Despite difficult market conditions, RWE AG had a good financial year in 2012. The energy company achieved an EBITDA of EUR 9.3 billion and an operating result of EUR 6.4 billion - both up 10% on the previous year and therefore higher than the outlook published in March 2012. Revenue increased to EUR 53.2 billion. As expected, recurrent net income was unchanged year on year at EUR 2.5 billion. Recurrent net income is the basis for determining the dividend. The Executive Board and the Supervisory Board of RWE AG will therefore propose an unchanged dividend compared to the previous year of EUR 2 per share to the Annual General Meeting on 18 April 2013.

One of the contributing factors to the improvement in the result was the absence of the exceptional burdens experienced in 2011 following the decision to phase out nuclear energy in Germany. In 2012, those burdens were much lighter. "We also benefited from strong earnings contributions from our efficiency programme and successful trading activities," says Peter Terium, CEO of RWE AG. In the gas midstream business, RWE Supply & Trading gained ground, as contract adjustments and compensatory payments were agreed upon with suppliers in nearly all gas price reviews.

RWE looks at the options of divesting RWE Dea

In addition, the Executive Board of RWE AG today decided to withdraw from the exploration and production of crude oil and natural gas. Therefore, RWE intends to look at the options for disposing of all of its shares in RWE Dea AG. The planned disposal would be in line with RWE AG’s strategic repositioning. It would also take considerable pressure off future capital expenditure and therefore make an essential contribution to improving RWE’s financial headroom. The details of any transaction and how it would be implemented are still under evaluation. Further important developments will be announced in due course in a suitable manner.

Electricity and gas production and sales

The RWE Group’s electricity generation rose by 10% to 227.1 billion kilowatt hours (kWh) in 2012. Various factors contributed to this: in Germany, the new twin-unit lignite-fired power station with a net capacity of 2,100 megawatts (MW) went online in early 2012, replacing 16 older lignite-fired units which were successively decommissioned by the end of 2012. In addition, electricity generation from hard coal increased as improved margins on the spot market led to higher capacity utilisation. The Netherlands also saw an improvement in the capacity utilisation of hard coal-fired power stations. The two new gas-fired power stations with a combined net capacity in excess of 1,700 MW contributed to the overall positive development in generation. However, capacity utilisation at gas-fired power stations in the Netherlands in general is weak. The picture is similar in the UK: improved market conditions for hard coal-fired power stations and the commissioning of a new gas-fired power station with a capacity of just under 2,200 MW contributed to an increase in electricity generation. The Group’s electricity generation from renewables increased by 41% to 12.4 billion kWh.

Despite cooler weather conditions, the Group’s external gas supply was some 5% down year on year, at 306.8 billion kWh. This was mainly due to competition-induced customer losses and negative economic effects.

Germany Division

The operating result for this division improved by 10% to EUR 4.6 billion. Earnings from power generation increased by 13% to EUR 3 billion. The operating result in the Sales/Distribution Networks Business Area increased by 5% to EUR 1.6 billion. This can be attributed to improvements in efficiency as well as the successful acquisition and retention of residential customers.

Netherlands/Belgium Division

The operating result in this area decreased by 7%, to EUR 228 million. The difficult market conditions for electricity generation are having a negative effect on the result. Cost reduction measures and the optimisation of gas procurement could not fully compensate for this effect.

UK Division

Efficiency improvements and higher gas sales volumes resulted in a 34% increase in the operating result to EUR 480 million (a rise of 25% net of currency effects). However, power station margins also declined in the UK compared to 2011.

Central Eastern and South Eastern Europe Division

The operating result for this division declined by 6% to EUR 1 billion (or 4% net of currency effects). In the Czech Republic, improvements in gas sales and transit revenues were contrasted by declines in the distribution network and earnings shortfalls in the domestic gas transmission business. In Poland, the electricity generation business posted a gain in its operating result, despite fierce competition in the end-customer market. In Hungary, earnings recorded by the electricity sales business were down on the previous year's level due to negative volume and price effects.

Renewables Division

At EUR 183 million, the operating result for RWE Innogy improved slightly. The development of growth projects is still very cost-intensive. This is contrasted by the positive impact of the commissioning of new generation capacity.

Upstream Gas & Oil Division

Higher gas and oil prices and the strengthening US dollar contributed to an increase in RWE Dea's operating result of just under a quarter, to EUR 685 million. Expenditure on exploration also decreased.

Trading/Gas Midstream Division

RWE Supply & Trading closed with an operating loss of EUR 598 million; however, this was significantly smaller than in the previous year. RWE Supply & Trading gained ground in the gas midstream business, and performance in energy trading improved considerably.

Capital investment

Investments were down by about one fifth to EUR 5.5 billion. The focus was on capital expenditure on property, plant and equipment (EUR 5.1 billion) for the expansion of conventional and renewable generation capacities and the maintenance and modernisation of network infrastructure.

Headcount

As at 31 December 2012, RWE employed 70,208 staff (expressed as full-time equivalent positions), down approximately 1,800 or 3% on the closing figure for 2011. This decline is the result of operational job cuts and the sale of stakes in companies. The Group continues to train more people than it needs - at the end of 2012, more than 2,800 young adults were undergoing professional training with RWE.

Outlook

RWE confirms its March 2012 forecast for 2013 and expects an operating result in the order of EUR 5.9 billion. The gas price review with Gazprom, the only one outstanding, is expected to be brought to a successful conclusion this year. This and a substantial earnings contribution from our efficiency enhancement measures will help mitigate earnings shortfalls in conventional generation.

EBITDA is expected to be in the order of EUR 9 billion, and recurrent net income approximately EUR 2.4 billion. Capital expenditure on property, plant and equipment will again be in the order of EUR 5 billion, and net debt is also expected to remain unchanged.

In view of the structural changes in the European energy market and their effects on the Group’s earnings prospects, RWE expects its operating result to decline significantly after 2013. "We are a company that has to work hard for its future,” says RWE CEO Peter Terium, "and we will face the challenges created by the transformation of the German energy market." The Group’s focus - to become "more sustainable, more robust and more international" - will stay the same, but will have to be pursued more slowly due to the limited financial headroom. However, high quality standards remain a priority. Describing RWE's vision, Peter Terium says, "As a partner in the transformation of the European energy market, we want to be among the leaders in terms of performance and trustworthiness."