility outages) could yield additional opportunities. General Statement on E.ON’s Future Development To ensure that going forward we continue to have the necessary earnings strength, we are systematically realigning our business for the future. We are guided by the four key components of our strategy for cleaner & better energy: focusing our business in Europe, enhancing our performance by increasing our efficiency and improving our organizational setup, optimizing our investment strategy, and achieving selective growth outside Europe. Policy decisions and massive changes in our markets are presenting us with unprecedented challenges. Our clear strategy gives us the answers. We are 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. This Combined Group Management Report contains certain forward-looking statements based on E.ON management’s current assumptions and forecasts and other currently available information. Various known and unknown risks, uncertainties, and other factors could lead to material differences between E.ON’s actual future results, financial situation, development or performance and the estimates given here. E.ON assumes no liability whatsoever to update these forward-looking statements or to conform them to future events or developments. 65
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2011 Annual Report
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Contents 2 CEO Letter 4 E.ON Stock
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Europe’s energy markets are conso
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Dividend At the 2012 Annual Shareho
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Global Units We manage all our oper
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How will we achieve all this? The f
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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 and 26: Gas Sales On a consolidated basis,
Page 27 and 28: Sales Our sales rose by 22 percent
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: We anticipate Renewables’ earning
Page 69 and 70: Audit Opinion According to § 322 A
Page 71 and 72: CEO Letter E.ON Stock Combined Grou
Page 75 and 76: Additional information on the State
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
Page 99 and 100: The gains on the disposal of invest
Page 101 and 102: 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
Page 107 and 108: The fees for financial statement au
Page 113 and 114: Of this total, an amount of €160
Page 115 and 116: (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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CEO Letter E.ON Stock Combined Grou
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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
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The Supervisory Board, at its discr
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the E.ON Group’s ROCE and prior-y
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Compensation of the Members of the
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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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2011 Annual Report - OTCIQ.com

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