rwe generation se – the new european generation approach · forward looking statement this...

RWE Generation SE –The new European generation approachEssen, 27 November 2012

Matthias HartungChief Executive OfficerRWE Generation SE

Dr. Frank WeigandChief Financial OfficerRWE Generation SE

2RWE Generation SE | Board meets Investors | 27 November 2012

Forward Looking StatementThis presentation contains certain forward-looking statements within the meaning of the US federal securities laws. Especially all of thefollowing statements: Projections of revenues, income, earnings per share, capital expenditures, dividends, capital structure or other financial items; Statements of plans or objectives for future operations or of future competitive position; Expectations of future economic performance; and Statements of assumptions underlying several of the foregoing types of statementsare forward-looking statements. Also words such as “anticipate”, “believe”, “estimate”, “intend”, “may”, “will”, “expect”, “plan”, “project”“should” and similar expressions are intended to identify forward-looking statements. The forward-looking statements reflect thejudgement of RWE’s management based on factors currently known to it. No assurances can be given that these forward-lookingstatements will prove accurate and correct, or that anticipated, projected future results will be achieved. All forward-looking statementsare subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Such risks anduncertainties include, but are not limited to, changes in general economic and social environment, business, political and legalconditions, fluctuating currency exchange rates and interest rates, price and sales risks associated with a market environment in thethroes of deregulation and subject to intense competition, changes in the price and availability of raw materials, risks associated withenergy trading (e.g. risks of loss in the case of unexpected, extreme market price fluctuations and credit risks resulting in the event thattrading partners do not meet their contractual obligations), actions by competitors, application of new or changed accounting standardsor other government agency regulations, changes in, or the failure to comply with, laws or regulations, particularly those affecting theenvironment and water quality (e.g. introduction of a price regulation system for the use of power grid, creating a regulation agency forelectricity and gas or introduction of trading in greenhouse gas emissions), changing governmental policies and regulatory actions withrespect to the acquisition, disposal, depreciation and amortisation of assets and facilities, operation and construction of plant facilities,production disruption or interruption due to accidents or other unforeseen events, delays in the construction of facilities, the inability toobtain or to obtain on acceptable terms necessary regulatory approvals regarding future transactions, the inability to integratesuccessfully new companies within the RWE Group to realise synergies from such integration and finally potential liability for remedialactions under existing or future environmental regulations and potential liability resulting from pending or future litigation. Any forward-looking statement speaks only as of the date on which it is made. RWE neither intends to nor assumes any obligation to update theseforward-looking statements. For additional information regarding risks, investors are referred to RWE’s latest annual report and to othermost recent reports filed with Frankfurt Stock Exchange and to all additional information published on RWE's Internet Web site.


EindhovenHelmondBergen op Zoom

IneosMoerdijk s-Hertogenbosch

Claus

Amer

Swentibold

IbbenbürenEmsland

Enschede

EricaGreat Yarmouth

KlazienaveenLittle BarfordPembroke

Staythorpe

Aberthaw

Matra

Biblis

Gundremmingen

Eemshaven

Ensdorf

BochumDortmund

Gersteinwerk

Goldenberg

Dormagen

Niederaußem

Fabrik Berrenrath

Fabrik Fortuna-Nord

Fabrik Frechen

FrimmersdorfNeurath

BergkamenDatteln

HerneKnepperScholvenVoerde

Walsum

Westfalen

Huckingen

GK West

Mannheim

Plomin

Saar-Energie

Weisweiler

Lignite Hard Coal Gas

Fawley

Mühlheim-Kärlich

Nuclear

Littlebrook

Oil

Competitive positions

Dispatch portfolio

Market position

Coremarkets

Germany- own plants- contracted

No 1 24 GW7 GW

UK No 4 11 GW

Netherlands No 2 7 GW

New GenCo No 1 ~50 GW1

RWE power plants in Europe

TilburyDidcot

Hydro

Vianden

Schluchsee

Biomass

Herdecke

Cuijk

1 includes 1.3 GW from RWE East

RWE’s generation portfolio is ideally located to be managed as one pan-European operation


New organisational asset structure

1 Biomass co-firing 2 Pumped Storages, O&M-contracts, RoR-plants in RWE Innogy

Coal, Gas,Biomass1

Generation SE

RWE AG

Lignite

…

RWE Technology

New builds

GER

…

NL

…

UK

…

Hydro2

…

Power stations

…

Mines

…

Refining

…

Nuclear

> Bundling of generation activities in one European generation company

> SE as legal corporation based in Germany

> Asset structure along fuel types while keeping regional component on the next organisational level

> German hard coal and gas-fired power plants to be transferred from RWE Power to new GenCo SE

> After separation of generation from retail businesses, GenCo to steer Dutch and UK coal, gas and biomass plants

> Nuclear plants, lignite stations, open cast mines as well as O&M of hydro plants remain legally within RWE Power AG, but will also be steered by the new GenCo

New steering model for conventional generation will be based on asset type structures cross-nationally


Organisational setup is prepared to combine all Generation activities under one lean management

Management organisation of RWE’s generation business as of 1 January 2013

1 CCO is also member of RWE Supply & Trading Management Board 2 Governance function for RWE Group

Corp. & Org Dev.

Legal & Compliance

Comm. & Policy

Operational Safety

Lignite Planning

Accounting

Corp. Controlling

Asset Controlling / Bus. Partnering

Tax

RWETechnology GmbH

HC/Gas UK

HC/Gas NL

HC/Gas Germany

Project Mgmt Office

Mines

Lignite Power Plants

Nuclear

Hydro

CO2/ Climate Mgmt.

Refining

CoE Health & Safety2

Commercial Asset Management CE

CAO UK

Asset Optimisation CE

CTOHC/G/B CHO

Infrastr. / Facility

R&D Germany

HR & Change

CFOCEO CTO Lignite and Nuclear CCO1

Information Mgmt


RWE has one of the most balanced generation portfolios of European electricity generators

0%

20%

40%

60%

80%

100%

Centrica CEZ EDF Enel E.ON Fortum GDF Iberdrola RWE SSE

Share in power plant capacity of own generation by fuel type.Source: Annual reports 2011, company presentations, RWE

Fuel mix of European electricity generators 2011 – installed capacity

Nuclear

Lignite

Hard Coal

Gas

Hydro/Other


0,9

1

1,1

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Q2 2011 Q2 2012 Q2 2012 at times of >15 GWsolar feed-in

Our lignite based electricity generation is at full load

> Photovoltaic installations have reached a new record high in Germany (c. 30 GW as of July 2012)

> Lignite base-load electricity generation still at full load if technically available

> Mid-merit generation (hard coal and gas) mainly affected

> Lignite plants offer high flexibility: capacity reduction of approx. 40% within 1 hour possible

> At times of high feed-in of renewables, Germany tends to export electricity to neighbouring countries

Average hourly utilisation of RWE’s 300 MW lignite blocks1

110%

90%

1 Average hourly market driven utilisation of our 300 MW lignite blocks.To compare the different periods, the numbers were adjusted for non-market drivenavailability factors, i.e. planned or unplanned outages like maintenance stops.

100%


Market scenario for the utilisation of power plants in Germany

> Long-term scenario for the development of renewable energies published by the BMU expects strong growth of renewables new build toc. 117 GW by the end of 2020

> RWE scenario assumes no further regulatory intervention into the market mechanism

> New build of renewables according to scenario will mainly impact (old) hard coal- and (old) gas-fired power plants

> New hard coal will also come under pressure after commissioning in 2014

> Utilisation of lignite-fired power plants remains high

Average utilisation of typical German power plants

0

20

40

60

80

100

2010 2012 2014 2016 2018 20200%

100%

20%

New lignite (1,000 MW unit)

New hard coal (750 MW unit)

New gas (800 MW unit)

Old (600 MW unit)

Old (400 MW unit)

Old (300/600 MW unit)

RWE model: Average utilisation assuming normalised non-market driven availability factors, i.e. planned outages like maintenance stops for 2012-2020. Demand development and renewables new build according to BMU (Federal Ministry of Environment) “Leitstudie Szenario A” March 2012.Commodity price assumptions based on forwards as of August 2012 until 2015 escalated with 1.5% p.a. for fuel and 5% p.a. for CO2 thereafter.

c. 28 GWinstalled

c. 19 GWinstalled c. 14 GW

installed


Synergy and restructuring potential is targeted across various functions of the generation business

> Improve functional and organisational efficiency and effectiveness> Reduce interfaces and adjust internal resources

> Adjust for future demands> Align all technical functions cross-nationally, eliminate duplications

> Establish international fleet management> Leverage O&M synergies across national portfolios (similar to

example of GT26 optimisation at new CCGTs)> Cost management in base-load fleet

> Harmonise sourcing processes> Optimise specifications, align make vs. buy strategy> Further bundling of procurement of services and materials

Management & support functions

Central technical functions

O&M cost

External spend / contracts

> Harmonise cross-border management of commodity positions and power plant dispatch

> Improve gross margin, in particular through further optimisation and close cooperation between technical and commercial units

Gross margin / Commercialasset optimisation

10

Back-up Charts


All three project modules have reached maturity status, so that RWE Generation is ready for operation by 1 January 2013

> Technical services and expertise

> RWE Technology and activities in regional units

> …> Spread and option

value allocation> Short term decision

processes> …

Project modules

Structure asset operations‘Grouping of Assets’

Design management model

Board Structure

Key PerformanceIndicators

Legal Structure

Special Processes(e.g. regional coordination)

CEO

Board memberCFO

1 3Align

complementary functions

2

> Strategy> Controlling> Portfolio management

> HR> Finance> IT> …

Management functions

Support functions

Technical functions

Commercial asset

management

GenCo

O&M


Scenarios for German capacity reserve margins

Starting point: Entso-E’s Scenario B (January 19:00 pm)1

Development of capacity reserve margin considering...

Scenario 1:... only announced new buildand most likely shut down of power plants

Scenario 2: ... additionally to scenario 1:plus shut down of plants>50 years of lifetime

Scenario 3: ... additionally to scenario 2:plus shut down of plants which are uneconomically according to RWE market model

Source: Entso-E (2012), RWE estimates (May 2012)

System required spare capacity (Entso-E)

Scenario 1 Scenario 2 Scenario 3

Scenarios

GW

Reliable available spare capacity for peak demand

-10

-8

-6

-4

-2

0

2

4

6

8

10

2012 2013 2014 2015 2016 2017 2018 2019 2020

1 Peak demand increased by 9 GW while reliable available capacity only by ~3 GW compared to System Adequacy Report 2011


0

4

8

12

1 German TSOs have contracted approx. 5 GW of balancing power to cover short-term grid imbalances.

Source: ENTSO-E, EEX, BDEW; German electricity import/export on 8 February 2012, 6:00 – 7:00 p.m.

0

50

100

150

Remaining sparecapacity (<2 GW)

Net exportbalance

German domesticconsumption

Installedcapacity

Capacitynot available

Requiredbalancing power1

0123456

France

Sufficient electricity supply was only guaranteed on the basis of hardly any outages in the thermal generation fleet

No relief through electricity imports during peak hours due to likewise high electricity demand in neighbouring countries: demand for electricity exports were higher than available imports

GW

GW

Austria Swiss Netherlands Denmark Poland CZ Net export(~2 GW)

EXPORT (from Germany) IMPORT (into Germany)

Thermalcapacity

HydroWindSolar

German electricity system at its limitCapacity situation on 8 February 2012


Forward selling1 by RWE Power in the German market

(Average realised price for 2011: €63/MWh (2010: €67/MWh)).

(Base-load & peak-load forwards in €/MWh)

40

60

80

100

40

60

80

100

2012

forw

ard

2013

forw

ard

01/01/2010 01/07/2010 01/01/2011 01/07/2011 01/01/2012

2014

forw

ard

01/07/2012 01/01/2013

Base-load electricity forward in €/MWh(prices until 31 October 2012)

Peak-load electricity forward in €/MWh(prices until 31 October 2012)

> x%

> 50%> 30% > 35% > 80% > 90%

> 10% > 30% > 50%

1 Hedge ratio in % of full year production(as of end of September 2012)

> 20%

40

60

80

100

> 80%

> 40%

> 90%

> 50%


Germany: Clean Dark and Spark Spreads (CDS/CSS)

Ø 14.88

Ø 4.93

Ø -1.64

Ø 9.99Ø 7.74

Ø 6.16

CDS Cal 2011–13 Base load (€/MWh)(assumed thermal efficiency: 36%)

Source: RWE Supply & Trading, prices until 31 October 2012.

CSS Cal 2011–13 Peak load (€/MWh)(assumed thermal efficiency: 49%)

Average CDS Cal 2011–13

Average CSS Cal 2011–13

2011 forward 2012 forward 2013 forward

Trading year 2010 Trading year 2011 Trading year 2012


UK: Clean Dark and Spark Spreads (CDS/CSS)

Ø 6.70Ø 3.55

Ø 3.44

Ø 22.14

Ø 13.78

Ø 8.19

CDS Cal 2011–13 Base load (€/MWh)(assumed thermal efficiency: 36%)

CSS Cal 2011–13 Base load (€/MWh)(assumed thermal efficiency: 49%)

Average CDS Cal 2011–13

Average CSS Cal 2011–13

2011 forward 2012 forward 2013 forward

Source: RWE Supply & Trading, prices until 31 October 2012

Trading year 2010 Trading year 2011 Trading year 2012

RWE Dea: Successful field development leading to growth

Essen, 27 November 2012

Thomas RappuhnChief Executive OfficerRWE Dea

Johannes KarlischChief Financial OfficerRWE Dea

2RWE Dea | Board meets Investors | 27 November 2012

Forward Looking StatementThis presentation contains certain forward-looking statements within the meaning of the US federal securities laws. Especially all of thefollowing statements: Projections of revenues, income, earnings per share, capital expenditures, dividends, capital structure or other financial items; Statements of plans or objectives for future operations or of future competitive position; Expectations of future economic performance; and Statements of assumptions underlying several of the foregoing types of statementsare forward-looking statements. Also words such as “anticipate”, “believe”, “estimate”, “intend”, “may”, “will”, “expect”, “plan”, “project”“should” and similar expressions are intended to identify forward-looking statements. The forward-looking statements reflect thejudgement of RWE’s management based on factors currently known to it. No assurances can be given that these forward-lookingstatements will prove accurate and correct, or that anticipated, projected future results will be achieved. All forward-looking statementsare subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Such risks anduncertainties include, but are not limited to, changes in general economic and social environment, business, political and legalconditions, fluctuating currency exchange rates and interest rates, price and sales risks associated with a market environment in thethroes of deregulation and subject to intense competition, changes in the price and availability of raw materials, risks associated withenergy trading (e.g. risks of loss in the case of unexpected, extreme market price fluctuations and credit risks resulting in the event thattrading partners do not meet their contractual obligations), actions by competitors, application of new or changed accounting standardsor other government agency regulations, changes in, or the failure to comply with, laws or regulations, particularly those affecting theenvironment and water quality (e.g. introduction of a price regulation system for the use of power grid, creating a regulation agency forelectricity and gas or introduction of trading in greenhouse gas emissions), changing governmental policies and regulatory actions withrespect to the acquisition, disposal, depreciation and amortisation of assets and facilities, operation and construction of plant facilities,production disruption or interruption due to accidents or other unforeseen events, delays in the construction of facilities, the inability toobtain or to obtain on acceptable terms necessary regulatory approvals regarding future transactions, the inability to integratesuccessfully new companies within the RWE Group to realise synergies from such integration and finally potential liability for remedialactions under existing or future environmental regulations and potential liability resulting from pending or future litigation. Any forward-looking statement speaks only as of the date on which it is made. RWE neither intends to nor assumes any obligation to update theseforward-looking statements. For additional information regarding risks, investors are referred to RWE’s latest annual report and to othermost recent reports filed with Frankfurt Stock Exchange and to all additional information published on RWE's Internet Web site.


RWE Dea with wider regional scope Existing countries and new ventures focus regions

Algeria Libya Egypt

Mauritania

Norway

Denmark

Poland

Great Britain

Germany Kazakhstan

Azerbaijan

Ukraine

Turkmenistan

Ireland

Canary Islands

Current areas of interest

New areas of interest

Exploration / Development (Production)

Exploration

New ventures

Trinidad & TobagoTrinidad & Tobago


Value chain in upstream businessA long route to production

HR-ManagementLogistic

Contracts, Legal, FinanceInformation management

QHSE

Concession acquisition

Exploration wells

Restor-ation

Concept selectionReservoir description

Construction and building work

ProductionData capture andevaluation

New projects Exploration

Evaluationand feasi-

bilityField development Production

Recoveryand

restoration

> From the first new venture activities until the start of production in the upstream business, a period of 7 to 15 years or more can elapse.

Supp

ortin

g pr

oces

ses

1 - 10 3 to 6 2 to 6 2 to > 40 years


RWE Dea projects in the pipelineExploration & development projects secure production increase

New Ventures Exploration Appraisal Field Development New Production

Eastern EuropeCaspian RegionAfrica

EgyptGermanyIrelandLibyaMauritaniaNorwayTrinidad & TobagoTurkmenistanUK

Titan, Zidane, Skarfjell (Norway)North El Amriya(Egypt)

Breagh, (UK)West Nile Delta, Disouq (Egypt) Reggane (Algeria)NC 193/195 (Libya)Knarr (Norway)Re-entry in old fields (Germany)

Clipper South, Devenick (UK)

Production start RWE share

Capex1

(€bn)2012 2013 2014 2015 2016 2017 2018

West Nile Delta NA 40%WMDW 20% 3.0

Disouq 100%(Operator) 0.2

Breagh 70%(Operator) 0.5

Clipper South 50%(Operator) 0.2

Devenick 11.3% 0.1

Reggane 19.5% 0.4

Knarr2 10% 0.2

NC 193 / 195 100%(Operator) 0.5

Start: 11 August 2012

Start: 30 September 2012

1 Share in capex2 Formerly Jordbær


Example: Field development Clipper SouthProduction commenced after fast track development

ENSCO 92 rig and Clipper South platform

Resources (RWE Dea share)> ~ 2 MMm³ OE

Investments (RWE Dea share)> ~ €0.2 billion

History and current development> Discovered by Shell in 1983. Seen as not

commercial and sold in 2007.> RWE Dea recognised a new technology opportunity

and acquired a 50% stake and operatorship in 2009.> Technical challenges: First offshore development by

RWE Dea using Frac-technology. Five long-reach wells with multiple fracs. Innovative design new platform. New pipeline to LOGGS.

> Less than 18 months from UK Government approval. First gas came on stream better than expected in August 2012 at rates of 1.2 million cubic metres per day. Production is expected to peak at 2.8 million cubic metres per day in early 2013.

Clipper South (Operator RWE Dea 50%)


Example: Field development Clipper SouthA challenging triangle had to be managed

Geology/Geography

> Tight gas reservoir> Offshore location

> Ecologically sensitive are

Technology> Drilling throughunusual designed

fixed wellhead platform> Hydraulic fracturing

Economics> Use of existing

infrastructure> Hired jack-up drilling rig

> Ambitious time and cost schedule

Callenges ofClipper South


Example: Field development Clipper SouthGood project management enabled a RWE Dea success story


Example: Field development BreaghDrilling operations safely on track

Breagh Resources (RWE Dea share)> ~ 6 MMm³ OE

Investments (RWE Dea share)> Phase 1: ~ €0.5 billion

History and current development> Discovered by Mobil in 1997. > RWE Dea acquired a 70% stake and operatorship in 2009.> Biggest field development project under the operatorship of

RWE Dea UK.> The first three wells have been successfully completed since

start of drilling in May 2012. Wells to be tested in November/early December.

> Progress on work at the gas processing plant (TGPP) behind schedule.

> First gas is expected spring 2013.

Breagh (Operator RWE Dea 70%)

Breagh drilling rig (ENSCO 70)and Breagh platform


Example: Field developments EgyptWest Nile Delta more concrete, Disouq on schedule

EGYPT

Mediterranean Sea

North Alexandria

Alexandria

West Nile Delta

Disouq

Site D

Resources (RWE Dea share North Alex Phase 1)> ~ 50 MMm³ OEInvestments (RWE Dea share)> ~ €3 billionCurrent development> Evaluation of alternative site for onshore facilities. Location site D:

Works on the geotechnical study started. Soil analysis in progress. The final decision on the location is still pending.

> First gas expected in 2017 if the political situation stabilises further.

West Nile Delta(N. Alex: RWE Dea 40%, W. Med. Deep RWE Dea 20%; Operator BP)

Resources (RWE Dea share)> ~ 10 MMm³ OEInvestments (RWE Dea share)> ~ €0.2 billionCurrent development> Drilling program Phase A is completed. Soil replacement on Central

Treatment Plant and road construction has been finalised. The pipe laying has been started.

> First gas is expected in second half 2013.

Disouq (Operator RWE Dea 100%)


Successful divestment agreement in Norway

Edvard Grieg

> RWE AG reached an agreement on the sale of our 20% licence interest in the “Edvard Grieg” development in Norway to OMV (Norge) for a purchase price of €247.9 million as per effective date 1 January 2012 plus a contingent payment of up to €35 million based on achievement of certain operational milestones.

> The disposal is an important part of RWE Dea’s contribution to the group's disinvestment plans.

> The transaction is subject to approval by the Norwegian Ministry of Petroleum and Energy and Ministry of Finance. The ministry of Finance did approve on 9th November. Completion of the transaction is expected in the fourth quarter of 2012.

Edvard Grieg, former Luno (RWE Dea 20 %, Operator Lundin)


Europe gas

Africa oil

Europe oil

Africa gas

> Main production increase from development of gas projects

> Europe and Germany remain important production areas

> Increase of production in North Africa

> In 2014, a production level of 40 MMboe (2011: 32 MMboe) and an operating result of €800m after planned disposals is expected (2011: €558m)

> Doubling of production volumes, however due to the disposals not by 2016 but by the end of the decade at the latest2012 2017

Expansion of the Gas and Oil ProductionUpcoming projects secure future growth


855

507

687

0

200

400

600

800

1,000

€ million

2009 2010 2011 FC 2012 2013*

* Including acquisition of Breagh and Clipper South

RWE Dea investmentsSteadily increasing to prepare for future growth


203

305

558

695

0

200

400

600

800€ million

2009 2010 2011 FC 2012 Target 2014

RWE Dea operating resultOn track to achieve ambitious growth targets


RWE Dea Exploration and New Ventures Transferring high success rate to new focus regions and exploration activities – examples 2012

Successful appraisal of recently discovered resources; oil discovery Skarfjell approves further exploration potential for the neighboring Dea license

Exploration in Egypt, Libya and Mauretania will be pursued further; evaluation of possible farm-ins and participations in licensing rounds in West and East Africa

Great BritainExisting exploration portfolio under evaluation; participation in new license rounds ongoing

Norway

Trinidad & TobagoMarket entry successful, RWE Dea is partner in the offshore block NCMA2 with a 30% share; seismic acquisition finished, identification and evaluation of leads and prospects ongoing to decide on drilling location

TurkmenistanSeismic acquisition finished in Block 23, a highly prospective near shore area in the Caspian Sea; exploration well planned for 2013

Africa

47

1420 20

9 8 60

10

20

30

40

50

0

20

40

60

80

100In %# Wells

Exploration & Appraisal

2012FC

50%

6

2011

15

53%

7

2010

20

45%

11

2009

3263%

12

2008

40

20

2007

25

56%

11

2006

11

64%

4

2005

7

57%

3

12

SuccessDry

50% 20

2013MTP


RWE Dea Reserves and ResourcesSolid Basis for growth and sustainable development

594 465 507862 834

844897

570 655

510

698474

0

250

500

750

1,000

1,250

1,500

Contingent resourcesReserves

mmboe 1,4321,4041,3091,2081,068 1,490

2006 2007 2008 2009 2010 2012*2011

* as of 26 Nov 2012


Running the whole E&P value chainHarnessing the production upside potential as a basis for exploration and organic growth

> Development projects build infrastructure (offshore/desert)on a so far verified resource basis

> The industry average shows that with ongoing field development advanced reservoir knowledge increases producible volumesand provides upside potentialand new projects

> IRRs are higher for thesefollow-on projects where existing infrastructure can be used

> Cash flow from this upside production is typically usedto finance overall exploration activities and new development

P

D

E

E

D

P

P+

P+

Financing

Cash flow

ProjectSanction

Production Upside production

up to 20 years up to 15 years in addition2 to 3 years3 to 5 years

E = exploration/appraisal; D = field development; P = production; P+ = upside production

Cash flow

RWE Deutschland AG –strong value driver positionand additional growth potentialEssen, 27 November 2012

Arndt NeuhausChief Executive OfficerRWE Deutschland AG

RWE Deutschland AG | Board meets Investors | 27 November 2012 2

Forward Looking StatementThis presentation contains certain forward-looking statements within the meaning of the US federal securities laws. Especially all of the following statements:

Projections of revenues, income, earnings per share, capital expenditures, dividends, capital structure or other financial items;Statements of plans or objectives for future operations or of future competitive position;Expectations of future economic performance; andStatements of assumptions underlying several of the foregoing types of statements

are forward-looking statements. Also words such as “anticipate”, “believe”, “estimate”, “intend”, “may”, “will”, “expect”, “plan”, “project”“should” and similar expressions are intended to identify forward-looking statements. The forward-looking statements reflect the judgement of RWE’s management based on factors currently known to it. No assurances can be given that these forward-looking statements will prove accurate and correct, or that anticipated, projected future results will be achieved. All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Such risks and uncertainties include, but are not limited to, changes in general economic and social environment, business, political and legalconditions, fluctuating currency exchange rates and interest rates, price and sales risks associated with a market environment in the throes of deregulation and subject to intense competition, changes in the price and availability of raw materials, risks associated with energy trading (e.g. risks of loss in the case of unexpected, extreme market price fluctuations and credit risks resulting in the event that trading partners do not meet their contractual obligations), actions by competitors, application of new or changed accounting standards or other government agency regulations, changes in, or the failure to comply with, laws or regulations, particularly those affecting the environment and water quality (e.g. introduction of a price regulation system for the use of power grid, creating a regulation agency for electricity and gas or introduction of trading in greenhouse gas emissions), changing governmental policies and regulatory actions with respect to the acquisition, disposal, depreciation and amortisation of assets and facilities, operation and construction of plant facilities, production disruption or interruption due to accidents or other unforeseen events, delays in the construction of facilities, the inability to obtain or to obtain on acceptable terms necessary regulatory approvals regarding future transactions, the inability to integratesuccessfully new companies within the RWE Group to realise synergies from such integration and finally potential liability for remedial actions under existing or future environmental regulations and potential liability resulting from pending or future litigation. Any forward-looking statement speaks only as of the date on which it is made. RWE neither intends to nor assumes any obligation to update these forward-looking statements. For additional information regarding risks, investors are referred to RWE’s latest annual report and to other most recent reports filed with Frankfurt Stock Exchange and to all additional information published on RWE's Internet Web site.


We are a leading energy utility in the German market

Key figures 2011 RWE Deutschland GroupSales revenue 20.4 Euro billion

Operating result/ EBITDA 1.5/2.2 Euro billion

Investments 1.2 Euro billion

Employees (FTE) 20,000

End customers 8 million

Electricity distributed 160 TWh

Gas distributed 84 TWh

Grid length electricity 342,000 km

Grid length gas 38,000 km

Essen

Market position GermanyElectricity supply No. 1

Gas supply No. 3

Dr. Arndt NeuhausCEO

Bernd BöddelingFinance

Dr. Heinz-WilliMöldersHuman Resources

Dr. Joachim SchneiderGrid Engineering

Dr. Bernd WideraSales and Regional Companies

Overview


Strong and stable earnings contribution with additional growth potential

We play a strong role in the RWE Group: distribution and sales business are essential value drivers

Overview

26 %

Distribution

RWE Deutschland AG

Sales

Earnings contribution to RWE Group 2011

> Sales Margin

> Customer Base

> Operative Costs

> Asset Managementon RAB1

> O&M-Costs

> Regulatory Management

Value Drivers

26 %

EBITDA RWE Group:8.5 € bn

Operating result RWE Group5.8 € bn

Share RWE Deutschland

1 RAB = Regulated Asset Base

EBITDA OR


Ongoing growth of operating result in past and futureOverview

Review operating result in € m1 Forecast 2012

Long-term

2003 2004 2005 2006 2007 2008 2009 2010 2011

Average growth rate of about 4.5% from 2003 to 2011:

Cost reduction through efficiency programmes

Increase of margin in sales business

Negative effect of regulation in grid business

1,150

1,505+4.5% p.a.

Stable income situation due to stable regulatory situation for this and the next regulatory period (until 2018)

Growth opportunities through efficiency improvements and smart energy system-

+

+

-

+

+

+

1 Pro forma figures for current organisational structure.

-

Operating result in the order of last year’s level:

Absence of positive one-off items compared to 2011

Improved efficiency enhancement

Lower income from investments from participations


Grid regions of RWE Deutschland Group

> RWE Deutschland group owns 342,000 km electricity and 38,000 km gas distribution grids.

> For operating local distribution grid (low and medium voltage) concessions from individual municipalities are needed.

> Municipalities assign these concessions for electricity,gas, water and distant heating. In return they receive a regulated concession fee.

> We supply electricity, gas and/or water to almost every fourth German municipality. Distribution grid area

electricity, natural gas and/or water

Distribution

München

StuttgartSaarbrücken

Mainz

Hannover

Hamburg

Berlin

Essen

DüsseldorfKöln

Augsburg

FrankfurtWiesbaden

Dresden


Germany’s regulatory framework of incentive-based regulation offers additional profit potential

Distribution

Cost-based regulation Incentive-based regulation

> A grid operator’s revenue cap is determined by its CAPEX and a specified rate of return: Revenue = CAPEX + RoE

> Efficiency gains resulting from cost reductions are passed through to theend consumer without delay.

> Problem: Since grid operators are always reimbursed for their costs, they do nothave any incentive to reduce costs.

> Principle: Decoupling of revenue from costs> Incentive: Grid operators may temporarily

generate higher profits if they disclose efficiency reserves and reduce costs.

> Efficiency profits are transmitted to the customer only time-delayed.

Grid revenueGrid revenue

CAPEXCAPEX Regulated rate of return(always constant)

Time

€ €

1st period 2nd period

CostsCosts

Grid revenueGrid revenueNew cost audit resultsin new starting point Profit

Gas: 2013 – 2017Electricity: 2014 – 2018


Financial performance of distribution grid business oriented at highest European benchmarks

Distribution

RWE’s target setting on regulatory outperformance3

Outperformance target

WACC [%] (regulatory conceded)

Return on RAB [%]

RWE European Comparables

> Strategic return on RAB1 goals for RWE distribution business based on ambitious outperformance target

> Outperformance target derived from European competitor analysis > Country-specific regulatory WACC2 adjusted for different regulatory regimes> Outperformance achieved by operative and regulatory management

Target achieved for current regulatory period until 2012/13

1 RAB = Regulated Asset Base 2 WACC = Weighted Average Cost of Capital 3 Outperformance = Return on RAB minus WACC


Regulator confirms highest efficiency of RWE gridDistribution

EXAMPLE: Electricity distribution

Source: Polynomics 2008.

RWE DSO:100% efficient

Effi

cien

cy v

alue

Industry average

Companies in order of efficiency


Our investment strategy yields high performance gridDistribution

110/10-kV-Substation10/0,4-kV-Substation

10-kV-Kabel/Freileitung

Brücke110/10-kV-Station10/0,4-kV-Station

10-kV-Kabel/Freileitung

1 km1 km

BrückeBridge10-kV-Cable/Overhead line

EXAMPLE: Typical grid area

Investment and maintenance strategy:Specific investments reduce long term CAPEX of the grid and optimise O&M costs

Grid topology after investment

Grid length 220 kmNo. of mid voltage fields 76Degree of cabling 60%

Grid topology before investment

Optimisation(investments, operation, O&M costs)

200 km Grid length56 No. of mid voltage fields90% Degree of cabling

Source: RWTH Aachen.


Smart Grids: „Smart“ solutions for profitable investmentsDistribution

Quelle: ZSW


Strong market position in German retail market: No. 1 in Electricity and No. 3 in Gas

Sales

Strategic aspiration

> Increase of turnover and EBITper customer due to differentiated products/services and the continuous utilisation of cross-selling potentials

Market position

> 16 % market share in electricity> 9 % market share in natural gasRWE could retain customersmore successfully than competitors

Household

> Value-oriented customer service, growth beyond pure commodity sales

> 13 % market share in electricity> 10 % market share in natural gas

> "Be excellent" in customer careand market oriented products

> 16 % market share in electricity> 6 % market share in natural gas

Business

Utilities/Reseller


German household segment in an excellent value driver position

Sales

Margin and cost analysis indicates our excellent performance compared to our competitors

> Average demand per household and small commercial customer in Germany is 3,500 kWh/a

> RWE household and small commercial customers with 3,600 kWh/a above average

> Together with high sales margins RWE Deutschland has most attractive customer base

> Service costs benchmarked regularly> 22 % of the German household customers

are considered in the benchmark> RWE is at average cost level with further

improvement potential

Sales Margins

Customer Base

Operative Costs

Average margin

RWE Large Utilities

Small/Medium Utilities

% aboveaverage

> RWE margins for tariff customers(household and small commercial) for electricityand gas are among the highest in Germany

> To maintain margin level and low churn rates,value oriented retention schemes are set up

EXAMPLE: Tariff customers electricity

w xRWE

3.600

Average

3.500kWh/a

Company

EXAMPLE: Customer service costs

RWE

Average costs

- 40 %

+80%

EXAMPLE: Average customer electricity demand

% aboveaverage


Energy services: approx. €500 million revenue and €40 million operating result in 2011; Expansion investment: 40 million € in 2011 to over 60 million € in 2012, further growth planned for the next years

RWE is the largest German energy service provider

Smart Markets: we use the potential of energy serviceswith distributed generation

Sales

- Energy services CAPEX [€ million] - - Energy services business with diversified portfolio -

> Major source of revenue> Classical district as "cash

cow"

> Strategic growth area> Main part of CAPEX

dedicated to contracting solutions

> Strike to initiate asset-based transactions and special products

> Importance of innovative products is steadily increasing

40

60

2013+

Energy servicesgrowth in implementation


Research & Development for markets of tomorrowR&D

Smart metering> Project "Mülheim Counts":

Provision of more than 100,000 smart electricity meters

> Investment volume: 30 € m

Smart grids> Development and expansion

of smart electricity grids > Investment: approx. 500 € m until 2020

Smart home> "inHaus2": Carbon-free

housing project in Duisburg > Provision of innovative

energy applications> Partnership with

Fraunhofer Institute

Superconductor > Energy transmission without

losses and saving space> Planned construction of the

world's longest superconductortest line in Essen (1.0 km)

E-mobility> Development and operation

of 1,300 charging pointsthroughout Germany

> Provision of electricity from renewable sources

> Cooperation partners:Daimler, Renault, Siemens,ADAC and others

Essen

DuisburgMülheim


Based on changing energy marketswe have three basic strategic pillars

Summary

RWE Deutschland AG yields continuously high contribution to RWE group’s value

Distribute Sale Develop

Outperform regulatory targets by optimised investment strategyand highest operating efficiency

Maintain position as top performer with high value customer base

Develop and success-fully implement new business models for a smart energy world with value enhancing growth potential

rwe generation se – the new european generation approach · forward looking statement this...

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