Fixed Income Investor Update - 1 June 2018
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Fixed Income Investor Update 1 June 2018
Agenda
1. Business update / Q1 results
2. Credit update
3. Transaction related topics
1innogy is a stable business with a platform for growth
innogy is active along the energy value chain
Sustainable generation of electricity Efficient distribution of energy Customer products and services
Renewables Grid & Infrastructure Retail
Wind Grid Assets Commodity
3.5 GW €13.5bn 22m
Hydro installed Grid+ regulated Energy+
customers
capacity asset base
Solar Broadband
Corporate/New Businesses (e.g. E-mobility)
Targeted leverage factor of ~4.0x Targeted payout ratio of 70-80% of adjusted net income
2Net investments 2018-2020 in line with innogy’s
financial targets – leverage factor of around 4.0x
innogy Group, 2018-20 additional net growth: 1.5-2.0
€ billion
up to 4.5 up to 10.0 Leverage:
~4.0x
7.0-7.5
up to (3.0)
~0.9 ~5.5
~4.6
G&I ~4.0
Retail ~0.4
Renewables ~0.1
Corporate ~0.1
Day-to Growth capex Commited capex Additional Total gross Equity sell-down/ Total planned
day capex (committed) growth investment disposal proceeds net capex 1
opportunities opportunities
1 Capital expenditure on property, plant and equipment and on intangible assets, financial assets ./. proceeds from disposal of assets/divestitures
and net changes in equity (including non-controlling interests). 3Renewables – we continue to develop value-accretive
growth options
Capacity in operation, under construction and under development1
GW, pro-rata
Onshore Offshore Hydro Solar/other 3.3 7.8
2.0
3.23
2.5
1.3 3.3
3.4 0.32
thereof depending on successful auction results:
0.1 0.8 1.5 2.4
31 Dec 2017 COD 2018-2019 2018-2019 2020-23 Post 2023 Total pipeline
in operation currently under currently under development4
construction
1 As of 12 March 2017. Ramp-up only includes Renewables division. Pipeline includes (1) Onshore Wind pipeline US; CFIUS (Committee on Foreign Investment in the United States) approval outstanding;
approx. 500 MW advanced stage; total project pipeline 2GW and (2) PV projects Australia; FIRB (Foreign Investment Review Board) approval outstanding; COD of 460MW expected in 2018/2019.
2 Expected share 2018: 200 MW, expected share 2019: 120 MW. 3 Incl. 860 MW Triton Knoll offshore wind project (UK CfD awarded, FID planned for mid-2018). 4 Based on planned commissioning
dates, excluding M&A activities and project-specific auctions. 4Renewables – acquisition of valuable project
opportunities across technologies
New York
Technology Onshore Wind Large-scale solar
Project name Cassadaga Limondale Sun Farm / Hillston Sun Farm3
Country/Location United States, New York Australia, New South Wales New South
Wales
Planned capacity 126 MW 347 MWp / 115 MWp
Construction Capex ~ USD 200 m ~ EUR 400 m (incl. project rights)
Average load factor 37% 23%
Status/consents Major state permit secured (NY Article X certificate) Late stage
Planned FID/construction 2019 Q2 2018 / Q3 2018
Planned Commissioning H1 2020 End of 2019
Support scheme 20-yr utility PPAs, project captures 100% PTCs Merchant
Project IRR above hurdle rate of >5% post tax1 above hurdle rate of >5% post tax1
Project Cassadaga is part of the Onshore Wind innogy benefits from BELECTRIC’s global
development pipeline (> 20 projects, >2 GW) that experience in constructing and operating utility-
innogy acquired in December (closing of scale solar power plants
transaction expected for Q2 20182)
1 Hurdle rates are subject to frequent review and differ depending on project structure/risks.
2 Closing of transaction and CFIUS (Committee on Foreign Investment in the United States) approval outstanding.
3 Closing of transaction and FIRB (Foreign Investment Review Board) approval outstanding. 5G&I Eastern Europe – stable regulatory environment
providing visibility on earnings
Region RAB (€ bn) WACC (%)1 Regulatory Period Expected Allowed Revenues2
Czech Republic 1.7 7.94 2016 – 2020
Hungary 0.9 6.233 2017 – 2020
Poland 0.7 5.63 2016 – 2020
Slovakia 0.5 6.27 2017 – 2021
Total 3.8 Ø 6.89
Overall regulatory development
• Capex spending recognized in RAB on a yearly basis
• Yearly GDP growth between 2.4-3.6%4 in all our Eastern European markets expected until 2022:
less pressure on allowed energy prices and therefore expected revenues
1-2% y-o-y RAB growth expected beyond regulatory period
1 CZ,PL: nominal; HU,SL: real. 2 Reference: 2017 Revenues. 3 Indicative WACC as of 2016, as within new regulatory period no explicit WACC is published.
4 Source: IMF World Economic Outlook Database. 6eMobility – innogy with a leading market position in
Europe and well positioned for mass market
Financial development, adj. EBIT, €m Current earnings drivers Major KPIs, as of March 2018
>0 IT backend charging sessions > 7,000 charging points connected
Connected charging points
> 50,000 charging sessions per month
Service contracts
(27)
~(50) Hardware sales Europe and US as core markets
2017 2018E 2019E 2020E 2021+
Tailor made customer solutions via modular offering/toolbox
Value Hardware IT Energy Electricity
Chain Installation O&M
supply Services services sales
Main • Development • Connection • Inspection • Backend connection • Grid integration • Electricity sale
value • Customisation management service • Authentification/ • Load management (€/kWh, flat rate,
pools • Production • Civil engineering • Full care billing • Energy+ time tariffs)
• Financial services • Installation process pack • Fleet management • Data-driven services
• App
7innogy · Q1 2018 results
Key messages Q1 2018
Financial > Q1 2018: Adjusted EBIT of €1,236 million – slightly below Q1 2017; adjusted net income
deliverables of €610 million, down 11% on Q1 2017, mainly driven by an adverse financial result
> Outlook 2018 confirmed: adjusted net income of more than €1.1 billion expected
> AGM approved the dividend proposed by the Board of €1.60 per share for fiscal 2017
Business update > German offshore: innogy secures rights for the construction and operation of Kaskasi
offshore wind farm in Germany with an installed capacity of 325 MW including a 20-year
feed-in tariff under the German Renewable Energy Act
> npower/SSE merger: early May, the CMA referred the proposed transaction for an in-
depth investigation (phase 2; the deadline for the final CMA report is 22 October)
> Higher Regional Court in Dusseldorf annulled the regulations of the imputed returns on
equity for the third regulatory periods for German electricity and gas networks. BNetzA
already indicated that it would challenge the decision at the Higher Federal Supreme Court
8innogy · Q1 2018 results
Key events 2018
Q1 Q2 Q3 Q4
US Onshore GER Offshore
Renewables
AUS Solar Closing EverPower
NL Offshore Auction results
Purchase of acquisition [27 April] UK Offshore
Wind auction NL Offshore
solar projects Triton Knoll
results AUS Solar UK Offshore Wind new auction round
Overland Financial Close
[end Q1] Closing Overland Triton Knoll FID
[Feb] acquisition [by end Q2]
GER East
GER GER
GER Determination Determination
Court decision
G&I
Determination
Final revenue caps gas1 of Xgen of allowed
Xgen gas RoE calculation
[starting end of May] electricity revenues for t+1
[28 Feb] [22 March]
[end of Nov] [end Q4]
GB npower &
GB npower & SSE merger GB npower & SSE merger GB npower & SSE merger GB npower &
SEE merger
SEE merger
Retail
submission of merger notice End of phase 1 proposal to SSE shareholders to completion of
to CMA investigation by CMA approve merger at AGM SSE CMA report on
transaction
[27 Feb] [8 May] [19 July] phase 2 due
[exp. end of
[22 Oct]
Q4/Q1 2019]
1 Can vary from DSO to DSO.
Remark: all dates preliminary. Next CfD auctions in UK for wind are scheduled for spring 2019; mentioning of auctions does not imply innogy participation. 9innogy · Q1 2018 results
Adjusted EBIT and adjusted net income down vs Q1 2017
and in line with expectations
Adjusted EBIT Adjusted net income
€ million € million
35
21
684
1,261
(25)
(70) 1,236
22 610
(11)
(10)
(61)
1
Q1 2017 RES G&I Retail Corp./ Q1 2018 Q1 2017 Adj. Adj. Adj. Minorities Q1 2018
NB EBIT financial taxes
result
1 Non-controlling interests. 10innogy · Q1 2018 results
Adjusted net income down 11% to €610m driven by
lower adjusted EBIT and financial result
Reconciliation of adjusted net income Key drivers
Q1 2018 adjust- Q1 2018 Q1 2017 • Non-operating result improved versus prior year due to the
€ million
reported ment adjusted adjusted valuation effect of certain derivatives
Adjusted EBITDA 1,582 - 1,582 1,617 • Effective tax rate slightly above Q1 2017 (30%) due to the
revaluation of deferred tax assets on the loss carry forward in the
Operating D&A1 (346) - (346) (356)
Netherlands
Adjusted EBIT 1,236 - 1,236 1,261 • Weaker adjusted EBIT and financial result driving development of
Non-operating result 99 (99) - - adjusted net income
Financial result (159) (53) (212) (151) • Normalised tax rate to derive adjusted net income set at 25 %, in
line with the expectation for the sustainable level of the effective
Income before taxes 1,176 (152) 1,024 1,110
tax rate
Taxes on income (376) 120 (256) (278) • Based on the 555,555,000 innogy shares outstanding, adjusted
Tax rate 32% - 25% 25% net income amounted to €1.10 per share
Income 800 (32) 768 832
Non-controlling
(158) - (158) (148)
interests
Net income 642 (32) 610 684
1 By definition, operating D&A includes operating impairment losses.
11innogy · Q1 2018 results
Negative free cash flow in Q1 consistent to seasonal
patterns
Cash flow statement (extract) Net debt composition (extract)
€ million Q1 2018 Q1 2017 +/- € billion 31 Mar 2018 31 Dec 2017 +/-
Funds from operations (FFO) 1,287 1,273 14 Financial assets 3,923 4,086 (163)
Changes in working capital (2,167) (1,936) (231) Financial liabilities2 17,521 16,378 1,143
Cash flow from operating t/o senior bonds 13,059 12,007 1,052
(880) (663) (217)
activities (CFOA)
t/o loans from RWE 1,656 1,656 -
Capex1 (371) (288) (83)
t/o loans from EIB 1,044 1,039 5
Proceeds from disposals of
126 128 (2) Net financial debt 13,598 12,292 1,306
assets/divestitures
Provisions for pensions and
Free cash flow (1,125) (823) (302) 3,332 2,986 346
similar obligations3
Provisions for wind farm
359 359 -
decommissioning
Total net debt 17,289 15,637 1,652
Note: rounding differences may occur.
1 Capital expenditure on property, plant and equipment and on intangible assets and on financial assets. This item solely includes capital expenditure with an effect on cash.
2 Adjusted for ‚step-up‘ effect of €824m as of 31 March 2018 and €877 million as of 31 December 2017.
3 Including ‘Surplus of plan assets over benefit obligations‘ of €(142)m as of 31 March 2018 and €(103)m as of 31 December 2017. 12innogy · Q1 2018 results
Outlook 2018 confirmed – Retail now excludes eMobility
€ million FY 2018 FY 2017
unless stated otherwise guidance1 reported
Renewables ~350 355
Grid & Infrastructure ~1,850 1,944
Retail2 ~750 ! 827
Adjusted EBIT3 ~2,700 2,816
Adjusted financial result ~(750) (689)
Tax rate for adjusted net income 25-30% 25%
Adjusted net income >1,100 1,224
Dividend 70-80% of ANI €1.60
Net capex4 ~€2.5 bn 1,949
target of
Leverage factor 3.6x
around 4.0x
1 Excluding Retail UK. Any earlier forward-looking statements on Retail UK should be disregarded.
2 Retail no longer includes eMobility. 3 Including Corporate/New Businesses
4 Capital expenditure on property, plant and equipment and on intangible assets, financial assets ./. proceeds from disposal of Outlook5 confirmed
assets/divestitures and net changes in equity (including non-controlling interests).
5 As per 13 March 2018. ! Outlook5 updated 13Agenda
1. Business update / Q1 results
2. Credit update
3. Transaction related topics
14Credit profile
innogy’s funding programmes
• Independent innogy debt issuance programme established
Debt issuance • Nominal volume: €20bn
programme • Supplement dated 18 May 2018 to the Prospectus dated 13 April 2018
• Stand-alone programme up and running
Commercial paper • Nominal volume: €3bn
programme
• €2bn syndicated credit line by a group of 22 international banks
Revolving credit • Maturity in 2022 with two renewal options after the first and
facilities second year
15Credit profile
innogy’s credit rating
innogy's investment grade ratings (as of 18 May 2018)
Fitch Moody’s S&P
Long-term issuer default rating BBB+ Baa2 BBB
Outlook Watch negative Stable Stable
Senior unsecured rating A- Baa2 BBB
Short-term issuer rating F2 P2 A-2
Moody´s removed negative watch on 18 May 2018
16Credit profile
innogy’s maturity profile
Maturity profile of bonds and loans as of 31 March 2018 (€ billion)
innogy’s issuances since the IPO:
5 Maturities of loans from RWE AG (lhs) 16
• First senior bond in April 2017
Maturities of loans from EIB (lhs) 14 €750m, 1%, maturity 2025
4 12
Maturities of senior bonds (lhs) • First green bond in October 2017
Total outstanding bonds and loans (rhs) 10 €850m, 1.25%, maturity 2027
3
8
• Senior bond in January 2018
6 €1,000m, 1.50%, maturity 2029
2
4
• Senior bonds in Mai 2018
1 2
€500m, 0.75%, maturity 2022
0 €500m, 1.625%, maturity 2026
0 -2
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027+
Cumulative maturities Total bonds and loans (as of 31 March 2018 ) of ~€16bn:
As of 31 March 2018 2018-2020 2021-2023 2024-2026 2027+ • t/o senior bonds of innogy SE/ Finance B.V. of ~€13bn
• t/o loans from RWE AG of ~€2bn
Senior bonds and RWE + EIB loans (€bn) 5.0 3.2 1.6 6.1
• t/o EIB loans of ~€1bn
% of total debt 32% 20% 10% 38%
17
1 Excluding Retail UK. Any earlier forward-looking statements on Retail UK should be disregarded.Agenda
1. Business update / Q1 results
2. Credit update
3. Transaction related topics
18Envisaged transaction structure
Voluntary public takeover offer – Share purchase and transaction agreement between RWE and E.ON –
basis for joint statement very limited public information available
Transfer of 76.8% stake in innogy
Renewables business1
Cash payment
PreussenElektra minority interests2
€1.5bn cash payment
innogy free float (23.2%)
Retail 16.67% stake in E.ON Renewables
business via capital increase business
Grid & Gas storage
Infrastructure business/
business Stake in Kelag
Note: Illustrative and simplified, based on publications by E.ON and RWE published on 12 March 2018.
1 Excluding German and Polish onshore wind assets belonging to e. dis (151MW) and the 20% stake in Rampion offshore wind farm (80MW). 2 Minority interests in nuclear power plants Lippe-Ems and
Gundremmingen. 19Timeline of the envisaged E.ON/RWE transaction
Closing I: Closing II:
Voluntary Expiry of E.ON to take Transfer of assets Latest day of
public takeover Joint statement acceptance innogy control over under consideration closing of
offer by E.ON by innogy period AGM 2019 innogy to RWE offer
27 Apr 18 10 May 18 early 30 Apr 19 Expected by Expected by 13 Jan 20
Q3 18 E.ON/RWE E.ON/RWE
not before not before
Offer period
mid 19 end 19
Initial acceptance period 27 Apr – 6 Jul
Offer Additional acceptance period 12 Jul – 25 Jul
period
Publication of (final) take-up/acceptance
11 Jul end of Jul
Watermark updates Weekly updates (daily in last week of offer period)
1 As communicated/expected by RWE/E.ON. 20Executive Board and Supervisory Board have issued a
joint statement on E.ON’s voluntary PTO
Executive Board and Supervisory Board of innogy…
> assess the consideration offered by E.ON for minority shareholders (“Offer Price“)
to be fair from financial point of view
> however, given the lack of information regarding the terms of the RWE/E.ON agreement,
cannot conclusively assess whether or not the consideration offered by E.ON for the acquisition of approx.
76.79% of innogy shares from RWE is equal to, or higher or lower than, the “Offer Price” of €36.76
> therefore cannot assess whether the “Offer Price” and the total value of the offer in aggregate are
appropriate and whether or not the overall transaction is in the best interests of innogy and the innogy
shareholders
> have concerns relating to possible future integration measures, in particular the treatment of innogy‘s
employees
> are convinced that an independent innogy Group is well positioned with its integrated green business
model to shape the energy world of tomorrow
21APPENDIX
Triton Knoll offshore wind – FID planned for mid-2018
Country UK
Technology Offshore wind
Location Area of c. 118 km2, 32 km off the coast of Lincolnshire
Planned capacity ~860 MW (90 MHI Vestas V164-9.5MW turbines)
Investment ~£2 billion (incl. up to £0.5 billion for grid connection)
Ownership 100% innogy1
10 km
Mean wind speed 9.83 m/s (at 107 m height)
Triton Knoll
offshore array
Water depths 15 to 24 m (avg. 18 m)
Offshore
Status/consents Fully developed, all required consents in place cable corridor
Onshore
FID planned for mid-2018, onshore works to begin cable corridor
FID/construction
in 2018, offshore works from 2020 Landfall
Commissioning Start of commissioning scheduled for 2021 Proposed Triton Knoll
substation
Support scheme UK CfD2, £74.75/MWh3 for a total period of 15 years Bicker Fen substation
1 innogy to review all options regarding the future ownership structure. I 2 Contract for Difference scheme. I 3 CfD strike price on 2012 prices.
23APPENDIX
Overview of senior bonds and loans
As of 31 March 2018, by maturity
Senior bonds Loans from RWE5
Notional Carrying amount Notional
Carrying amount
Issuer amount (in EUR million) Coupon Maturity Instrument amount Coupon Maturity
(in EUR million)
(LCY1, million) (LCY1, million)
innogy Finance B.V. EUR 980 995 5.13% Jul 18 Intercompany loan6 EUR 956 956 0.56% Mar 19
innogy Finance B.V. EUR 1,000 1,047 6.63% Jan 19 EUR 700 700 0.86% Oct 20
Intercompany loan6
innogy Finance B.V. EUR 750 760 1.88% Jan 20
Total 1,656 0.69%4
innogy Finance B.V. GBP 570 707 6.50% Apr 21
innogy Finance B.V. EUR 1,000 1,161 6.50% Aug 21
innogy Finance B.V. GBP 500 611 5.50% Jul 22
innogy Finance B.V. GBP 488 599 5.63% Dec 23
innogy Finance B.V. EUR 800 839 3.00% Jan 24
innogy Finance B.V. EUR 750 745 1.00% Apr 25 Loans from EIB
innogy Finance B.V. EUR 850 839 1.25% Okt 27 Notional
Carrying amount
innogy Finance B.V. EUR 1,000 985 1.50% Jul 29 Instrument amount Coupon Maturity
(in EUR million)
innogy Finance B.V. GBP 760 955 6.25% Jun 30 (LCY1, million)
innogy Finance B.V. EUR 600 726 5.75% Feb 33 EIB loan EUR 645 695 3.23% Oct 20
innogy SE USD 50 41 3.80% Apr 33 GBP 350 410 2.14% Feb 23
EIB loan
innogy Finance B.V. GBP 600 642 4.75% Jan 34
Total 1,105 2.81%4
innogy SE EUR 468 512 3.50% Oct 37
innogy Finance B.V. GBP 1,000 1,229 6.13% Jul 39 thereof: step-up effect 61
innogy SE JPY 20,0002 179 4.76%3 Feb 40
innogy SE EUR 100 100 3.50% Dec 42
innogy SE EUR 150 150 3.55% Feb 43
Total 13,822 4.45%4
thereof: step-up effect 763
Note: Rounding differences may occur. 1 Local currency. 2 Swapped in Euro: JPY20,000m in €159m. 3 Interest rate after swap in Euro. 4 Notional-weighted average coupon.
5 One additional loan of €18m not included. 6 Related to hybrids issued by RWE.
24IR contacts Verena Nicolaus-Kronenberg
T +49 152 0933 1400
verena.nicolaus-kronenberg@innogy.com
Holger Perlwitz Martin Jäger
Fixed Income T +49 162 2754 355
T +49 162 2843 044 martin.jaeger@innogy.com
holger.perlwitz@innogy.com
Britta Wöhner Sandra Schuck
T +49 152 5460 7527 T +49 172 2982 483
britta.woehner@innogy.com sandra.schuck@innogy.com
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