Quarterly Report • May 15, 2013
Quarterly Report
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| RWE Group – key figures | Jan – Mar | Jan – Mar | +/− | Jan – Dec | |
|---|---|---|---|---|---|
| 2013 | 2012 | % | 2012 | ||
| Electricity production | billion kWh | 62.1 | 60.4 | 2.8 | 227.1 |
| External electricity sales volume | billion kWh | 70.9 | 73.8 | −3.9 | 277.8 |
| External gas sales volume | billion kWh | 126.9 | 113.6 | 11.7 | 306.8 |
| External revenue | € million | 16,050 | 15,593 | 2.9 | 53,227 |
| EBITDA | € million | 3,042 | 3,125 | −2.7 | 9,314 |
| Operating result | € million | 2,334 | 2,436 | −4.2 | 6,416 |
| Income before tax | € million | 2,079 | 1,979 | 5.1 | 2,230 |
| Net income | € million | 1,416 | 1,311 | 8.0 | 1,306 |
| Recurrent net income | € million | 1,297 | 1,288 | 0.7 | 2,457 |
| Earnings per share | € | 2.30 | 2.13 | 8.0 | 2.13 |
| Recurrent net income per share | € | 2.11 | 2.10 | 0.5 | 4.00 |
| Cash flows from operating activities | € million | 58 | 298 | −80.5 | 4,395 |
| Capital expenditure | € million | 764 | 1,073 | −28.8 | 5,544 |
| Property, plant and equipment and intangible assets | € million | 757 | 987 | −23.3 | 5,081 |
| Financial assets | € million | 7 | 86 | −91.9 | 463 |
| Free cash flow | € million | −699 | −689 | −1.5 | −686 |
| 31 Mar 2013 | 31 Dec 2012 | ||||
| Net debt | € million | 33,163 | 33,015 | 0.4 | |
| Workforce1 | 69,427 | 70,208 | −1.1 |
1 Converted to full-time positions.
| Letter from the CEO | 1 |
|---|---|
| RWE on the capital market | 2 |
| Review of operations | 4 |
| Economic environment | 4 |
| Major events | 10 |
| Commentary on the segments | 12 |
| Business performance | 14 |
| Outlook | 27 |
| Development of risks and opportunities | 31 |
| Consolidated financial statements (condensed) | 32 |
|---|---|
| Income statement | 32 |
| Statement of recognised income | |
| and expenses | 33 |
| Balance sheet | 34 |
| Cash flow statement | 35 |
| Statement of changes in equity | 36 |
| Notes | 37 |
| Financial calendar 2013/2014 |
»The performance of our business has met our expectations so far. We confirm the Group's earnings forecast for 2013.«
Our start to the 2013 financial year was satisfactory, in particular with regard to our planned disposals, with which we want to strengthen our capital base and increase our financial headroom. At the end of March, we signed the contracts for the sale of the Czech long-distance gas network operator NET4GAS, our most important project this year. Furthermore, we are satisfied with the sale price. The buyer is a consortium made up of the financial investors Allianz and Borealis Infrastructure Management. The transaction is scheduled for completion in the second half of 2013. In March, we were able to finalise the sale of minority interests in the Welsh offshore wind farm Rhyl Flats (90 MW) and in the Little Cheyne Court onshore wind farm in the south of England (60 MW). RWE Innogy is still the majority owner of these wind farms. By selling these stakes, we gained reliable partners. We plan to take more steps of this kind in the future, because the burden of the transformation of the European energy market must be placed on many shoulders.
Also in March, my fellow Executive Board members and I took the decision to examine the options for selling all of the shares in RWE Dea. Let me explain the background to the decision: since liquid European gas markets have been established, access to in-house gas sources is no longer important to us. There are hardly any synergies between oil and gas production and our traditional utility business. In addition, the divestment of RWE Dea will enable us to save the funds which we have earmarked for capital expenditures necessary to tap the company's full potential for growth. The time frame and details of the sale are yet to be clarified. What I can say for now is that we do not expect a transaction to take place this year.
In closing, I would like to say a few words about the development of our business in the first quarter: it was as expected. Our consolidated earnings totalled €2,334 million, slightly lagging behind last year's comparable figure. Recurrent net income amounted to €1,297 million, which was roughly on a par with 2012. Positive effects of cost reductions and improvements in our gas procurement conditions were contrasted by substantial earnings shortfalls in the conventional electricity generation business. These factors will continue to have a significant impact on our business performance. In March 2013, we informed you of our expectations for the RWE Group's earnings for the full year. We confirm this forecast: this means that we expect the operating result to total about €5.9 billion and recurrent net income, the yardstick for our dividend policy, to amount to approximately €2.4 billion. Therefore, our shareholders can also count on an attractive dividend for 2013.
Sincerely yours,
Peter Terium CEO of RWE AG Essen, May 2013
The upward trend on the German stock market witnessed last year lost momentum in the first quarter of 2013. The DAX ended the month of March at 7,795 points. It was therefore 2 % higher than its closing quotation in 2012. Positive economic indicators and a temporary calming of the situation in euro crisis countries contributed to the German lead index briefly surpassing the 8,000 point mark in March. Afterwards, the impending insolvency of Cyprus and the unclear political situation in Italy characterised developments on the stock market. In April, the DAX fell below the level it had at the beginning of the year, after which it posted a significant gain.
The first quarter was disappointing for RWE shareholders. Our common shares lost 7 % of their value. They closed March at €29.08. Preferred stock was down 2 % to €27.98. The main reason for the weak developments in share prices was that electricity forward prices on the German wholesale market decreased considerably in January. Many analysts and investors saw this as a sign of a further deterioration of the earnings prospects in the conventional electricity generation business.
The corporate bond market has recently been characterised by historically low interest rates. In the first quarter, the average yield on a ten-year German government bond was 1.5 %. In view of the attractive financing conditions, in January, RWE issued a €750 million bond with a tenor of seven years and a coupon of 1.875 % (see page 11). The cost of hedging credit risk via credit default swaps (CDSs) was also relatively low. The average quotation for five-year CDSs on the iTraxx Europe Index, which consists of the prices of the CDSs of 125 major European companies, averaged 111 basis points from January to March. This was the lowest average for a quarter since the spring of 2011. As the crisis in Cyprus came to a head at the end of March, the iTraxx Europe reached its current high for the year of 126 basis points before falling again in April. Prices of the five-year CDS for RWE were much lower than the index level: in the period under review, they averaged 94 basis points.
Based on initial estimates, in the first quarter of 2013, global economic output was about 2 % higher than a year earlier. However, gross domestic product (GDP) in the Eurozone probably declined. The general economic situation continues to be characterised by the sovereign debt crisis. Using this as a benchmark, the German economy developed above average: it may well have grown slightly, partly due to robust consumer spending. In contrast, the Netherlands is unlikely to have decoupled itself from the European trend. Based on available information, the country's GDP declined. According to initial estimates, the United Kingdom posted a gain of 0.6 %, with positive stimulus coming in particular from the service and production sectors. The countries of Central Eastern Europe got off to varying starts to the year: whereas industrial production was down in Poland and the Czech Republic, it was up in Slovakia. The growth of the economy as a whole in these countries is also likely to have developed accordingly.
Whereas the economic trend is primarily reflected in demand for energy among industrial enterprises, residential consumption of electricity and gas is strongly influenced by weather conditions. In the northwest of Europe, temperatures in the first quarter of 2013 were unusually low, whereas in the southeast of Europe, they were higher than average. Compared to 2012, the weather was much colder, especially in the United Kingdom and the Netherlands. It was also colder in Germany and the Czech Republic, whereas temperatures in Hungary and the Balkans rose slightly. In addition to energy consumption, the generation of electricity is also affected by the weather, with wind levels playing a major role. In Germany and the Netherlands, utilisation of our wind farms was much lower than in the same period last year. In the United Kingdom, it was down only marginally, whereas it was up in Spain. Solar intensity is also increasingly influencing developments on the electricity market. This is a consequence of the significant rise in solar power capacity in Germany, where an average of 179 hours of sunshine was recorded from January to March. This was considerably less than in the previous year's corresponding period (326).
Energy usage in our core markets was partly subject to negative economic effects, whereas the cold weather increased the need for heating. According to estimates made by the German Association of Energy and Water Industries (BDEW), German electricity usage in the first quarter of 2013 was 1 % lower than in the same period last year. Based on available data, demand for electricity in the Netherlands and Poland was also down on 2012. Conversely, it was slightly up in the United Kingdom and Hungary. In relation to gas, based on information from the BDEW, consumption in Germany was 8.5 % higher year on year due to the weather. Network operators in the Netherlands and the United Kingdom calculated gains of 8 % and 15 % in their respective countries. Unusually low temperatures were the main reason here as well. In addition, in the UK, there was a rise in gas used by power stations. Estimates for the Czech Republic have consumption increasing by 4 %, whereas a decline of 3 % has been predicted for Hungary.
Prices on international crude oil markets lagged behind the very high level achieved a year earlier. In the first quarter of 2013, a barrel of North Sea Brent traded at an average of US\$113 (€85) on the London spot market. This is US\$6 less than in the same period in 2012. The decline in price reflected the uncertainty concerning the development of demand in euro crisis countries. Furthermore, last year, the oil market was characterised by tension surrounding Iran's nuclear programme, with fears of an escalation of the conflict and a curtailment of oil supplies leading to temporary price increases.
As some gas imports to Continental Europe are still based on long-term contracts linked to the price of oil, the development on the oil market also affected gas prices. In Germany, gas imports in the first quarter of 2013 cost an average of 4 % less than a year earlier. Conversely, oil quotations do not have a direct impact on the development of quotations in European gas trading. Spot prices at the Title Transfer Facility (TTF), the Dutch trading hub, rose for weather-related reasons. Averaged for the quarter, they were slightly higher than €28 per megawatt hour (MWh). This represents an increase of over €4, or 18 %, compared to 2012. In TTF forward trading, contracts for delivery in the coming calendar year (2014 forward) were settled for €27 per MWh. The figure for the preceding year was just as high.
Gas prices in the German end-customer business advanced slightly compared to the same period last year, rising by 2 % for households and 4 % for industrial enterprises. In the Netherlands, gas was 5 % more expensive for residential customers, whereas it was slightly cheaper for industrial consumers. The aforementioned customer groups had to pay 7 % and 13 % more than a year earlier in the United Kingdom, but slightly less in the Czech Republic. In the Hungarian gas supply business, residential tariffs were down by 9 % due to regulatory restrictions, whereas they did not change significantly for the industrial sector.
The downward trend in hard coal prices witnessed last year continued. In the first quarter of 2013, a metric ton of steam coal including freight and insurance was quoted at an average of US\$86 (€65) on the Rotterdam spot market. This was US\$14 less than a year earlier. Observations made on the supply side indicate that US coal producers are increasingly turning to the export market in reaction to the heightened competitive pressure exerted by low-cost shale gas. The slight cool-down of the Chinese economy is having an impact on the demand side. Moreover, overseas transportation costs have dropped. In the period being reviewed, the standard route from South Africa to Rotterdam cost an average of US\$6.70 per metric ton. A year before, this figure was US\$9.40. The German Federal Office of Economics and Export Control (BAFA) determines the price of hard coal produced in Germany based on quotations for imported hard coal. Therefore, the BAFA price follows developments on international markets, albeit with a time lag. When this report went to print, no average figure was available for the first quarter of 2013, but experts estimate it to be €85 per metric ton of hard coal unit. The comparable figure for 2012 was €100.
The price curve in European emission allowance trading also continues to trend downwards. In the first three months of 2013, the standard certificate (referred to as an EU Allowance - EUA) for 2013 traded at an average of €4.80 per metric ton of carbon dioxide (CO2). This was €3 less than what had to be paid for the 2012 certificate in the same period last year. The decline in price is partly due to the economy-driven weakening in electricity generation and industrial output. The rapid expansion of renewable energy also plays a role, especially in Germany: feed-ins from solar panels and wind turbines are increasingly reducing the amount of electricity generated by fossil-fuelled power stations, also causing demand for emission allowances to decline. EU plans to temporarily limit the number of available certificates briefly stabilised prices. The European Parliament rejected the plans in the middle of April, but will re-address the issue over the course of the year. Following the negative vote, EUAs declined even more in value. At the end of April, they were quoted at €3.20. Certified Emission Reductions (CERs), which are credits earned from emission-reducing measures in developing and emerging countries, dropped in price even more than EUAs. In the period under review, a CER for 2013 cost an average of €0.35. By comparison, CERs for 2012 traded at about €4 a year earlier. The decline in price is due to the fact that the EU established absolute caps for recognising CERs in the European emissions trading system. In addition, there are currently no major sales markets for these certificates outside Europe. Due to the large number of emission-reducing projects around the world, far more CERs are expected to be generated than can in fact be used.
The drop in emissions trading quotations and the expansion of renewables weighed on German wholesale electricity prices. On the spot market in the first three months of the year, base-load power sold for an average of €42 per MWh, while peak-load electricity settled at €54 per MWh. Compared to 2012, this represents decreases of €3 and €2, respectively. Quotations on the forward market were similar to those in spot trading: the 2014 forward was priced at an average of €42 per MWh of base-load power and €53 per MWh of peak-load power. This was €10 and €11 less than what had to be paid for 2013 forwards in the same period last year.
We sell forward most of the output of our power plants and secure the prices of the required fuel and emission allowances in order to reduce short-term volume and price risks. Therefore, the most recent developments on the market only had a minor impact on the income we generated in the reporting period. What was decisive instead was the conditions at which electricity contracts for delivery in 2013 sold in preceding years. The average price we realised for such transactions for the electricity we have generated this year was lower than the comparable figure for 2012. This reduced our power plant margins. The fact that power producers in Western Europe will hardly be allocated any free certificates by government for the third CO2 emissions trading period, which runs from 2013 to 2020, is another huge burden. However, this effect is being cushioned as emission allowances have become much cheaper since 2011. The aforementioned drop in the cost of purchasing hard coal also had a positive impact on margins.
In the German end-customer business, average residential and industrial electricity tariffs were 12 % and 4 % higher year on year. This is mainly due to the state surcharges on the price of electricity, which are imposing an increasing burden on households in particular. For example, the apportionment pursuant to the German Renewable Energy Act (REA) was increased from 3.59 euro cents (2012) to 5.28 euro cents (2013). This is primarily due to the rapid and continuous expansion of wind and photovoltaic capacity. Burdens in connection with the increasing support of combined heat and power generation plants have also become greater. In addition, the offshore liability apportionment in accordance with Section 17f of the German Energy Act was introduced with effect from 1 January 2013. The funds are set aside for financing compensatory payments for delays in connecting offshore wind farms to the grid.
Unlike in Germany, electricity in the United Kingdom became more expensive on the wholesale market. On the UK spot market, prices averaged £54 (€63) per MWh of base-load power and £61 (€71) per MWh of peak-load power in the first quarter of 2013, compared to £45 and £51 in the same period last year. The weather-driven increase in gas quotations played an important role. Gas-fired power plants account for a much bigger share of electricity generated in the United Kingdom than in Germany and therefore have a stronger influence on electricity prices. Quotations on the UK electricity forward market were also up, albeit marginally. Base-load and peak-load power for the 2014 calendar year was settled at prices identical to those on the spot market. Compared to the prices paid for 2013 forwards in 2012, this corresponds to a rise of £2 in both cases. Here, the introduction by the UK government of a tax on carbon dioxide emissions with effect from 1 April 2013 came to bear. The levy made electricity generation from fossil fuels more expensive (see page 47 of RWE's 2012 Annual Report).
Income recorded by our UK gas and hard coal-fired power stations in the period being reviewed was down year on year. This is a result of the fact that CO2 emission allowances stopped being allocated for free. Excluding this effect, margins would have improved on the whole.
In the UK supply sector, residential tariffs rose by an average of 7 %. One of the main reasons is the increasing costs of energy savings measures in households, which the major utilities are obliged to bear within the scope of government programmes. Electricity also became more expensive for industrial enterprises, albeit only marginally.
Wholesale electricity prices decreased in the Netherlands, but they were much higher than in Germany. The fact that hard coal-fired power stations have had to bear additional fiscal burdens since 1 January 2013 played a role (see page 46 of RWE's 2012 Annual Report). As in the United Kingdom, the high level of gas quotations also came to bear. Averaged for the quarter, the spot price was €55 for base-load power and €64 for peak-load power. In forward trading, the 2014 forward settled at €48 (base load) and €57 (peak load). The margins that we realised for our Dutch hard coal and gas-fired power plants in the quarter being reviewed were smaller than a year before. Besides the added cost incurred for CO2 certificates, the tax on hard coal was a contributing factor.
In the Dutch end-customer business, prices charged to households were up by an average of approximately 5 %. Industrial enterprises had to pay about 3 % more.
Based on initial estimates, end-customer prices in our Central Eastern European electricity markets changed as follows: residential tariffs were up roughly 4 % in Poland, essentially unchanged in Slovakia, and down approximately 8 % for regulatory reasons in Hungary. Electricity supplied to industrial customers in Poland and Hungary was approximately 5 % and 3 % cheaper, respectively, whereas in Slovakia it was about 3 % more expensive.
On 5 March 2013, the Executive Board of RWE AG decided to withdraw from the oil and gas exploration and production business. It will consider options for selling all of the shares in RWE Dea. The details and the time frame of a possible transaction have not yet been established. RWE Dea was an integral part of the Group's portfolio in the past, as having access to proprietary gas sources was strategically important. This has ceased to be necessary since liquid gas markets have been formed in Europe. Furthermore, there are hardly any synergies between RWE Dea and the rest of our core business. We expect the sale of the company to contribute to strengthening our financial power, especially because we will be able to save substantial funds, which have been earmarked for capital expenditures necessary to tap RWE Dea's full potential for growth.
We have taken a major step forward in implementing our package of measures to strengthen our financial power: at the end of March, we agreed with Allianz and Borealis Infrastructure Management that a consortium of the two companies would buy our Czech long-distance gas network operator NET4GAS. The contractually agreed price corresponds to an enterprise value of about €1.6 billion. NET4GAS owns the exclusive license for the operation of the long-distance gas network in the Czech Republic, which has a length of more than 3,600 kilometres, and is responsible for national gas transmission and international gas transit. In our reporting, the company is assigned to the Central Eastern and South Eastern Europe Segment. The transaction is scheduled for completion in the second half of 2013. It is pending approval from the relevant antitrust authority, among others.
RWE will not participate in the construction of the European Nabucco gas pipeline. At the beginning of March, we sold our stake in the Nabucco consortium to the Austrian consortium manager OMV. It was agreed that the details of the transaction would be kept confidential. The Nabucco pipeline should give European customers access to new gas sources in the Caspian region and in the Middle East via a new route and promote competition on the international gas market. Besides OMV, the consortium includes MOL (Hungary), Transgaz (Romania), Bulgarian Energy Holding (Bulgaria) and BOTAS (Turkey). We still believe the Nabucco project will represent a major step towards improving European gas infrastructure. However, the project has become less important to us due to the sale of NET4GAS, our Czech long-distance gas network operator.
Also in March, we sold a 49.9 % stake in the Welsh Rhyl Flats offshore wind farm (90 MW). The listed renewable energy fund company Greencoat UK Wind and state-owned UK Green Investment Bank each acquired half the stake. In addition, we sold 41 % of the shares in the Little Cheyne Court onshore wind farm (60 MW) in the southeast of England. Greencoat UK Wind was the sole buyer. RWE Innogy still owns the majority of both wind farms and remains the plants' operating manager. Proceeds from the disposal of the wind farm shares total an equivalent of €195 million. RWE Innogy also plans to seek the involvement of public and private investors in projects in the future. In so doing, we aim to raise further capital for the expansion of renewables.
We took great strides in reorganising our Czech energy business in January. First, we pooled the gas distribution network activities of our four Czech regional utilities in a new company, RWE Grid Holding a.s. (RGH). Then we transferred nearly 35 % of RGH to a group of funds managed by Macquarie. In addition to a cash payment, we received minority interests in three of our four regional utilities, which Macquarie had purchased from their former owners, namely SPP, E.ON and GDF SUEZ. As a result of the transaction, we now hold stakes of between 98.67 % and 100 % in our regional utilities. Over the course of the year, we will acquire the remaining minority shareholdings, after which we will pool all the regional supply activities in a single company. In the future, our Czech energy business will be managed by RWE Česká republika a.s., which was founded on 1 October 2012.
At its meeting on 27 February, the Supervisory Board of RWE AG extended the contract of the Executive Board member Dr. Rolf Martin Schmitz by five years until 31 January 2019. Dr. Schmitz joined the Executive Board in May 2009 and has been its Deputy Chairman since 1 July 2012. Dr. Leonhard Birnbaum, the Executive Board member in charge of commercial management, declined the extension of his contract in order to dedicate himself to new tasks. Dr. Birnbaum resigned his office at the end of March. The Supervisory Board decided to distribute the tasks of RWE's Executive Board among the four remaining mandates. This decision is also a demonstration of the efforts being made to further simplify structures and processes.
In view of the unusually favourable refinancing conditions on the capital market in the recent past, in the middle of January, we issued a €750 million bond with a tenor of seven years and a coupon of 1.875 %. The issuance met with keen interest and was considerably oversubscribed. Furthermore, we conducted a private placement of €150 million and topped up a private placement made in October 2012 by €105 million at the beginning of February. The tenors are 30 and 25 years, respectively. Another private placement followed in April, with an issue volume of US\$50 million and a 20-year tenor.
On 18 April 2013, the Annual General Meeting of RWE AG approved paying a dividend of €2 per common and preferred share for fiscal 2012, as proposed by the Executive and Supervisory Boards. The dividend payment thus amounted to 50 % of recurrent net income. In addition, the Annual General Meeting elected Dr. Werner Brandt and Prof. Dr. Dr. E.h. Hans-Peter Keitel to the Supervisory Board of RWE AG. They succeed Dr. Paul Achleitner and Carl-Ludwig von Boehm-Bezing, who retired their offices with effect from the end of the Annual General Meeting on 18 April 2013. Mr. von Boehm-Bezing had been on the Supervisory Board since 1997, and Dr. Achleitner had been a member since 2000.
| RWE Group since 1 January 2013 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Conventional Power Generation |
Supply/ Distribution Networks Germany |
Supply Netherlands/ Belgium |
Supply United Kingdom |
Central Eastern and South Eastern Europe |
Renewables | Upstream Gas&Oil |
Trading/Gas Midstream |
||
| RWE Generation | RWE Deutschland |
Essent | RWE npower | RWE East | RWE Innogy | RWE Dea | RWE Supply & Trading |
||
| NET4GAS | Internal Service Providers | ||||||||
| unbundled | RWE Consulting RWE Group Business Services RWE IT |
RWE Service
The presentation of the business performance in 2013 is based on a new reporting structure. As explained on page 48 of RWE's 2012 Annual Report, we pooled nearly all of our fossil-fuelled and nuclear electricity generation in the newly established RWE Generation SE with effect from 1 January 2013. This gives us a more efficient setup and allows us to react more swiftly to the significant changes in the energy sector. The establishment of RWE Generation created the new segment called 'Conventional Power Generation.' RWE is now divided into eight segments (divisions) based on geographic and functional criteria. We have adjusted prior-year figures to the new structure, in order to make like-for-like comparisons.
• Supply United Kingdom: This is where we report the figures of RWE npower, which ranks among the six major energy companies in the United Kingdom. As our UK power stations have been operated by RWE Generation since the beginning of the year, like Essent, RWE npower's focus is now solely on the electricity and gas supply business.
• Central Eastern and South Eastern Europe: This division contains activities in the Czech Republic, Hungary, Poland, Slovakia, Turkey and Croatia. Our Czech business focuses on the supply, distribution, supraregional transmission, transit and storage of gas. We are the nation's market leader in this field. However, once the impending sale of NET4GAS has been completed, we will withdraw from the transmission and transit sector. In 2010, we also started selling electricity in the Czech Republic. In Hungary, we cover the entire value chain in the electricity business, from production through to the operation of the distribution system and sales to end-customers, and are also active in the gas supply sector via a minority stake. The Polish activities, which we report under 'Central Eastern and South Eastern Europe', include the distribution and supply of electricity. In Slovakia, we are active in the electricity network and electricity end-customer businesses via a minority interest and in the gas supply sector via RWE Gas Slovensko. Last year, we began establishing electricity supply operations in Turkey. Our wastewater business in Zagreb (Croatia) has belonged to the Central Eastern and South Eastern Europe Division since 1 January 2013. It used to be assigned to RWE Deutschland.
We report certain groupwide activities outside the divisions as part of 'other, consolidation.' These are the Group holding company RWE AG as well as our in-house service providers RWE Group Business Services, RWE Service, RWE IT and RWE Consulting. This item also includes our minority interest in the electricity transmission system operator Amprion.
| Electricity production by division January – March |
Lignite | Hard coal | Gas | Nuclear | Renewables | Pumped storage, oil, other |
RWE Group | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Billion kWh | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 |
| Conventional Power Generation |
19.8 | 21.0 | 16.1 | 15.8 | 10.1 | 9.1 | 8.5 | 8.4 | 1.7 | 1.2 | 0.7 | 0.6 | 56.9 | 56.1 |
| of which: | ||||||||||||||
| Germany1 | 19.8 | 21.0 | 9.4 | 8.7 | 2.0 | 2.2 | 8.5 | 8.4 | 0.1 | 0.1 | 0.7 | 0.6 | 40.5 | 41.0 |
| Netherlands/Belgium | - | - | 1.8 | 1.9 | 1.5 | 1.8 | - | - | 0.4 | 0.5 | - | - | 3.7 | 4.2 |
| United Kingdom | - | - | 4.9 | 5.2 | 6.6 | 5.1 | - | - | 1.2 | 0.6 | - | - | 12.7 | 10.9 |
| Central Eastern and South Eastern Europe |
1.4 | 1.3 | - | - | - | - | - | - | - | - | - | - | 1.4 | 1.3 |
| Renewables2 | - | - | - | - | 0.1 | 0.1 | - | - | 2.2 | 2.0 | - | - | 2.3 | 2.1 |
| RWE Group3 | 21.2 | 22.3 | 17.0 | 16.1 | 10.5 | 9.5 | 8.5 | 8.4 | 4.2 | 3.5 | 0.7 | 0.6 | 62.1 | 60.4 |
1 Including electricity from power plants not owned by RWE that we can deploy at our discretion on the basis of long-term agreements.
In the first quarter of 2013, it amounted to 6.6 billion kWh, of which 5.8 billion kWh were generated from hard coal.
2 Including electricity procured from power plants co-financed by RWE, which are owned by companies that are not fully consolidated.
In the first quarter of 2013, these purchases totalled 0.5 billion kWh. 3 Including small generation volumes of other divisions.
In the first quarter of 2013, the RWE Group produced 62.1 billion kWh of electricity. This is 1.7 billion kWh, or 3 %, more than in the same period last year. The biggest increase in absolute terms was recorded by electricity generation from gas, mainly due to the commissioning of our power station at Pembroke (United Kingdom). Since September 2012, the plant has had its full capacity of 2,188 megawatts (MW) online. Hard coal also made a larger contribution to power generation, primarily driven by improved margins on the German spot market. A counteracting effect was felt from the fact that some of our contracts governing the usage of German hard coal-fired power stations not owned by RWE expired at the end of 2012. This caused the generation capacity at our disposal from these kinds of plants to decrease by 1.9 gigawatts (GW) to 4.5 GW. Renewables also contributed to the rise in our electricity production. A significant portion of the additional volume stems from the biomass-fired power plant at Tilbury, which had been offline for several months in 2012 following a fire. In contrast, electricity generation from lignite was down because we had decommissioned all of our old 150 MW units by the end of 2012. Ten blocks were still in service as of 31 March 2012.
In addition to our in-house generation, we procure electricity from external suppliers. These purchases amounted to 13.9 billion kWh compared to 18.2 billion kWh in the same quarter last year. In-house generation and power purchases combined for 76.0 billion kWh. The comparable figure for 2012 was 78.6 billion kWh.
In the period under review, RWE Dea produced 668 million cubic metres of gas and 595 thousand cubic metres of oil. Converting the gas to oil equivalent and adding it to crude oil production results in a total output of 1,242 thousand cubic metres, or 7.8 million barrels. This compares to 1,310 thousand cubic metres, or 8.2 million barrels, in the first quarter of 2012. Gas production decreased by 7 %, in part because of the progressive depletion of reserves, affecting the Völkersen field in Lower Saxony, among others. Furthermore, production from the Norwegian Snøhvit field had to be interrupted for maintenance work. Additional gas
volumes came from the Clipper South and Devenick fields in the UK North Sea, where we began production in the third quarter of 2012. We experienced a 3 % decrease in crude oil volume. An important factor in this context is that the share of total production accounted for by oil in the Norwegian Gjøa field dropped, whereas the proportion allocable to gas rose. Conversely, we produced more oil in the German Mittelplate field than in the comparable period in 2012, as we benefited from a new production well.
| External electricity sales volume January – March |
Residential and commercial customers |
Industrial and corporate customers |
Distributors | Electricity trading | Total | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Billion kWh | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 |
| Conventional | ||||||||||
| Power Generation | 0.1 | 0.1 | 0.2 | 0.2 | 2.4 | 2.2 | - | - | 2.7 | 2.5 |
| Supply/Distribution | ||||||||||
| Networks Germany | 7.2 | 7.7 | 6.9 | 7.4 | 18.8 | 17.6 | - | - | 32.9 | 32.7 |
| Supply Netherlands/Belgium | 3.1 | 3.1 | 3.4 | 2.4 | 0.4 | - | - | - | 6.9 | 5.5 |
| Supply United Kingdom | 5.3 | 5.2 | 7.8 | 8.2 | - | - | - | - | 13.1 | 13.4 |
| Central Eastern and | ||||||||||
| South Eastern Europe | 2.3 | 2.2 | 2.2 | 2.4 | 1.4 | 1.5 | - | - | 5.9 | 6.1 |
| Renewables | - | - | - | - | 0.6 | 0.6 | - | - | 0.6 | 0.6 |
| Trading/Gas Midstream | - | - | 3.8 | 7.9 | - | - | 5.0 | 5.1 | 8.8 | 13.0 |
| RWE Group | 18.0 | 18.3 | 24.3 | 28.5 | 23.6 | 21.9 | 5.0 | 5.1 | 70.9 | 73.8 |
In the first quarter of 2013, we sold 70.9 billion kWh of electricity to external customers. This was 4 % less than in 2012. We experienced a significant decline in the industrial and corporate customer segment, as RWE Supply&Trading stopped auctioning off electricity on 1 January 2013. In 2007, we agreed with the Federal Cartel Office that we would conduct such auctions for the supply period from 2009 to 2012. RWE Supply&Trading's sales in the first quarter were also affected by the fact that the company transferred its Dutch industrial and corporate customers to Essent. In the Supply/Distribution Networks Germany Division, the sale of Koblenzer Elektrizitätswerk und Verkehrs-Aktiengesellschaft (KEVAG) in December of last year removed supply volumes. Despite this, the division sold more electricity than in 2012 due to the successful acquisition of customers in business with distributors. However, this was contrasted by competition-induced losses in sales volume in the other two customer segments.
| External gas sales volume January – March |
Residential and commercial customers |
Industrial and corporate customers |
Distributors | Total | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Billion kWh | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | ||
| Supply/Distribution Networks | ||||||||||
| Germany | 12.3 | 12.9 | 6.6 | 5.6 | 16.2 | 8.1 | 35.1 | 26.6 | ||
| Supply Netherlands/Belgium | 19.9 | 16.8 | 14.5 | 14.8 | - | - | 34.4 | 31.6 | ||
| Supply United Kingdom | 19.8 | 16.3 | 0.7 | 0.7 | - | - | 20.5 | 17.0 | ||
| Central Eastern and | ||||||||||
| South Eastern Europe | 9.3 | 10.2 | 9.9 | 9.8 | 0.3 | 6.2 | 19.5 | 26.2 | ||
| Upstream Gas&Oil | - | - | 1.6 | 0.2 | 3.8 | 4.8 | 5.4 | 5.0 | ||
| Trading/Gas Midstream | - | - | 4.8 | 4.3 | 7.2 | 2.9 | 12.0 | 7.2 | ||
| RWE Group | 61.3 | 56.2 | 38.1 | 35.4 | 27.5 | 22.0 | 126.9 | 113.6 |
The RWE Group sold 126.9 billion kWh of gas, 12 % more than in 2012. A major contributing factor was the cold weather in Northwestern Europe. The rise in demand for heating was the main reason why we sold much more gas to residential and commercial customers. This primarily related to RWE npower and Essent. We also benefited from the colder weather in Germany and the Czech Republic. Despite this, gas sales to households and commercial operations were down. In Germany, this was due to the reclassification of customers to the industrial and corporate customer segment, and in the Czech Republic, it was because of a competitiondriven deterioration of our position on the market. The RWE Group also sold much more gas in the distributor business. This applies in particular to the Supply/Distribution Networks Germany Division, where we won new customers and benefited from the weather-driven increase in purchases by existing customers. The Trading/ Gas Midstream Division also posted significant growth in the sales volume achieved from distributors, whereas the Central Eastern and South Eastern Europe Division recorded a decline of a similar order. This is a result of the internal reassignment of the Czech wholesale business to RWE Supply&Trading.
| External revenue | Jan – Mar | Jan – Mar | +/− | Jan – Dec |
|---|---|---|---|---|
| € million | 2013 | 2012 | % | 2012 |
| Conventional Power Generation | 418 | 382 | 9.4 | 1,626 |
| Supply/Distribution Networks Germany | 6,951 | 6,499 | 7.0 | 23,710 |
| Supply Netherlands/Belgium | 2,441 | 2,021 | 20.8 | 5,863 |
| Supply United Kingdom | 2,846 | 2,461 | 15.6 | 8,708 |
| Central Eastern and South Eastern Europe | 1,583 | 1,789 | −11.5 | 5,274 |
| Renewables | 116 | 129 | −10.1 | 387 |
| Upstream Gas&Oil | 466 | 569 | −18.1 | 1,848 |
| Trading/Gas Midstream | 1,204 | 1,714 | −29.8 | 5,698 |
| Other, consolidation | 25 | 29 | −13.8 | 113 |
| RWE Group | 16,050 | 15,593 | 2.9 | 53,227 |
| Natural gas tax/electricity tax | 897 | 830 | 8.1 | 2,456 |
| RWE Group (excluding natural gas tax/electricity tax) | 15,153 | 14,763 | 2.6 | 50,771 |
The RWE Group generated €16,050 million in external revenue. This is 3 % more than in the first quarter of 2012. Gas revenue rose in particular, amounting to €5,705 million and surpassing the year-earlier figure by 11 %. This is largely due to sales volumes being substantially affected by the cold weather. In contrast, electricity revenue was essentially unchanged, totalling €8,962 million. The slight decline in delivery volumes was offset by price increases. In Germany, some of our regional companies have raised tariffs for residential and commercial customers. This was in response to the rise in expenses caused predominantly by the increased apportionment for electricity generated in accordance with the German Renewable Energy Act (REA). We also had to adjust residential tariffs in the United Kingdom. One major price driver is the higher costs incurred for energy savings in UK households, which large utilities are obliged to bear within the scope of government programmes. Changes in foreign exchange rates only had a minor impact on the development of consolidated revenue. In the first quarter of 2013, the British pound cost an average of €1.17, as opposed to €1.19 in the same period last year. The Czech crown, the Hungarian forint and the Polish zloty also depreciated against the euro. In contrast, the US dollar appreciated from €0.75 to €0.76.
| External revenue by product | Jan – Mar | Jan – Mar | +/− | Jan – Dec |
|---|---|---|---|---|
| € million | 2013 | 2012 | % | 2012 |
| Electricity revenue | 8,962 | 8,975 | −0.1 | 34,256 |
| of which: | ||||
| Supply/Distribution Networks Germany | 5,093 | 4,922 | 3.5 | 19,173 |
| Supply Netherlands/Belgium | 742 | 594 | 24.9 | 2,144 |
| Supply United Kingdom | 1,611 | 1,611 | - | 6,107 |
| Central Eastern and South Eastern Europe | 601 | 622 | −3.4 | 2,391 |
| Trading/Gas Midstream | 657 | 1,060 | −38.0 | 3,707 |
| Gas revenue | 5,705 | 5,123 | 11.4 | 14,222 |
| of which: | ||||
| Supply/Distribution Networks Germany | 1,561 | 1,315 | 18.7 | 3,553 |
| Supply Netherlands/Belgium | 1,629 | 1,366 | 19.3 | 3,551 |
| Supply United Kingdom | 983 | 817 | 20.3 | 2,188 |
| Central Eastern and South Eastern Europe | 950 | 1,131 | −16.0 | 2,761 |
| Upstream Gas&Oil | 141 | 159 | −11.3 | 469 |
| Trading/Gas Midstream | 440 | 334 | 31.7 | 1,697 |
| Oil revenue | 341 | 685 | −50.2 | 1,540 |
| of which: | ||||
| Upstream Gas&Oil | 304 | 384 | −20.8 | 1,289 |
| Trading/Gas Midstream | 37 | 301 | −87.7 | 251 |
| Other revenue | 1,042 | 810 | 28.6 | 3,209 |
| RWE Group | 16,050 | 15,593 | 2.9 | 53,227 |
| Internal revenue | Jan – Mar | Jan – Mar | +/− | Jan – Dec |
|---|---|---|---|---|
| € million | 2013 | 2012 | % | 2012 |
| Conventional Power Generation | 2,367 | 2,709 | −12.6 | 9,605 |
| Supply/Distribution Networks Germany | 304 | 541 | −43.8 | 2,020 |
| Supply Netherlands/Belgium | 176 | 1 | - | 13 |
| Supply United Kingdom | 73 | 54 | 35.2 | 227 |
| Central Eastern and South Eastern Europe | 100 | 133 | −24.8 | 502 |
| Renewables | 176 | 124 | 41.9 | 491 |
| Upstream Gas&Oil | 66 | 50 | 32.0 | 143 |
| Trading/Gas Midstream | 7,213 | 6,680 | 8.0 | 25,738 |
| Reconciliation of income from operating activities to EBITDA | Jan – Mar | Jan – Mar | +/− | Jan – Dec |
|---|---|---|---|---|
| € million | 2013 | 2012 | % | 2012 |
| Income from operating activities1 | 2,387 | 2,296 | 4.0 | 3,845 |
| + Operating income from investments | 121 | 139 | −12.9 | 587 |
| + Non-operating income from investments | −2 | 14 | - | −110 |
| - Non-operating result | −172 | −13 | - | 2,094 |
| Operating result | 2,334 | 2,436 | −4.2 | 6,416 |
| + Operating depreciation and amortisation | 708 | 689 | 2.8 | 2,898 |
| EBITDA | 3,042 | 3,125 | −2.7 | 9,314 |
1 See the income statement on page 32.
| EBITDA | Jan – Mar | Jan – Mar | +/− | Jan – Dec |
|---|---|---|---|---|
| € million | 2013 | 2012 | % | 2012 |
| Conventional Power Generation | 1,014 | 1,404 | −27.8 | 4,378 |
| of which: | ||||
| Continental Western Europe | 906 | 1,280 | −29.2 | 3,928 |
| United Kingdom | 112 | 124 | −9.7 | 456 |
| Supply/Distribution Networks Germany | 762 | 772 | −1.3 | 2,266 |
| Supply Netherlands/Belgium | 186 | 153 | 21.6 | 293 |
| Supply United Kingdom | 297 | 240 | 23.8 | 371 |
| Central Eastern and South Eastern Europe | 449 | 387 | 16.0 | 1,312 |
| Renewables | 129 | 129 | - | 364 |
| Upstream Gas&Oil | 283 | 328 | −13.7 | 1,041 |
| Trading/Gas Midstream | −45 | −218 | 79.4 | −591 |
| Other, consolidation | −33 | −70 | 52.9 | −120 |
| RWE Group | 3,042 | 3,125 | −2.7 | 9,314 |
| Operating result | Jan – Mar | Jan – Mar | +/− | Jan – Dec |
|---|---|---|---|---|
| € million | 2013 | 2012 | % | 2012 |
| Conventional Power Generation | 745 | 1,150 | −35.2 | 3,275 |
| of which: | ||||
| Continental Western Europe | 712 | 1,079 | −34.0 | 3,085 |
| United Kingdom | 37 | 70 | −47.1 | 194 |
| Supply/Distribution Networks Germany | 595 | 607 | −2.0 | 1,578 |
| Supply Netherlands/Belgium | 165 | 129 | 27.9 | 190 |
| Supply United Kingdom | 278 | 220 | 26.4 | 286 |
| Central Eastern and South Eastern Europe | 383 | 322 | 18.9 | 1,052 |
| Renewables | 82 | 84 | −2.4 | 183 |
| Upstream Gas&Oil | 191 | 241 | −20.7 | 685 |
| Trading/Gas Midstream | −47 | −220 | 78.6 | −598 |
| Other, consolidation | −58 | −97 | 40.2 | −235 |
| RWE Group | 2,334 | 2,436 | −4.2 | 6,416 |
In the first quarter of 2013, the RWE Group's EBITDA was €3,042 million and the operating result was €2,334 million. This is 3 % and 4 % less than in the same period last year, primarily because, as expected, earnings in the conventional power generation business deteriorated significantly. Positive developments in other divisions, especially in the Trading/Gas Midstream Segment, were unable to make up for this. Disregarding major consolidation and currency effects, EBITDA and the operating result declined by 1 % and 3 %, respectively. Developments in our divisions were as follows.
• Supply United Kingdom: The operating result achieved by RWE npower increased by 26 % to €278 million. Net of currency effects, the rise amounted to 29 %. Efficiency improvements and the colder weather also played a central role here. Furthermore, in the first quarter, we benefited from the relatively low costs associated with the promotion of energy savings measures in households, which we are obliged to bear by the government. At the beginning of the year, a new programme was launched, which will not lead to significant burdens until later in the year. The operating result for the quarter was curtailed by the fact that UK households are becoming more energy efficient. Moreover, we had to pay higher network usage fees. However, the additional costs were cushioned by price adjustments. RWE npower lifted residential tariffs most recently in November 2012, raising them by 8.8 % for electricity and 8.6 % for gas.
• Central Eastern and South Eastern Europe: The operating result recorded by this division grew by 19 % to €383 million. Excluding currency effects, it was up 22 %. This was primarily due to a considerable improvement in earnings from transactions to limit currency risks. Risks of this kind arise in part because gas and electricity purchases for our markets in Central Eastern Europe are usually settled in euros and US dollars, whereas they are settled in local currency when they are re-sold. Polish electricity supply activities also contributed to the rise in earnings in the first quarter. In the Czech gas business, network margins grew, as did procurement costs in the supply business. In Hungary, a state-ordered reduction in network fees and residential electricity and gas tariffs led to earnings shortfalls.
| Non-operating result | Jan – Mar | Jan – Mar | +/− | Jan – Dec |
|---|---|---|---|---|
| € million | 2013 | 2012 | € million | 2012 |
| Capital gains | 4 | 45 | −41 | 487 |
| Impact of commodity derivatives on earnings | 136 | 221 | −85 | 470 |
| Restructuring, other | 32 | −253 | 285 | −3,051 |
| Non-operating result | 172 | 13 | 159 | −2,094 |
The reconciliation from the operating result to net income is characterised by the absence of one-off burdens incurred last year and a decline in the effective tax rate.
The non-operating result rose by €159 million to €172 million, largely due to the absence of one-off burdens, which affected the 'restructuring, other' item in 2012. Last year, we had accrued risk provisions for investments. In addition, we depreciated RWE npower's customer base for the last time in 2012. Capital gains in the period under review amounted to €4 million, remaining below the low level achieved a year earlier (€45 million). The accounting treatment of certain derivatives, with which we hedge the prices of commodity forward transactions, resulted in a gain of €136 million compared to €221 million in the first quarter of 2012. Pursuant to IFRS, these derivatives are accounted for at fair value at the corresponding balance sheet date, whereas the underlying transactions (which display the opposite development) are only recognised as a profit or loss when they are realised. These timing differences result in short-term effects on earnings, which are neutralised over time.
| Financial result € million |
Jan – Mar 2013 |
Jan – Mar 2012 |
+/− € million |
Jan – Dec 2012 |
|---|---|---|---|---|
| Interest income | 93 | 101 | −8 | 413 |
| Interest expenses | −296 | −314 | 18 | −1,249 |
| Net interest | −203 | −213 | 10 | −836 |
| Interest accretion to non-current provisions | −237 | −276 | 39 | −1,208 |
| Other financial result | 13 | 19 | −6 | −48 |
| Financial result | −427 | −470 | 43 | −2,092 |
The financial result improved by €43 million to −€427 million, mainly due to relief in the interest accretion to non-current provisions. Last year, we had recognised an increase in other non-current provisions in this item, which resulted from a reduction in discount rates. Conversely, discount rates did not change in the first quarter of 2013. Net interest also displayed a positive development. The decline in market interest rates caused the cost of repaying our financial debt to drop. The volume of interim financing via commercial paper also declined.
Income before tax rose by 5 % to €2,079 million. Our effective tax rate decreased by three percentage points to 25 %. One of the reasons was that we increased the share of our earnings achieved in countries with relatively low effective tax rates. Special items relating to deferred taxes also played a role, whereas the decline in our tax-free capital gains had a counteracting influence. After taxes, income grew by 9 % to €1,553 million.
At €111 million, the minority interest in income was 16 % higher than in the same period last year, largely due to the improved earnings of some fully consolidated German regional utilities, in which non-Group companies hold shares. The portion of our earnings attributable to hybrid investors amounts to €26 million. This sum corresponds to the finance costs after tax. However, only the hybrid bonds classified as equity pursuant to IFRS are considered. These are the issuances of €1,750 million in September 2010 and of £750 million in March 2012. The latter was the main reason why the share in earnings attributable to hybrid investors rose by €9 million compared to the first quarter of 2012.
Net income earned by the RWE Group rose by 8 % to €1,416 million. Per share, it amounted to €2.30. In the period being reviewed, an average of 614.7 million RWE shares were outstanding, roughly as many as a year before (614.4 million).
| Reconciliation to net income | Jan – Mar | Jan – Mar | +/− | Jan – Dec | |
|---|---|---|---|---|---|
| 2013 | 2012 | % | 2012 | ||
| Operating result | € million | 2,334 | 2,436 | −4.2 | 6,416 |
| Non-operating result | € million | 172 | 13 | - | −2,094 |
| Financial result | € million | −427 | −470 | 9.1 | −2,092 |
| Income before tax | € million | 2,079 | 1,979 | 5.1 | 2,230 |
| Taxes on income | € million | −526 | −555 | 5.2 | −526 |
| Income | € million | 1,553 | 1,424 | 9.1 | 1,704 |
| Minority interest | € million | 111 | 96 | 15.6 | 302 |
| RWE AG hybrid investors' interest | € million | 26 | 17 | 52.9 | 96 |
| Net income/RWE AG shareholders' share | |||||
| in net income | € million | 1,416 | 1,311 | 8.0 | 1,306 |
| Recurrent net income | € million | 1,297 | 1,288 | 0.7 | 2,457 |
| Earnings per share | € | 2.30 | 2.13 | 8.0 | 2.13 |
| Recurrent net income per share | € | 2.11 | 2.10 | 0.5 | 4.00 |
| Number of shares outstanding (average) | millions | 614.7 | 614.4 | - | 614.5 |
| Effective tax rate | % | 25 | 28 | - | 24 |
The yardstick for determining the dividend is recurrent net income, which is adjusted for exceptional items. It does not include the non-operating result or the tax on it. If major non-recurrent effects in the financial result and income taxes occur, these are also excluded. In the first quarter of 2013, recurrent net income totalled €1,297 million, slightly more than the corresponding figure achieved in the same period last year (€1,288 million).
| Capital expenditure | Jan – Mar | Jan – Mar | +/− | Jan – Dec |
|---|---|---|---|---|
| € million | 2013 | 2012 | € million | 2012 |
| Capital expenditure on property, plant and equipment and on intangible assets |
||||
| Conventional Power Generation | 272 | 470 | −198 | 1,784 |
| of which: | ||||
| Continental Western Europe | 256 | 384 | −128 | 1,534 |
| United Kingdom | 6 | 15 | −9 | 101 |
| Supply/Distribution Networks Germany | 66 | 76 | −10 | 904 |
| Supply Netherlands/Belgium | 7 | 8 | −1 | 43 |
| Supply United Kingdom | 11 | 17 | −6 | 89 |
| Central Eastern and South Eastern Europe | 38 | 61 | −23 | 518 |
| Renewables | 213 | 198 | 15 | 999 |
| Upstream Gas&Oil | 129 | 145 | −16 | 684 |
| Trading/Gas Midstream | 2 | 1 | 1 | 4 |
| Other, consolidation | 19 | 11 | 8 | 56 |
| Total | 757 | 987 | −230 | 5,081 |
| Capital expenditure on financial assets | 7 | 86 | −79 | 463 |
| Total capital expenditure | 764 | 1,073 | −309 | 5,544 |
The RWE Group spent €764 million in capital, €309 million, or 29 %, less than in the equivalent period last year. We spent €757 million on property, plant and equipment and intangible assets. Compared to 2012, this represents a decrease of €230 million. Capital expenditure on financial assets amounted to €7 million and was thus of minor significance. The expansion and modernisation of our electricity generation capacity continues to be a focal point of our investing activity. This holds true especially for the Conventional Power Generation Division. However, much less capital was spent in this area compared to the first quarter of 2012, as four large stations from our ongoing new-build power plant programme began commercial operation in 2012 (see page 49 of RWE's 2012 Annual Report). Three projects are still in the construction phase: we are building a gas-fired power plant with a net installed capacity of 775 MW near the Turkish town of Denizli, which should be commissioned this year. Added to this is a 1,528 MW dual-block hard coal power plant at Hamm and another one with a capacity of 1,560 MW at Eemshaven (Netherlands). These stations are planned for completion in 2014. Capital expenditure in the Renewables Division was also high: the single-largest project is the Gwynt y Môr offshore wind farm off the north coast of Wales, which is scheduled to put its full capacity of 576 MW online in September 2014. The Upstream Gas&Oil Division also spent a considerable amount of capital. In this context, RWE Dea concentrated on the development of oil and gas fields in preparation for production. Funds in the Supply/Distribution Networks Germany and Central Eastern and South Eastern Europe Divisions were primarily used to improve electricity and gas network infrastructure.
| Cash flow statement1 | Jan – Mar | Jan – Mar | +/− | Jan – Dec |
|---|---|---|---|---|
| € million | 2013 | 2012 | € million | 2012 |
| Funds from operations | 2,174 | 2,277 | −103 | 5,446 |
| Change in working capital | −2,116 | −1,979 | −137 | −1,051 |
| of which: influence of the variation margins | −191 | 42 | −233 | 831 |
| Cash flows from operating activities | 58 | 298 | −240 | 4,395 |
| Cash flows from investing activities | −430 | 213 | −643 | −1,285 |
| Cash flows from financing activities | 1,095 | −867 | 1,962 | −2,463 |
| Effects of changes in foreign exchange rates and other changes | ||||
| in value on cash and cash equivalents | −9 | 17 | −26 | 16 |
| Total net changes in cash and cash equivalents | 714 | −339 | 1,053 | 663 |
| Cash flows from operating activities | 58 | 298 | −240 | 4,395 |
| Minus capital expenditure on property, plant and equipment and on | ||||
| intangible assets | −757 | −987 | 230 | −5,081 |
| Free cash flow | −699 | −689 | −10 | −686 |
1 The full cash flow statement can be found on page 35.
At €58 million, our cash flows from operating activities were unusually low, as in the first quarter of last year. This is largely due to seasonal influences, which are reflected in changes in working capital. Among other things, the weather-induced rise in gas sales volumes was partially responsible for the combined €2.5 billion increase in trade accounts receivable in the Supply/Distribution Networks Germany, Supply Netherlands/ Belgium and Supply United Kingdom Divisions over the course of the first quarter. However, this effect will become less significant later on, as payments are received. Cash outflows for investing activities in the period being reviewed amounted to €430 million, which was much less than what we spent on property, plant and equipment as well as on intangible and financial assets. This is due to proceeds from the sale of investments and property, plant and equipment, which are offset. Cash flows from financing activities amounted to €1,095 million, primarily owing to bond issuances (see page 11). On balance, the aforementioned cash flows increased our cash and cash equivalents by €714 million.
Cash flows from operating activities, minus capital expenditure on property, plant and equipment and intangible assets, result in free cash flow, The latter amounted to −€699 million, which was roughly as much as in the same period last year (−€689 million).
As of 31 March 2013, our net debt totalled €33.2 billion. This is slightly more than its level at the end of 2012 (€33.0 billion) and primarily due to the negative free cash flow. Dividends paid to minority shareholders (€0.1 billion) and an increase in nuclear and mining provisions (€0.1 billion) also contributed to the rise in debt. A counteracting impact was felt from proceeds on asset disposals (−€0.4 billion) and foreign exchange effects (−€0.2 billion).
| Net debt | 31 Mar 2013 | 31 Dec 2012 | +/− |
|---|---|---|---|
| € million | % | ||
| Cash and cash equivalents | 3,386 | 2,672 | 26.7 |
| Marketable securities | 3,198 | 3,047 | 5.0 |
| Other financial assets | 2,068 | 1,892 | 9.3 |
| Financial assets | 8,652 | 7,611 | 13.7 |
| Bonds, other notes payable, bank debt, commercial paper | 18,619 | 17,748 | 4.9 |
| Other financial liabilities | 2,529 | 2,198 | 15.1 |
| Financial liabilities | 21,148 | 19,946 | 6.0 |
| Net financial debt | 12,496 | 12,335 | 1.3 |
| Provisions for pensions and similar obligations | 6,749 | 6,856 | −1.6 |
| Surplus of plan assets over benefit obligations | - | 36 | - |
| Provisions for nuclear waste management | 10,247 | 10,201 | 0.5 |
| Mining provisions | 2,903 | 2,874 | 1.0 |
| Adjustment for hybrid capital (portion of relevance to the rating) | 768 | 785 | −2.2 |
| Plus 50 % of the hybrid capital stated as equity | 1,337 | 1,351 | −1.0 |
| Minus 50 % of the hybrid capital stated as debt | −569 | −566 | −0.5 |
| Net debt of the RWE Group | 33,163 | 33,015 | 0.4 |
| Balance sheet structure | 31 Mar 2013 | 31 Dec 2012 | ||
|---|---|---|---|---|
| € million | % | € million | % | |
| Assets | ||||
| Non-current assets | 62,969 | 67.8 | 63,362 | 71.8 |
| Intangible assets | 15,823 | 17.0 | 16,017 | 18.2 |
| Property, plant and equipment | 35,712 | 38.5 | 36,006 | 40.8 |
| Current assets | 29,858 | 32.2 | 24,840 | 28.2 |
| Receivables and other assets1 | 21,532 | 23.2 | 16,436 | 18.6 |
| Total | 92,827 | 100.0 | 88,202 | 100.0 |
| Equity and liabilities | ||||
| Equity | 17,694 | 19.1 | 16,437 | 18.6 |
| Non-current liabilities | 48,287 | 52.0 | 47,521 | 53.9 |
| Provisions | 28,174 | 30.4 | 28,067 | 31.8 |
| Financial liabilities | 16,381 | 17.6 | 15,417 | 17.5 |
| Current liabilities | 26,846 | 28.9 | 24,244 | 27.5 |
| Other liabilities2 | 16,639 | 17.9 | 14,904 | 16.9 |
| Total | 92,827 | 100.0 | 88,202 | 100.0 |
1 Including financial accounts receivable, trade accounts receivable and tax refund claims.
2 Including financial accounts payable and income tax liabilities.
As of 31 March 2013, the RWE Group had a balance sheet total of €92.8 billion. This is €4.6 billion more than at the end of 2012. On the assets side, accounts receivable and derivative positions increased by €3.4 billion and €1.5 billion, respectively. On the equity and liabilities side, provisions were up, advancing by €0.7 billion. In addition, financial liabilities and derivative positions both rose by €1.2 billion. The RWE Group's shareholders' equity was €1.3 billion higher than at the end of 2012. Its share of the balance sheet total amounted to 19.1 %. The equity ratio therefore rose by 0.5 percentage points.
| Workforce1 | 31 Mar 2013 | 31 Dec 2012 | +/− |
|---|---|---|---|
| % | |||
| Conventional Power Generation | 17,505 | 17,583 | −0.4 |
| Supply/Distribution Networks Germany | 19,520 | 19,510 | 0.1 |
| Supply Netherlands/Belgium | 3,293 | 3,376 | −2.5 |
| Supply United Kingdom | 9,277 | 9,528 | −2.6 |
| Central Eastern and South Eastern Europe | 10,592 | 10,900 | −2.8 |
| Renewables | 1,503 | 1,573 | −4.5 |
| Upstream Gas&Oil | 1,424 | 1,375 | 3.6 |
| Trading/Gas Midstream | 1,488 | 1,457 | 2.1 |
| Other2 | 4,825 | 4,906 | −1.7 |
| RWE Group | 69,427 | 70,208 | −1.1 |
| In Germany | 40,163 | 40,272 | −0.3 |
| Outside of Germany | 29,264 | 29,936 | −2.2 |
1 Converted to full-time positions.
2 Of which 2,564 were accounted for by RWE IT (end of 2012: 2,624) and 1,674 were accounted for by RWE Service (end of 2012: 1,692).
RWE had 69,427 employees as of 31 March 2013. Part-time positions were included in these figures on a prorata basis. Since the end of 2012, on balance, 781 staff members have left the Group, the biggest share (672) of which worked at our foreign sites. Efficiency measures in the UK supply business and in the Central Eastern and South Eastern Europe Division were largely responsible for the reduction in the workforce. Acquisitions and disposals only had a minor impact: on balance, they added 77 employees.
Based on initial forecasts, world economic output will increase by about 2.5 % in 2013, growing slightly more than in 2012. The prerequisite for this is that the Eurozone's sovereign debt crisis does not escalate. Measures taken to consolidate state budgets in euro countries will curtail growth. Therefore, gross domestic product (GDP) in the Eurozone is likely to shrink. Germany's prospects are a little brighter: following an expansion of 0.7 % last year, the German Council of Economic Experts is of the opinion that a gain of the same order is also possible for 2013. It expects the relatively high level of employment within a European context and rising disposable income to provide growth stimulus. Economic output could decline in the Netherlands, whereas it is expected to rise slightly in Belgium. The United Kingdom may well post growth of about 1 %. Initial estimates for our Central Eastern European markets indicate that Polish GDP may again rise by some 2 %. In contrast, economic output in the Czech Republic and Hungary will probably only increase marginally.
Our forecast for this year's energy consumption is based on the aforementioned economic developments. As it is virtually impossible to predict the weather, we assume that temperatures will remain at a normal level over the remainder of the year. Following the unusually cold first quarter in large parts of Europe, temperatures would therefore be marginally lower than in 2012 for the full year. We do not expect German, Dutch or UK electricity consumption to change significantly compared to last year. However, progress made in the field of energy efficiency will have a dampening effect. We forecast a moderate gain in Poland and a slight drop in Hungary. Based on the aforementioned assumptions, demand for gas in most RWE markets may well exceed last year's levels due to weather conditions. Gas-fired power plants are not expected to stimulate growth in demand, as the capacity utilisation of these facilities is unlikely to improve much compared to 2012.
Developments on commodity markets witnessed until the end of April suggest that the prices of most of the energy commodities of relevance to us will be lower than in 2012. This holds true especially for hard coal. Following the negative vote of the European Parliament on the reduction in the supply of CO2 certificates, quotations in emissions trading will probably be much lower year on year. This and the continued expansion of renewables will maintain the pressure on wholesale prices. However, this will not have a significant effect on our earnings in the current fiscal year as we have already sold nearly all of our electricity generation for 2013 and hedged the prices of the required fuel and emission allowances. We also mitigated the price risk exposure of our oil and gas production through forward sales, albeit to a much lesser extent than for electricity.
| Outlook for fiscal 2013 | 20121 actual1 € million |
March 2013 forecast2 | Update |
|---|---|---|---|
| External revenue | 53,227 | In the order of €54 billion | - |
| EBITDA | 9,314 | In the order of €9 billion | - |
| Operating result | 6,416 | In the order of €5.9 billion | - |
| Conventional Power Generation | 3,275 | Significantly below last year's level | - |
| Supply/Distribution Networks Germany | 1,578 | In the order of last year's level | - |
| Supply Netherlands/Belgium | 190 | In the order of last year's level | - |
| Supply United Kingdom | 286 | Above last year's level | - |
| Central Eastern and South Eastern Europe | 1,052 | Significantly below last year's level | - |
| Renewables | 183 | Above last year's level | In the order of last year's level |
| Upstream Gas&Oil | 685 | In the order of last year's level | Below last year's level |
| Trading/Gas Midstream | −598 | Significantly above last year's level | - |
| Recurrent net income | 2,457 | In the order of €2.4 billion | - |
| Capital expenditure on property, plant and | |||
| equipment and on intangible assets | 5,081 | In the order of €5 billion | - |
| Net debt | 33,015 | In the order of last year's level | - |
1 Some figures are pro-forma due to the change in the reporting structure.
2 See page 99 et seqq. of RWE's 2012 Annual Report.
Our current prediction for the development of business this year is roughly in line with our expectations at the beginning of the year. We confirm the forecast we published in March 2013 (see page 99 et seqq. of RWE's 2012 Annual Report) with respect to the Group figures. Accordingly, external revenue should be in the order of €54 billion. We anticipate EBITDA to total approximately €9 billion and the operating result to amount to approximately €5.9 billion, with recurrent net income to total approximately €2.4 billion. These figures already take account of the sale of NET4GAS. With the exception of Renewables and Upstream Gas&Oil, the divisions should also post figures in line with the March forecast.
• Supply/Distribution Networks Germany: Earnings posted by this division are expected to be in the order of last year. On the one hand, we anticipate that efficiency-improving measures will have a positive impact. On the other hand, the earnings contributed by activities which we sold last year have been eliminated. This primarily relates to our stakes in the Koblenz-based regional utility KEVAG and the Berlin waterworks.
• Supply Netherlands/Belgium: We expect this division to achieve earnings in the order of last year. We are countering the competition-induced pressure on gas margins with continued efficiency enhancements. In addition, we will benefit from the cold weather in the first quarter and we expect that we will be able to enlarge our customer base in Belgium. This will be contrasted by earnings shortfalls caused by the more sparing use of energy made by households.
As before, capital expenditure on property, plant and equipment and intangible assets is estimated to total about €5 billion in 2013. This would be roughly in line with the level recorded in 2012 (€5.1 billion). Our capital spending will focus on the final phase of the new-build power plant programme, building new wind farms, expanding and modernising our distribution networks, and further developing RWE Dea's upstream position.
By the end of 2013, the RWE Group's net debt should be in the order of last year's level (€33.0 billion), as long as the interest level remains stable, and therefore also the discount rates for non-current provisions. Furthermore, we expect to complete the sale of NET4GAS in the second half of the year. If so, the leverage factor – the ratio of net debt to EBITDA – may also be in the order of the level recorded in 2012 (3.5). We are aiming for an upper limit of 3.0 over the medium term, in order to ensure that we continue to have unrestricted access to the capital market, even in difficult times.
The number of our employees should drop over the course of the year. This applies especially to our UK and Dutch supply businesses as well as to the Central Eastern and South Eastern Europe Division, where we want to reduce the headcount through efficiency improvements. The disposal of NET4GAS will probably result in approximately 560 employees leaving the RWE Group.
Uncertain political framework conditions, changing market structures and volatile electricity and fuel prices bring huge entrepreneurial challenges, making professional risk management more important than ever. To us, the systematic recording, assessment and control of risks is a key element of good corporate governance. It is equally important to identify and take advantage of opportunities. We have reported on the organisation and processes of our risk management, the organisational units entrusted with it, the major risks and opportunities, and measures taken to control and monitor risks in detail on pages 88 to 96 of RWE's 2012 Annual Report. There were no substantial changes to this presentation. The overall assessment of the risk and opportunity situation by executive management on page 90 of the same publication also reflects the Group's current situation.
We control and monitor risks arising from the volatility of commodity prices and financial risks using indicators such as the Value at Risk (VaR). The VaR specifies the maximum loss from a risk position not exceeded with a given probability over a certain period of time. The VaR figures within the RWE Group are generally based on a confidence interval of 95 %. The assumed holding period for a position is one day. This means that, with a probability of 95 %, the daily loss does not exceed the VaR.
The central risk controlling parameter for commodity positions is the Global VaR, which is related to the trading business of RWE Supply&Trading and may not exceed €40 million. It averaged €11 million in the first quarter of 2013 compared to €9 million in the same period last year. Its maximum daily value was €14 million (first quarter of 2012: €13 million).
As regards interest risks, we differentiate between two categories. On the one hand, rises in interest rates can lead to reductions in the price of securities held by RWE. This primarily relates to fixed-interest bonds. On the other hand, interest rate increases also cause our financing costs to rise. The VaR for our securities price risk associated with our capital investments in the first quarter of 2013 averaged €5 million (first quarter of 2012: €6 million). We measure the sensitivity of the interest expense with respect to rises in market interest rates using the Cash Flow at Risk. We apply a confidence level of 95 % and a holding period of one year. The Cash Flow at Risk in the period under review averaged €9 million (first quarter of 2012: €14 million).
The securities we hold in our portfolio include shares. In the period under review, the VaR for the risk associated with changes in share prices averaged €6 million (first quarter of 2012: €10 million). As in 2012, the VaR for our foreign currency position was less than €1 million.
This report contains forward-looking statements regarding the future development of the RWE Group and its companies as well as economic and political developments. These statements are assessments that we have made based on information available to us at the time this document was prepared. In the event that the underlying assumptions do not materialise or additional risks arise, actual performance can deviate from the performance expected. Therefore, we cannot assume responsibility for the correctness of these statements.
| Jan – Mar | Jan – Mar | |
|---|---|---|
| € million | 2013 | 2012 |
| Revenue (including natural gas tax/electricity tax) | 16,050 | 15,593 |
| Natural gas tax/electricity tax | −897 | −830 |
| Revenue | 15,153 | 14,763 |
| Cost of materials | −10,486 | −9,752 |
| Staff costs | −1,301 | −1,309 |
| Depreciation, amortisation, and impairment losses | −708 | −762 |
| Other operating result | −271 | −644 |
| Income from operating activities | 2,387 | 2,296 |
| Income from investments accounted for using the equity method | 113 | 103 |
| Other income from investments | 6 | 50 |
| Financial income | 183 | 122 |
| Finance costs | −610 | −592 |
| Income before tax | 2,079 | 1,979 |
| Taxes on income | −526 | −555 |
| Income | 1,553 | 1,424 |
| of which: minority interest | 111 | 96 |
| of which: RWE AG hybrid capital investors' interest | 26 | 17 |
| of which: net income/income attributable to RWE AG shareholders | 1,416 | 1,311 |
| Basic and diluted earnings per common and preferred share in € | 2.30 | 2.13 |
| Jan – Mar | Jan – Mar | |
|---|---|---|
| € million | 2013 | 2012 |
| Income | 1,553 | 1,424 |
| Actuarial gains and losses of defined benefit pension plans and similar obligations | −9 | −499 |
| Income and expenses of investments accounted for using the equity method (pro rata) | −3 | |
| Income and expenses recognised, not to be reclassified through profit or loss | −12 | −499 |
| Currency translation adjustment | −241 | 311 |
| Fair valuation of financial instruments available for sale | 41 | 86 |
| Fair valuation of financial instruments used for hedging purposes | −127 | 227 |
| Income and expenses of investments accounted for using the equity method (pro rata) | 10 | 12 |
| Income and expenses recognised, to be reclassified through profit or loss in the future | −317 | 636 |
| Other comprehensive income | −329 | 137 |
| Total comprehensive income | 1,224 | 1,561 |
| of which: attributable to RWE AG shareholders | (1,124) | (1,412) |
| of which: attributable to RWE AG hybrid capital investors | (26) | (17) |
| of which: attributable to minority interests | (74) | (132) |
1 Figures stated after taxes.
| Assets | 31 Mar 2013 | 31 Dec 2012 |
|---|---|---|
| € million | ||
| Non-current assets | ||
| Intangible assets | 15,823 | 16,017 |
| Property, plant and equipment | 35,712 | 36,006 |
| Investment property | 106 | 111 |
| Investments accounted for using the equity method | 3,741 | 3,625 |
| Other non-current financial assets | 881 | 959 |
| Receivables and other assets | 3,089 | 3,040 |
| Deferred taxes | 3,617 | 3,604 |
| 62,969 | 63,362 | |
| Current assets | ||
| Inventories | 2,191 | 3,128 |
| Trade accounts receivable | 11,251 | 8,033 |
| Receivables and other assets | 10,281 | 8,403 |
| Marketable securities | 2,749 | 2,604 |
| Cash and cash equivalents | 3,386 | 2,672 |
| 29,858 | 24,840 | |
| 92,827 | 88,202 | |
| Equity and liabilities | 31 Mar 2013 | 31 Dec 2012 |
| € million | ||
| Equity | ||
| RWE AG shareholders' interest | 13,231 | 12,122 |
| RWE AG hybrid capital investors' interest | 2,673 | 2,702 |
| Minority interest | 1,790 | 1,613 |
| 17,694 | 16,437 | |
| Non-current liabilities | ||
| Provisions | 28,174 | 28,067 |
| Financial liabilities | 16,381 | 15,417 |
| Other liabilities | 2,382 | 2,714 |
| Deferred taxes | 1,350 | 1,323 |
| 48,287 | 47,521 | |
| Current liabilities | ||
| Provisions | 5,440 | 4,811 |
| Financial liabilities | 4,767 | 4,529 |
| Trade accounts payable | 7,255 | 7,315 |
| Other liabilities | 9,384 | 7,589 |
| 26,846 | 24,244 | |
| 92,827 | 88,202 |
| Jan – Mar | Jan – Mar | |
|---|---|---|
| € million | 2013 | 2012 |
| Income | 1,553 | 1,424 |
| Depreciation, amortisation, impairment losses/write-backs | 709 | 788 |
| Changes in provisions | 417 | 220 |
| Deferred taxes/non-cash income and expenses/income from disposal | ||
| of non-current assets and marketable securities | −505 | −155 |
| Changes in working capital | −2,116 | −1,979 |
| Cash flows from operating activities | 58 | 298 |
| Capital expenditure on non-current assets/acquisitions | −761 | −1,072 |
| Proceeds from disposal of assets/divestitures | 440 | 183 |
| Changes in marketable securities and cash investments | −109 | 1,102 |
| Cash flows from investing activities | −430 | 213 |
| Cash flows from financing activities | 1,095 | −867¹ |
| Net cash change in cash and cash equivalents | 723 | −356 |
| Effect of changes in foreign exchange rates and other changes in value on cash and cash equivalents | −9 | 17 |
| Net change in cash and cash equivalents | 714 | −339 |
| Cash and cash equivalents at the beginning of the reporting period | 2,672 | 2,009 |
| Cash and cash equivalents at the end of the reporting period | 3,386 | 1,670 |
1 Includes the issuance of hybrid capital to be classified as equity as per IFRS (€892 million).
| Subscribed | Retained | Treasury | Accumulated | RWE AG | RWE AG | Minority | Total | |
|---|---|---|---|---|---|---|---|---|
| capital and | earnings | shares | other | share | hybrid | interest | ||
| additional | and | comprehen | holders' | capital | ||||
| paid-in | distributable | sive income | interest | investors' | ||||
| capital of | profit | interest | ||||||
| € million | RWE AG | |||||||
| Balance at 1 Jan 2012 | 3,959 | 10,755 | −24 | −711 | 13,979 | 1,759 | 1,344 | 17,082 |
| Capital paid in/repayments | 892 | −9 | 883 | |||||
| Dividends paid | −68 | −68 | ||||||
| Income | 1,311 | 1,311 | 17 | 96 | 1,424 | |||
| Other comprehensive | ||||||||
| income | −479 | 580 | 101 | 36 | 137 | |||
| Total comprehensive | ||||||||
| income | 832 | 580 | 1,412 | 17 | 132 | 1,561 | ||
| Other changes | −1 | −1 | 6 | −1 | 4 | |||
| Balance at 31 Mar 2012 | 3,959 | 11,586 | −24 | −131 | 15,390 | 2,674 | 1,398 | 19,462 |
| Balance at 1 Jan 2013 | 3,959 | 8,664 | −501 | 12,122 | 2,702 | 1,613 | 16,437 | |
| Capital repayments | −1 | −1 | ||||||
| Dividends paid | −64 | −51 | −115 | |||||
| Income | 1,416 | 1,416 | 26 | 111 | 1,553 | |||
| Other comprehensive | ||||||||
| income | 2 | −294 | −292 | −37 | −329 | |||
| Total comprehensive | ||||||||
| income | 1,418 | −294 | 1,124 | 26 | 74 | 1,224 | ||
| Other changes | −15 | −15 | 9 | 155 | 149 | |||
| Balance at 31 Mar 2013 | 3,959 | 10,067 | −795 | 13,231 | 2,673 | 1,790 | 17,694 |
RWE AG, headquartered at Opernplatz 1, 45128 Essen, Germany, is the parent company of the RWE Group ("RWE" or "Group").
The interim consolidated financial statements as of 31 March 2013 were approved for publication on 13 May 2013. They have been prepared in accordance with the International Financial Reporting Standards (IFRSs) applicable in the EU.
In line with IAS 34, the scope of reporting for the presentation of the interim consolidated financial statements for the period ended 31 March 2013 was condensed compared with the scope applied to the consolidated financial statements for the full year. With the exception of the changes and new rules described below, this consolidated interim report was prepared using
the accounting policies applied in the consolidated financial statements for the period ended 31 December 2012. For further information, please see the Group's 2012 Annual Report, which provides the basis for this interim report. The interim consolidated financial statements and the interim Group review of operations have not been subjected to an audit or to a review.
The discount rate applied to provisions for nuclear waste management and provisions for mining damage is 5.0 % (31 December 2012: 5.0 %). Provisions for pensions and similar obligations are discounted at an interest rate of 3.5 % in Germany and 4.1 % abroad (31 December 2012: 3.5 % and 4.2 %, respectively).
Consolidated Financial Statements (condensed) 37
The International Accounting Standards Board (IASB) and the IFRS Interpretations Committee (IFRS IC) have approved several amendments to existing International Financial Reporting Standards (IFRSs), new IFRSs and a new interpretation, which became effective for the RWE Group as of fiscal 2013:
IFRS 13 Fair Value Measurement (2011) defines general standards for measuring fair value. Furthermore, the standard expands disclosure requirements on fair valuations in the notes. This also applies to interim reporting according to IAS 34 to a certain extent.
Presentation of Items of Other Comprehensive Income (Amendment of IAS 1, 2011) relates to the presentation of items included in the statement of recognised income and expenses. Now, these must be divided into two categories, depending on whether they are to be recognised in the income statement in the future ("recycling").
Amendments to IAS 19 Employee Benefits (2011) abolish options to recognise actuarial gains and losses. New regulations on considering the expected return on plan assets are also introduced. In addition, the disclosure obligations in the notes are expanded. Abolishing the options does not have an impact on the RWE Group's consolidated financial statements, as we already recognise actuarial gains and losses directly in equity. We expect the new regulations on the treatment of the expected return on plan assets to result in a reduction of €93 million for fiscal 2013. Furthermore, the financial statements as of 31 December 2013 will contain additional information in the notes.
(2011) mandate disclosure in the notes on the offsetting of financial assets and financial liabilities. The presentation of this disclosure is in the section entitled "Reporting on financial instruments".
The following amendments to standards and interpretations, which become effective from fiscal 2013 onwards, will not have any material effects on the RWE Group's consolidated financial statements:
In addition to RWE AG, the consolidated financial statements contain all material German and foreign companies which RWE AG controls directly or indirectly. Principal associates and joint ventures are accounted for using the equity method.
Changes in the scope of consolidation in the first quarter of 2013 relate to four companies that were consolidated for the first time in the Supply/Distribution Networks Germany, Central Eastern and South Eastern Europe, Renewables and Trading/Gas Midstream Segments as well as one company stated under "Other, consolidation." Three former fully consolidated companies, which belonged to the Conventional Power Generation and Renewables Segments, were removed from the scope of consolidation and four were merged, of which three belonged to the Supply/Distribution Networks Segment.
The scope of consolidation is as follows:
| 31 Mar 2013 | 31 Dec 2012 | |
|---|---|---|
| Fully consolidated companies | 364 | 366 |
| Investments accounted for using | ||
| the equity method | 119 | 113 |
On 22 February 2013, RWE sold its 80 % stake in Gocher Bioenergie GmbH for €32 million. The gain on deconsolidation amounted
Revenue generated by energy trading operations is stated as net figures, i.e. reflecting only realised gross margins.
Information was provided on share-based payment plans for executive staff at RWE AG and at subsidiaries in the consolidated financial statements for the period ended 31 December 2012.
RWE AG's 18 April 2013 Annual General Meeting decided to pay a dividend of €2.00 per individual, dividend-bearing share for
to €5 million and is reported in the "Other operating income" item in the income statement. This company was a part of the Renewables Segment.
On the same date, RWE sold its 51 % stake in BEB Bio Energie Baden GmbH for €21 million. The loss on deconsolidation amounted to €2 million and is reported in the "Other operating expenses" item in the income statement. This company was a part of the Renewables Segment.
On 22 March 2013, RWE sold a 49.9 % stake in Rhyl Flats Wind Farm Limited, Swindon, United Kingdom, for £115 million. RWE still has the majority of the voting rights in the company, which operates an offshore wind farm off the coast of Wales. The sale led to a rise of €15 million in RWE AG shareholders' interest and of €119 million in the minority interest.
On the same date, RWE sold a 41 % stake in Little Cheyne Court Wind Farm Limited, Swindon, United Kingdom, for £51 million. RWE still has the majority of the voting rights in the company, which operates an onshore wind farm in the County of Kent in the southeast of England. The sale led to a rise of €31 million in RWE AG shareholders' interest and of €28 million in the minority interest.
Within the framework of business transactions, sales prices amounted to €48 million (first quarter of 2012: €0 million); all payments were made in cash.
In the first quarter of 2013, another tranche was issued within the framework of the Long-Term Incentive Plan for executive staff ("Beat 2010").
fiscal 2012 (fiscal 2011: €2.00). The dividend payment totalled €1,229 million.
In January 2013, RWE Finance B.V. issued a €750 million bond with a coupon of 1.875 % p.a. The bond has a tenor that expires in January 2020.
In February 2013, RWE AG issued a €150 million bond with a 30-year tenor and a coupon of 3.55 % p.a.
Also in February 2013, a €270 million bond with a coupon of 3.5 % p.a. and a tenor expiring in October 2037 issued by RWE AG in October 2012 was topped up by €105 million.
| Jan – Mar | Jan – Mar | ||
|---|---|---|---|
| 2013 | 2012 | ||
| Net income/income attributable to RWE AG shareholders | € million | 1,416 | 1,311 |
| Number of shares outstanding (weighted average) | thousands | 614,745 | 614,447 |
| Basic and diluted earnings per common and preferred share | € | 2.30 | 2.13 |
The RWE Group classifies associated companies and joint ventures as related parties. In the first quarter of 2013, transactions concluded with material related parties generated €711 million in income (first quarter of 2012: €830 million) and €748 million in expenses (first quarter of 2012: €687 million). As of 31 March 2013, accounts receivable amounted to €1,643 million (31 December 2012: €1,639 million), and accounts payable totalled €186 million (31 December 2012: €234 million). All business transactions are concluded at arm's length conditions and on principle do not differ from those concluded with other companies. Other obligations from executory contracts amounted to €6,157 million (31 December 2012: €6,480 million).
Furthermore, in the year-earlier period, companies in which Dr. Jürgen Großmann, the CEO of RWE AG at the time, was a partner, were classified as related parties of the RWE Group. These were the corporate groups of Georgsmarienhütte Holding GmbH and RGM Holding GmbH. In the first quarter of 2012, RWE Group companies provided services and deliveries to these companies amounting to €1.7 million and received services and deliveries from these companies amounting to €1.3 million. All transactions were completed at arm's length conditions; the business relations did not differ from those maintained with other enterprises.
Financial instruments are divided into non-derivative and derivative. Non-derivative financial assets essentially include other non-current financial assets, accounts receivable, marketable securities and cash and cash equivalents. Financial instruments in the "available for sale" category are recognised at fair value, and other non-derivative financial assets at amortised cost. On the liabilities side, non-derivative financial instruments principally include liabilities recorded at amortised cost. Fair values are derived from the relevant stock market quotations or are measured using generally accepted valuation methods.
As regards derivative financial instruments, prices on active markets (e.g. exchange prices) are drawn upon for the measurement of commodity derivatives. If no prices are available, for
example because the market is not sufficiently liquid, the fair values are determined on the basis of generally accepted valuation methods. In doing so, we draw on prices on active markets as much as possible. If such are not available, company-specific planning estimates are used in the measurement process. These estimates encompass all of the market factors which other market participants would take into account in the course of price determination. Assumptions pertaining to the energy sector and economy are made within the scope of a comprehensive process conducted by an independent team in RWE AG's Group Strategy Department, with the involvement of both in-house and external experts. The assumptions are coordinated and agreed upon with the operating subsidiaries in a steering committee within the Group and approved as binding budgeting data by the Executive Board.
Forwards, futures, options and swaps involving commodities are recognised at their fair values as of the balance-sheet date, insofar as they fall under the scope of IAS 39. Exchange-traded products are measured using the published closing prices of the relevant exchange. Non-exchange traded products are measured on the basis of publicly available broker quotations or, if such quotations are not available, of generally accepted valuation methods. The fair value of certain long-term procurement or sales contracts is determined using recognised valuation models, on the basis of internal data if no market data are available.
Forward purchases and sales of shares of listed companies are measured on the basis of the spot prices of the underlying shares, adjusted for the relevant time component.
For derivative financial instruments which we use to hedge interest risks, the future payment flows are discounted using the current market interest rates corresponding to the remaining maturity, in order to determine the fair value of the hedging instruments as of the balance-sheet date.
The fair value of financial instruments which are reported under other financial assets and securities is the published exchange price, insofar as the financial instruments are traded on an active market. The fair value of non-quoted debt and equity instruments is determined on the basis of discounted expected payment flows. Current market interest rates corresponding to the remaining maturity are used for discounting.
The counterparty default risk is also taken into account when determining fair values. The counterparty default risk associated with derivative financial instruments is determined on the basis of the RWE Group's net risk position with respect to each counterparty. Some derivative financial instruments with negative fair values are backed by inseparable credit collateral which is considered when determining their fair value.
As a rule, the carrying amounts of financial assets and liabilities subject to IFRS 7 are identical with their fair values. There are deviations only in relation to bonds, commercial paper, bank debt, and other financial liabilities. Their carrying amounts totalled €21,148 million (31 December 2012: €19,946 million) and their fair values totalled €23,985 million (31 December 2012: €22,293 million).
The following overview presents the main classifications of financial instruments measured at fair value in the fair value hierarchy prescribed by IFRS 7. In accordance with IFRS 13, the individual levels of the fair value hierarchy are defined as follows:
Level 1: Measurement using (unadjusted) prices of identical financial instruments formed on active markets. Level 2: Measurement on the basis of input parameters which are not the prices from Level 1, but which can be observed for the financial instrument either directly (i.e. as price) or indirectly (i.e.derived from prices).
Level 3: Measurement using factors which cannot be observed on the basis of market data.
| Fair value hierarchy | Total | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 |
|---|---|---|---|---|---|---|---|---|
| € million | 31 Mar 2013 | 31 Dec 2012 | ||||||
| Other financial assets | 881 | 127 | 388 | 366 | 959 | 119 | 398 | 442 |
| Derivatives (assets) | 6,104 | 5,944 | 160 | 4,568 | 4,331 | 237 | ||
| Securities | 2,749 | 1,661 | 1,088 | 2,604 | 1,609 | 995 | ||
| Derivatives (liabilities) | 4,952 | 4,903 | 49 | 3,761 | 3,586 | 175 |
Due to increasing price quotations on active markets, financial assets with a fair value of €2 million were reclassified from Level 2 to Level 1 in the first quarter of 2013 with effect from the end of the reporting period.
The development of the fair values of Level 3 financial instruments is presented in the following table:
| Level 3 financial instruments: | Balance at | Changes in the | Changes | Balance at | |
|---|---|---|---|---|---|
| Development in 2013 | 1 Jan 2013 | scope of consolidation, currency adjustments |
Recognised in profit or loss |
With a cash effect |
31 Mar 2013 |
| € million | and other | ||||
| Other financial assets | 442 | −45 | −30 | 367 | |
| Derivatives (assets) | 237 | 11 | −88 | 160 | |
| Derivatives (liabilities) | 175 | −67 | −59 | 49 |
| Level 3 financial | Total | Of which: | |
|---|---|---|---|
| instruments: | 31 Mar 2013 attributable to |
||
| Amounts recognised in | financial instru | ||
| profit or loss | ments held at the | ||
| € million | balance-sheet date | ||
| Revenue | 79 | 79 | |
| Cost of materials | −1 | −1 | |
| 78 | 78 |
Level 3 derivative financial instruments substantially consist of commodity and electricity purchase agreements, which also relate to trading periods for which there are no active markets yet. This primarily relates to long-term gas procurement contracts linked to the price of oil, the valuation of which depends on the development of wholesale gas and oil prices. All other things being equal, rising gas and sinking oil prices cause the fair values of the corresponding contracts to increase.
The following is an overview of the financial assets and financial liabilities which are netted out in accordance with IAS 32 or are subject to enforceable global offsetting agreements or similar arrangements.
| Netting of financial assets | Gross amounts | Amount | Net amounts | Associated non-netted amounts | Net total | |
|---|---|---|---|---|---|---|
| and financial liabilities as | recognised | netted out | recognised | Financial | Cash collateral | |
| of 31 Mar 2013 € million |
instruments | received/pledged | ||||
| Derivatives (assets) | 2,374 | −1,543 | 831 | −620 | 211 | |
| Derivatives (liabilities) | 2,529 | −2,138 | 391 | −46 | −317 | 28 |
| Netting of financial assets | Gross amounts | Amount | Net amounts | Associated non-netted amounts | Net total | |
| and financial liabilities as | recognised | netted out | recognised | Financial | Cash collateral | |
| of 31 Mar 2012 € million |
instruments | received/pledged | ||||
| Derivatives (assets) | 4,704 | −3,863 | 841 | −574 | 267 | |
| Derivatives (liabilities) | 4,731 | −4,289 | 442 | −40 | −336 | 66 |
The associated non-netted amounts include cash collateral received and pledged for over-the-counter transactions as well as collateral pledged in advance for exchange transactions, which may consist of securities transferred as collateral.
Information on events after the balance-sheet date is presented in the review of operations.
| 14 August 2013 | Interim report for the first half of 2013 |
|---|---|
| 14 November 2013 | Interim report for the first three quarters of 2013 |
| 4 March 2014 | Annual report for fiscal 2013 |
| 16 April 2014 | Annual General Meeting |
| 17 April 2014 | Dividend payment |
| 14 May 2014 | Interim report for the first quarter of 2014 |
| 14 August 2014 | Interim report for the first half of 2014 |
| 13 November 2014 | Interim report for the first three quarters of 2014 |
This is a translation of the German interim report. In case of divergence from the German version, the German version shall prevail.
The Annual General Meeting and all events concerning the publication of the financial reports are broadcast live on the internet and recorded. We will keep the recordings on our website for at least twelve months.
Opernplatz 1 45128 Essen Germany T +49 201 12−00 F +49 201 12−15199 I www.rwe.com
Investor Relations
T +49 201 12−15025 F +49 201 12−15265 E [email protected]
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