OREANDA-NEWS.. In line with expectations, the EnBW Group’s earnings trends in the first half of 2013 were down year-on-year given continued difficult electricity and gas markets, as well as extraordinary charges. CFO Thomas Kusterer commented as follows: “Due to new statutory requirements, especially in the nuclear energy area, we were faced with absorbing a high level of charges that negatively impacted Group net profit to a significant extent. EnBW’s operating business has nevertheless performed in line with the expectations that we have held to date, despite rough waters in almost all our markets. For this reason, we are confident that we will land within our predicted corridor by the end of this year, and that we will achieve EBITDA adjusted for extraordinary items that is 5 percent to 10 percent below the previous year.”

With its 19,774 employees, EnBW generated ˆ 10.6 billion of revenue during the first six months of 2013, up 9.3 percent year-on-year. All segments contributed to the revenue growth, albeit to differing extents.

EBITDA (earnings before interest, tax, depreciation and amortisation) adjusted for extraordinary items nevertheless fell 2.3 percent to around ˆ 1.4 billion. This included positive valuation effects from derivatives which reverse when the underlying transactions are realised. EBITDA additionally adjusted to reflect these effects amounted to around ˆ 1.3 billion (-7.3 percent).

Lower prices and spreads in electricity production as well as the burden arising from the full auctioning of CO2 emission allowances since the start of 2013 represent the main reasons for this decrease. This fed through to significantly lower results in the generation and trading segments, as well as in the renewable energies segment. The decline in earnings in the electricity sales segment was partly due to lower margins whose negative earnings effects failed to be offset by higher gas unit sales volumes. The grids segment improved its earnings through higher network user charges and lower overhead costs, by contrast.

Non-operating EBITDA reported a marked deterioration of more than ˆ 250 million from ˆ -55.0 million to ˆ -309.6 million. This particularly reflected higher expenses in the nuclear energy area as a result of the new Site Selection Act, as well as the addition to the provision for onerous contracts relating to energy procurement agreements.

As a consequence, the Group non-operating loss amounted to ˆ -285 million compared with ˆ -30.6 million in the previous year. Adjusted Group net profit of ˆ 475.6 million was below the previous year’s ˆ 575.6 million.

Cash flow from operating activities in the first half of 2013 was up by 21.4 percent from ˆ 612.5 million in the prior-year period to ˆ 743.5 million. Free cash flow advanced by ˆ 98.5 billion, or 22.6 percent, to ˆ 535.2 million despite a higher level of capital investments in intangible assets and property, plant and equipment.

Especially given the electricity price trend, EnBW assumes it will report significantly lower earnings in its generation and trading as well as renewable energies segments on a full-year basis. Marked earnings growth is expected in the grids segment, by contrast. EnBW expects higher full-year earnings in its sales segment, despite the drop in earnings in the first half of 2013. For this reason, the company is confirming its existing forecast of generating adjusted EBITDA on a full-year basis for 2013 that is down by -5 percent to -10 percent year-on-year.

Strategic and structural reorientation

In June 2013, EnBW presented and launched its far-reaching strategic reorientation. EnBW CEO Frank Mastiaux commented as follows: “Trends over recent years and currently during the first half of 2013 have shown that we need to act quickly and consistently. We are able to do this with our new EnBW 2020 Strategy and our new structure. We will direct our activities and investments where our customers’ demand lies, and where we can reliably generate satisfactory income in the future. We will spin off less promising activities.”

Along with modernisation investments, and in addition to investments that have already been approved specifically as part of existing planning, EnBW will invest a total of around ˆ 7 billion by 2020 in order to implement its strategy. Expanding wind and hydro power, the expansion and modernisation of the grid business, and the development of decentralised solutions and business models that are close to customers form the focal points.

The management and the employee representatives rapidly approved the new EnBW structure at the end of June. Mastiaux went on to add: “This consensus is encouraging, and reflects a great strength of our company. We will significantly reduce the EnBW Group’s complexity with our new structure. We will be able to make decisions and act more quickly and flexibly in the future. This will play a decisive role in supporting the successful implementation of our strategy.” The implementation of the new structure will be concluded before the end of 2014 with the aggregation of six core companies and their merger with EnBW AG.

EnBW CEO Frank Mastiaux: “Our aim is to play an active and significant role in helping to structure the ‘Energiewende’. We will favour customer-orientation and partnership with our customers in this context. We are convinced that this will allow us to achieve a turnaround in earnings over the coming years. We aim to deliver sustainable added value in the interests of our employees and our shareholders.”