Download Annual Report 1999/2000

Annual Report 1999/2000
At a glance
RWE Group
1999/2000
1998/1999
% Change
+ 24.7
External net sales
E
million
47,918
38,415
Operating result
E
million
2,664
3,116
–
14.5
Profit before tax
E
million
2,151
2,722
–
21.0
Profit after tax
E
million
1,556
1,545
+
0.7
Net profit
E
million
1,212
1,149
+
5.5
Cash flow
E
million
3,354
4,580
–
26.8
EBITDA
E
million
4,688
4,950
–
5.3
Capital expenditure
E
million
4,923
5,244
–
6.1
Return on invested capital (ROIC)
%
9.2
11.2
–
17.9
Earnings per share
E
2.24
2.07
+
8.2
Cash flow per share
E
6.19
8.25
–
25.0
Dividend per share
E
1.00
1.00
0.0
Dividend including tax credit
per share
E
1.43
1.43
0.0
Number
152,132
154,223
Workforce (June 30)
–
1.4
Events of the year 1999/2000
Events of the year 1999/2000
07
09
1999
1999
■ RWE becomes Germany’s largest water
■ Quantum leap in the Construction and
utility when the agreements sealing the
Civil Engineering Division. In September
partial privatization of Berliner
1999 HOCHTIEF takes over Turner
Wasserbetriebe are signed at the begin-
Corporation, New York/USA, America’s
ning of July 1999. Acceptance of the bid
second largest company in the general
tendered by a consortium including RWE
building sector.
Umwelt marks a milestone in the implementation of our multi-utility strategy.
10
11
1999
1999
■ RWE triggers the process that will
■ RWE Annual General Meeting adopts a
make it one of Europe’s largest multi-
resolution to repurchase up to 55 million
utility companies. The Supervisory Boards
preference shares, heralding one of the
of RWE and VEW give their Executive
biggest share buyback programs in
Boards the go-ahead to enter into merger
German stock market history.
negotiations.
■ Leading European energy trader: RWE
Energy Trading Limited, the company
08
founded in London, enters the market.
1999
12
1999
RWE aims to rank among the leading
■ RWE-DEA streamlines portfolio in the
traders in electricity, gas and energy
■ LAHMEYER’s shareholders authorize
chemicals sector. The PVC business of
derivatives.
the merger with RWE AG, paving the way
CONDEA Vista, Houston/USA, is sold to
Georgia Gulf Corporation, Atlanta/USA.
for the amalgamation of the energy-rela■ Withdrawal from telecommunications
ted technical services in the newly formed
business: RWE and VEBA announce the
company, TESSAG Technische Systeme &
sale of their 60.25 % interest in the mo-
Services. The RWE holding company assu-
bile radio operator, E-Plus.
mes direct control of the shareholding in
Heidelberger Druckmaschinen.
■ RWE AG
■ Energy
■ Petroleum and Chemicals
01
04
05
2000
2000
2000
■ Successful implementation of the com-
■ Rheinbraun becomes an electricity gen-
■ Position on the gas market reinforced.
puter 2000 projects in the RWE Group.
erating company. Lignite mining and its
RWE raises its shareholding in
All the supply facilities and systems make
conversion to electricity in the Rhineland
Thyssengas, one of Germany’s leading
a smooth transition to
are amalgamated effective April 1, 2000.
long-distance gas companies, to 75 %.
the new millennium.
This is the first landmark in a series of
sweeping measures announced in 2000.
■ RWE Umwelt disposes of non-core
business. At the beginning of April 2000
02
the non-European environmental consul-
2000
06
2000
ting activities of the Environmental
■ RWE instigates the most far-reaching
Services Division are sold.
■ Clear framework created for RWE’s
change process in its history. Its structure
nuclear power stations. On June 14, 2000
is geared towards market needs. At the
the foremost German utilities reach agree-
same time RWE reacts to the collapse in
ment with the federal government on the
electricity prices by launching the most
outline conditions for the continued opera-
rigorous cost cutting program to date. By
tion of nuclear power stations in Germany
2003/04 costs are to be reduced by
and the disposal of their waste.
E
2.6 billion.
■ Merger of RWE and VEW nears com-
03
pletion. At an extraordinary shareholders’
2000
meeting of RWE AG on June 29, 2000 an
■ RWE Energie steps up international
overwhelming majority votes in favor of
sales activities. BASF Espanola and a
joining forces with VEW. The merger to
consortium comprising RWE Energie and
form the new RWE is executed with eco-
Iberdrola, the Spanish electricity utility,
nomic effect from July 1, 2000.
conclude an extensive energy supply contract for the Tarragona facility of the
Spanish BASF subsidiary.
■ Environmental Services
■ Industrial Systems
■ Construction and Civil Engineering
ELECTRICITY PRICES COLLAPSE
Electricity sales fell more abruptly than anticipated,
pushing down the consolidated operating result by 15 %.
COST OFFENSIVE INITIATED
By the end of fiscal 2003/04 we will have appreciably
improved our competitiveness with cost savings of
E 2.6 billion.
SUCCESSFUL REORIENTATION
By merging with VEW we have created Germany’s leading
utility, while making the Group more efficient and better
aligned with the market.
POSITIVE OUTLOOK
Although the electricity market continues to exert pressure,
we intend to close the new fiscal year with an operating
result that is at least as high as the previous year’s.
1
Report on the 1999/2000 Fiscal Year
2
Contents
■ Letter to Shareholders
4
■ Report of the Supervisory Board
8
■ Special Report
12
■ RWE Share
22
■ Report of the Executive Board
28
■ Annual Review
28
■ Value Management at RWE
52
■ Workforce
56
■ Energy Division
62
■ Petroleum and Chemicals Division
72
■ Environmental Services Division
78
■ Industrial Systems Division
82
■ Construction and Civil Engineering Division
90
■ Consolidated Financial Statements
96
■ Income Statement
98
■ Balance Sheet
99
■ Cash Flow Statement
100
■ Changes in Equity
101
■ Notes
102
■ Auditors’ Report
139
■ Principal Investments
142
■ The Boards of RWE
145
■ Glossary
150
■ Imprint
152
■ Ten-Year Overview
153
■ Financial Calendar
154
3
Letter to Shareholders
We are about to make a new start. Fiscal 2000/01 marks the birth of a new RWE.
Only the name will remain unchanged. It is a name that has represented high quality,
reliability and innovative power throughout the energy supply sector for more than one
hundred years. These attributes will continue to be significant factors in the energy
markets of the near and more distant future, but will need the support of other skills if we
4
are to sustain an appropriate position in the transforming competitive environment.
Against this backdrop we are adopting a fundamentally new orientation. We aim to
enhance customer proximity, response times and process efficiency by way of the merger with
VEW, a potent Group structure and a rigorous cost cutting program. Taking a general view,
we have initiated the most far-reaching change process in RWE’s history. It was a prominent
aspect of the past fiscal year and will be shaping the immediate future as well.
DEREGULATION LEAVES INDELIBLE MARK
Events last year made it absolutely clear that the rapid pace of change in our operating
environment leaves little time for formulating a response. Since the market was deregulated
in April 1998, electricity prices have fallen sharply. Compared with the rest of Europe, Germany has the lowest electricity prices in the dominant key account business. This fact had a
considerable impact in fiscal 1999/2000. Electricity revenues fell more steeply than expected, by 16 %. This pushed down the Group’s operating result by 15 % despite 25 % growth in
consolidated sales and cost savings of
E
700 million.
The vigor of the energy sector’s international reorientation and consolidation picked
up considerably while deregulation was in progress. Takeovers and mergers have become
familiar news as the market players seek to achieve the critical mass and competence
demanded by the battle for European market shares.
Dr. Dietmar Kuhnt, born in 1937 in
Wroclaw, studied law, joined the RWE Group
in 1968. From 1992 through 1994 President and Chief Executive Officer of RWE
Energie AG and Executive Vice President of RWE AG. Since 1995 President and Chief
Executive Officer of RWE AG, current responsibilities: Corporate Communications,
Auditing and Financial Investments.
VEW – AN IDEAL PARTNER
We have adopted an aggressive strategy. The merger with our regional neighbor, VEW, gives
us a clear competitive lead. VEW occupies an attractive position on the German electricity,
gas and waste disposal markets. The merger unlocks cost synergies in the amount of more
than
E
700 million. Moreover, our geographic and strategic proximity paves the way for
efficient integration.
5
RETHINKING RATHER THAN REFORMING
The merger is being executed at the same time as further stringent measures:
■
In February 2000 we adopted a program to reduce costs in the energy business by a
further
E
1.7 billion in the period until 2003/04. Including the synergies prompted by
the merger, the Group will be saving a total of
■
E
2.6 billion.
Effective October 1, 2000 we redefined the value chain in our core multi-utility
business. The energy and environmental activities of RWE and VEW are to be conducted in eight independent companies, five of which are new.
■
We are divesting non-core business units. By disposing of E-Plus and TeleColumbus, we
have almost entirely stripped the telecommunications activities. By the end of the
current fiscal year we will have sold businesses with further revenues of
E
3 billion.
By 2002/03 we will have disposed of non-essential real estate with a market value of
E
750 million.
IMPROVED EARNINGS OUTLOOK
These measures are to form the basis of a continuous increase in our value. Although we
expect the current year to be impaired by substantial knock-on effects of the prior year’s
electricity price decreases, we are confident of avoiding a decline in earnings. The current
market situation also indicates that prices are unlikely to decrease further. By eliminating
overcapacities in the power station segment, we will be contributing to making the market
healthier.
Letter to Shareholders
ENSURING SUCCESS AS A TOP-RANKING EUROPEAN UTILITY
The new RWE distinguishes itself from its rivals by way of forward-looking strengths:
Market leadership Together with VEW, we occupy leading positions in Germany, which is
Europe’s largest energy market. We lead the electricity supply and waste disposal markets.
We also rank among the foremost providers in the gas and water supply sectors. Key
accounts in industry and the energy business generate significant demand for our services.
This gives us an excellent launch pad for safeguarding a key role in the process of consolidation that is unfolding in Europe. We have already made much progress with shareholdings in
eastern European utilities and power station projects in several countries. By implementing
rigorous cost cutting programs, we will be in the vanguard of cost leaders in the European
power generating market.
6
Focus Our multi-utility strategy corresponds to our core competences in the energy and
environmental sectors: we are an all-inclusive provider for electricity, gas, water, waste
disposal and energy-related services. These strengths are to become an even more potent
factor in the context of the new Group structure. They also demarcate the activities that are
outside the core business units.
Market driven By disintegrating the value chain into smaller and more effective operating
units, we can respond more quickly and comprehensively to our customers’ needs. Each of
the new companies will be concentrating on its specific market competence, from electricity
generation, the grid and gas to sales and trading.
Innovation As a technology leader we give our customers direct access to progress. Our
expertise embraces powerline, e-business and fuel cells, as well as highly efficient power
plant facilities.
EXECUTIVE BOARD
Dr. Richard R. Klein, born in 1943 in
Manfred Remmel, born in 1946 in
Bad Oeynhausen, studied economics,
Offenburg/Baden, studied industrial
until 1994 Chief Administrative
engineering, until 1998 head of pro-
Officer of the City of Duisburg, joined the RWE Group in 1994.
duction and materials management in the passenger car division
Since December 1996 Executive Vice President of RWE AG,
of DaimlerBenz AG, joined the RWE Group in January 1999.
current responsibilities: Corporate Development/Mergers & Acqui-
Executive Vice President of RWE AG, current responsibility:
sitions.
Multi-Utility.
COMPETITIVE DRAWBACK ATTRIBUTABLE TO POLITICAL ENVIRONMENT
Utilities are highly integrated in political and social processes. The nuclear energy consensus
reached in June 2000 has created quantifiable conditions in this respect. We therefore
welcome the agreement with the federal government, while sustaining our call for a genuine
solution to urgent energy and environmental policy issues. The laws recently enacted to
promote renewable energies and cogeneration have given rise to fresh burdens. Additional
encumbrances are in the pipeline. We consider the underlying approach misguided, and thus
remain committed to securing conditions in which the German energy sector can thrive as a
member of the European competitive community.
We are approaching a difficult phase in our development with a determination to
exploit the challenge as an opportunity for growth. It is a path worth treading. RWE has the
potential to occupy a foremost position in tomorrow’s dynamic utility market. We are
7
placing our confidence in the entrepreneurial creativity and motivation of our labor force,
whose performance in the most recent fiscal year is worthy of much praise. We also trust in
your sustained and dependable commitment to our future cause. For our part, we will be
investing every effort in raising the value of the RWE share.
Yours sincerely,
Dr. Dietmar Kuhnt
President and Chief Executive Officer of RWE AG
Dr. Klaus Sturany, born in 1946 in
Jan Zilius, born in 1946 in Marburg,
Wehrda/Hesse, studied mathematics,
studied law, until 1990 legal director
until May 1999 Spokesman of the
of iGBE, joined the RWE Group in
Executive Board of GEA AG. Since December 1999 Executive
1990. Since April 1998 Executive Vice President of RWE AG
Vice President of RWE AG, current responsibilities: Finance,
and Labour Director, current responsibilities: Human Resources
Controlling, Investor Relations.
and Law.
Report of the Supervisory Board
Dr. h.c. Friedel Neuber
In fiscal 1999/2000 the Supervisory Board discharged its obligations pursuant to the law and the
Articles of Incorporation, and continuously monitored the management of the company by the Executive
Board. The Supervisory Board met on six occasions and received written reports and decision-making
documents from the Executive Board; it regularly and comprehensively evaluated the pattern of business
and the Group’s economic position and development, its medium-term plans, including the financial,
investment and personnel budgets, as well as acquisition projects and other significant individual transactions and measures. The Supervisory Board discussed the reports and documents with the Executive
Board and took the decisions required by law and the Articles of Incorporation.
Following an extraordinary meeting of the Supervi-
8
Board concerned itself with the merger report prepared by
sory Board on October 21, 1999, the Executive Board’s
the Executive Boards of RWE and VEW, including the
reports and the Supervisory Board’s deliberations focused
expert opinion prepared by the two mandated auditing
on the company’s anticipated merger with VEW Aktien-
companies, and with the exchange ratio and draft merger
gesellschaft. At this and in subsequent meetings the Execu-
agreement, which it ratified. It also took advice on the
tive Board explained in detail the economic grounds and
required breakup of shareholdings commonly held with
objectives of the merger and the Group’s future strategic
Veba AG and VIAG AG (now E.ON AG), and authorized
orientation. It kept the Supervisory Board informed of the
the Executive Board to initiate the necessary action.
status and outcome of the negotiations between the parties
and of the discussions with the Federal Cartel Office. On
Besides this issue, the Supervisory Board consid-
this basis the Supervisory Board endorsed the conceived
ered and approved numerous changes in the Group’s port-
merger and management structure of the new RWE Group
folio of shareholdings insofar as required by the Articles
as presented by the Executive Board, and corroborated the
of Incorporation’s provisions. The principal investment
key points of the manpower adjustment policy and
issues were the sale of the participation in E-Plus Mobil-
envisaged amalgamation of the lignite-fired power stations
funk GmbH by VR Telecommunications GmbH & Co., the
and opencast mines under the auspices of Rheinbraun AG.
company jointly owned by RWE and Veba, and the acqui-
In a further specially convened meeting the Supervisory
sition of Turner Corporation by HOCHTIEF AG.
SUPERVISORY BOARD as of September 22, 2000
Dr. h.c. Friedel Neuber
Chairman
Alwin Fitting*
Deputy Chairman
Dr. Paul Achleitner
Johann Heiß*
Carl-Ludwig von Boehm-Bezing
Heinz-Eberhard Holl
Dr. Friedhelm Gieske
Rudolf Kersting
Erwin Hahn*
Berthold Krell*
Among the other material subject matter of the
In the context of the discussion of the 1998/99
reports to and deliberations by the Supervisory Board
financial statements in the meeting on September 23,
were the Executive Board’s decisions to extend and accel-
1999, the auditor reported to the Supervisory Board on
erate efficiency enhancing and cost cutting measures, pri-
his review of the risk identification system to the extent
marily in the Energy Division (including Mining and Raw
necessary to evaluate and assess the risks associated with
Materials), in response to the precipitated collapse of
the anticipated development. He found the recording of
prices in the electricity business. It considered similar
risks in charts and the identification of all material risks
programs at RWE-DEA, RWE Umwelt and TESSAG, and
throughout the Divisions to have been completed and the
the intended sale of business activities outside the
concept of the risk management system to have been
Group’s future core operating area as well as non-essen-
integrated in the Group’s structures and procedures.
9
tial real estate.
The presiding committee of the Supervisory
The Supervisory Board was regularly updated on
Board met three times, in September 1999 and in
the progress of the energy consensus talks with the feder-
January and February 2000. It discussed individual key
al government and the content of the agreement reached
issues in detail and thus performed the groundwork for
in mid-June 2000 concerning the outline conditions of the
subsequent full sessions of the Supervisory Board.
nuclear power stations’ continued operation.
Dr. Walter Mende
Klaus Schmid*
Dr. Alfons Friedrich Titzrath
Wilhelm Nowack
Dr. Manfred Schneider
Erwin Winkel*
Branko Rakidzija*
Ernst-W. Stuckert*
Bernhard von Rothkirch*
Klaus-Dieter Südhofer*
* Employee representative
Report of the Supervisory Board
10
Two meetings of the Executive Board personnel
The financial statements of RWE Aktiengesell-
committee were convened. It took mandatory decisions
schaft, the consolidated financial statements as of June
on personnel issues relating to the Executive Board and
30, 2000 and the joint review of RWE Aktiengesellschaft
prepared resolutions for the plenary sessions of the
and the Group concerning fiscal 1999/2000, including the
Supervisory Board. The mediation committee pursuant to
accounting records, have been examined and certified
§ 27 Subsection 3 Codetermination Law did not hold any
without qualification by PwC Deutsche Revision Aktien-
meetings.
gesellschaft Wirtschaftsprüfungsgesellschaft, Frankfurt
am Main, Essen branch, who were appointed auditors at
The chairman of the Supervisory Board received
reports from his counterpart on the Executive Board
the Annual General Meeting on November 18, 1999 and
mandated to perform the audit by the Supervisory Board.
outside of the Supervisory Board’s meetings; the
chairmen discussed major issues concerning the company
and Group in separate talks.
The financial statements, consolidated financial
statements and the joint management report for RWE
Aktiengesellschaft and the Group, the Annual Report, the
proposal for the distribution of profit and the auditors’
reports concerning the financial statements and consolidated financial statements were submitted to all members
of the Supervisory Board in good time before the balance
sheet meeting on September 22, 2000. The documents
were discussed in detail in the presence of the auditors
who signed the audit reports; they reported on the material findings of their audit and were available to answer
questions. The Supervisory Board has approved the
findings of the auditors’ examination of the financial
statements.
The Supervisory Board has examined the
Dr. Diethart Breipohl retired from the Supervisory
financial statements prepared by the Executive Board,
Board at the close of March 15, 2000, Dr. Klaus-Peter
the consolidated financial statements, the joint review of
Balthasar at the close of March 28, 2000, and Mr. Ralf
RWE Aktiengesellschaft and the Group, and the proposal
Zimmermann at the close of July 31, 2000. The Super-
for the distribution of profit. The final result of this
visory Board has thanked all three men for their valuable
examination reveals no grounds for objections. The
terms in office. By order of Essen Local Court of March
Supervisory Board has given its approval to the financial
16, 2000; April 3, 2000 and August 22, 2000, Dr. Paul
statements as of June 30, 2000 prepared by the
Achleitner, a member of the Executive Board of Allianz
Executive Board, which are hereby adopted. It concurs
AG; Mr. Heinz-Eberhard Holl, Head of the Rural District
with the proposal of the Executive Board concerning the
Administration for Osnabrück; and Mr. Branko Rakidzija,
distribution of profit, which envisages a dividend of
Federal Secretary of the Supply and Waste Disposal
E
Section of the ÖTV Trade Union, were appointed to the
1.00 per entitled non-par share.
Supervisory Board.
Essen, September 22, 2000
The Supervisory Board
Dr. h.c. Friedel Neuber
Chairman
11
Special Report
12
*
* Subject to approval by the competent bodies of WFG
(Westfälische Ferngas)
THE NEW RWE: LEAN AND RESPONSIVE
Deregulation, international orientation, new technologies – our markets demand an entirely
new breed of utility. We are eager to meet this challenge. Effective October 1, 2000 we adopted
an entirely new group structure driven by market orientation, speed and efficiency. It will put
us in the vanguard of European multi-utility companies.
The reorganization was based on the principle of
DETERMINED TRANSFORMATION FOR A DYNAMIC
breaking down the value chain in our core businesses to
LAUNCH
form potent operating units. Each of these is to focus on
The reengineering process demands and fosters the ability
a key competence, from power generation, the grid and
to accept a fresh outlook. Although RWE is retaining its
gas to sales and trading.
name, it is adopting an entirely new structure.
BENEFITS:
■
■
■
■
■
■
The energy and environmental activities of RWE
More immediate contact to individual customer
and VEW are to be conducted in eight independent
target groups
companies, five of which are new. The operating units are
Better utilization of business potential and
to be overseen directly by RWE AG in its function as a
strengths
holding company. This completely redefines the organiza-
More effective control by way of a business-specific
tional core of RWE and VEW. The first stage was imple-
system of targets
mented in the year under review when, on April 1, 2000,
Leaner and more transparent structure and
we brought together the lignite mining and generating
procedures
activities in the Rhineland. Most of the remaining steps
Faster decision-making and implementation
were taken much earlier than originally planned, effective
processes
October 1, 2000.
Clearer accountability
13
Special Report
RWE Plus:
Focus on systematic marketing
RWE Net:
THE NEW
Responsible for 375,000 km of electricity lines
RWE Plus is the Group’s horizontal, cross-product cus-
RWE Net oversees all our network activities in the elec-
tomer interface. Its principal purpose is to sell electri-
tricity sector; we are bringing together the transmission
city, but it also gives customers access to all the other
and distribution networks of RWE and VEW. Our
multi-utility products from a single source. To ensure a
network is the densest and most extensive in Europe.
uniform market presence, RWE Plus is responsible for
coordinating the marketing strategies and management
14
of the various customer segments.
RWE Gas*:
Amalgamation of gas expertise
RWE Trading:
Benchmark for pricing
RWE Gas is the operating management company for all
All the trading business is executed under the manage-
the Group’s gas activities. It controls the development
ment of RWE Trading. It forms the interface between
and integration of our gas skills all along the value chain,
generation, the wholesale market and sales. Our traders
from procurement, transport and storage to distribution
deal in electricity, gas, oil and coal, and procure primary
and sales.
energies for our generating activities. Our price policy is
* Subject to approval by the competent bodies of WFG
(Westfälische Ferngas)
driven by the market prices established by RWE Trading.
STRUCTURE:
RWE Power:
Oversees the power station inventory
RWE Umwelt:
Integration reinforces market leadership
RWE Power is responsible for all the hard coal and
This company organizes the waste disposal and recycling
gas-fired power stations and the nuclear power plants.
activities and controls the water and waste water busi-
It also controls the generating mix of the new RWE,
ness of the new RWE. It is closely integrated in co-
including the lignite-fired power stations.
ordination of the Group’s multi-utility strategy. To
exploit cross-selling opportunities, RWE Umwelt collaborates with RWE Plus.
15
RWE Rheinbraun:
One-stop power generation and mining
RWE Systems:
Pooling services for the whole Group
The production and conversion of lignite to electricity as
RWE Systems renders services to the Group as a whole,
well as our interest in the international hard coal mining
from data processing and materials management, to
business are managed by a single entity. The strategy and
managing the real estate and building portfolios.
power plant capacity utilization planning are coordinated with RWE Power.
TESSAG, RWE-DEA and financial holdings
TESSAG and RWE-DEA are to retain their existing structures.
The companies that operate outside of our core business are held as financial holdings. These are HOCHTIEF, Heidelberger
Druckmaschinen, HARPEN and – until they are sold – the chemicals activities of RWE-DEA.
Special Report
THE NEW
16
THE LOGO
Following the merger, the new RWE is also adopting a fresh appearance, including a new corporate identity and logo that
reflect the transformation in the Group’s make-up.
For the first time in its history, the Group has a unified logo: a symbolic hand against a blue background. It illustrates
our multi-utility concept – all services from a single source – as well as our brand values, namely competence, customer
proximity and approachability.
The new logo forges a visual link between the quality products and services originated by RWE. It sets an inimitable
landmark in the competitive environment.
FACE:
17
THE CAMPAIGN
RWE’s reorientation as a pacemaker and instigator, and its unconventional approach that redefines traditional
perspectives in order to achieve better solutions, give rise to parallels with Christoph Daum, the future chief coach of the
national soccer team. His skills as a manager, motivator and innovator are widely acknowledged. RWE recently launched
an advertising campaign with the German coach.
The campaign strategically ties together the corporate brand and Avanza, the product brand, which sponsors Christoph
Daum’s current club, Bayer 04 Leverkusen. The motto of the RWE campaign speaks for itself: Thinking has changed
direction.
Special Report
One group. Multi utilities.
18
THE MERGER: HIGH ENERGY + HIGH SYNERGY
Green light for a major step ahead. In June 2000 the shareholders approved the merger of
RWE and VEW, giving rise to Germany’s leading utility. The benefits extend from underpinning
the impetus of our European multi-utility strategy to attractive cost cutting synergies.
E
COMPELLING STRATEGIC LOGIC
POTENTIAL SYNERGIES OF MORE THAN
The merger of RWE and VEW marks an ideal strategic
MILLION
fit:
In view of the high pressure on prices in the energy indus-
700
try, cost synergies are among the key benefits of the
■
■
■
RWE and VEW supplement and reinforce each
merger. We have determined an annual cost saving
other’s core businesses.
potential of
RWE and VEW can implement their equivalent
VEW, this represents an above-average volume. The
multi-utility strategies more quickly together than
greatest potential for savings resides in the power
as discrete entities.
stations, administration and the electricity network. We
The strategic and regional match engenders
expect to achieve the total volume by the end of fiscal
considerable synergetic potential.
2003/04. In addition, we can eliminate
E
725 million. Measured against the size of
from the capital spending budget.
E
250 million
19
Special Report
Much improved competitive position: With sales of some
E
4.8 billion in 1999 and almost 15,000 employees,
CONCERTED
Electricity:
The merger strengthens our position among
Europe’s largest utilities. RWE’s electricity sales volume
VEW is Germany’s fifth largest utility. Together we
will increase from 171 to about 210 terawatt hours.
occupy leading market positions:
Together we supply more than ten million direct private
1
customers, 50,000 industrial customers and 200 distributing utilities. Bringing together the power plant
portfolios will achieve a balanced energy mix comprising
20
lignite, hard coal and gas-fired and nuclear power stations.
With an aggregate length of 375,000 km, we own of one
of Europe’s most extensive electricity networks.
October 21, 1999
February 23, 2000
MERGER MI
The Supervisory Boards of
The Supervisory Boards of
RWE seeks to pay
RWE and VEW authorize
RWE and VEW approve the
par DM 50 share in a volun-
RWE and VEW ratify the
the Groups’ Executive
merger concept.
tary public offering to all the
merger agreement.
March 8 and 21, 2000
E
May 4, 2000
200 per
Boards to commence merger
private and municipal share-
negotiations.
holders of VEW.
The Supervisory Boards of
STRENGTHS:
Gas:
The merger makes us the number-two on the
Waste disposal:
RWE Umwelt and Edelhoff, the VEW
E
2 billion.
German gas market. RWE’s gas sales volume will rise
subsidiary, generate total sales of more than
from 94 to 177 terawatt hours. Together we supply more
We are therefore bolstering our stance as the number-
than one million customers. By extending each other’s
one on the German and number-three on the European
gas and electricity supply areas, we have created an
market. RWE’s current turnover in this business unit is
ideal platform for implementing an integrated strategy
some
2
E
1.5 billion.
3
for these energies.
21
LESTONES:
June 27 and 29, 2000
November 23, 2000
The shareholders’ meetings
Final ordinary shareholders’
exchange of shares. RWE
to receive five shares in the
of VEW and RWE approve
meeting of the “old” RWE.
shareholders are to receive
new RWE for each par
the merger agreement.
Thereafter the merger is to
shares of the same class in
DM 50 share in VEW.
be entered in the Commercial
the new RWE at a ratio of
Register, thus triggering the
1:1. VEW shareholders are
RWE Share
UPTURN IN RWE SHARE PERFORMANCE
The share price pattern was disappointing in the year under review. Since July 2000, however, the RWE
shares have significantly increased in value; the electricity market has become more predictable.
Moreover, we have mapped out a course that will create value, implemented the largest share buyback
program in German history, and initiated a more intensive information policy.
22
WEAK PERFORMANCE IN REPORT YEAR
report year the RWE common and preference shares had
In the period covered by the present report the German
slipped to 19.5 % and 13.2 % of the equivalent prior
stock market rose sharply. The DAX climbed by almost
year’s values.
30 % to 6,898 points as per June 30, 2000. The upsurge
was prompted primarily by the above-average develop-
CLEAR PRICE RISE IN NEW FISCAL YEAR
ment of technology, media and telecommunications
The share performance has picked up substantially since
shares. German utilities’ stocks played only a subsidiary
the beginning of fiscal 2000/01. Measured against June
role. This trend was reinforced by the debate concerning
30, 2000, the common share price had risen by 18.9 %
the phase-out of nuclear energy and the continuing uncer-
effective August 31, 2000. In the same period the prefer-
tainty concerning electricity prices. At the end of the
ence share advanced 18.8 %. This pattern reflects the
PERFORMANCE of RWE shares relative to DAX and CDAX Utilities
140
DAX
120
CDAX Utilities
100
RWE preference share
80
RWE common share
60
06/30/99
08/31/00
06/30/99 = 100
COMPARATIVE PERFORMANCE OF RWE SHARES
% p.a.
1 year
5 years
10 years
RWE common share 1)
–
19.5
+ 11.8
+
7.3
RWE preference share1)
–
13.2
+ 12.9
+
8.0
DAX 30 1)
+
28.3
+ 28.1
+ 14.4
CDAX Utilities 1)
–
4.5
+ 14.1
+ 10.3
Dow Jones EURO STOXX 50 1)
+
37.3
+ 33.1
n. a.
Dow Jones STOXX 50 1)
+
30.6
+ 32.0
n. a.
Dow Jones STOXX 1)
+
23.4
+ 27.0
n. a.
Dow Jones STOXX Utility 1)
+
7.4
+ 22.3
n. a.
REXP 2)
+
0.8
+
6.8
+
8.0
1) Price development including cash dividends and earnings from capital market measures
2) Index for government securities on the German bond market with a residual term of 0.5 to 10.5 years with due regard to price
changes and interest income
23
return to a more positive assessment of utilities’ stocks in
Moody’s awarded a rating of Aa3 and Standard & Poor’s
response to the Cartel Office’s approval of the merger
a mark of AA-. Both agencies conferred the highest
with VEW and, in particular, the successful conclusion of
possible short-term rating, namely P-1 and A-1+
the consensus talks on nuclear energy. Other influential
respectively.
factors were the stabilization of electricity prices and the
renaissance of the old economy.
Apart from state-owned enterprises, RWE thus
ranks among the European utilities with the highest
CLEAR LONG-TERM INCREASE IN VALUE
ratings. Furthermore, RWE is one of only a few DAX
Investors who purchased RWE common stock in mid-
industrial stocks to have a long-term rating. Our rating
1990 booked a return of more than one hundred per cent
enables us to raise long-term funds on the capital market
in mid-2000. In this period a securities account with an
at especially favorable rates.
initial value of
to
E
E
10,000, for example, would have grown
20,204. This corresponds to an average annual yield
of 7.3 %. An equivalent investment in preference shares
would have increased to
E
21,648. These performance
figures assume that the full amount of dividends and
rights revenues was reinvested.
HIGH MARKS FROM RATING AGENCIES
To enhance our company’s image among the financial
community, we applied for ratings from the two leading
agencies, Moody’s and Standard & Poor’s, at the
beginning of February 2000. Each gave an above-average
assessment of RWE’s long-term creditworthiness;
RWE Share
24
REPRESENTED IN EUROPE’S FOREMOST INDICES
the envisaged exchange of shares will increase their
The RWE share is listed in 35 European stock indices,
total number by only about 5 %.
making it one of the continent’s strongest blue chips.
Among others, it forms part of the DAX 30, CDAX Utili-
By the balance sheet date, June 30, 2000, we had
ties, Dow Jones EURO STOXX 50, Dow Jones STOXX and
repurchased 32 million preference shares from the
FTSE EUROTOP 300.
market. We have since continued to redeem shares and
thus executed the largest repurchasing program in the
history of the German stock market.
DIVIDEND REMAINS HIGH
The Supervisory and Executive Boards have decided to
propose a dividend of
E
1.00 per non-par-value share to
STOCK OPTION PROGRAM FOR EXECUTIVES
the Annual General Meeting. In other words, despite the
We have extended the executive stock option program we
pressure on earnings in our core business, we intend to
launched in spring 1999. Our goal is to offer a stronger
pay our shareholders an unchanged dividend. The total
incentive to fulfill our company targets. Third-tier execu-
payout for fiscal 1999/2000 is thus
(previous year
E
E
523 million
555 million).
tives were integrated in the program for the first time.
More than 700 executives have been granted a total of
4.3 million options to purchase RWE common shares.
SUCCESSFUL BUYBACK OF PREFERENCE SHARES
On November 18, 1999 the Annual General Meeting
Each option entitles the holder to purchase
of RWE AG approved the repurchase of up to 55
one share. The options have a term of five years and
million preference shares, representing some 10 % of
can be exercised between the third and fifth year. The
the company’s capital stock. In keeping with the prin-
price at which the entitled executives can acquire RWE
ciple of one share, one vote, we wish gradually to
common stock depends on the share’s performance
reduce the proportion on non-voting shares. The share
measured against the Dow Jones STOXX index, with
buyback program also makes the merger with VEW
the proviso that the share must gain at least 6 %
more favorable for the shareholders of the new RWE;
a year. The subscription price is determined by dis-
RWE SHARE INDICATORS
1999/2000 1998/1999 1997/1998 1996/1997 1995/1996
Per share 1)
Earnings 2)
E
2.24
2.07
1.80
1.64
1.51
Cash flow 2)
E
6.19
8.25
8.47
8.70
8.02
Dividend 3)
E
1.00
1.00
0.92
0.82
0.77
Dividend including tax credit
E
1.43
1.43
1.31
1.17
1.09
Balance sheet ratio 4)
E
11.00
10.92
10.15
10.95
10.69
End of year (06/30)
E
35.20
44.89
54.61
38.35
30.32
Highest
E
46.55
55.48
56.50
40.32
31.60
Lowest
E
30.50
36.20
37.32
26.95
24.59
End of year (06/30)
E
28.40
33.70
39.42
31.04
23.93
Highest
E
34.70
40.65
43.87
32.08
24.24
Lowest
E
24.95
23.50
30.32
21.94
19.48
555
511
455
425
Common share prices
Preference share prices
Dividend paid
E
million
Payout ratio 5)
5236)
%
43.2
48.3
51.2
68.2
69.5
Number of shares (06/30)
million
523.3
555.3
555.3
555.3
554.1
Common
million
473.0
473.0
330.4
330.4
330.4
Preference
million
50.3
82.3
217.8
217.8
216.6
Registered
million
–
–
7.1
7.1
7.1
18.1
24.0
27.0
19.7
15.4
Market capitalization (06/30)
E
billion
counting the market price at the time the option right is
exercised.
In the context of the existing share option plan
for employees, we have issued a further 1.5 million
options to about 25,500 individuals.
1) Weighted average number of shares outstanding in 1999/2000: 541.5 million (previous
year: 555.3 million)
2) From 1997/98 based on IAS
3) 1997/98 dividend includes anniversary bonus
of E 0.05
4) Equity (less proposed dividend) per share
5) Referred to net profit
6) Less dividend paid for the own shares not
entitled to a dividend held by the company at
the time of adoption of the resolution concerning profit distribution
25
RWE Share
26
NEW CHALLENGES FOR INVESTOR RELATIONS
Looking after institutional investors
The financial market has once again stepped up its
The following publications and events reach an aggregate
demand for information. The principal subjects in the
of more than 1,000 institutional investors and some
report year were the fundamental changes in the German
50 financial analysts employed by the major banks:
electricity market and our response to the transfor-
■
Two analysts’ conferences coinciding with
mation, namely the merger with VEW, our offensive on
publication of the half-year and annual financial
costs and the realignment of the Group structure. Among
statements
the other topics were political issues, such as the phase-
■
on individual divisions
out of nuclear energy and the tax reform. For this reason
we intensified the dialog with our shareholders.Three key
■
Need to address institutional and potential investors
in RWE more directly
■
■
Italy, Switzerland and the Netherlands
■
Closer insight into internal processes and
management for analysts
12 to 14 roadshows a year targeted at investors in
Germany, the USA, Great Britain, France, Spain,
requirements emerged:
■
Three to four analysts’ conferences a year to report
International conference calls on quarterly financial
statements and key individual topics
■
About 150 individual meetings with investors and
More extensive information on issues that require
analysts in our offices, sometimes in the form of
explanation
one-day company field trips embracing several
divisions
■
Participation every year in five to eight international conferences for investors
■
Distribution of IR newsletters by fax and e-mail
WHAT HAPPENS NEXT
RWE/VEW MERGER TIMETABLE
November 23, 2000: Final Annual General Meeting of
the “old” RWE AG.
From November 24, 2000: Entry of the merger creat-
ing the new RWE AG in the Commercial Register,
thus rendering the merger effective.
From effectiveness of the merger:
■
Delisting of the RWE common and preference
shares and the VEW common shares at the close of
trading on the date of entry in the Commercial
Looking after private investors
27
Register
Some 250,000 private investors hold shares in RWE. By
■
Exchange of shares starts on the following market
way of the following media, we offer them the same level
day: RWE shareholders receive same-category
of information as institutional investors and analysts:
shares in the new RWE at a ratio of 1:1. VEW
■
Among other things, our website at www.rwe.com
shareholders obtain five shares in the new RWE for
contains up-to-the-minute company news, share
each VEW share with a par value of DM 50. The
prices and profit forecasts by leading investment
exchange program runs for three months. Shares
houses
are exchanged by the competent depositary bank
■
Presentation materials for analysts’ conferences and
free of charge and taxes
conference calls are available on the Internet
■
■
The shares of the new RWE are to be listed in Ger-
Our investor hotline is staffed by trained employees.
many on the stock exchanges in Frankfurt am Main
Calls to the hotline peaked at more than 3,000 on
and Düsseldorf as well as on the Swiss stock
one day. We also respond to telephone and e-mail
exchange. The American Depositary Receipt (ADR)
inquiries within 24 hours.
program sponsored by RWE is to be sustained by
its successor in title, the new RWE. The ADR
program for preference shares is to be terminated.
Contact addresses
Investor hotline
Germany: 0 800 – 60 60 60 60
Abroad:
00 800 – 60 60 60 60
Internet: www.rwe.com
E-mail:
[email protected]
Annual Review
A YEAR OF KEY DECISIONS
The deregulation of the electricity market has left an indelible mark. Although sales climbed by some
25 %, the operating result dipped by 15 %. We are responding with an aggressive strategy founded on the
merger with VEW and the most far-reaching change process in the company’s history. It will enable us to
halt the downturn in earnings and create the basis for continuous profit growth.
28
WORLD ECONOMIC CLIMATE MORE FAVORABLE
year’s rise was just 1.4 %. Industrial output was general-
The global business cycle picked up appreciably in the
ly more prodigious. Rising capacity utilization and sales
year covered by the present report. As individual
prospects boosted capital spending. Private consumption
countries pulled out of regional crises in Asia, eastern
also escalated.
Europe and South America, demand and production
picked up considerably.
WIDELY DIVERGENT TRENDS IN RWE’S KEY BUSINESS
SECTORS
North America sustained its sharp economic
The German energy industry did not benefit from the
upturn thanks to lively domestic demand. Towards the end
economy’s reinvigoration. The intense competition for
of the fiscal year, however, the US economy lost some of
market shares peaked in this, the second business year
its momentum following an increase in key interest rates.
after the electricity market’s deregulation. Prices
Japan’s economy showed signs of a recovery.
slumped quickly and dramatically. Despite the momentum
produced by the business cycle, primary energy consump-
The EU member states registered a definite
tion in Germany fell by 2.5 %.
upswing, fueled primarily by buoyant export business. The
cornerstone was provided by a persistently high volume of
The petroleum sector was overshadowed by
exports to the USA and growing demand from emerging
record crude oil prices. Revenues in the petroleum
nations. Additional impetus was generated by the euro’s
refining business were initially unable to keep pace with
devaluation. Domestic demand subsequently improved as
the rapid advance of crude costs. The situation worsened
well.
in February 2000 as a price conflict unfolded on the German gas station market.
The German economy benefited in particular
from the vigorous export business. Demand on the home
Waste disposal activities in Germany were
market also strengthened. The gross domestic product
curtailed by stagnating volumes and tough competition
increased by 2.6 % in the year under review. The previous
between private enterprises. New opportunities were
created at the same time by the continuing round of part-
SALES CLIMB BY 25 %
privatizations and the award of municipal contracts.
In the year under review consolidated net sales climbed
24.7 % to
The markets in which the Industrial Systems
E
29
47.9 billion. The strong growth was largely
attributable to first-time consolidations abroad. The
Division operates behaved in different ways. German utili-
international component of the Group’s sales thus
ties cut back their capital spending and maintenance
increased from 27.6 % to 36.8 %. Above all, domestic
activities, whereas other branches of industry picked up
sales were bolstered by the rise in crude oil prices. This
in response to the healthy economy. The international
trend was countered by a sharp decline in electricity
printing industry made especially good progress.
prices, which pushed revenues down. Allowing for consolidation effects, Group sales grew by 11.2 %.
The worldwide building sector generally followed
the pattern of economic development, but demand in
Germany remained unsatisfactory.
The Energy Division’s external net sales were on
a par with the previous year’s. The Energy and the Mining
and Raw Materials Divisions were combined for the first
1999/2000 1998/1999
RWE Group
SALES BY REGION
Germany
63.2 %
72.4 %
Rest of Europe
14.2 %
14.5 %
America
19.1 %
9.9 %
Asia
2.8 %
2.5 %
Africa
0.4 %
0.5 %
Australia
0.3 %
0.2 %
Annual Review
time in fiscal 1999/2000 following the merger of RWE
The Petroleum and Chemicals Division lifted its
Energie’s lignite-fired power plants with Rheinbraun’s
sales by 32.4 %. Its progress was driven by higher prices
lignite mining activities effective April 1, 2000.
for crude oil and products, as well as increased mineral
oil taxes. The most substantial growth was achieved by
The price reductions triggered by competition in
the downstream subdivision, especially with petroleum
the electricity sector initiated an abrupt decrease in sales.
products. In the upstream segment, we more than com-
Adjusted to eliminate the electricity tax that was imposed
pensated the contraction in crude oil business by way of
in April 1999, electricity turnover fell by 15.7 %. An
higher crude oil and gas prices as well as a rise in domes-
elevated volume of sales to industrial key accounts and in
tic gas sales volumes. Sales in the chemicals subdivision
electricity trading dampened the impact only marginally.
were pushed up by increased product prices despite the
The gas sales revenues posted by the Energy Division
disposal of the PVC business.
increased because of higher volumes and prices. In the
30
Sales by the Environmental Services Division
lignite segment, sales were reduced in particular by
price-led revenue downturns from the deliveries by
edged up by 3.0 %. Higher revenues in the waste disposal
Lausitzer Braunkohle (LAUBAG) to VEAG Vereinigte
and recycling subdivision counteracted the diminished
Energiewerke. The first full-year consolidation of our
sales of the water/waste water and environmental
American hard coal company, CONSOL Energy, gave rise
consulting business segments.
to additional sales of
E
2.1 billion. Without this incluThe Industrial Systems Division expanded its
sion, the Energy Division would have recorded a 9.3 %
sales by 12.9 %. Key to this development were the first-
decline in sales.
time consolidation of the digital printing activities
NET SALES
RWE Group
Energy (including Mining and
Raw Materials)
of which electricity/
natural gas tax
1999/2000
1998/1999
Change %
E
million
13,536
13,674
E
million
443
124
+ 257.3
Petroleum and Chemicals
of which mineral oil tax
E
E
million
million
18,008
5,049
13,601
4,442
+ 32.4
+ 13.7
Environmental Services
E
million
1,524
1,480
+
Industrial Systems
E
million
6,841
6,058
+ 12.9
Construction and
Civil Engineering
E
million
7,960
3,392
+ 134.7
Other activities
of which Telecommunications
E
E
million
million
49
5
210
172
Total
E
million
47,918
38,415
+ 24.7
Germany
E
million
30,290
27,823
+
International
E
million
17,628
10,592
+ 66.4
–
–
–
1.0
3.0
76.7
97.1
8.9
OPERATING RESULT by Division
RWE Group
1999/2000
1998/1999
Change %
Energy
E
million
1,757
2,439
–
28.0
Petroleum and Chemicals
E
million
387
412
–
6.1
Environmental Services
E
million
101
96
+
5.2
Industrial Systems*
E
million
474
463
+
2.4
Construction and
Civil Engineering*
E
million
149
158
–
5.7
Other activities/holding company/consolidation
of which Telecommunications
E
E
million
million
452
341
+ 54.9
–
Total
E
million
–
–
–
204
30
3,116
2,664
–
14.5
*) Previous year’s value adjusted to allow for change in calculation of interest credit on prepayments received
acquired from the US company Eastman Kodak and the
OPERATING RESULT DOWN 15 %
generally successful pattern of business at Heidelberger
Our performance was restrained by the sharp contraction
Druckmaschinen (Heidelberg). TESSAG Technische
in electricity prices. Despite an appreciable increase in
Systeme & Services, the new company that primarily
sales, the operating result fell by just under 15 % to
embraces the energy-related technical services of the
E
former LAHMEYER, also raised its volume.
lower margins in the petroleum and petrochemicals busi-
2,664 million. Besides the collapse in power prices,
nesses as well as higher goodwill amortization also had
The Construction and Civil Engineering Division
an impact. The principal positive factors were the
accomplished the most appreciable leap in sales with a
elimination of the prior year’s losses in telecommunica-
more than two-fold increase. Its performance is attribut-
tions and first-time consolidations. In the context of its
able to the consolidation of the US construction com-
disposal, we reclassified the earnings of the mobile radio
pany, Turner Corporation, effective October 1, 1999.
operator, E-Plus Mobilfunk GmbH, as a component of the
Making due allowance for this change, sales were 13.1 %
non-operating result.
higher than in 1998/99. The growth was prompted by
major projects at home and abroad.
The operating result of the Energy Division fell
28.0 % short of the previous year’s total. Even our exten-
Following divestments in the cable and fixed network businesses, sales in the telecommunications segment
sive cost cutting measures were unable fully to counterbalance the decline in electricity prices.
were only marginal.
In the Petroleum and Chemicals Division the
operating result slipped by 6.1 %. Improvements in the
upstream subdivision failed to make good the slump in
downstream business. Besides higher processing costs,
this decrease was triggered by much lower margins in
petroleum sales and petrochemicals in particular; against
31
Annual Review
the backdrop of considerably higher crude oil prices,
of the difficult domestic price situation, delays in negoti-
input costs rose more sharply than product revenues.
ations concerning supplementary construction works, and
The upstream subdivision increased its result primarily
the restructuring of HOCHTIEF-Verkehrswegebau.
because of the hike in crude oil and gas prices. The
chemicals business segment more or less matched its
NET PROFIT SOME 6 % HIGHER DESPITE
previous year’s result.
RESTRUCTURING PROVISIONS
The profit before tax fell by 21.0 % and thus more
After putting the business back on a sound
abruptly than the operating result. The downturn mirrors
footing, the Environmental Services Division enhanced its
the drop in the financial result, which was not sufficiently
operating result by 5.2 %. The upturn was prompted by
counterbalanced by a doubling of the non-operating
operating refinements and the continued streamlining of
result.
our company portfolio.
The financial result was impaired by higher
32
Measured against the previous year, the operating
expenses from the accumulation of interest on long-term
result of the Industrial Systems Division increased by
provisions and by writing down securities. This adjust-
2.4 %. Earnings were raised despite the amortization of
ment reflects a complete write-off in respect of the
goodwill, chiefly attributable to Heidelberger Druck-
convertible bonds issued by Philipp Holzmann AG and
maschinen on a pro rata basis, associated with the
held by HOCHTIEF.
increased stake in LAHMEYER. TESSAG improved on
The non-operating result shows the impact of
the previous year’s poor operating result.
proceeds from disposals in the amount of
The operating result of the Construction and Civil
E
3.1 billion.
The main divestments were of the mobile radio operator,
Engineering Division receded by 5.7 %. Even consolidat-
E-Plus, and the cable TV company, TeleColumbus GmbH.
ing Turner for the first time failed to overcome the effects
The gains on disposal were offset by charges of
INCOME STATEMENT
RWE Group
1999/2000
1998/1999
Change %
Operating result*
E
million
2,664
3,116
Non-operating result
E
million
422
218
+ 93.6
Financial result*
E
million
612
–
52.8
Profit before tax
E
million
2,151
2,722
–
21.0
Taxes on income
E
million
595
– 1,177
Profit after tax
E
million
1,556
1,545
Minority interests
E
million
Net profit
E
million
–
–
–
935
344
1,212
–
–
396
1,149
*) Previous year’s value adjusted to allow for change in calculation of interest credit on payments received
–
14.5
+ 49.4
+
0.7
+ 13.1
+
5.5
CASH FLOW STATEMENT (abridged)
RWE Group
1999/2000
1998/1999
Change %
Cash flow
E
million
3,354
4,580
–
26.8
Net cash from operating
activities
E
million
3,241
4,782
–
32.2
Net cash used in investing
activities
E
million
–
889
– 3,614
+ 75.4
Net cash used in financing
activities
E
million
– 2,829
– 1,176
– 140.6
Net change in cash and
cash equivalents
E
million
–
168
148
–
Cash and cash equivalents
at year end
E
million
2,812
2,980
Net securities and cash and
cash equivalents at year end
E
million
15,097
13,336
–
5.6
+ 13.2
Please consult the complete cash flow statement on page 100 of the Notes.
33
E
2.7 billion, largely for restructuring measures that will
enhance our competitive position in the energy sector.
Some
E
1.7 billion of the total are being dedicated to
CASH FLOW PUSHED DOWN BY EARNINGS
The cash flow of the RWE Group fell short of the prior
years’ totals, decreasing by 26.8 % to
E
3.4 billion.
accelerating the pace of manpower reductions. The result
was also affected by our share of VEAG’s losses
The downturn is explained primarily by the weak-
associated with provisions for impending losses from elec-
er earnings of the Energy Division. The marginally steeper
tricity contracts. Furthermore, we took account of poten-
decline in the net cash from operating activities is mainly
tial burdens arising from disposals to comply with condi-
attributable to an expansion of customer financing
tions imposed by the Cartel Office.
business by the Heidelberg group.
In contrast to the profit before tax, the net profit
climbed by 5.5 % to more than
E
1.2 billion. The much
At just less than
E
5 billion, the volume of invest-
ment remained high. Furthermore, spending on securities
reduced tax burden that prompted this advance chiefly
and cash investments was higher than in the previous
resulted from minimizing the tax impact when disposing
year. On the other hand, these investments were offset by
of shareholdings. Our tax ratio fell from 43.2 % in
substantial income from asset disposals, in particular
1998/99 to 27.7 % in the year under review. Alongside
from the sale of E-Plus. At
the favorable tax effect, the net profit was bolstered by
outflow from investing activities was considerably lower
reduced minority interests in the Industrial Systems
than in 1998/99.
Division after we raised our participation in
LAHMEYER.
E
0.9 billion, the net cash
Annual Review
Financing activities consumed resources of
E
2.8 billion, or more than twice as much as in the pre-
cash investments, with borrowings more or less unchanged, by
E
1.8 billion to
E
15.1 billion.
vious year. The key factor here was the repurchase of own
shares. By the cutoff date June 30, 2000 we had spent
some
E
940 million on buying back 32 million preference
BALANCE SHEET STRUCTURE AFFECTED BY SALE OF
E-PLUS
As of June 30, 2000 the balance sheet total of the
shares.
RWE Group had increased by almost
On balance, the financing requirement was almost
E
E
10 billion to
65.0 billion. The main factors were capital expenditure
entirely covered by the net cash from operating activities.
and, in particular, the E-Plus transaction. VR Tele-
The cash and cash equivalents decreased by a little less
communications GmbH & Co, the joint venture with
than
E
0.2 billion. At the end of the year under review
they totaled
E
2.8 billion.
E.ON AG whose assets and liabilities are valued at
equity, showed the proceeds from the sales of E-Plus as
a receipt in the year under review. The profit triggered a
34
Our financial resources remain very healthy.
sharp rise in our investment income. Fixed assets
E
5 billion in total. Current
Despite the drop in cash and cash equivalents, the net
advanced by more than
financial assets were lifted by growth in securities and
assets climbed as well, by more than
E
3 billion, because
BALANCE SHEET STRUCTURE as of 06/30/2000
14.7 %
Equity and minority
interests
E
E
Fixed assets
34,493 million
53.1 %
45.2 %
Long-term
provisions
E
Inventories, accounts
receivable etc.
E
Other long-term debt
30.6 %
Short-term provisions and
liabilities
E
3,235 million
32.0 %
20,803 million
E
E
2,812 million
4.3 %
Deferred taxes
10.6 %
E
6,881 million
ASSETS
E
29,371 million
5.0 %
Cash and cash equivalents
Total
9,557 million
64,989 million
4.5 %
SHAREHOLDERS’
EQUITY AND
LIABILITIES
19,868 million
Deferred taxes
E
2,958 million
Total
E
64,989 million
Despite the pressure on earnings in our core business, we intend to match the previous year’s high
dividend. The Executive and Supervisory Boards will
propose to the Annual General Meeting that a dividend of
E
1.00 per non-par share be paid. In addition, the
entitled shareholders are to receive a corporate income
tax credit of
E
0.43.
The financial statements of RWE AG bearing the
unqualified auditors’ report of PwC Deutsche Revision
Aktiengesellschaft Wirtschaftsprüfungsgesellschaft are
published in the Bundesanzeiger and filed with the
of the first-time consolidation of Turner and other
Commercial Register of Essen Local Court. They are
influences.
available from RWE AG and on the Internet.
On the liabilities side, the short-term liabilities
SLIGHTLY FEWER EMPLOYEES
showed a clear increase. The main item was a liability of
The Group employed 152,132 people effective the cutoff
RWE AG to VR Telecommunications from the investment
date, June 30, 2000. The labor force thus shrank by
of the liquid assets arising from the sale of E-Plus. In
1.4 % in fiscal 1999/2000. Adjusted for changes in the
addition, the long-term provisions were pushed up by a
scope of consolidation, the number of Group employees
rise in expenditure for restructuring and pensions.
fell by 3.9 %.
E
The equity and minority interests fell by almost
Structural manpower adjustments were made in
0.5 billion, principally because of our share buyback
practically all business units. The cost cutting programs
program. The equity ratio decreased from 18.1 % to
eliminated some 8,800 jobs throughout the Group. A
14.7 %. The ratio of total long-term funds to fixed assets
further 5,600 employees left the Group as a result of
was 122.2 %.
divestments. At the same time we created about
3,000 new jobs. First-time consolidations added a further
DIVIDEND REMAINS HIGH DESPITE LOWER RESULT
At
E
523 million, the net profit for the year of RWE AG
9,400 people to the payroll, predominantly in the
Construction and Civil Engineering Division, which gained
was 48.7 % lower than in 1998/99. The contraction
6,200 employees, and in Industrial Systems, whose
primarily resulted from the burden of additional expen-
2,800 additional workers are employed chiefly in the
diture on the Group’s restructuring. This is reflected in
printing systems subdivision.
a decline in profit transfers by subsidiaries. The distributable profit of RWE AG corresponds to the net profit
for the year.
35
Annual Review
36
MERGER WITH VEW SIGNIFICANTLY REINFORCES
Shareholders in RWE are to receive shares of the
CORE ENERGY AND ENVIRONMENTAL BUSINESSES
same category in the new RWE at a ratio of 1:1. VEW
Initiating and executing the merger with VEW AG
shareholders will obtain five shares in the new company
of Dortmund was the outstanding event of fiscal
per par DM 50 of one VEW share. This corresponds to a
1999/2000. With sales of some
E
4.8 billion in 1999 and
company value weighting of 83.4 % (RWE) to 16.6 %
almost 15,000 employees, VEW is Germany’s fifth
(VEW). The exchange of shares is to commence on the
largest utility.
new company’s entry in the competent Commercial
Register. This will take place following the Annual
The Supervisory Boards of RWE and VEW
General Meeting of RWE on November 23, 2000.
approved the merger concept on February 23, 2000. On
June 27 and 29, 2000 the two companies’ shareholders
PURCHASE OF SHAREHOLDINGS TO REINFORCE
ratified this decision by an overwhelming majority.
WATER AND GAS BUSINESS
The water market is of growing significance to our multiThe merger is to be effected as a merger by
utility strategy. For this reason we acquired an interest in
absorption. RWE AG and VEW AG are to transfer their
Berliner Wasserbetriebe effective November 1, 1999.
assets to RWE Gesellschaft für Beteiligungen mbH,
With sales of
which will become the new RWE AG with registered
privatized municipal water utility. Together with the
offices in Essen. The merger will take place with retro-
French company, Vivendi S.A., we hold a 49.9 % stake
active economic effect from July 1, 2000.
via RWE/VIVENDI Berlinwasser BeteiligungsAG. In this
E
1.1 billion in 1999, it is Europe’s largest
context we are also exploring the options for exploiting
regional multi-utility potential by cross-selling electricity,
natural gas and heat. Berlin has thus become one of the
key projects in our “ten-metropolis program”.
By raising our shareholding in Thyssengas GmbH
Effective July 1, 1999 we sold all our shares in
from 50 % to 75 % in May 2000, we strengthened our
the cable TV network operator, TeleColumbus. On October
position in the German gas market. As the country’s fifth
18 we announced the sale of E-Plus. The interest of
largest long-distance gas company, Thyssengas posted
60.25 % held by RWE and E.ON was acquired by the
turnover of some
E
800 million in 1999. As an importer,
co-shareholder, the US telephone company, Bell South
the company has broad access to regional gas and muni-
Corporation, exercising its preemptive right. We booked
cipal utilities as well as industrial enterprises.
proceeds of
E
E
3.6 billion and a pre-tax profit of
2.8 billion.
SYSTEMATIC FOCUS: SUCCESSFUL WITHDRAWAL
FROM TELECOMMUNICATIONS
We have also ended our commitment to the satel-
In association with our concentration on energy and the
lite radio business. A new investor for Iridium LLC, in
environmental sector, we are disposing of all our interests
which VR Telecommunications holds a 8.35 % interest,
in the telecommunications business. We practically
was not found in good time, so that it was decided to
concluded this policy’s successful implementation in the
wind up the company. On March 17, 2000 Iridium
year under review.
suspended its commercial services. VR Telecommunications also intends to liquidate Iridium’s European sales
Key aspects of our activities were conducted
and gateway companies by the end of 2000 at the latest.
through VR Telecommunications GmbH & Co, a joint
venture with E.ON. At the beginning of fiscal 1999/2000
We sold our shareholdings in the German city
we raised our stake in VR Telecommunications from
carriers, Meocom Telekommunikation GmbH & Co. KG
37.5 % to 48.75 % according to a previously defined
and TeleLev Telekommunikation GmbH, in August 2000.
schedule. This enabled us to benefit from the sharp rise in
Our telephone companies in the Czech Republic and
selling prices in the telecommunications market.
Hungary and the minority interest in the Hungarian
mobile radio provider, Vodafone V.R.A.M. Rt., are in the
process of being sold.
37
Annual Review
38
FURTHER DIVESTMENTS OUTSIDE THE SCOPE OF
business conducted under the CONDEA brand (sales
CORE BUSINESS
of about
Beyond disposing of the telecommunications activities, we
■
remain committed to additional divestments. We aim to
eliminate aggregate turnover of at least
E
2.3 billion) by the end of fiscal 2000/01
Environmental Services: Disposal of the European
environmental consulting business conducted by
3 billion by the
the HPC Harress Pickel Consult group
(E 30 million turnover) by the end of 2000.
end of fiscal 2000/01. We are targeting operations
outside of the core business as well as peripheral
E
■
Construction and Civil Engineering: Sale of
activities without the critical mass embodied by competi-
HOCHTIEF’s traffic route construction business
tive prowess and financial strength.
(sales of
■
E
85 million).
Sale of non-essential real estate with a market
We concluded the following divestments in the year under
value of about
review:
2002/03.
■
750 million by the end of fiscal
Petroleum and Chemicals: Sale of the PVC business
(sales of about
■
E
E
260 million) of the RWE-DEA
THE NEW TESSAG: TECHNICAL SERVICES TO
subsidiary, CONDEA Vista Company, to Georgia
UNDERPIN THE MULTI-UTILITY STRATEGY
Gulf Corporation, Atlanta/USA, effective November
We concluded the merger of LAHMEYER with RWE AG
12, 1999.
in February 2000. TESSAG is now responsible for the
Environmental Services: Disposal of the non-Euro-
energy-related services and industrial activities of the
pean environmental consulting business embraced
former LAHMEYER. In the radically changed climate on
by ENSR Corp. (sales of some
E
200 million) to
the energy markets, we are now able to operate from a
a group of investors, Wingate Partners L.P.,
much stronger competitive position. Heidelberger Druck-
Dallas/USA, effective March 31, 2000.
maschinen AG, which formed a part of LAHMEYER, is
now a direct subsidiary of RWE AG and operates as a
The disposal of the following activities was initiated:
■
Petroleum and Chemicals: Sale of the chemicals
financial investment.
COST CUTTING PROGRAM 2000/01 THROUGH 2003/04
Cost cutting
in Energy
Division
Efficiency
enhancement
programs
Synergies from
RWE/VEW
merger
Total
2000/01
E
million
800
100
125
1,025
2001/02 additionally
E
million
400
30
250
680
2002/03 additionally
E
million
250
–
250
500
2003/04 additionally
E
million
250
–
100
350
2003/04 Total
E
million
1,700
130
725
2,555
ACQUISITIONS TO REINFORCE MARKET POSITION OF
1999/2000 COST CUTTING TARGET MET
FINANCIAL INVESTMENTS
Dramatic changes in the marketplace demand radical
Effective April 1, 1999 Heidelberg took over the office
adjustments. For this reason we are making every effort
imaging division of Eastman Kodak, which generates
to improve our cost position in the energy business. We
annual turnover of more than
E
200 million. This
reached the goal we had set for fiscal 1999/2000, namely
E
700 million in the Energy
signposts an appreciable expansion of activities in
to eliminate costs of
the growth market of digital printing.
Division. The largest part of the savings was made by
reducing electricity purchasing costs. We also implement-
In the fall of 1999 HOCHTIEF acquired all of
the shares in the Turner Corporation within the frame-
ed extensive measures to raise efficiency, including
manpower reductions.
work of a public takeover bid. HOCHTIEF has thus
reached its objective of achieving a nationwide presence
in America. Turner registered sales of almost
E
5 billion
FURTHER COST CUTTING OFFENSIVE TO SAVE
E
2.6 BILLION BY 2003/04
in 1999. In March 2000 HOCHTIEF obtained a 48.6 %
In February 2000 we significantly stepped up our
interest in the Canadian building company, Armbro
endeavors to enhance competitiveness. These focus on
Enterprises Inc.. With an annual construction volume of
further annual cost savings of about
some
E
700 million, the Armbro group is Canada’s
largest listed building undertaking.
E
2.6 billion. We
aim to achieve this volume successively by the close of
fiscal 2003/04. Some 95 % of the savings are to be made
in the Energy Division.
39
Annual Review
40
Milestones of the program:
■
“THE NEW RWE”: REORIENTATION OF CORPORATE
Precipitating the envisaged medium-term
STRUCTURE INITIATED
elimination of 6,500 jobs in the Energy Division. In
Associated with the integration of VEW is a funda-
the year under review we made a provision for the
mentally new structure for the RWE Group. The aim is to
necessary early retirement programs and severance
make our core business much leaner and more responsive.
arrangements in the amount of
■
E
The energy and environmental activities of RWE and
Exploitation of synergies in the amount of
VEW are to be conducted in eight independent com-
E
panies, five of which are new. These will focus on their
725 million in the context of the merger with
VEW. The merger costs of some
■
1.7 billion.
E
500 million are
key interests along the multi-utility value chain, from
largely shown in the form of provisions as of
generation and the network to sales and trading. The new
June 30, 2000.
companies need to adopt lean structures and procedures,
Merger of the lignite mining and power generating
concentrate on their key skills, remain close to the
activities under the auspices of Rheinbraun with
market, and employ fast decision-making processes. We
annual synergies of
E
150 million.
created the preconditions for this strategy in the year
covered by the present report. The first stage of imple-
The supplemental efficiency enhancement programs of RWE-DEA, RWE Umwelt and TESSAG are
targeting annual cost savings of about
2001/02.
E
130 million by
mentation was also completed in the year under review
when we brought together the lignite mining and generating activities in the Rhineland effective April 1, 2000.
Most of the remaining steps were taken earlier than
originally planned, effective October 1, 2000.
factors here were restructuring the Heide refinery and
CAPITAL SPENDING LOWER THAN IN 1998/99
At just less than
E
5 billion, the Group’s capital spending
implementing a series of oil and gas projects in the
was 6.1 % lower than in the previous year. Expenditure
upstream business segment.
on tangible assets increased, especially in the Petroleum
and Chemicals and Industrial Systems Divisions. In con-
The Environmental Services Division scaled down
trast, capital expenditure on financial assets decreased
its investment activity. The main target of spending was
following the prior year’s substantial investment of
procurements in the logistics and systems sector of the
E
waste and recycling subdivision.
1.5 billion in additional shares in LAHMEYER.
As a consequence of reduced spending on grid
The rise in the Industrial Systems Division was
supply facilities, capital spending on tangible assets edged
mainly attributable to higher capital spending on refining
down in the Energy Division. Investments in power plants
printing machines and optimizing production processes.
focused on the new 950 MW lignite-fired unit in Nieder-
This was augmented by the investment in the office imag-
aussem and the construction of CCGT stations on behalf
ing business of Eastman Kodak by Heidelberg.
of customers. The total was further boosted by the capital
expenditure of CONSOL, which was consolidated for the
In the Construction and Civil Engineering Division
first full year in 1999/2000. The division’s investments in
the appreciable rise in capital expenditure was prompted
financial assets rose slightly, chiefly because of the
by HOCHTIEF’s acquisition of Turner.
addition to the shareholding in Thyssengas as well as furThe Group’s financial investments principally re-
ther share purchases in Hungary and the Czech Republic.
ferred to raising the interest in the VR Telecommunications
joint venture in the amount of E 0.6 billion.This mainly con-
Capital expenditure in the Petroleum and Chemi-
cerned the shareholding in E-Plus, which we have since sold.
cals Division was higher than in the previous year. The key
CAPITAL EXPENDITURE
1999/2000
1998/1999
million
1,960
1,996
million
729
640
+ 13.9
million
241
275
–
million
580
524
+ 10.7
E
million
564
93
+ 506.5
Other activities
of which Telecommunications
E
E
million
million
849
690
1,716
198
– 50.5
+ 248.5
Total
E
million
4,923
5,244
–
6.1
Tangible assets
E
million
2,827
2,664
+
6.1
Financial assets*
E
million
2,096
2,580
–
18.8
RWE Group
Energy
E
Petroleum and Chemicals
E
Environmental Services
E
Industrial Systems
E
Construction and
Civil Engineering
*) Excluding investments held as fixed assets and other loans
Change %
–
1.8
12.4
41
Annual Review
RESEARCH AND DEVELOPMENT BUDGET
INNOVATIONS FOR THE CORE BUSINESS: FUEL CELLS
APPRECIABLY INCREASED
AND POWERLINE COMMUNICATION
With competition getting tougher all the time, innovative
We intend to be in the vanguard of new applications tech-
ability is becoming a more significant factor. We are con-
nology development in the Energy Division. Given the
centrating on three aspects. First, raising the quality and
medium-term growth in significance of distributed power
efficiency of our products and processes in our
generation in small cogeneration plants, we are also
customers’ interest. Second, continuous productivity
engaged in the further development of fuel cells. We
improvements with the aim of cutting costs. Third,
expect to commission a demonstration plant in Essen at
gaining a lead through the use of innovative technologies.
the beginning of 2002. This plant has an integrated gas
turbine; it will be the world’s first grid-linked combined
For this reason we increased the spending on
research and development by 26.6 % to
42
E
505 million in
the year under review. A total of 2,860 people were
power and heat generating station of its kind. In addition,
fuel cell trials are to be conducted with manufacturers
with a view to supplying private households.
employed in R&D at the development centers and production facilities of the RWE group.
We aim to adopt powerline communication to
offer customers data transfer, Internet access and tele-
The R&D ratios of the Group companies vary
phony by way of the existing electricity network. We are
widely from one branch of industry to the next.
currently collaborating with partner companies to verify
Approximately three-quarters of our development budget
the technical feasibility of data transfer via the low-
is consumed by Heidelberg alone.
voltage network. An independent company, RWE Powerline GmbH, has been formed. It is conducting larger-scale
operating trials with 200 households in the period until
December 2000. We look forward to offering commercial
products in 2001.
1999/2000 1998/1999
RWE Group
Energy
Spending on
Petroleum and
Chemicals
RESEARCH AND DEVELOPMENT
Industrial Systems
Other
activities
11 %
17 %
7%
10 %
77 %
67 %
5%
6%
E-BUSINESS OFFERS NEW OPPORTUNITIES FOR
e-business applications. It is fostering the implementation
SALES AND PURCHASING
of e-business concepts relating to our multi-utility strate-
Innovative e-business solutions can create additional
gy. An amount of
E
50 million has been made available.
sales channels and make existing processes more efficient
and less costly. For this purpose we prepared the ground
HIGH PRIORITY ATTACHED TO ENVIRONMENTAL
for an independent e-business company in the year under
PROTECTION
review; it was formed at the beginning of fiscal 2000/01.
Increasing environmental and climate protection require-
The new company will coordinate our e-business
ments as well as the need to conserve natural resources
activities and enter the market with its own Internet
have emerged as additional competitive factors. Against
portals. Private and commercial customers as well as key
this background comprehensive environmental manage-
accounts are to be presented with an efficient platform
ment is a high priority for RWE. The progress made by
for executing transactions relating to our multi-utility
the individual divisions is reflected in the growing number
offering. We also intend to use portals for our energy
of certified environmental management systems.
43
trading business and as a marketplace for contractor
In fiscal 1999/2000 we spent a total of
services.
E
Exploiting purchasing synergies via the Internet
866 million, which represents a decrease of 31.2 %.
The reason for the fall was declining expenditure on
is the aim of a joint project we have initiated with eleven
flue-gas desulfurization plants for power stations fired by
leading European utilities. Within its framework we are
fossil fuels following the conclusion of measures to
investigating the legal and operational preconditions for
reduce emissions. In contrast, spending on landscape
establishing a shared procurement marketplace.
preservation increased in the year under review. It
focused on measures in the proximity of opencast lignite
We have set up a venture capital fund to promote
mines and on land reclamation in the mining regions.
the commercial development of further promising
1999/2000 1998/1999
Landscape
preservation
50 %
RWE Group
30 %
Spending on
Air pollution control 21 %
41 %
Prevention of
water pollution
16 %
13 %
Waste disposal
12 %
15 %
Noise control
1%
1%
ENVIRONMENTAL PROTECTION
Annual Review
44
Environmental considerations are playing an
SYSTEMATIC RISK MANAGEMENT IS KEY TO OUR
increasing role in the production and sale of our products
DECISION-MAKING
and services. In 1999, for example, we launched the
In fiscal 1998/99 we were prompted by the Law concern-
Avanza ecological brand for electricity generated from
ing Control and Transparency in Undertakings (KonTraG)
renewable sources. The pollutant content of the fuels
to develop our existing early warning and monitoring
marketed by RWE-DEA was further reduced, in some
instruments in the form of a unified risk management
cases beyond the statutory requirements. As regards
system. It complies with the Law’s provisions to extend
environmentally sensitive power generation, we rank
the Executive Board’s reporting obligations to the Super-
among the foremost technology innovators. In the report
visory Board. Beyond the scope of the Law, the
year we appreciably reinforced our commitment to
management system also contributes to developing a
combined power and heat generation in industrial CCGT
value-driven risk culture within the RWE Group and
plants, to the further development of fuel cells, and the
forms the basis of our commercial decisions.
more widespread use of renewable energies.
The operating units and the holding company
We are also involved in exploring new instru-
continuously identify, evaluate, monitor and control their
ments for climate protection. RWE is the first German
risk situation. Within the framework of a standardized
power company to join the World Bank’s Prototype
planing and controlling process, they also report to the
Carbon Fund (PCF). It is seeking to ensure the timely
Executive Board. We assess the risks according to poten-
implementation of measures to protect the climate in
tial loss and probability of occurrence, and classify them
Third World countries and to rehearse the associated
at both divisional and Group level. The likely loss
trade in emission certificates.
associated with a specific risk is measured against the
operating result and equity of the division concerned and
These and other examples of our ecological
commitment are described in detail in the RWE Environmental Report for 2000.
of the Group. This enables us clearly to categorize risks
and to formulate appropriate plans of action.
The internal control system and audit teams, as
■
Financial risks
well as the company that audits our financial statements,
To hedge against the interest rate, currency and
monitor the efficiency and effectiveness of the risk
price risks associated with our operating business,
management system. We have installed a special risk con-
the RWE Group makes use of primary and
trolling system for our trading activities that pays due
derivative financial instruments. These are explained
regard to the particular requirements of this business.
in the Notes to the present Annual Report.
We differentiate between the following risk categories:
■
Structural risks
The political, legal and social framework in which
■
Market risks
the RWE Group operates is subject to constant
The RWE Group companies are exposed to the risks
change. Adequate security as a planning basis can
inherent in a market that is being shaped by global-
be obtained only in a stable and socially accepted
ization and deregulation. We are addressing these
environment. We therefore make every effort active-
risks with a multi-utility strategy that offers a vari-
ly to influence the climate by engaging in dialog and
ety of supply services from a single source. The
contributing our specialist knowledge to debate. A
merger of RWE and VEW and the reengineering
key example was the consensus talks between the
of the future RWE Group with independent
federal government and the utilities concerning
management companies accountable for their own
phasing out nuclear energy, which were brought to a
results are further strengthening our competitive
successful conclusion. Other major structural risks
position. Moreover, rigorous cost management poli-
that we have identified are those associated with the
cies are being pursued throughout the Group. In the
ecological tax reform, new provisions relating to the
trading business the exposure to market price
promotion of cogeneration and renewable energies,
fluctuations is restricted by continuously reexamin-
and – in view of the high proportion of lignite and
ing the portfolio’s position and setting risk limits.
hard coal-fired power plants in our portfolio – the
introduction of an emission tax. We are addressing
■
Operating risks
this risk by way of measures to enhance efficiency,
We operate technologically complex, networked
modernizing our power stations and optimizing the
production installations at every stage of the value
mix of primary energies.
chain. We counter the risk of malfunctions and
production shortfalls with the potential to impair
■
Other risks
our result by means of systematic maintenance and
As a group that practices the division of activities,
quality assurance, by continuously improving our
we are in principle exposed to risks arising from
production methods, and employing highly skilled
corporate governance as well. We take these into
personnel. Where appropriate, insurances restrict
account by implementing a Group-wide compliance
the potential impact of losses.
directive and other measures.
45
Annual Review
Key points of the agreement:
■
The federal government is to ensure that operation
of the nuclear power stations and the disposal of
their waste are not disturbed by political action. It
undertakes not to revise economic and tax
provisions in a manner prejudicial exclusively to the
use of nuclear energy.
■
The operating periods of the individual power
stations are restricted by the residual electricity
quantities they are allowed to generate. These
electricity quantities are transferable as a general
rule, both between our own stations and between
46
power station operators.
NUCLEAR ENERGY CONSENSUS TALKS CONCLUDED
WITH FEDERAL GOVERNMENT
■
The aggregate electricity quantity for all nuclear
On June 14, 2000 the negotiations between the federal
power stations is 2,623 TWh. This corresponds to a
government and the four largest German utilities
theoretical operating period of 32 years at high
concerning the phasing-out of nuclear energy were
capacity utilization. Some 810 TWh of the total are
wrapped up with an agreement. It will form the basis of
attributable to the power stations that are majority
a draft amendment to the Nuclear Energy Act to be
owned by RWE and VEW.
formulated by the government in consultation with the
■
The aggregate quantity includes 107 TWh of
companies. Our nuclear power stations will now be able
generating capacity for our Mülheim-Kärlich power
to operate within the type of reliable and clear
station. RWE has agreed not to recommission the
framework we have been demanding for eight years.
plant and to drop its compensation claims. In
return, we are entitled to transfer the MülheimKärlich quota to other stations (excluding unit A in
Biblis).
■
From July 1, 2005 radioactive waste is to be
disposed of exclusively by direct ultimate storage.
The transportation of spent fuel assemblies for
waste disposal purposes is to be resumed until local
interim storage facilities are available and as necessary to wind up existing reprocessing contracts.
■
The Konrad and Gorleben ultimate storage projects
are to be sustained.
■
The retrofitting required for unit A in Biblis, which
did not previously envisage a time limit, is to be
modified according to the agreed remaining use. The
aim of the negotiations initiated with the competent
be offset against the grid access fee. Follow-up legislation
authorities is to define a retrofitting program that
already announced by the federal government intends to
ensures both safe operation and economic viability.
double the quantity of electricity generated by industry
and interconnected companies in CCGT plants from the
ENERGY BUSINESS CLIMATE IMPAIRED BY
current 80 TWh by 2010.
LEGISLATIVE FRAMEWORK
By adopting two new pieces of legislation, the federal
government has imposed two significant burdens on electricity consumers and utilities. The rulings seek to pro-
EVENTS AFTER THE END OF
THE FISCAL YEAR
mote electricity generation from renewable energies as
well as cogeneration. They will give rise to additional
CARTEL OFFICE GIVES GREEN LIGHT TO RWE/VEW
capacities in a stagnating market. Moreover, a large
MERGER
portion of the deregulated German electricity market will
On July 3, 2000 the Cartel Office approved the merger of
be removed from the competitive environment.
RWE and VEW. The go-ahead is subject to numerous
conditions relating to the electricity, gas and waste
The Law concerning the Primacy of Renewable
disposal sectors. The principal requirement is the disposal
Energies entered force on April 1, 2000, superseding the
of the interests held by RWE and VEW in VEAG, the
former law that regulated the mandatory supply of
eastern German utility, and LAUBAG. The divestment
electricity to the public grid. It is intended to at least
process has already been initiated. The Cartel Office has
double the portion of total electricity consumption attri-
also called for the disposal of our east German regional
butable to renewable energies by 2010. Renewable
utility, Envia Energie Sachsen Brandenburg AG (Envia).
energies currently account for about 6 % of consumption.
A purchase option is to be granted to the acquirer of the
Unlike the former legislation, the new law envisages fixed
shares in VEAG/LAUBAG. In case the option is not
payments for supplying the public grid. Network
exercised, we shall remain obliged to purchase electricity
operators are also obliged to pay for all the electricity
from VEAG.
generated from renewable energies and fed into their
systems. The former load limit has been eliminated.
In the gas sector we have to give up our minority
interest in Spreegas GmbH. The Cartel Office further
The second new law refers to electricity
generation in combined heat and power plants. The
requires the breakup of rhenag, the regional utility in
which RWE and E.ON are the principal shareholders.
Cogeneration Law that entered force on May 18, 2000
protects power stations that are uncompetitive in the
Additional interests are to be unbundled by
deregulated marketplace. The payments to be made by
acquiring the some 20 % stake in VEW held by E.ON. In
network operators for electricity generated in CCGT
this context we are principally to transfer the following
plants are well above the market price. Industrial CCGT
minority interests to E.ON: GASAG Berliner Gaswerke
plants are excluded from this ruling. The costs incurred
AG, BAWAG Bayerische Wasserkraftwerke AG, Erdgas
by the power system operator that accepts the infeed can
Schwaben GmbH and Bergemann GmbH, which has a
47
Annual Review
shareholding in Ruhrgas AG. VEW will dispose of its
HOCHTIEF REINFORCES POSITION IN AIRPORT
shares in Gelsenwasser AG to E.ON.
MANAGEMENT
The bid tendered by HOCHTIEF AirPort GmbH and the
Further conditions are envisaged to simplify the
Irish Aer Rianta International plc, relating to the partial
wheeling arrangements for electricity and gas. In the
privatization of Flughafen Hamburg GmbH, was accepted
waste disposal sector VEW is to divest its interests in
on July 18, 2000. The consortium is to obtain a 36 %
Entsorgung Dortmund GmbH, Interseroh AG and
interest in the company
Müllverbrennungsanlage Hamm Eigentümer-GmbH.
HOCHTIEF SELLS PERIPHERAL ACTIVITIES
48
FISCAL YEAR TO BE ALIGNED WITH CALENDAR YEAR
In August 2000 HOCHTIEF disposed of the pre-
We will be adopting the calendar year as our fiscal year
fabricated house builder, Streif AG, and Prüm Türenwerk
instead of the period July 1 through June 30 of the
GmbH, which together generated annual turnover of
following year. In a first stage RWE AG is to switch to
about
E
125 million.
the calendar year effective January 1, 2001, so that an
abbreviated fiscal year will run from July 1 through
TESSAG EXTENDS SKILL BASE IN POWER
December 31, 2000. The consolidated financial
INSTALLATION CONSTRUCTION
statements are to be prepared on a calendar year basis
TESSAG intends to take over the Dutch company, SMIT
following an abbreviated fiscal year from July 1 through
Transformatoren N V., and its affiliates in the Nether-
December 31, 2001, implemented because of the time
lands and the USA. SMIT is a specialty manufacturer of
required to adjust the substantial scope of consolidation.
large power transformers; it posted sales revenues of
E
Our shareholders will benefit in two ways. First,
RWE’s figures will be easier to compare because the
calendar year is becoming the internationally accepted
accounting standard. The change will also reduce the cost
of preparing interim reports in divisions with different
reporting cycles. Second, we will avoid the unjustified
disadvantage imposed by the reform of company taxes. If
it were to retain its current accounting period, RWE
would not obtain the envisaged tax relief until July 1,
2001, but it would already bear the burdens introduced
to finance the reform from January 1, 2001. As a result
of the change to the calendar year, the positive effects of
the Tax Reduction Law will already have a generally
positive impact on RWE in 2001.
71 million in 1999. The objective is to round off the
transformer product range and become an all-inclusive
supplier.
OUTLOOK FOR 2000/2001
position among distributing utilities also gives us indirect
access to the private customer segment, which is the most
effective long-term route.
ECONOMIC CLIMATE REMAINS FAVORABLE
We expect the world economy to expand further in the
coming fiscal year, albeit at a slower pace. In view of the
Our infrastructure offers ideal preconditions for
country’s high export volume and a reinvigoration of
these purposes: RWE’s inventory of power stations is
domestic demand, especially for capital goods, economic
founded on a balanced mix of primary energies. Once
output is likely to increase in Germany. Against this
thorough cutbacks have been implemented, we intend to
background we anticipate a rise of up to 2 % in electri-
rank among the European cost leaders. We operate
city consumption.
Germany’s largest electricity network and already lead
on costs in this segment.
IMPROVED STRATEGIC PLATFORM FOR MULTI-
We are committed to rigorously enforcing the
UTILITY
Despite difficult market conditions in our core business,
initiated cost offensive. By the end of fiscal 2000/01 we
our outlook on the new fiscal year remains confident.
aim to have eliminated a further
Restructuring the Group is enabling us to implement our
in the Energy Division. This amount will be supplemented
multi-utility strategy more effectively and quickly. In this
by savings of some
context we are building on RWE’s greatest strength,
new management companies will be adopting additional
namely collaboration with industrial key accounts and
targets as they strive continuously to enhance efficiency.
distributing utilities in the electricity, gas, water, waste
In a period of rapid and far-reaching market changes, we
disposal and energy-related service sectors. Here we dis-
regard the exploitation of all available cost cutting
pose of an outstanding customer base in Europe’s largest
potential as a constant task. This commitment is being
energy market. We will be extending this platform while
cemented in our management processes.
exploiting the potential for cross-selling. Our strong
FORECASTS FOR 2000/2001
RWE Group
1999/2000
2000/2001*
Net sales
E
million
47,918
3
Operating result
E
million
2,664
3
Energy
E
million
1,757
4
Petroleum and Chemicals
E
million
387
2
Environmental Services
E
million
101
2
Industrial Systems
E
million
474
2
Construction and
Civil Engineering
E
million
149
4
Other activities
E
million
204
2
*) Before merger with VEW
–
E
E
800 million of costs
100 million in other divisions. The
49
Annual Review
the privatization process unfolds. At the same time, our
policy of divesting non-core activities will remain on track.
OPERATING RESULT TO BE SUSTAINED
The Group’s performance is largely governed by the
pattern of results in the Energy Division. Prices on the
electricity market appear to have bottomed out. On the
other hand, the competition-led price concessions made in
the most recent fiscal year will have a significant knockon effect because of contracts already concluded with
customers. We have nonetheless adopted the goal of closing fiscal 2000/01 with a consolidated operating result
All these steps will be much facilitated by the
50
on a par with that posted in the preceding year. It is to be
merger with VEW. By extending our market position in
met by means of an intensified cost cutting program and
the electricity, gas and waste disposal industries, we are
impetus generated by the divisions that operate outside
better placed to compete on the European stage. The syn-
the energy sector. This objective disregards the profit con-
ergies arising from the merger will make a telling contri-
tributions to be made by VEW’s activities as well as the
bution to our cost cutting endeavors. They will amount to
envisaged divestitures.
about
E
125 million this year. The merger is also paring
the capital spending budget by about
E
250 million.
DIVISIONAL RESULT FORECASTS
The non-recurring cost of the merger, in the amount of
In the Energy Division the preceding year’s electricity
E
price reductions will have a delayed effect and impose a
500 million, is largely covered by the provision formed
in fiscal 1999/2000.
burden on earnings. The Law concerning the Primacy of
Renewable Energies and the Act to promote
By way of further acquisitions we will be expanding
Cogeneration are also likely to exert a negative influence.
our core business and safeguarding a position among
Our comprehensive cost cutting programs represent a
Europe’s leading utilities. Our focus is on western Europe.
counter-measure in this context. We expect to close the
We intend to develop our market share in the growth regions
year with an operating result that is not significantly
of eastern Europe by acquiring shares in local utilities as
lower than the one posted in 1999/2000.
Following the downturn in the year under review,
NET SALES IN LINE WITH PREVIOUS YEAR’S
we are counting on the Petroleum and Chemicals Division
Consolidated sales are expected to remain more or less
improving its operating result. Its performance will be
stable without the contribution of VEW, which will add
boosted by higher downstream margins. Our cost cutting
more than
E
4 billion to the Group’s total.
measures will make a major contribution here. They are
expected to be eliminating costs of
E
Sales will be pushed up by extending trading
60 million a year by
the close of fiscal 2001/02. The upstream result is likely
activities in the Energy Division, tax increases in the
to fall short of the previous year’s.
Petroleum and Chemicals Division, and turnover advances
in Construction and Civil Engineering as well as at
The Environmental Services Division intends to
Heidelberg. At the same time we will be eliminating sales
E
3 billion as we dispose of non-core businesses.
increase its operating result considerably by implement-
of up to
ing its efficiency enhancement program and sustaining
The conditions imposed by the Cartel Office in connection
the portfolio streamlining endeavors.
with the merger will reduce sales by as much as
E
The operating result of the Industrial Systems
2.1 billion following the sale of LAUBAG, the breakup
of rhenag and the optional disposal of Envia. The other
Division is on course for a rise. Bolstered by favorable
divestments refer to minority interests whose turnover is
demand, Heidelberg will close with a higher operating
not consolidated.
result as well. TESSAG is likely at least to match the
previous year’s performance.
We anticipate an operating result much lower
than the prior year’s in the Construction and Civil
Engineering Division. A positive influence will be exerted
by the first full year’s consolidation of Turner, but the
situation on the German building market has become even
tougher. In particular, the situation has been exacerbated
because of delays in negotiations concerning
supplementary construction works.
The present report contains forward-looking state-
statements are based on our own prudent assumptions.
ments concerning the projected course of business,
In view of residual risks and uncertainties, however, we
including economic and political forecasts, as well as
cannot warrant their accuracy either wholly or in part.
the anticipated development of our company. These
51
Value Management at RWE
CREATING VALUE
Our return on invested capital reached 9.2 % in the year under review. The RWE Group therefore created
value in the amount of
E
1.1 billion. Our value performance thus exceeded the cost of capital by 3.8 %.
We created less value than in 1998/99 because of the collapse in electricity prices. We are targeting an
ROIC of 15 % in fiscal 2003/04.
52
Above all, the capital costs were pushed down by
LESS VALUE CREATED
In fiscal 1999/2000 the RWE Group created value of
the contraction of interest-bearing equity; the buyback of
E
RWE preference shares reduced the subscribed capital
1.1 billion. Representing a ratio of 3.8 %, the perform-
ance was less auspicious than in the previous year. The
and reserves of RWE AG. The deferred taxes that are
change is attributable to a lower operating result and
offset against equity also changed. The underlying cost of
more substantial assets. The reduced capital costs exerted
capital rates remained unchanged.
a positive influence.
We made a moderate adjustment to the previous
year’s figures, primarily to reflect the switch from gross
The operating result in the RWE Group declined
by
E
to net interest credit on prepayments received.
0.4 billion, chiefly because of the collapse in prices
in the electricity business. The assets swelled by about
E
1.2 billion, in particular owing to the first-time consol-
idation of Turner in the Building and Civil Engineering
Division and the takeover of Eastman Kodak’s digital
printing activities in the Industrial Systems Division. The
ROIC fell accordingly, to 9.2 %.
VALUE CREATION
RWE Group
1999/2000
1998/1999
Operating result
E
billion
2.7
3.1
Operating assets
E
billion
28.9
27.7
ROIC
%
9.2
11.2
Total capital costs
%
5.4
6.2
Value created
%
3.8
5.0
The derivation of the value management components is explained on pages 140 and 141.
ENERGY: HIGHEST VALUE CREATION DESPITE
ENVIRONMENTAL SERVICES STILL BELOW CAPITAL
ELECTRICITY PRICE COLLAPSE
COSTS IN SPITE OF IMPROVEMENT
At 5.6 % or
E
0.9 billion, the Energy Division once again
Value creation in the Environmental Services Division
made the most telling contribution to the value created
was still negative, but the trend is clearly upward. Assets
by the Group. On the other hand, the total stopped well
contracted a little owing to divestments. Thanks to an
short of the previous year’s, principally because of an
operating result on a par with the previous year’s, the
operating result that was almost
E
0.7 billion lower than
one year earlier. In addition, the assets climbed by some
E
0.4 billion to
E
ROIC advanced to 6.4 %. Despite this improvement, the
return was lower than the capital costs of 7.8 %.
15.9 billion. This increase was prompt-
ed by investments in modern lignite-fired and CCGT
INDUSTRIAL SYSTEMS: HEIDELBERG AGAIN ACHIEVES
power plants as well as shareholdings. In total the ROIC
GROUP’S HIGHEST ROIC
fell by 4.6 percentage points to 11.1 %.
The value creation by the Industrial Systems Division
totaled 2.8 %. At 15.4 %, the printing systems sub-
PETROLEUM AND CHEMICALS: MARKET-LED DECLINE
division once again posted the Group’s highest ROIC,
Measured against the previous year, the value creation of
but it was lower than the previous year’s. Expansion
3.4 % was below par. The chief factors were the fall in
endeavors increased the assets, while the operating result
ROIC, from 14.6 % to 12.1 % and a marginal rise in
fell because of goodwill amortization and other factors.
capital costs. The division’s assets rose by
to
E
E
0.4 billion
3.2 billion because of higher spending on efficiency
The new technical systems & services subdivision
enhancement and expansion in all subdivisions. Some
(TESSAG) is still being established; at 3.5 %, its ROIC
of these investments were funded by divestitures. The
was low. At capital costs of 4.3 %, value creation was
operating result was pushed down by tougher competition
still negative.
in petroleum marketing and through higher costs in
petroleum processing. We were unable to counterbalance
this effect by way of higher results in the upstream
segment.
VALUE MANAGEMENT AT RWE
It is a central instrument of planning, controlling and
Increasing shareholder value is a key objective of the
monitoring all activities. How is the principle applied?
RWE strategy. Additional value is created when the
The ROIC is the ratio of the operating result to the
return on invested capital (ROIC) exceeds our capital
average tied-up assets. The determined ROIC must be
costs. Our value management system ensures that this
higher than the cost of capital used to finance the
objective is pursued consistently throughout the Group.
employed assets.
53
Value Management at RWE
For this reason we have redefined the target for
CONSTRUCTION AND CIVIL ENGINEERING:
STILL FALLING SHORT OF CAPITAL COSTS BECAUSE
the Energy Division. By the close of fiscal 2003/04, we
OF EXPANSION STRATEGY
aim to achieve an ROIC of 15 %.
This division made a negative contribution of –2.8 % to
We have raised the target return for the for the
value creation. We were unable further to improve ROIC
Environmental Services Division to 10 % in view of the
as the business expanded considerably. Operating assets
improved prospects after the successful turnaround. TES-
climbed by
E
0.9 billion to
E
5.4 billion in response to
SAG’s target has been cut to 10 % because of its funda-
the first-time consolidation of Turner and a higher volume
mental restructuring. The existing figures remain valid for
of orders in progress. Furthermore, the operating result
the other divisions. The Group’s target return by 2003/04
was slightly impaired by the difficult traffic route con-
is thus 15 %.
struction business. On the other hand, the downturn in
54
ROIC was counteracted by lower capital costs.The decrease
FUND PERFORMANCE 5.4 %
is attributable to higher initial and installment payments as
The provisions for pensions, nuclear energy and mining
well as improved management of accounts receivable.
averaged
E
23.0 billion in the year under review. They
were counterbalanced by financial assets in the amount
E
17.1 billion. The difference of
TARGET RETURNS REVISED IN LIGHT OF RADICALLY
of
CHANGED MARKET
invested in operating assets.
E
5.9 billion was
We introduced target returns throughout the Group in
The fund’s aggregate profit was
fiscal 1997/98. In the interim period some key peripheral
E
1.3 billion.
conditions have changed in our core businesses. In
Alongside interest income, dividends and realized price
particular, the full impact of deregulating the energy
gains (E 1.1 billion), the total contains an interest credit
markets could not be foreseen.
in respect of funds invested for operating purposes in the
amount of
E
0.3 billion. The non-realized market value
changes totaled
RWE Group
TARGET RETURNS
by Division
E
2003/2004
Energy
%
15.0
Petroleum und Chemicals
%
18.0
Environmental Services
%
10.0
Technical Systems & Services
%
10.0
Printing Systems
%
20.0
Construction and Civil Engineering
%
9.0
Group
%
15.0
Industrial Systems
– 0.1 billion.
VALUE CREATION by Division
RWE Group
ROIC
1999/2000
Capital costs
1999/2000
Value created
1999/2000
ROIC
1998/1999
Energy
%
11.1
5.5
5.6
15.7
Petroleum and Chemicals
%
12.1
8.7
3.4
14.6
Environmental Services
%
6.4
7.8
1.4
5.9
Industrial Systems
%
11.8
9.0
Technical Systems & Services
%
3.5
4.3
Printing Systems
%
15.4
10.8
Construction and Civil Engineering
%
3.8
6.6
All divisions
%
9.6
Group
%
9.2
–
–
–
2.8
–*
0.8
–*
4.6
20.5
2.8
4.8
12.6
5.4
3.8
11.2
*) Comparable prior year’s figures not available
55
Measured against market values, the fund’s
Nonetheless, we attained our prime objective in
performance of 5.4 % was higher than in 1998/99, but
the report year, namely to balance the fund’s aggregate
remained below our medium-term target return of 7 %.
profit of
Stock markets performed well, but the bond markets were
the forenamed provisions.
E
1.3 billion against the interest expenses for
weak. In the period covered by the present report, each of
our benchmarks, the German share index, DAX, and the
European Dow Jones STOXX 50 posted growth rates of
some 30 %. The BHF bond index achieved an overall
performance of just 0.7 %. Since we have invested our
financial assets predominantly in fixed-interest securities,
the strong performance of the stock markets had only a
pro rata impact.
RWE FUND CONCEPT
from investing the financial assets must be at least
We have transferred the provisions for pensions,
as high as the interest expenses for the forenamed pro-
nuclear energy and mining to a fund balance sheet. On
visions. In the medium term the investment will be
the other side are the associated liquidity or financial
expected to generate an even more substantial yield.
assets. Our primary objective is to achieve at least a
The fund will then be making an additional value
break-even fund result. In other words, the income
contribution to the operating business.
Workforce
LOOKING FOR AND FOSTERING POTENTIAL
Change is a permanent process. Our new personnel strategy is seeking to recruit qualified and motivated
employees for the more intense competitive environment. We aim to promote a theoretical and practical
business approach on all tiers – with individual people development, anticipatory management planning
and the Group-wide exchange of high-potential employees.
56
MARKET PROMPTS DECLINE IN LABOR FORCE
Divisions. As a consequence of company disposals, 5,600
The Group employed 152,132 people on the balance
employees left the Group. At the same time we have cre-
sheet date, June 30, 2000. During fiscal 1999/2000 the
ated about 3,000 new jobs elsewhere. A further 9,400
workforce thus shrank by 1.4 %. Adjusted to take
positions were added by first-time consolidations. The
account of changes in the scope of consolidation, the
largest portion, totaling 6,200 employees, is claimed by
number of Group employees decreased by 3.9 %.
the Construction and Civil Engineering Division, while the
Industrial Systems Division took up 2,800, chiefly in the
Structural manpower adjustments were made in
printing systems subdivision.
practically all divisions. The cost cutting measures eliminated some 8,800 jobs throughout the Group, primarily in
the Energy and Construction and Civil Engineering
06/30/2000
06/30/1999
62,498
66,177
–
5.6
9,517
10,036
–
5.2
Environmental Services
10,120
12,460
–
18.8
Industrial Systems
40,609
39,748
+
2.2
Construction and Civil Engineering
28,782
24,969
+ 15.3
606
833
–
27.3
Total
152,132
154,223
–
1.4
Germany
106,691
111,736
–
4.5
45,441
42,487
+
7.0
RWE Group
Number
Energy
Petroleum and Chemicals
EMPLOYEES*
Other activities
International
*) Excluding employees on parental leave; previous year’s figures adjusted
Change %
SOCIALLY ACCEPTABLE MANPOWER ADJUSTMENTS
COALITION FOR JOBS WITHIN THE GROUP
We have largely employed socially compatible
We sustained our commitment to training and integrating
instruments to scale down the workforce:
young people that forms part of the employment initiative
■
attractive early retirement schemes
launched in 1998. Above all, we are providing one year’s
■
extension of part-time work for pre-retirees
work experience to prepare young people for future
■
reinforced commitment to modern working hour
careers, as well as focusing on training, and promoting
arrangements
projects targeted at assimilating the young unemployed.
By the end of the year under review, the number
of pre-retirees who had opted for part-time work had
increased by 15.7 % to some 2,600. More flexible forms
of employment, such as job sharing and teleworking, were
also utilized. The moderate agreements between the
parties to collective agreements also contributed much
to safeguarding competitive jobs at RWE.
The cost offensive initiated in February 2000
presents our personnel management team with a complex
task in fiscal 2000/01. By the end of 2003/04 we intend
to eliminate about 12,500 jobs from the core energy
business. Socially acceptable measures are to be adopted
in connection with this program.
57
Workforce
58
PRIORITY No1: SEAMLESS INTEGRATION OF THE VEW
Larger variable pay components act as additional
AND RWE TEAMS
incentives for key personnel.
If the chemistry is not right, if personnel issues are not
■
Management development is a task assigned to the
systematically resolved, mergers are unlikely to succeed.
most senior executives. Members of the Executive
About six months after merger negotiations started, the
Boards of the holding company and new
constitution of the new company’s top management had
management companies meet regularly to discuss
already been determined. Decisions were taken on the
appointments to key positions, transfers within the
basis of potential analyses and workshops attended by
Group, and the promotion of high-flyers. Their role
the Executive Boards of RWE and VEW. We kicked off
also includes systematic planning for the next
the process on August 21, 2000 with a conference
generation of managers.
entitled “Shared success”, at which approximately
700 managers were briefed on the new RWE.
■
By means of regular management forums at various
levels we seek to foster an understanding of crucial
strategic developments and to promote interdiscipli-
POLICY RETHINK: NEW DEMANDS TO BE MET BY
MANAGEMENT DEVELOPMENT
Within one year the realm in which energy utilities operate has radically changed. We have responded by revising
our management development program as well. We have
started to implement its key aspects in fiscal 2000/01:
■
Based on corporate strategy, the Executive Board
and personnel department have formulated new
requirements for managerial positions.
■
Leadership by way of target setting enables us to
gear each manager’s performance more closely
towards the company’s and divisional objectives.
nary collaboration throughout the Group.
PERSONNEL MARKETING TO SAFEGUARD SUPPLY OF
SURGE IN DEMAND FOR EMPLOYEE SHARES
GRADUATES
Our share program for employees is growing in populari-
More than 600 university graduates started a career with
ty. At 48.3 %, the participation ratio in Germany was
RWE in the year under review, some of them by joining a
higher than in the previous year. We were offering
trainee program. At further education fairs and through
common shares at a discounted price. In addition, each
direct contacts, we take early measures to recruit the
purchased share granted an option to acquire three
next generation of qualified employees. Some 1,700
further common shares. The options can be exercised
working students and interns took the opportunity to
after three years provided that the RWE share price has
gain initial work experience and get to know RWE.
increased by at least 10 %. The price discount is limited
to 20 % of the market price at the time the option was
TRAINING IN CAREERS WITH A BRIGHT FUTURE
issued.
With more than 5,800 apprentices in 98 commercial and
industrial professions, we provided training to 2.2 %
SOCIAL SPONSORSHIP: THE RWE YOUTH FOUNDATION
more young people than in 1998/99. The training ratio
To promote vocational qualifications, social integration
thus reached 4.8 % in Germany. Once again we were
and social commitment, the RWE Youth Foundation
training far more people than required to satisfy our own
sponsored 15 projects with a total of
demand. As we enter the service and information era, we
year under review. The projects seek to develop children’s
also offer vocational training in emerging professions,
and young people’s initiative and acceptance of responsi-
including combined skills in mechanical engineering and
bility in a social context. The subject matter ranged from
electronics, and for information and telecommunications
avoiding excessive financial debt and preventing
executives.
addiction, to nursery education for deaf children.
E
500,000 in the
59
Divisions
60
Energy
62
Petroleum and Chemicals
72
61
Environmental Services
Industrial Systems
78
82
Construction and Civil Engineering
90
Energy
62
RAPID ADJUSTMENT OF COST STRUCTURES
We felt the full impact of the collapse in electricity prices and posted lower sales
and earnings as a consequence. With further contraction unlikely, we look forward to stabilizing the
result of our energy activities by way of extensive cost cutting. The merger with
VEW gives our multi-utility strategy additional momentum.
1999/2000 1998/1999
Energy Division
Change %
External net sales
E
million
13,536
13,674
Internal net sales
E
million
111
62
Division net sales
E
million
13,647
13,736
–
0.6
EBITDA
E
million
2,979
3,393
–
12.2
Operating result
E
million
1,757
2,439
–
28.0
Profit before tax
E
million
663
2,078
%
11.1
15.7
–
29.3
Return on invested
capital (ROIC)
–
–
1.0
+ 79.0
–
Capital expenditure
E
million
1,960
1,996
–
1.8
Cash flow
E
million
2,189
2,961
–
26.1
Number
62,498
66,177
–
5.6
Workforce (06/30)
INTEGRATION OF FORMER ENERGY AND MINING AND
and commercial customers generally remained loyal.
RAW MATERIALS DIVISIONS
Prices fell much less sharply in this segment of the
Against the backdrop of deregulated markets, we are
market.
transforming our core business. At the top of the agenda
are measures to enhance efficiency and reduce costs.
Primary energy consumption in Germany
Merging the lignite-to-electricity conversion activities
decreased by 2.5 %. Mild weather in the year under
of RWE Energie with the lignite mining business of
review counterbalanced the rise in demand prompted by
Rheinbraun represents a key part of this strategy. These
the healthy economy. Natural gas continued to gain in
operations were placed under the central control of
popularity, but oil consumption fell considerably. With
Rheinbraun effective April 2000. For this reason the
power stations curtailing their demand, the consumption
present Annual Report deals with the former Energy and
of lignite declined. Hard coal was affected by a fall in
Mining and Raw Materials Divisions as a single entity.
orders by electricity generators. The contribution of
nuclear energy, in contrast, rose as a consequence of
STEEP DECLINE IN PRICES ON GERMAN ELECTRICITY
higher capacity utilization. The exploitation of renewable
MARKET
energy sources increased slightly; they are being promot-
The intense competition for shares of the German
ed by a series of public policies.
electricity market reached its peak in the year under
review and was mirrored by a sharp and vigorous con-
Measured against the previous year, electricity
traction in prices in all customer segments. The competi-
consumption from the German national grid edged up
tion to retain and attract industrial customers and
by 1 %. Nuclear energy defended its position as the
distributors was especially tough. In this segment prices
mainstay of electricity demand coverage. The portions
dipped by more than one-third. Although still low, prices
of the individual energy sources remained largely
have been stabilizing since the beginning of 2000. Private
unchanged.
63
Energy
EXTERNAL NET SALES
Energy Division
1999/2000
1998/1999
Electricity
E
million
8,750
9,948
Gas
E
million
571
469
+ 21.7
District heat
E
million
116
114
+
1.8
Run-of-mine lignite
E
million
520
628
–
17.2
Refined lignite products
E
million
400
436
–
8.3
Hard coal
E
million
1,900
885
+ 114.7
Other activities
E
million
1,279
1,194
+
7.1
Total*
E
million
13,536
13,674
–
1.0
*) Of which electricity/natural gas tax in 1999/2000: E 443 million (previous year
64
Change %
E
–
12.0
124 million)
EXTERNAL NET SALES ON A PAR WITH PREVIOUS
ELECTRICITY SALES DRIVEN DOWN BY PRICES
YEAR
At
The Energy Division posted external net sales of
the prior year. Allowing for the effect of electricity tax
E
for the first full year, the total was 15.7 % lower than
13.5 billion in the year covered by the present report,
E
8.8 billion, electricity sales closed 12.0 % down on
which was 1.0 % lower than in 1998/99. Sales declined
one year earlier. We responded to the considerable price
as a result of competition-led price decreases in the
pressure on the German market by revising our agree-
electricity sector. This effect was largely canceled out for
ments with industrial key accounts and distributing
accounting purposes by the first full year’s consolidation
utilities. The standard special rates for business cus-
of our US hard coal company, CONSOL. Disregarding the
tomers were adjusted effective July 1, 1999. We have
impact of this consolidation, sales were 9.3 % lower than
been offering our domestic and commercial customers
in the previous year.
reduced standard rates since November 1, 1999.
1999/2000 1998/1999
Germany
PRIMARY ENERGY
CONSUMPTION
To
t
c
nt
al 4
80.2 millio
Source: Arbeitsgemeinschaft Energiebilanzen (Energy Accounting Working Party)
e
Oil
38.5 %
39.7 %
Natural gas
21.8 %
21.5 %
Hard coal
13.6 %
13.5 %
Nuclear energy
13.1 %
12.3 %
Lignite
10.6 %
10.4 %
2.4 %
2.6 %
Water, wind,
other
EXTERNAL ELECTRICITY SALES VOLUME
Energy Division
1999/2000
1998/1999
Change %
Private and commercial
million kWh
32,378
32,579
–
0.6
Business
million kWh
27,764
27,919
–
0.6
Key accounts
million kWh
102,197
99,633
+
2.6
Industry
million kWh
42,437
38,645
+
9.8
Utilities
million kWh
57,211
60,534
–
5.5
Trade and services
million kWh
2,549
454
Electricity trading
million kWh
8,232
7,996
+
3.0
Total
million kWh
170,571
168,127
+
1.5
+ 461.5
ELECTRICITY SALES VOLUME BOOSTED BY IMPROVED
contracts were unable fully to compensate for the
KEY ACCOUNTS BUSINESS
termination of agreements by municipal utilities. Business
Despite intense competition we increased our electricity
with domestic customers also edged down because of the
sales volume by 1.5 % to 170.6 terawatt hours. We sold
mild weather.
65
more electricity to industrial key accounts in particular,
but also raised the volume of our power trading business.
FURTHER DECLINE IN ELECTRICITY PROCUREMENT
COSTS
Besides the impetus generated by the economy,
Our electricity output in the year under review increased
growth in the key account business was fueled by new
by 1.9 % to 182.6 TWh. At some 62 %, the volume of
customers. As deregulation continued on the European
our demand satisfied by own power stations fell slightly.
electricity markets, we scored additional successes in
The shortfall is chiefly attributable to the lower output of
neighboring western countries as well. In contrast, the
our Rhenish lignite-fired power stations for inspection
volume of sales to distributing utilities declined. New
reasons. Nuclear energy, on the other hand, contributed
1999/2000 1998/1999
Germany – Public power supply
PRIMARY ENERGY SOURCES
Shares in gross electricity generation
To
t
Source: DVG
kW
al 5
04.7 billion
h
Nuclear energy
33.5 %
32.7 %
Lignite
27.6 %
27.5 %
Hard coal
25.8 %
26.9 %
Gas and other
8.6 %
thermal power plants
8.6 %
Hydropower
4.3 %
4.5 %
Energy
EXTERNAL GAS SALES VOLUME
Energy Division
66
1999/2000
1998/1999
Change %
Gas sales
million kWh
22,352
21,995
+
Gas trading
million kWh
4,502
0
–
Total
million kWh
26,854
21,995
+ 22.1
more to the total. We also made greater use of our hard
network. The volume was further bolstered by the
coal-fired units.
expansion of our gas trading business.
We further reduced the cost of procuring outside
1.6
LOWER LIGNITE PRICES PUSH DOWN SALES
electricity by optimizing utilization of our power stations
Turnover continued to trace a downward pattern in the
and purchasing at more favorable prices.
lignite business. We generated external net sales of
E
less than in fiscal 1998/99. The decline was triggered by
APPRECIABLE RISE IN GAS TURNOVER
We raised our gas sales by 21.7 % to
E
520 million with run-of-mine lignite, which was 17.2 %
571 million. The
lower prices for deliveries to VEAG’s power stations.
increase was prompted by an upturn in selling prices in
Refined lignite product sales dipped by 8.3 % to
response to higher fuel oil prices, and by volume effects.
E
We posted a gain despite the mild weather, primarily by
briquettes. The key factors here were the decommission-
connecting additional customers to our distribution
ing of briquette-fired industrial boilers and the ongoing
400 million, chiefly because of a fall in demand for
1999/2000 1998/1999
Own generation
Energy Division
PRIMARY ENERGY SOURCES
Shares in total electricity output
To
t
al
W
nk
182
,614 millio
h
62.4 %
64.3 %
Lignite
37.5 %
40.7 %
Nuclear energy
17.3 %
15.9 %
Hard coal
3.0 %
2.9 %
Gas
3.2 %
3.3 %
Hydropower,
other
1.4 %
1.5 %
37.6 %
35.7 %
Outside electricity
purchases
EXTERNAL COAL SALES VOLUME
Energy Division
1999/2000
1998/1999
Change %
Run-of-mine lignite
thousand t
50,136
47,900
+
4.7
Refined lignite products
thousand t
8,352
8,589
–
2.8
thousand sht*
78,714
38,267
Hard coal
+ 105.7
*) 1 short ton = 0.907 metric tons
restructuring of the residential heating segment. In the
FULL-YEAR CONSOLIDATION OF CONSOL MORE THAN
powdered lignite sector we benefited from the higher
DOUBLES HARD COAL SALES
price of imported energies.
Our hard coal sales reached a new dimension in the year
covered by this report. The total advanced by 114.7 %
We raised the external sales volume of run-
to
E
1.9 billion. This growth was accomplished by consol-
of-mine lignite as LAUBAG substantially increased its
idating the sales of CONSOL for the first full year. The
deliveries to the power stations operated by the east Ger-
US enterprise joined the group of consolidated companies
man utility, VEAG. In contrast, our own power stations in
on January 1, 1999. The favorable dollar exchange rate
the Rhineland and Hungary consumed less run-of-mine
provided an additional boost. Adjusted to eliminate the
lignite than in the previous year. Due to overhaul outages,
effects of consolidation and currency, sales were on a par
Rheinbraun’s power plants had a lower demand. The total
with the previous year’s.
fell by 5.5 % to 80.6 million tons. Despite selling more
electricity, the coal input of the power stations operated by
Despite the great buoyancy of the US economy,
the Hungarian affiliate, Mátrai Erömü Rt. (MÁTRA),
CONSOL’s coal deliveries remained constant in
edged down to 7.6 million tons. The lower consumption
1999/2000, closing at 78.7 million sht. Two factors
was achieved by consuming coal with a higher net calorific
curbed demand on the US market, namely the mild winter
value.
weather and the increased share of nuclear power in the
country’s generating output.
RESULT IMPAIRED BY ELECTRICITY PRICE EROSION
At
E
1.757 million, the operating result was 28.0 %
lower than in 1998/99. The key contributory factor was
the severe contraction of sales revenues in the electricity
sector. Even our extensive program of measures to eliminate costs was unable sufficiently to counter the effect.
67
Energy
NEW COST OFFENSIVE TO SAVE
E
1.7 BILLION
We have adopted further rigorous measures to make our
cost structures significantly more competitive. Disregarding the synergetic benefits of the merger with VEW, we
are budgeting for the following savings in the coming
years:
■
2000/01: E 800 million,
■
2001/02: E 400 million,
■
2002/03: E 250 million,
■
2003/04: E 250 million.
To implement the cost management program we
The non-operating result was influenced above all
68
are precipitating the previously announced manpower
by the non-recurring expenditure on endeavors to cut
reductions. We intend to eliminate 6,500 jobs. Synergies
costs. The financial result was lower than the previous
arising from the merger of mining and converting lignite
year’s, mainly because of higher expenses from the accu-
to electricity will allow the payroll to be reduced by a
mulation of interest on long-term provisions. The pre-tax
further 2,000. The merger will also give rise to the loss of
loss totaled
E
663 million.
2,400 jobs at RWE. Including the labor force measures
to be implemented by VEW, the Group will be employing
1999/2000 COST SAVING BUDGET FULFILLED
By eliminating costs of some
E
700 million, we reached
12,500 fewer people than its predecessor companies. The
workforce is to be scaled down within the framework of a
the target for the year under review. We focused on
social policy embracing early retirement, severance
reducing the cost of materials by
payments and natural fluctuation.
■
decreasing the cost of purchasing outside electricity,
■
spending less on operating and maintaining the
DEVELOPING LIGNITE AS A COMPETITIVE ENERGY
power stations and networks,
GENERATING SOURCE
■
increasing the efficiency of lignite production, and
Effective April 1, 2000 we brought together the Rhenish
■
optimizing other procurement.
opencast lignite mines and lignite-fired power stations
under the common control of Rheinbraun. The objective
We also used the existing early retirement and
severance options to reduce personnel expenses.
was to create a single accountable entity for managing
the process of converting lignite to electricity. This
organizational measure alone offers potential annual cost
savings of
E
150 million. In the process chain for gener-
ating power from lignite we aim to increase productivity
by a total of 30 % by the end of fiscal 2003/04. Meeting
this target will reinvigorate our lignite activities as a key
competitive advantage.
MULTI-UTILITY METROPOLIS PROGRAM LAUNCHED IN
primarily with electricity, but also with natural gas, oil
BERLIN
and coal. They also offer derivative deals for price
We are extending our market position in Europe by way
hedging purposes. RWE Energy Trading has sales offices
of targeted investments. In this context capital cities are
in the Netherlands and Poland and will be opening others
being given strategic priority in our “ten-metropolis pro-
soon. It is their task to acquire trading customers, market
gram”. In August 2000, for example, we initiated a pilot
services and conclude complex energy trading and risk
unified offering of electricity, gas and thermal power in
management contracts. Our electricity trading volume
Berlin. This program is based on the participation by our
already totaled 8 TWh in 1999/2000. We intend to more
Environmental Services Division in Berliner Wasser-
than double this performance this year.
betriebe (BWB), Europe’s largest privatized municipal
water utility. This investment has given us direct access to
INTERNATIONALIZATION EMBRACES POWER STATION
a population of 3.5 million people and 250,000 key
PROJECTS
accounts, as well as the small and mid-size businesses
Key accounts’ recognition of RWE as a power station
domiciled in the German capital.
operator gave us additional access to foreign markets in
the year under review. We will be supplying electricity and
MULTI-UTILITY PRESENCE UNDERSCORED IN
steam to the BASF facilities in Antwerp and Tarragona.
EASTERN EUROPE AS WELL
For this purpose we have joined forces with local
In February 2000 we concluded agreements to found two
partners to build and operate CCGT plants on site. In
holding companies with majority interests in the Prague
addition, we have commissioned power station units in
electricity utility, Praska Energetická a.s., and Praska
Portugal and Croatia in collaboration with electricity
Plynarenská a.s., the gas utility based in the same city.
generating companies.
This gives us a solid platform for offering a comprehensive array of multi-utility services in the Czech
Republic as well.
Our shareholdings in two regional utilities in
Budapest have made good progress. They represent a
potent launch pad for offering electricity, gas, water and
waste disposal services in this growth market.
PREMIER EUROPEAN PLAYER IN ENERGY TRADING
Trading already plays a major role in the European
energy market, and its significance is likely to increase
substantially in the coming years. By way of RWE Energy
Trading GmbH, which started operating in October 1999,
we rank among the leading companies in this sector. Our
traders in London and Essen conduct transactions
69
Energy
The general downturn in outlay for property,
plant and equipment is attributable to a more restrictive
spending policy, especially as regards grid supply facilities
and lignite production. Power plant investments focused
on the new 950-megawatt lignite unit in Niederaussem.
Its technology is much more efficient than that employed
in conventional facilities. From 2002 it will be contributing substantially to raising the efficiency of lignite-toelectricity conversion. We have also invested considerably
in CCGT power plants being built and operated on behalf
of customers. Since July 2000 for instance, we have been
supplying electricity and process steam to the production
70
AVANZA – BRANDED ELECTRICITY FROM RWE
facilities of Bayer AG in Dormagen. In Hungary, MÁTRA,
Effective September 1, 1999 we launched “:avanza”, our
the generating and mining company, has continued its
electricity brand for the private customer market. We
power station modernization program. Alongside the 25
offer to supply electricity to customers resident anywhere
% block of shares in Thyssengas, capital expenditure on
in Germany. An avanza tariff for electricity generated
financial assets referred to additions to shareholdings in
from renewable energies made its debut on December 1,
Hungary and the Czech Republic. Furthermore, CONSOL
1999.
acquired the gas activities of the MCN Energy Group,
which extracts methane gas from coal seams.
GAS BUSINESS REINFORCED
To strengthen our natural gas business, we raised our
POWERLINE: TELEPHONY AND THE INTERNET VIA THE
shareholding in Thyssengas GmbH by 25 % to 75 % in
ELECTRICITY NETWORK
May 2000. We procured the additional interest from Esso
We are developing new services in the network sector as
Deutschland GmbH. Thyssengas disposes of a broad
well. Powerline communication is our solution to offering
customer portfolio comprising regional gas and municipal
customers telephony and Internet access by way of the
utilities as well as industrial enterprises, especially in
existing electricity network. We are currently collaborat-
North Rhine-Westphalia.
ing with partner companies to verify the technical
feasibility of data transfer via the low-voltage network.
SLIGHT DECREASE IN CAPITAL EXPENDITURE
At just less than
E
2 billion, the Energy Division’s capital
An independent company, Powerline GmbH, has been
formed. It is scheduled to conclude larger-scale operating
expenditure was 1.8 % lower than in 1998/99. The
trials with 200 households in December 2000. We look
principal reason was the moderate decline in spending on
forward to offering commercial products in 2001 and
tangible assets. Capital expenditure on financial assets, in
intend to market these both directly and indirectly
contrast, rose slightly.
through distributing utilities.
DEVELOPING INNOVATIVE FUEL CELL APPLICATIONS
relevant activities of RWE and VEW will be integrated
Given the medium-term growth in significance of distrib-
in these companies. Their lean structures and flat
uted power generation in small cogeneration plants, we
hierarchies will enable them to act on the market more
are also engaged in the further development of fuel cells.
quickly and in closer proximity to their customers.
We will be commissioning a demonstration plant with an
Through our interest in trading, the companies will
integrated gas turbine and a total electricity output of
consistently be guided by the needs of the market.
320 kW in Essen at the beginning of 2002. It will be the
world’s first grid-linked combined power and heat gener-
OUTLOOK
ating station of its kind. In addition, fuel cell trials are
The upturn in the German economy is likely to fuel
to be conducted with manufacturers with a view to
demand in the energy sector as well. In view of our sales
supplying households. We intend to give our customers
successes, especially with domestic and foreign key
prompt access to this technology.
accounts, and the expansion of trading activities, we
expect to post an increase in volumes. Electricity market
MERGER WITH VEW TO EXTEND LEADING MARKET
prices appear to have bottomed out, but the effect of last
POSITION IN THE ENERGY BUSINESS
year’s contract revisions will be delayed and will not
The merger with VEW is giving a significant boost to our
alleviate the burden on the pattern of sales and earnings
multi-utility strategy, especially as far as the electricity
in fiscal 2000/01. The Law concerning the Primacy
business is concerned. RWE and VEW will together claim
of Renewable Energies and the Act to promote
an electricity sales volume of about 210 terawatt hours,
Cogeneration are also likely to exert a negative influence.
making it the leading utility in Europe’s largest energy
Our comprehensive cost cutting programs represent a
market. We are reinforcing our position not only as the
counter-measure in this context. We expect to close the
largest network operator, but also as the cost leader in
year with an operating result that is not significantly
this field. Bringing together the precursor companies’
lower than that posted in 1999/2000. As far as this goal
power station inventories is creating a balanced energy
is concerned, the contribution to earnings made by VEW
generating mix comprising lignite, hard coal and gas-fired
has been disregarded.
as well as nuclear power stations. In the gas business we
are benefiting from the strong market position of VEW.
FUNDAMENTAL REORIENTATION OF ENERGY DIVISION
INITIATED
The current fiscal year is one of far-reaching change for
the Energy Division. We are responding to the conceptual
redefinition of our markets by thoroughly reshaping our
own organization. Independent companies responsible for
sales, the network, the gas business and power generation
are to be launched effective October 1, 2000. Once the
merger is entered in the Commercial Register, the
71
Petroleum and Chemicals
72
UPSTREAM MAIN SOURCE OF PROFIT
Crude price at record high: while our oil and gas production benefited, the
downstream business came under pressure, and income declined. We strengthened our
position as the number-three in German petroleum sales, and are working on the sale of the
chemicals business. A profit improvement is expected in 2000/01.
Petroleum and Chemicals
Division
1999/2000 1998/1999
Change %
External net sales
E
million
18,008
13,601
+ 32.4
Internal net sales
E
million
57
42
+ 36.4
Division net sales
E
million
18,065
13,643
+ 32.4
EBITDA
E
million
738
734
+
0.5
Operating result
E
million
387
412
–
6.1
Profit before tax
E
million
373
359
+
3.9
%
12.1
14.6
–
17.1
Return on invested
capital (ROIC)
Capital expenditure
E
million
729
640
+ 13.9
Cash flow
E
million
609
585
+
4.1
Number
9,517
10,036
–
5.2
Workforce (06/30)
CRUDE PRICES AT RECORD HIGH
Petroleum demand in Germany totaled
Crude prices in 1999/2000 reached their highest levels in
119.4 million mt, a 5.2 % decline on the year before.
many years. This was due to the restrictive production
Sales of light heating oil even dropped by 19.0 % as a
policies pursued mainly by the OPEC states and the revival
result of the mild weather and high price levels. Motor
of crude demand which led to a sizeable drawdown of
gasoline sales were down 2.1 %, mainly because of the
worldwide inventories. On average for the fiscal year, the
improved fuel economy of a new generation of cars.
barrel of Brent crude cost US$ 25, twice as much as
Diesel fuel consumption rose by 4.6 % as a result of
the year before. In March 2000 the price peaked at
stronger demand in road haulage.
US$ 32. Although the OPEC members decided to
increase production, the resulting price reduction was
NET SALES PUSHED UP BY HIGHER CRUDE PRICES
small.
AND TAXES
The external net sales of the Petroleum and Chemicals
Up to March 2000 the revenues from German
Division totaled
E
18.0 billion. The 32.4 % increase was
crude refining did not keep up with the rapid rise in crude
essentially due to the higher prices of crude oil and petro-
costs. German refineries only began to improve their
leum products, and to higher mineral oil taxes.
unsatisfactory margins after that. However, the petroleum
sales situation started to deteriorate in January 2000 as
a result of fierce price competition in the retail business.
73
Petroleum and Chemicals
EXTERNAL NET SALES
Petroleum and Chemicals Division
to
E
1998/1999
Change %
Upstream
E
million
636
352
+ 80.7
Downstream
of which mineral oil tax
E
E
million
million
14,801
5,049
11,114
4,442
+ 33.2
+ 13.7
Chemicals
E
million
2,566
2,130
+ 20.5
Other activities
E
million
5
5
0.0
Total
E
million
18,008
13,601
+ 32.4
The external net sales of Upstream rose 80.7 %
74
1999/2000
636 million, primarily as a result of the crude price
The external net sales of RWE-DEA Chemicals
rose by 20.5 % to nearly
E
2.6 billion. Our prices went
surge. However, crude production was down 6.6 % to
up in the wake of higher feedstock costs. Chemical sales
3.6 million mt, mainly as a result of temporary pro-
declined by 6.8 % to 4.2 million mt, as a result of the
duction engineering problems in Norway and the natural
sale of CONDEA Vista’s vinyls business. Adjusted for that
production decline in mature fields. On the other hand,
effect, sales were unchanged from the previous year.
our production in Kazakhstan, which came on stream in
October 1998, increased significantly. Gas prices showed
HIGH REFINERY CAPACITY USE
considerable improvement, too. RWE-DEA’s gas produc-
Capacity use was high, although crude runs were slightly
3
tion rose 36.7 % to 2.1 billion m . Major volumes were
reduced because of temporarily unsatisfactory refinery
sold to customers in addition to the long-term contractu-
margins. The refinery runs totaled 20.3 million mt of
al supply and offtake commitments in place.
crude oil and semi-refined feedstocks, just 1.3 % less
than the year before.
The external net sales of Downstream increased
by 33.2 % to
E
14.8 billion, mainly because of higher
The restructuring program resolved for the DEA
crude prices and mineral oil taxes. Petroleum product
refinery in Heide in May 1997 will be completed in fall
sales totaled 20.8 million mt, a slight decline from the
2000. The most important single project is a new hydro-
year before, although domestic sales outperformed the
cracker to improve product yield pattern and plant
German market as a whole. This was primarly due to the
efficiency. The restructuring will also enable us to meet
fact that we focused on strengthening our marketing
stricter automotive fuel standards.
channels in the end-user market and upgrading the retail
network. Sales of aviation fuels increased significantly.
Petrochemical sales increased by 9.8 % to 2.6 million mt.
The reason was higher plant availability.
SALES AND PRODUCTION
1999/2000
1998/1999
thousand mt
3,593
3,848
–
million m3
2,103
1,538
+ 36.7
Petroleum products
thousand mt
20,757
21,452
–
3.2
Petrochemicals
thousand mt
2,554
2,327
+
9.8
Chemicals
thousand mt
4,212
4,517
–
6.8
Petroleum and Chemicals Division
Crude oil production*
Natural gas production*
Change %
6.6
*) Prior-year figure is adjusted, so far without minority interests
OPERATING RESULT BELOW PREVIOUS YEAR’S LEVEL
The operating result declined 6.1 % to
E
387 million. The
HIGHER CAPITAL EXPENDITURE ON TANGIBLE
ASSETS
substantial reduction of downstream earnings was due to
The capital expenditures of the Petroleum and Chemicals
depressed margins in petroleum and petrochemical sales.
Division in 1999/2000 totaled
Upstream earnings, on the other hand, showed an
from the previous year’s level. Upstream capital expendi-
exceptionally positive development, thanks mainly to
ture focused on Norway, the development of gas reserves
higher oil and gas prices, and to increased natural gas
in northern Germany, and the second expansion stage of
sales on the domestic market. Chemical earnings,
the gas storage facility in Breitbrunn in Bavaria. High
unchanged from the year before, benefited from the
downstream expenditures went into the restructuring pro-
highly profitable ethylene business, while the operating
gram for the Heide refinery and the increase in methanol
income generated by detergent raw materials and fatty
production at the Wesseling refinery. In addition, we
alcohols was down.
invested in the upgrading of our retail business in
E
729 million, up 13.9 %
Germany and new service stations in Poland.
The profit before tax improved by 3.9 % to
E
373 million. The financial result and non-operating
result were slightly higher. The latter includes a book
profit from the sale of the interest in DKV Euro-Service,
which operates a card system for trucking companies.
75
Petroleum and Chemicals
76
IMPLEMENTATION OF NEW COST REDUCTION
UPSTREAM: NEW OIL AND GAS PRODUCTION
PROGRAM
POTENTIALS
In view of the strong competitive pressure on our
After being awarded 15 – 30 percent stakes in three
business, we stepped up our profit improvement efforts
licenses in the Norwegian Sea, RWE-DEA expects to sig-
and will implement cost reductions of some
E
60 million
nificantly improve its upstream position. The concession
by the end of fiscal 2001/02, a goal mainly to be
areas hold high to very high hydrocarbon potential. At
achieved through organizational realignments. The meas-
present, we have oil and gas reserves of about 79 million
ures to be taken include a socially cushioned reduction in
mt of oil equivalent. Production could come on stream in
the number of jobs by about 300, mainly in petroleum
2006 after the completion of seismic surveys and the
sales and the headquarter service functions.
subsequent exploratory investments. In spring 2000 we
started up additional production out of Mittelplate
CHEMICALS BUSINESS TO BE SOLD
Offshore, the highest-potential German oil field, from an
In line with the RWE Group’s focus on core activities,
onshore location. That will nearly double our domestic oil
RWE-DEA Chemicals is to be sold in the current fiscal
production to more than 0.9 million mt as early as fiscal
year. In November 1999 we sold the vinyls business of
2000/01.
CONDEA Vista with a turnover of approx. E 260 million.
INNOVATIONS IN MARKETING AND SALES
OUTLOOK
We are introducing innovative marketing measures to
For 2000/01 we expect net sales to be similar to the year
respond to the strong competitive pressure in retail busi-
before and operating income to improve, mainly in the
ness. To enhance customer loyalty, DEA is participating
Downstream segment. In spring 2000 refinery margins
in the cross-industry PAYBACK program. Twenty major
began to recover from their extremely depressed level. We
retailers and service providers have become partners so
also expect better profitability in petrochemical and
far. Customers can collect points when making purchases
petroleum sales. The Upstream result is expected to be
with their PAYBACK card. The credit to customers at
below the very high prior-year level as a result of high
DEA service stations is about 1 pfennig per liter of gaso-
capital expenditures. Our cost reduction program will
line or diesel, or about 20 pfennigs per liter of motor oil.
make an important contribution to profit improvement.
We will develop and strengthen our sales of light
heating oil, diesel fuel and lubricants. DEA is now
marketing these products through DEA Mineraloel &
Service GmbH (DMS) which started doing business on
July 1, 2000.
NEW LOW-POLLUTING PRODUCTS
At the beginning of 2000 we launched a new generation
of automotive fuels. Motor gasolines now contain less
benzene and less sulfur. Super Plus gasoline already
meets the EU standards for 2005. The sulfur content of
diesel fuel has been further reduced.
77
Environmental Services
78
CLEAR IMPROVEMENT IN THE NEW FISCAL YEAR
Having achieved the turnaround, our Environmental Services Division moderately improved its
operating result with slightly higher sales. Further disposals are being made
to reinforce the core business, which will also be strengthened by the imminent integration of
the VEW Umwelt subsidiary, Edelhoff. Initial steps have already been taken to link our energy
and environmental offerings. We have the potential to raise the result substantially in the new fiscal year.
1999/2000 1998/1999
Environmental Services
Division
Change %
External net sales
E
million
1,524
1,480
+
3.0
Internal net sales
E
million
25
31
–
19.4
Division net sales
E
million
1,549
1,511
+
2.5
EBITDA
E
million
306
252
Operating result
E
million
101
96
+
5.2
Profit before tax
E
million
25
37
–
32.4
%
6.4
5.9
+
8.5
Return on invested
capital (ROIC)
+ 21.4
Capital expenditure
E
million
241
275
–
12.4
Cash flow
E
million
225
244
–
7.8
Number
10,120
12,460
–
18.8
Workforce (06/30)
MARKET OF OPPORTUNITY DESPITE COMPETITIVE
higher secondary raw material prices, bigger margins in
PRESSURE
the municipal and commercial waste sectors, and first-
The German waste disposal market was marked by
time consolidations. We also booked increases in the
diverse trends in 1999/2000. Volumes stagnated and cre-
waste disposal and recycling international subdivision.
ated additional overcapacities in the traditional waste
Key to this growth were the marginal expansion of
disposal business. Competition between private companies
operating business in eastern Europe and the favorable
for industrial and commercial waste volumes therefore
pattern traced by the US dollar exchange rate. The
remained tough. Price pressure continued to squeeze
business volume declined in the water/waste water and
margins in the municipal sector as well.
environmental consulting units following the disposal of
companies and majority interests.
New opportunities also arose, however, as local
authorities partly privatized or awarded contracts for
IMPROVED RESULT DESPITE PRICE PRESSURE
waste disposal services. This trend refers to the water and
The operating result increased by 5.2 % to E 101 million.
waste water market as well, which is largely under local
As expected, we thus stabilized our earnings situation
authority control. Significant signs of growth were also
after achieving the turnaround in the prior year. We did so
evident on the international front. The key factors here
by making operating improvements and booking income
are a rapid rise in the demand for water and an acute
from the continued streamlining of our company
need to invest in infrastructure.
portfolio.
At
SALES PUSHED UP BY EXPANDING WASTE DISPOSAL
E
25 million, the profit before tax was
AND RECYCLING BUSINESS
E
In fiscal 1999/2000 the Environmental Services Division
wholly attributable to the expenses for projected man-
posted external net sales of some
E
1.5 billion, which
was slightly higher than the previous year’s total.
Allowing for the effect of changes to the scope of consolidation, net sales advanced by 7.4 %. Growth was fueled
by more substantial sales in the waste disposal and recycling Germany subdivision. With a share of 80 %, this
unit claims the largest share of activities in the
environmental portfolio. The revenues were swollen by
12 million lower than in fiscal 1998/99. The decline is
power reduction measures relating to the merger and
contained in the non-operating result.
79
Environmental Services
EXTERNAL NET SALES
Environmental Services Division
80
1999/2000
1998/1999
+/– in %
Waste disposal and recycling
Germany
E
million
1,219
1,109
+
9.9
Waste disposal and recycling
international
E
million
75
71
+
5.6
Water/waste water
E
million
41
82
–
50.0
Environmental consulting
E
million
189
218
–
13.3
Total
E
million
1,524
1,480
+
3.0
FURTHER CONSOLIDATION OF COMPANY PORTFOLIO
BWB is Europe’s largest privatized municipal water
We sustained our program of eliminating low-yield
utility. Together with the French enterprise, Vivendi, we
participations and peripheral activities. The largest single
hold a 49.9 % share via RWE/ VIVENDI Berlinwasser
measure was the sale of the non-European environmental
BeteiligungsAG. This investment has given us direct
consulting business headed by ENSR effective March 31,
access to a population of 3.5 million people, 250,000 key
2000. This reduced annual sales by about
E
200 million.
This company operates in an especially difficult market
accounts as well as small and mid-size companies in the
German capital.
and offers only marginal synergetic potential for our core
business. We expect to sell the European consulting activ-
DOWNTURN IN CAPITAL EXPENDITURE
ities overseen by the HPC group later this year.
At
E
241 million, capital expenditure fell short of the
previous year’s. The investments in tangible assets
We have also disposed of 60 % of our shares in
remained stable. Spending concentrated on procurements
the Italian company, Saceccav S.p.A., which belongs to
for modernization and replacement purposes in the logis-
the RWE Ambiente group, and withdrawn from Romania.
tics and systems sector, the purchase of facilities, and
Sustaining activities in Romania had become untenable
landfill installation work. Financial investments were
above all because of the continuing payment difficulties
lower, but focused on commitments to strengthen the
of our partner in the joint venture with the City of
water/waste water business.
Bucharest.
BERLINER WASSERBETRIEBE TRIGGERS START OF
MULTI-UTILITY OFFENSIVE
The water market is of growing significance to our multiutility strategy. Against this background we obtained an
interest in Berliner Wasserbetriebe (BWB) effective
November 1, 1999. With sales of
E
1.1 billion in 1999,
INTEGRATION OF EDELHOFF GROUP TO EXTEND
With a view to exploiting opportunities in the
LEADING MARKET POSITION
national and international water and waste water
By merging the Environmental Services Division with the
markets, we plan to extend the RWE Umwelt Aqua group
VEW subsidiary, Edelhoff AG, we are extending our
by acquiring operator and joint venture projects, taking
German market lead in fiscal 2000/01. With total sales
over additional regional market players, and steadily
of some
E
2 billion, we will also rank third on the
expanding regional companies in Germany.
European market. Integrating Edelhoff will enable us to
establish a nationwide direct sales structure in Germany.
OUTLOOK
The pattern of highly intense competition on the waste
GROWTH DRIVEN BY PRIVATIZATION AND
disposal markets is unlikely to change in the foreseeable
INTERNATIONALIZATION
future. A key feature of our current fiscal year is
The merger has put us in a strong position to exploit
therefore the merger of the Edelhoff group. It will unlock
further profitable growth. We intend to step up our
further sales and synergy potential. We are also
commitment to public/private partnership projects, in
concentrating on implementing our envisaged efficiency
which private service providers accept responsibility for
enhancement measures. We expect to close 2000/01 with
executing public services. This type of business is a
a much higher operating result even without any
critical growth factor in the waste disposal and recycling
allowance for the integration of Edelhoff.
segment. The industrial sector, where outsourcing waste
disposal services is a growing trend, also harbors
potential for further success. We are also aiming to
expand our activities in Spain, Austria, Hungary and the
Czech Republic. These markets in particular offer the
prospect of favorable growth and earnings.
81
Industrial Systems
82
CLEAR STRUCTURES
We have adopted a more competitive structure for the Industrial Services Division.
The new TESSAG embraces the energy-related technical services of the former LAHMEYER,
and its key activities form part of RWE’s core business. Heidelberger Druckmaschinen
is now a direct financial investment of RWE AG. Both these companies have a strong
base on which to build sustainable increases in performance.
Industrial Systems Division
1999/2000 1998/1999
Change %
+ 12.9
External net sales
E
million
6,841
6,058
Internal net sales
E
million
260
248
Division net sales
E
million
7,101
6,306
+ 12.6
EBITDA
E
million
753
671
+ 12.2
Operating result*
E
million
474
463
+
2.4
Profit before tax
E
million
400
483
–
17.2
+
4.8
EXTENDING MARKET POSITION IN DIFFICULT
Return on invested
capital (ROIC)
%
11.8
–
–
CLIMATE
Capital expenditure
E
million
580
524
+ 10.7
Deregulation of the European electricity markets has
Cash flow
E
million
514
510
+
0.8
prompted a significant decline in prices. Numerous
Number
40,609
39,748
+
2.2
utilities appreciably curtailed their capital spending and
Workforce (06/30)
*) Previous year’s value adjusted to allow for change in calculation of interest credit on
prepayments received
maintenance activities as a result. By expanding its activities in the industrial and service sectors, TESSAG was
able to more than offset this effect. We benefited from
the appreciable upturn in the business cycle and a
TESSAG
pleasing pattern of demand on markets abroad.
TECHNICAL SERVICES TO SUPPORT THE
DYNAMIC ORDER INTAKE
MULTI-UTILITY
At
We concluded the merger of LAHMEYER AG with RWE
than in the previous year. The power systems segment
AG in February 2000. The energy-related engineering
posted the strongest growth. Above all, it was bolstered
services performed by the former LAHMEYER have since
by the sharp rise in demand for uninterruptible power sys-
been conducted under the auspices of TESSAG. In energy
tems in the USA and western Europe. Customers abroad
markets whose outline conditions have changed radically,
also stepped up their demand for transformers. The
we are now well positioned to operate much more
networks segment also recorded a satisfying increase in
competitively. Heidelberger Druckmaschinen AG, which
new business. Within this unit we have significantly
had formed a part of LAHMEYER, is now a direct
reinforced our telecommunications engineering activities;
subsidiary of RWE AG and managed as a financial
we won a series of large orders in the mobile radio and
investment.
fixed line sectors. In the domestic engineering segment,
E
2.2 billion, the orders in hand were 19.6 % higher
the Rheinelektra Technik group considerably raised its
The companies in the TESSAG group render
order intake although the market remained difficult. As
energy-related services and supply power systems. In view
in the preceding years, the key factors were streamlined
of their interests, they constitute a major component of
structures and a market stance that stresses the group’s
our multi-utility strategy. TESSAG brings key advantages
skills as a systems provider with domestic engineering
to RWE’s core business: it has an international presence
service packages. The industry segment also booked a
and disposes of many years of experience with industrial
greater value of orders than in 1998/99. Our services tai-
customers in highly competitive markets. Supplementing
lored to decommissioning nuclear facilities and disposing
the energy supply business with a broad array of services
is giving rise to additional market opportunities.
83
1999/2000 1998/1999
TESSAG
Technical Systems & Services
Industrial Systems
Change %
External net sales
E
million
2,239
2,110
+
6.1
Internal net sales
E
million
260
248
+
4.8
Division net sales
E
million
2,499
2,358
+
6.0
EBITDA
E
million
115
71
+ 62.0
Operating result*
E
million
45
6
+ 650.0
Profit before tax
E
million
62
0
–
%
3.5
–
–
–
of their waste made especially good progress, whereas
the extent of new business decreased in the industrial
Return on invested
capital (ROIC)
plant engineering segment.
Capital expenditure
E
million
99
109
–
9.2
Cash flow
E
million
43
90
–
52.2
Number
16,647
18,390
–
9.5
Workforce (06/30)
MAQUET AG, our financial investment in the
medical systems sector, registered a moderate rise in
*) Previous year’s value adjusted to allow for change in calculation of interest credit on
prepayments received
order activity. It consolidated its position as a leading
supplier of operating tables.
SALES HIGHER THAN PREVIOUS YEAR
At
E
2.2 billion, the external net sales of the TESSAG
group were 6.1 % higher than the total posted one year
84
earlier. Our networks segment contributed the largest
beginning of the year under review. They focused on
part of the rise, but the turnover of the industry unit fell
enhancing the efficiency of all TESSAG’s activities.
sharply because of a smaller account settlement volume
Additional non-recurring restructuring expenses in the
in industrial plant engineering. In contrast, both the
amount of
power systems and the domestic engineering segments
pushed down the pre-tax result to
E
65 million arose in this connection, which
E
– 62 million.
accomplished pleasing growth rates.
OPERATING RESULT IMPROVED – PRE-TAX EARNINGS
IMPAIRED BY RESTRUCTURING
TESSAG followed its 1998/99 operating result of
E
6 million with a 1999/2000 total of
E
45 million.
This positive development is chiefly attributable to the
extensive cost cutting measures we initiated at the
ORDERS IN HAND
1999/2000
1998/1999
Change %
million
702
614
+ 14.3
million
574
561
+
million
416
229
+ 81.7
million
357
289
+ 23.5
million
158
152
+
million
2,207
1,845
+ 19.6
million
1,393
1,123
+ 24.0
million
814
722
+ 12.7
TESSAG
Networks
E
Industry
E
Power systems
E
Domestic engineering
E
Financial investments
E
Total
E
Germany
E
International
E
2.3
3.9
FRESH OPPORTUNITIES WITH UNINTERRUPTIBLE
uninterruptible power systems segment of the power
POWER SYSTEMS AND COMMUNICATIONS
systems unit enabled us to enlist new customers. Globally
TECHNOLOGY
networked E-commerce applications driven by databases
The potent new corporate structure puts us in a far more
need an absolutely reliable and consistent power supply.
favorable position to exploit new market opportunities at
This business also reduces our dependence on the unit’s
short notice. In the networks segment, for example, we
traditional customer group, namely utilities.
are considerably better placed in the communications
technology business. We are benefiting from the increased
call for installation and other services in the mobile radio
network sector. The demand that will be triggered by the
adoption of new network standards makes this an attractive market. Our performance spectrum in the
EXTERNAL NET SALES
1999/2000
1998/1999
Change %
million
685
520
+ 31.7
million
772
884
–
million
280
236
+ 18.6
million
347
316
+
9.8
million
155
154
+
0.6
million
2,239
2,110
+
6.1
million
1,178
1,089
+
8.2
million
1,061
1,021
+
3.9
TESSAG
Networks
E
Industry
E
Power systems
E
Domestic engineering
E
Financial investments
E
Total
E
Germany
E
International
E
12.7
85
Industrial Systems
86
DECREASE IN CAPITAL EXPENDITURE
With an expended budget of
E
99 million, the TESSAG
OUTLOOK
In view of the impetus being generated by the economy as
group fell just short of its previous year’s capital outlay.
a whole, the TESSAG group companies expect the order
The majority of spending was dedicated to tangible assets
intake and sales to continue their positive pattern in fiscal
purchased to enhance efficiency and optimize production
2000/01. We have identified good market opportunities
procedures. We also acquired shareholdings in smaller
in the communications technology, nuclear engineering
companies with a view to expanding our activities in the
services and power supply segments in particular.
communications and network engineering and data transfer sectors.
This year we will be making further preparations
for developing new products and extending international
TECHNOLOGIES FOR FUTURE MARKET SUCCESS
sales. The associated non-recurring expenses are likely to
In the context of TESSAG’s market-led reorientation, we
be counterbalanced by our current efficiency enhance-
stepped up development work in all business units.
ment measures. Against this backdrop we expect the
Special uninterruptible power systems were elaborated,
2000/01 operating result to be at least on a par with
for instance, for Internet and e-commerce providers. We
that posted in the year under review.
have conceived a new type of control software for managing and servicing complex energy networks. As regards
solar technology, our development engineers have improved the efficiency of solar modules for extraterrestrial
applications.
Printing systems –
Heidelberger Druckmaschinen
1999/2000 1998/1999
Change %
External net sales
E
million
4,602
3,948
+ 16.6
Internal net sales
E
million
0
0
–
Division net sales
E
million
4,602
3,948
+ 16.6
EBITDA
E
million
638
600
+
6.3
Operating result*
E
million
429
457
–
6.1
Profit before tax
E
million
462
483
–
4.3
%
15.4
20.5
–
24.9
Return on invested
capital (ROIC)
Capital expenditure
E
million
481
415
+ 15.9
Cash flow
E
million
471
420
+ 12.1
Number
23,962
21,358
+ 12.2
Workforce (06/30)
*) Previous year’s value adjusted to allow for change in calculation of interest credit on
prepayments received
HEIDELBERGER
DRUCKMASCHINEN
GROWING AT HIGH SPEED
in east Asia generated additional momentum following
Heidelberg is now a direct subsidiary of RWE. The world
the collapse of investments in the printing sector.
market leader for printing systems takes its place in the
new corporate structure as a financial investment, so that
ORDERS IN HAND CLIMB 40 %
it is more clearly separate from the core multi-utility
In the year under review Heidelberg raised its order
business. This gives the company greater strategic
intake by 39.3 % to
independence during its current phase of above-average
consolidation effects, the increase was still 26.7 %.
growth. We have obtained a decisive competitive lead
One-half of the growth of more than
with the strategy of offering integrated solutions to raise
achieved by the core sheetfed segment. The success was
the efficiency and quality of the entire printing process.
driven by product innovations and a reinforcement of
In addition, we dispose of world-beating infrastructure in
direct sales. The most appreciable growth, of more than
this branch of industry, which will enable us to translate
80 %, was posted by the finishing segment. It was boost-
this lead into profitable volume increases.
ed by more competitive products and the consolidation
E
4.7 billion. Allowing for first-time
E
1.3 billion was
for the first full year of the Stahl group, a leading
AUSPICIOUS ECONOMIC CLIMATE
producer of folding machines. The order inflow increased
The graphics industry worldwide and, in particular,
by a similar amount in the digital segment, which
Heidelberger Druckmaschinen have profited from
embraces our prepress products and the digital printing
improved general economic conditions. The key printing
machine business acquired from Eastman Kodak. The
industry markets performed favorably. Business remained
double-digit growth in the order intake of the web
on course for growth in the free trade area of North
systems segment was fueled by exchange rates in
America and in western Europe. Printers’ high capacity
particular.
utilization bolstered the demand for sheetfed offset
presses, especially in the USA. This trend was underpinned by impressive growth in information technology
and the strength of the US dollar. The economic recovery
87
Industrial Systems
SALES CLIMB STEEPLY AS WELL
NEW MARKETS: INNOVATIVE PRODUCTS FOR DIGITAL
We advanced the external net sales by 16.6 % to
PRINTING AND NEWSPAPER PRESSES
E
By building on existing digital printing activities, we have
4.6 billion. In keeping with the preceding years, the
60 % share of the sheetfed segment made the largest
mapped out the course for future market success. The
contribution to turnover. Finishing accomplished the
strategy is based on the change process taking place in
strongest growth, largely because of the former Stahl
the graphics industry. More and more, conventional print-
group’s input. Sales in the web systems segment were
ing techniques are merging with digital communications
only marginally higher than in 1998/99. Our repositioned
technology. New marketing trends are demanding smaller
business unit, digital, generated 14 % of total sales in its
print runs with high quality, sophisticated personalization
first year. The volume of business was also improved by
and extremely short production times. Integrating
currency effects deriving from the US dollar’s high
Eastman Kodak’s office imaging division, a process we
valuation.
have already concluded, represented an important step
in this context. It has equipped Heidelberg to face the
88
EARNINGS PUSHED DOWN BY GOODWILL
already buoyant demand for digital black-and-white
AMORTIZATION
presses. The first digital color press, the NexPress 2100,
The operating result declined by 6.1 % to
E
429 million.
was presented at Drupa 2000, the international trade fair
This change is chiefly attributable to Heidelberg’s pro
for the printing and paper industries. It was developed in
rate amortization of goodwill arising from the addition
a joint venture with Eastman Kodak.
to the interest in LAHMEYER. The profit before tax
followed a similar pattern. At
E
462 million, it was
The launch of the new newspaper press, which
4.3 % lower than in 1998/99.
was also among our exhibits at Drupa 2000, signposted
further progress. As a supplier of complete system
solutions for newspaper printing, we intend to close one
of the few remaining gaps in our product portfolio by
joining the ranks of the leading providers in this sector.
ORDERS IN HAND
1999/2000
1998/1999
Change %
million
670
374
+ 79.1
million
2,911
2,218
+ 31.2
million
704
560
+ 25.7
million
409
217
+ 88.5
million
4,694
3,369
+ 39.3
million
657
643
million
4,037
2,726
Heidelberger Druckmaschinen
Digital
E
Sheetfed
E
Web
E
Finishing
E
Total
E
Germany
E
International
E
+
2.2
+ 48.1
expenditure. The most significant acquisition was the
takeover of Eastman Kodak’s office imaging business.
BUILDING AN INTERNET PORTAL FOR THE GRAPHICS
INDUSTRY
The more digital processes infiltrate print production, the
greater the potential for offerings by way of e-business.
For this reason we are originating a global Internet
transaction platform for the graphics industry together
with Deutsche Telekom AG. The goal is to give partners in
the printing process value chain a faster and less
The success of the new newspaper technology was
expensive means of collaborating, via the Internet.
verified by a rash of orders during the Drupa trade event.
OUTLOOK
By investing some 8 % of sales in research and
Backed by a favorable global economy, Heidelberg an-
development, Heidelberg underscored its commitment to
ticipates further growth in fiscal 2000/01. We expect
technology.
orders in hand and sales to advance more quickly than
general economic growth. The operating result is likely to
increase in line with the business volume.
FURTHER RISE IN CAPITAL EXPENDITURE
Capital spending climbed by 15.9 % to
E
481 million.
Much of the increase is attributable to investments in
tangible assets, which were channeled into new technologies and optimizing manufacturing processes.
Extending the IT infrastructure provided another focus of
EXTERNAL NET SALES
1999/2000
1998/1999
Change %
million
659
416
+ 58.4
million
2,850
2,626
+
8.5
million
695
674
+
3.1
million
398
232
+ 71.6
million
4,602
3,948
+ 16.6
million
709
699
million
3,893
3,249
Heidelberger Druckmaschinen
Digital
E
Sheetfed
E
Web
E
Finishing
E
Total
E
Germany
E
International
E
+
1.4
+ 19.8
89
Construction and Civil Engineering
90
QUANTUM LEAP IN FOREIGN BUSINESS
By acquiring the Turner Corporation, the second-ranking company
on the US building market, we have appreciably reinforced the competitive position of our
construction and civil engineering business. We are also developing new opportunities
with the system leadership strategy of HOCHTIEF. These endeavors are flanked by a
market-led corporate structure and our debut in the e-business sector.
Construction and Civil
Engineering Division
1999/2000 1998/1999
Change %
+ 134.7
External net sales
E
million
7,960
3,392
Internal net sales
E
million
63
102
Division net sales
E
million
8,023
3,494
+ 129.6
Performance
E
million
10,987
6,408
+ 71.5
EBITDA
E
million
175
170
+
2.9
Operating result*
E
million
149
158
–
5.7
Profit before tax
E
million
208
293
–
29.0
%
3.8
4.8
–
20.8
Return on invested
capital (ROIC)*
–
38.2
Capital expenditure
E
million
564
93
+ 506.5
Cash flow
E
million
287
212
+ 35.4
Number
28,782
24,969
+ 15.3
Workforce (06/30)
*) Previous year’s value adjusted to allow for change in calculation of interest credit on
prepayments received
UPTURN ON INTERNATIONAL BUILDING MARKETS
This is chiefly attributable to the more substantial
Business cycles traced divergent patterns in the world’s
contribution made by the Australian affiliate, Leighton
building economies. The sustained strength of the domes-
Holdings Limited.
tic US economy was reflected in the construction segment.
91
In South America and Southeast Asia the end of finan-
The domestic order inflow fell short of the previ-
cial and economic crises enabled the building sectors to
ous year’s. In contrast to the recent past, the market
stabilize. Demand slowed down significantly in Australia
failed to offer up any significant large projects. Neither
at the end of the building boom triggered by preparations
industrial building nor public sector investments created
for the Olympic Games. The European construction busi-
any momentum, so that competition on prices remained
ness benefited from the general economic upturn, but
very aggressive. HOCHTIEF responded by deliberately
Germany, the largest building economy in Europe, was
avoiding projects with an element of income risk.
among the poorer performers. The German commercial
construction sector began to pick up, but the residential
MUCH IMPROVED PERFORMANCE, ORDERS IN HAND
and public building segments remained below par.
AND EXTERNAL NET SALES
At
E
11.0 billion, the performance was 71.5 % higher
ORDERS IN HAND MORE THAN DOUBLED
than in fiscal 1998/99. International business posted a
HOCHTIEF made considerable progress in the year under
clear increase even without Turner. Making due allowance
review as it seeks to establish itself among the world’s
for its inclusion, activities climbed by 12.5 % to
leading construction companies. The principal success
E
factor was foreign business.
and South American markets. The rise in Germany stems
3.5 billion. We recorded vigorous growth on the North
largely from work on major projects dating from the
The order inflow climbed by 74.1 % to
E
11.8
billion, marking a new dimension in business volume. The
key factor here was the acquisition of Turner. The USA’s
second largest general building group joined the scope of
consolidation effective October 1, 1999. Even disregarding the inclusion of Turner, the order intake generated by
HOCHTIEF’s international activities advanced by 71.7 %.
prior year, including the new high-speed rail link between
Construction and Civil Engineering
Nuremberg and Ingolstadt being built on behalf of
NET PROFIT CURTAILED BY RESTRUCTURING
Deutsche Bahn AG.
The operating result totaled E 149 million in fiscal
1999/2000, which is 5.7 % lower than the total posted one
Growth in the volume of orders in hand matched
the increase in performance. At
E
12.2 billion, the value
as of June 30, 2000 was 83.6 % higher than a year
earlier. Some
E
4.9 billion of the total was attributable
year earlier.The profit from international business increased,
in particular because of Turner’s first-time inclusion and
the contribution made by the Athens airport project. These
effects failed, however, fully to counterbalance the tense sit-
to Turner. The expansion of our foreign business more
uation on the German construction market. The domestic
than made good the contraction on the domestic front.
result was impaired by the difficult price situation, delays
in negotiations concerning supplementary construction
The external net sales of HOCHTIEF more than
doubled to
92
E
8.0 billion in the year covered by the
works, and the restructuring of HOCHTIEF’s traffic route
construction business. We intend to sell these activities.
present report, primarily because of Turner’s influence.
The non-operating result was much lower than in
Comparing like with like, we pushed up our sales by
13.1 %. The new Athens airport generated about
1998/99, when non-recurring profits from realigning the
E
real estate portfolio gave rise to an above-average total.
400 million of turnover, and the Nuremberg-Ingolstadt
infrastructure project some
E
100 million.
In contrast, we raised the financial result thanks to a
favorable liquidity pattern and income from securities.
This more than compensated the effect of writing off the
remaining convertible bonds issued by Philipp Holzmann.
The profit before tax fell by 29.0 % to
E
208 million.
1999/2000 1998/1999
Construction and Civil Engineering Division
PERFORMANCE BY REGION
Germany
32 %
51 %
America
39 %
4%
Rest of Europe
18 %
28 %
Australia
8%
11 %
Asia
2%
4%
Africa
1%
2%
Construction and Civil Engineering Division
1999/2000
1998/1999
Change %
E
million
11,792
6,772
+ 74.1
Germany
E
million
2,861
3,991
–
International
E
million
8,931
2,781
+ 221.1
E
million
10,987
6,408
+ 75.1
Germany
E
million
3,482
3,283
+
International
E
million
7,505
3,125
+ 140.2
E
million
12,188
6,640
+ 83.6
Germany
E
million
2,822
3,407
–
International
E
million
9,366
3,233
+ 189.7
Order inflow
Performance
Orders in hand (06/30)
28.3
6.1
17.2
HOCHTIEF BECOMES LEADING PLAYER IN NORTH
EASTERN EUROPEAN BUSINESS REINFORCED
AMERICA TOO
In November 1999 HOCHTIEF acquired a majority inter-
By acquiring Turner we have secured a leading position in
est in the Czech building company, Vodni Stavby Bohemia
the USA, which is the world’s largest building market.
a.s. (VSB). With an annual construction volume of E 165
With an annual construction volume of just under
E
5
million and about 2,700 employees, VSB ranks among the
billion and 3,500 employees, Turner represents the most
foremost building enterprises in the Czech Republic. Hav-
significant acquisition in the history of HOCHTIEF.
ing already established a good position in Poland,
Together with Turner, HOCHTIEF books a performance of
HOCHTIEF’s takeover of VSB marks a further milestone
nearly
E
12 billion, making it the world’s sixth largest
in the growth strategy for central and eastern Europe.
construction company.
SUBSTANTIAL INVESTMENTS IN SHAREHOLDINGS
In March 2000 we procured a 48.6 % interest
Against the background of extensive acquisitions, the
E
in the Canadian building company, Armbro Enterprises
investment volume totaled an above-average
Inc.. HOCHTIEF had already aided Armbro’s successful
lion, which was six times more than in 1998/99. Capital
takeover of the Canadian building company, BFC
expenditure on tangible assets remained low because of
Construction Corporation, at the end of 1999. With
weak domestic demand and the expansion of the building
construction work performed of about
E
700 million, the
564 mil-
machinery leasing business.
Armbro group is now Canada’s largest listed construction
enterprise. It has many years of experience in the traffic
INTERNATIONAL ORIENTATION AUGMENTED BY NEW
route and infrastructure construction sectors. In
ORGANIZATIONAL STRUCTURE
addition, its shareholding in Canadian Highway Inter-
The dynamic process of internationalization is placing
national makes Armbro Canada’s leading project
extremely high demands on the structures and procedures
developer for toll roads.
of the Construction and Civil Engineering Division. In the
year under review we therefore initiated further changes
geared towards the focus on international business.
93
Construction and Civil Engineering
The company adopted seven product and market-
94
national structure for our key account management. In
led subdivisions in a project entitled “HOCHTIEF
keeping with the policy of presenting one face to the
2000+”:
customer, dedicated teams are appointed to look after
■
Airport (airport management)
customers’ interests anywhere in the world. This strategy
■
Building (building construction)
will also enable us to exploit cross-selling opportunities,
■
Civil (civil engineering)
that is to say increase the volume of HOCHTIEF’s sales.
■
Development (project development)
In the context of our system leadership this embraces
■
North America
planning, financing, building and operation, in particular
■
International
for our construction-related services, namely project
■
Services
development, facility management and software.
The objective of this reengineering program is to bring
together related skills and employ them efficiently world-
GMP STRATEGY SHARPENS COMPETITIVE EDGE
wide. It will also enable us to track the international
System leadership is also key to establishing innovative
orientation of major clients.
forms of contractual agreement in Germany and Europe.
HOCHTIEF is keen to conclude agreements with a guar-
We have also divested peripheral activities; at the
anteed maximum price (GMP), whereby the contractor or
beginning of the current fiscal year, for example, we sold
system leader undertakes to execute the work without
the German prefabricated house builder, Streif AG, and
exceeding a price limit. Any overspend is borne by the
Prüm Türenwerk GmbH, which together generated annual
contractor. Each party benefits in case the budget is not
turnover of some
E
125 million.
fully expended, sharing the difference according to a
previously agreed ratio. GMP contracts are especially
LAUNCH OF INTERNATIONAL KEY ACCOUNT
attractive to the building sponsor if it engages
MANAGEMENT
HOCHTIEF at an early stage and exploits the company’s
With a view to stepping up our customer orientation on
systems expertise during the planning procedures.
a worldwide platform, we have also adopted an inter-
been founded for projects in the e-business segment. The
partners are reputable companies with international
activities, namely the Swedish construction company,
SKANSKA AB; the British building enterprise, AMEC
plc.; and the Australian real estate development
company, Lend Lease Corp., and its British subsidiary,
the Bovis Construction Group.
The aim is to establish an open Internet portal
for the international construction industry. The first of
two principal envisaged uses is as a transaction platform,
typically offering customized solutions for the procureAIRPORT MANAGEMENT: A GROWTH BUSINESS
ment of complex services from partner companies. Its
Obtaining shareholdings in Athens and Düsseldorf
second aim is appreciably to accelerate and facilitate
airports marked our successful initiation of business in
collaboration between building sponsors, architects, plan-
the growing international market for airport management
ners, general contractors and consortium members.
services. In the year under review HOCHTIEF Airport
made preparations for an imminent round of privati-
OUTLOOK
zations concerning airports in Portugal, Italy, Germany
The international business will remain the driving force of
and elsewhere. The participation in Flughafen Düsseldorf
our further growth in fiscal 2000/01. We expect North
GmbH developed well and the budgeted business result
America to generate the strongest impetus, but the mar-
was exceeded.
kets in Latin America, Southeast Asia and eastern Europe
are also developing favorably. In view of the buoyant order
We were disappointed not to obtain a share of
situation, our performance and turnover are likely to climb
projects in Berlin. On the other hand, our bid relating to
without interruption in 2000/01. The German market,
the partial privatization of Hamburg airport was accept-
however, has become more difficult. Earnings are being
ed in July 2000. Together with its partner, the Irish
held back above all by delays in negotiations on
airport operator, Aer Rianta International, HOCHTIEF
supplementary construction works. Despite the positive
was selected to acquire 36 % of Flughafen Hamburg
influence of Turner’s full consolidation for the first
GmbH.
complete year, we therefore anticipate an operating result
well below that posted in the year covered by the present
HOCHTIEF BREAKS NEW GROUND IN E-BUSINESS
We are also committed to systematically exploiting the
opportunities afforded by e-business. The focus of our
interest is on new ways of reducing purchasing and
project settlement costs. HOCHTIEF is setting new
standards in this context; a joint venture has already
report.
95
Consolidated Financial Statements of RWE AG
96
Consolidated Financial Statements
Auditors’ Report
96
139
97
Principal Investments
The Boards
Glossary
145
150
142
Consolidated Income Statement
for the year ended June 30, 2000
(cf. notes)
1999/2000
E million
1998/1999
E million
Net sales
(1)
47,918
38,415
Mineral oil tax/natural gas tax/ electricity tax
(2)
Net sales
(without mineral oil tax/natural gas tax/electricity tax)
Changes in finished goods and work in progress
–
Own worked capitalized
4,533
33,882
80
–
80
212
276
Other operating income
(3)
3,049
2,042
Cost of materials
(4)
27,266
18,336
Staff costs
(5)
7,940
7,120
Depreciation and amortization
(6)
2,419
2,191
Other operating expenses
(7)
7,917
5,465
129
2,944
Profit from operating activities
98
5,492
42,426
Results of investments
Financial results
(8)
(9)
Profit before tax
Taxes on income
(10)
Profit after tax
Minority interest
(11)
Net profit
Earnings per share (E)
(23)
–
2,912
357
3,041
3,301
890
–
579
2,151
2,722
595
1,177
1,556
1,545
344
396
1,212
1,149
2.24
2.07
Consolidated Balance Sheet
as at June 30, 2000
ASSETS
(cf. notes)
Fixed assets
06/30/2000 06/30/1999
E million
E million
(12)
1,421
1,582
Tangible assets
Intangible assets
17,344
17,125
Financial assets
15,728
10,403
34,493
29,110
Current assets
Inventories
(13)
3,282
3,382
Accounts receivable and other assets
(14)
9,959
7,123
Securities
(15)
7,339
6,620
Cash and cash equivalents
(16)
2,812
2,980
23,392
20,105
Deferred taxes
(17)
6,881
5,830
Prepaid expenses
(18)
223
187
64,989
55,232
EQUITY AND LIABILITIES
(cf. notes)
Equity/
minority interest
06/30/2000 06/30/1999
E million
E million
(19)
Group interest
Subscribed capital
1,340
1,420
Capital reserve
1,697
1,617
Retained earnings
2,806
3,026
523
556
6,366
6,619
3,191
3,405
9,557
10,024
Distributable profit
Minority interest
Provisions
(20)
35,082
31,841
Liabilities
(21)
15,479
8,714
Deferred taxes
(17)
2,958
2,745
Deferred income
(22)
1,913
1,908
64,989
55,232
99
Consolidated Cash Flow Statement
Anhang
for the year ended June 30, 2000
(cf. notes)
(27)
1999/2000
E million
1998/1999
E million
Profit after tax
1,556
1,545
Depreciation, amortization, write-back
2,536
2,258
Changes in long-term provisions
2,262
1,371
Changes in deferred taxes
–
795
–
402
Other non-cash items
–
2,205
–
192
mainly equity accounting, result of fixed asset disposals
Cash flow
Changes in short-term provisions
Changes in working capital
–
Changes in other balance sheet items
Intangible assets/tangible assets
Capital expenditure
Proceeds from sale of fixed assets
4,580
727
89
333
1,192
352
Net cash from operating activities
100
3,354
–
220
4,782
3,241
–
2,827
827
–
2,664
576
–
2,096
4,977
–
2,580
625
Changes in securities and cash investments
–
1,770
Net cash used in investing activities
–
889
Proceeds from issuance of share capital and
buyback of own shares
–
1,1411)
Dividends paid to RWE shareholders
and minority interests
–
Acquisitions, investments and loans
to investments
Capital expenditure
Proceeds from sale of fixed assets/divestitures
Issuance of financial debt
770
429
–
3,614
3242)
–
688
621
119
Repayment of financial debt
–
1,037
–
1,433
Net cash used in financing activities
–
2,829
–
1,176
Net change in cash and cash equivalents
–
477
–
8
Effects of exchange rate changes and
other changes in value
19
7
290
149
168
148
Cash and cash equivalents at beginning of year
2,980
2,832
Cash and cash equivalents at end of year
2,812
2,980
Effects of changes in the consolidated group
Total net change in cash and cash equivalents
–
1) This amount includes E – 1,147 million for share buybacks at RWE AG and HOCHTIEF.
2) Of this amount, E 208 million are attributable to the Group’s equity in connection with the
Initial Public Offering of CONSOL.
Statement of Changes in Equity and
Minority Interest
for the year ended June 30, 2000
in
E
Subscribed
capital
Capital
reserve
of
RWE AG
Retained
earnings
Difference
from
currency
translation
Distributable profit
Group
interest
Minority
interest
Total
1,420
1,617
2,504
94
511
6,146
4,121
10,267
million
Balance at 07/01/1998
Capital contributions
116
Dividends paid
–
Currency translation adjustments
593
Other changes
–
Balance at 06/30/1999 / 07/01/1999
–
1,420
1,617
80
80
Share buyback
556
198
2,899
–
127
556
–
Currency translation adjustments
556
36
Profit after tax
689
Other changes
111
1,340
1,697
511
–
33
–
2,643
523
688
5
28
1,545
198
– 1,046
6,619
3,405
–
1,244
10,024
6
6
–
1,056
–
91
–
1,147
–
556
–
214
–
770
16
6,366
52
344
1,212
111
163
116
–
396
36
523
177
1,149
–
– 1,056
Dividends paid
Balance at 06/30/2000
–
33
Profit after tax
Capital contributions
511
–
275
3,191
1,556
–
164
9,557
101
Notes
CHANGES IN FIXED ASSETS
Cost of acquisition or construction
Balance at
07/01/1999
in
E
million
Additions/
disposals
through
changes
in cons.
group
Additions
Transfers
Currency
translation
adjustments
Disposals
Balance at
06/30/2000
Intangible assets
Development costs
19
Concessions, industrial and similar rights and
assets as well as licenses in such rights and assets
1,846
Goodwill
• from separate financial statements
• from capital consolidation
178
1,747
Negative goodwill from capital consolidation
Prepayments
102
–
57
–
57
60
7
346
1
6
2
12
3
486
1,492
–
3
3
4
118
182
1,283
–
8
169
–
9
3,630
78
–
70
–
99
7
282
124
1
8
538
2,943
25
331
86
244
336
12,017
Tangible assets
Land, land rights and buildings, including buildings
on third-party land
11,667
Technical plant and machinery
39,563
Plant and equipment
161
1,199
702
72
923
40,452
5,071
–
38
433
23
145
468
5,242
•
•
Prepayments
• to subsidiaries
• to investees
• to other enterprises
434
1
216
–
183
5
463
Plants under construction
871
6
524
–
636
7
87
685
91
2,703
–
8
468
1,819
58,859
– 1,227
1,356
–
1
166
234
12
•
15
27
471*)
162
1
57,606
–
•
•
Financial assets
Investments in subsidiaries
272
Loans to subsidiaries
Investments
• in associates accounted for using the equity method
• other investments
Loans to investees
Other loans
Total fixed assets
*)
– 1 million of additions and
•) negligible amount
–
10
3,122
840
–
4,860
62
657
Securities held as fixed assets
E
40
E
5,344
9
952*)
35
7,510
906
108
94
•
4
564
299
9
1,535
285
1
489
6,667
–
521
5
86
10
5
114
513
10,796
3,665
3,716
295
19
2,335
16,156
72,032
3,292
6,543
288
495
4,692
77,958
225 million of disposals result from using the equity method
Accumulated depreciation/amortization
Balance at
07/01/1999
Additions/
disposals
through
changes
in cons.
group
1
Depreciation/
amortization
for the year
Transfers
Currency
translation
adjustments
Disposals
Carrying amounts
Writebacks
4
Balance at
06/30/2000
Balance at
06/30/2000
Balance at
06/30/1999
5
73
18
1,585
–
7
91
–
12
1
477
1,181
311
261
98
363
–
–
2
223
10
207
–
1
2
1
118
106
229
76
1,054
80
1,384
–
1
2,048
–
232
312
–
13
3
596
4,550
–
8
401
–
15
87
111
32,188
–
93
1,233
38
45
658
3,736
–
19
473
10
91
409
–
•
•
–
3
•
40,481
–
123
2,107
101
–
2
20
5
2
–
223
1
169
8
1,522
1,421
1,582
4,896
7,121
7,117
32,753
7,699
7,375
3,862
1,380
1,335
•
•
463
434
4
681
864
41,515
17,344
17,125
10
109
125
171
3
3
24
35
15
9
154
57
7,356
849
2,961
733
•
13
–
6
•
7
161
107
8
99
1
1,178
8
–
–
88
51
96
10
–
16
102
1
3
1
1
11
502
512
393
–
156
234
20
•
50
13
428
15,728
10,403
42,922
–
511
2,653
20
226
1,824
21
43,465
34,493
29,110
1
9
1
9
1
21
11
12
1
298
656
93
6,574
5,335
103
Notes
Statement by the Executive Board
The Executive
Board of RWE AG is responsible for the preparation of the consolidated financial statements and
the Group management report.
104
The consolidated financial statements for the year
ended June 30, 2000, have been prepared in accordance with the International Accounting Standards
(IAS) issued by the International Accounting
Standards Committee (IASC). They are in compliance with the 83/349/EEC Directive. The previous
year’s figures have been established according to
the same principles. Pursuant to section 292a
added to the German Commercial Code under the
German Act to Facilitate the Raising of Capital,
these consolidated financial statements compiled
in compliance with IAS have an exempting effect.
Internal control systems, the use of uniform directives throughout the Group, and our measures for
employee training ensure that the consolidated
financial statements and the Group management
report are adequately prepared. Compliance with
legal regulations and Group-internal directives as
well as the reliability and viability of the control
systems are continuously examined within the Group.
In line with the requirements of the German
Corporate Control and Transparency Act, our risk
management system enables the Executive Board
to identify potential risks at an early stage and
initiate countermeasures, if necessary.
According to the resolution adopted by the Annual
General Meeting, PwC Deutsche Revision Aktiengesellschaft Wirtschaftsprüfungsgesellschaft have
audited the consolidated financial statements and
the Group management report and have given
thereon the unqualified audit opinion stated below.
In the presence of the auditors, the consolidated
financial statements, the Group management
report and the auditors’ report were intensely
debated at the Supervisory Board’s meeting on
financial statements.The results of the Supervisory
Board’s examination have been included in the
report of the Supervisory Board (pp. 8 to 11 of
this Annual Report).
Essen, September 22, 2000
The Executive Board
Kuhnt
Klein
Remmel
Sturany
Zilius
General principles
The International Accounting Standards (IAS) effective at the balance sheet date are
applied in the consolidated financial statements.
Additionally, the interpretations of the Standing
Interpretations Committee (SIC) are observed.
The consolidated financial statements comprise
the income statement, the balance sheet, the cash
flow statement and the statement of changes in
equity and minority interest. The notes additionally
contain segment reporting.
Compared to June 30, 1999, the following
standards are applied which came into force on
July 1, 1999: IAS 16 (revised 1998), IAS 22
(revised 1998), IAS 28 (revised 1998), IAS 31
(revised 1998), IAS 32 (revised 1998), and IAS
38. IAS 10 (revised 1999) which has already
been adopted but which has not yet come into
force is voluntarily applied in advance. Any
resulting changes in recognition are explained in
the notes. Previous-year figures are adjusted
accordingly.
Some individual items of the balance sheet and
the income statement are combined in order to
improve clarity. These items are stated and
explained separately in the notes. The income
statement is prepared using the nature of expenditure method.
Consolidated group
The consolidated financial
statements include RWE AG and all the domestic
and foreign subsidiaries in which RWE AG
directly or indirectly holds the majority of the
shareholders’ votes. Principal associates are
accounted for using the equity method. E-Plus
Mobilfunk GmbH was sold on February 10,
2000, at a price of E 7.4 billion plus repayment
of shareholder loans in the amount of E 1.0 billion. RWE’s share amounted to 48.75 %; the
profit before tax arising from this transaction
totaled E 2.8 billion. Following the disposal of
this principal investment, VR Telecommunications
GmbH & Co., so far included by proportionate
consolidation, is now carried as associate.
If investments in subsidiaries, joint ventures or
associates are of secondary importance from the
point of view of the Group, they are accounted for
using the cost method. Non-operating subsidiaries
and those with a small business volume are
generally not consolidated. They account for altogether less than 1 % of the Group’s sales and
results.
Subsidiaries that have a different balance sheet
date prepare interim financial statements. In view
The consolidated financial statements are drawn
up in euros. All amounts are stated in millions of
euros (E million).
105
of the closeness of the date, enterprises whose
fiscal year ends on March 31 are consolidated on
the basis of their financial statements drawn up
to said date. If necessary, adjustment entries are
made.
A collective listing of the investments of the Group
and of RWE AG in accordance with section 285,
no. 11, and section 313, subsection 2, nos. 1 to 4,
and subsection 3 of the German Commercial Code
is filed with the Commercial Register at the Essen
Local Court.The principal consolidated subsidiaries
and enterprises accounted for using the equity
method are listed on pages 142 to 144.
In the year under review, 21 domestic and 66 foreign enterprises have been consolidated for the
first time. 55 enterprises left the consolidated
group; 16 have been merged. 25 associates, including 11 abroad, have been accounted for using the
equity method for the first time. 23 enterprises
which had been accounted for under the equity
method in the previous year, including 9 abroad,
have been sold or merged or have been fully consolidated. The first consolidation or deconsolidation generally takes place at the time of acquiring
or selling the shares.
Notes
Germany
06/30/2000
International
06/30/2000
Total
06/30/2000
Total
06/30/1999
Number of fully consolidated enterprises
256
262
518
502
Number of proportionately consolidated
joint ventures
–
–
–
25
154
43
197
195
Number of investments accounted for using
the equity method
106
As far as the subsidiaries are concerned, the
following share increases and acquisitions are
particularly significant:
■ On February 21, 2000, the merger of LAHMEYER
Aktiengesellschaft into RWE Aktiengesellschaft
was entered into the Commercial Register of
the Essen Local Court. With the merger taking
effect, the LAHMEYER shareholdings especially
in Heidelberger Druckmaschinen AG and TESSAG
Technische Systeme & Services AG as well as
the companies of the energy supply business of
LAHMEYER Aktiengesellschaft have been transferred to RWE Aktiengesellschaft with retroactive economic effect as of July 1, 1999. The
energy utilities transferred to RWE AG have also
been contributed to RWE Energie AG with
retroactive economic effect as of July 1, 1999.
As of February 21, 2000, the LAHMEYER shares
were no longer traded on the stock exchange.
■ In September 1999, HOCHTIEF took over the
Turner Corporation, Wilmington/USA, the
second-largest American corporation in the
general building sector, at a price of US $ 330
million. Turner has been fully consolidated as of
October 1, 1999. The acquisition of Turner
Corp. has led to a goodwill of E 118 million for
the Construction and Civil Engineering division.
Turner’s 1999 sales amounted to US $ 4,666
million.
Additionally, the following share increases and
acquisitions deserve a mention:
■ RWE Energy Trading Limited, London/Great
Britain, foundation, shareholding: 100 %,
■ Acquisition of the “digital black-and-white printing machines” business from Eastman Kodak
and contribution to Heidelberg Digital Finishing
GmbH, Mühlhausen, shareholding: 100 %,
■ Heidelberg-PMT Co. Ltd., Tokyo/Japan, share
increase to 90.9 %.
For the acquisition of shares in enterprises
consolidated for the first time, a total of E 545
million was used. Of this, E 445 million were paid
in cash. In total, fixed assets of E 189 million,
current assets (including deferred taxes) of
E 1,290 million, cash and cash equivalents of
E 290 million as well as liabilities and provisions
of E 1,321 million were taken over from the
acquisition or disposal of consolidated enterprises. The selling prices of the subsidiaries disposed
of totaled E 102 million, E 85 million of which
were paid in cash.
The following share increases and acquisitions
are to be highlighted for the enterprises accounted for under the equity method:
■ Following the confirmation by the Berlin
Constitutional Court on October 21, 1999, of
the legality of the partial privatization of Berliner
Wasserbetriebe, RWE Umwelt AG took over a
share of 50 % in RWE/VIVENDI Berlinwasser
Beteiligungs AG. This company holds a stake of
49.9 % in Berliner Wasserbetriebe.
■ Gallus Holding Aktiengesellschaft,
St. Gall/Switzerland, acquisition of 30 %,
■ NexPress Solutions LLC., Rochester/USA,
acquisition of 50 %,
■ Armbro Enterprises Inc., Brampton/Canada,
acquisition of 48.6 %,
■ Leighton Holdings Limited, Sydney/Australia,
share increase by 2.86 % to 49.86 %,
■ Stredoceská energetická a.s., Prague/Czech
Republic, share increase by 10.2 % to 35.0 %,
■ Thyssengas GmbH, Duisburg, share increase
by 25 % to 75 %.
On July 1, 1999, the share in VR Telecommunications GmbH & Co. (VRT) (previously: o.tel.o)
was increased by 11.25 % to 48.75 % as
planned. The purchase price was E 617 million.
E-Plus Mobilfunk GmbH held by VRT was sold
on February 10, 2000. The 100 % investment of
VRT in TeleColumbus was sold as of July 1, 1999
(pro-rata sales proceeds: E 364 million).
As agreed in August 1999, the sale of the PVC
business of CONDEA Vista, Houston/USA, to
Georgia Gulf Corporation, Atlanta/USA, was
executed on November 12, 1999, at a price of
US $ 270 million.
Consolidation principles
The consolidated financial
statements of domestic and foreign enterprises
are prepared using uniform accounting policies.
The capital consolidation takes place by offsetting
the carrying amounts of the investments against
the proportionate amounts of the revalued equity
of the subsidiaries at the time of their acquisition.
The assets and liabilities are recognized at their
fair values. Any remaining debit differences are
capitalized as goodwill and, according to their
future economic benefit, are amortized over a
period of up to 20 years with an effect on results.
Generally, 10 to 15 years are taken as a basis.
Negative goodwill from first-time consolidation is
also carried as an asset and is released in accordance with IAS 22.61 - 22.63. In the context of
first-time consolidation, the remaining carrying
amounts of the capitalized goodwill and the negative goodwill are taken into account when calculating the income from disposals.
The US environmental consulting activities of
REP Environmental Processes Inc./ENSR were
sold to a financial investor as of March 31, 2000.
The influences resulting from the changes in the
group of consolidated companies are stated in the
notes as far as they are of particular importance.
Expenses and income as well as receivables and
payables between consolidated enterprises are
eliminated. Intra-group profits or losses are eliminated unless they are of minor significance. The
depreciation on investments in consolidated enterprises disclosed in separate financial statements
is reversed as a general rule.
The same consolidation principles apply to the
investments in associates accounted for using the
equity method, whereby a recognized goodwill is
reported on the balance sheet under investments
and the amortization is disclosed accordingly in
the results of investments. The income from
investments disclosed in the results of investments
also includes a corporation tax imputation claim;
this relates to the proposed dividend payouts.
Uniform accounting principles are also adopted
for the financial statements of all principal enterprises accounted for using the equity method.
107
Notes
Currency translation
In the enterprises’ separate
financial statements, foreign currency transactions
are measured at the exchange rate applicable at
the time of first entry or, when hedged by futures,
at the futures’ price. Exchange rate losses from
the measurement of receivables or payables
occurring up to the balance sheet date are taken
into account. Gains and losses from fluctuations
in exchange rates are included in the results.
108
To translate currency, functional currency
translation is used. In the consolidated financial
statements, the balance sheet items of all foreign
enterprises are translated from the respective
country’s currency into euros at the day’s
average exchange rate at the balance sheet date
according to the official regulations, as the
principal foreign enterprises included in the consolidated financial statements conduct their business independently in their national currency.
When translating the adjusted equity of foreign
enterprises accounted for under the equity
method, the same procedure is followed. Any differences to previous-year translations are netted
against the retained earnings without profit/loss
effect. Goodwill is recognized as an asset in the
reporting currency. Income and expense items are
translated at annual average exchange rates,
changes to reserves at closing rates. Annual
financial statements from Group enterprises
which are based in a country with hyperinflation
are translated according to IAS 29.
The following exchange rates were adopted for translating the relevant currencies of the countries not
participating in the European Monetary Union:
in
E
Average
1999/2000
1998/1999
Balance sheet date
06/30/2000
06/30/1999
1 US Dollar
1.01
0.90
1.04
0.97
1 Canadian Dollar
0.68
0.60
0.71
0.66
1 Australian Dollar
0.63
0.56
0.63
0.64
1 Pound Sterling
1.60
1.48
1.58
1.53
100 Greek Drachmas
0.30
0.31
0.30
0.31
100 Norwegian Kroner
12.22
11.76
12.22
12.33
100 Polish Zlotys
23.98
24.31
23.78
24.65
0.01
0.01
0.01
0.01
62.79
62.24
64.17
62.40
2.77
2.77
2.81
2.74
100 Romanian Lei
100 Swiss Francs
100 Czech Korunas
100 Hungarian Forints
0.39
0.40
0.38
0.40
100 Japanese Yen
0.95
0.73
1.00
0.80
100 Argentine Pesos
100.74
90.24
104.46
96.88
100 Brazilian REAL
54.81
62.53
57.91
54.73
100 Mexican Pesos
10.61
9.27
10.57
10.27
100 Chinese Yuan
12.17
10.92
12.61
11.73
Accounting policies
Intangible assets are carried at
cost. The major components are software for
commercial and technical applications which is
amortized over three to five years by the straight-
line method, and concessions and other licenses
whose useful life is generally up to 15 years.
Goodwill from the separate financial statements
is capitalized and amortized by the straight-line
method over its expected useful life as is the
goodwill from the capital consolidation. Any
negative goodwill from capital consolidation is
also disclosed on the assets side. In the previous
year, it was disclosed as a liability item under
deferred income.
Development costs are recognized as an asset
when a newly developed product or process can
be clearly defined, is technically feasible and is
intended to be used or marketed by the enterprise
itself. Furthermore, the asset recognition requires
that there is sufficient certainty that the development costs will be covered by the future inflow of
funds. The capitalized development costs are
amortized on a systematic basis over the time
period over which the products are expected to be
sold. Research costs are recognized as an expense.
Property, plant and equipment are carried at the
cost of acquisition or construction less any
depreciation through use. The costs of construction
for property, plant and equipment comprise full
costs. The borrowing costs are not capitalized as
part of the acquisition or construction costs.
Exploratory wells are disclosed according to the
successful efforts method, i.e. they are fundamentally capitalized only in the case of profitable success. Property, plant and equipment and mine
developments are basically depreciated using the
straight-line method unless another depreciation
method would be better suited for the expected
pattern of use in exceptional cases.
109
The depreciation for assets that we typically hold is calculated according to the following useful lives,
which apply throughout the Group:
Years
Buildings
12 – 50
Technical plant
Thermal power plants
15 – 20
Electricity networks
20 – 35
Gas and water storage facilities
20 – 33
Refinery and chemical plants
6 – 20
Service stations
3 – 16
Waste management facilities
6 – 15
Mining equipment
Mechanical and electrical plant
engineering equipment
Construction and civil engineering machinery
Mine developments
Wells in the Petroleum and Chemicals division
Property, plant and equipment held under a
finance lease are capitalized at fair value or, if
lower, at the present value of the lease payments
and are depreciated on a straight-line basis over
the expected useful life or, if applicable, shorter
lease terms.
4 – 20, 25
4 – 15
4– 8
20 – 35
8 – 15
At the end of each fiscal year, the recoverability of
the carrying amount is assessed for all intangible
assets (including capitalized development costs
and goodwill) as well as tangible assets. If the
recoverable amount of an asset is less than its
carrying amount, an impairment loss is recognized.
Notes
If the reason for an impairment loss recognized
in prior years has ceased to exist, the impairment
loss is reversed.
The investments in unconsolidated subsidiaries,
associates not accounted for under the equity
method and the Group’s other investments
disclosed under financial assets are carried at cost
or, in individual cases, at lower fair values. If the
reasons for the recognition of impairment losses
in prior years have ceased to exist, these impairment losses are reversed. The investments in associates accounted for using the equity method are
disclosed at the pro-rata equity plus goodwill.
110
The securities held as fixed assets are measured
at the lower of cost and quoted market price.
Interest-bearing loans standard for the market
are shown at nominal value in the balance sheet;
interest-free and low-interest loans are discounted to their present value.
The inventories are carried at the cost of acquisition or construction. Measurement is generally
based on average values; for certain inventories
the LIFO method is used. The overburden of
lignite mining is valued according to the FIFO
method. The costs of conversion include full
costs; they are determined based on the normal
capacity of the production facilities. In detail, the
costs of conversion, in addition to the directly
allocatable costs, comprise adequate portions of
the necessary materials and production overheads,
including production-related depreciation and
retirement benefit expenses. Borrowing costs are
not capitalized as part of the acquisition or
construction costs. Inventory risks resulting from
decreased usability are taken into account by
appropriate value deductions. Lower values at the
reporting date due to reduced net realizable values are disclosed. If the net realizable value of
inventories written down in earlier periods has
increased, the resulting reversal of the writedown is recognized as a reduction in the cost of
materials.
The prepayments received from customers are
carried as liabilities.
The nuclear fuel assemblies shown under inventories are measured at amortized cost.
Depreciation is energy-related according to consumption and capacity-related according to the
service life of the reactor.
Long-term construction contracts are recognized
under the percentage of completion method; the
amount to be capitalized is shown under accounts
receivable and sales revenues. The stage of
completion is determined through measurements
and according to the costs incurred (cost-to-cost
method). Any contract losses to be expected are
covered by valuation allowances or provisions; they
are determined taking the identifiable risks into
account. The revenue from contracts and contract
supplements which have been confirmed by the
client in writing are stated as contract revenue.
Accounts receivable and other assets are disclosed
at cost after deduction of any necessary valuation
allowances, which are oriented towards the actual
non-payment risk. Under accounts receivable for
supplies and services in the Energy division, prepayments received are netted against the consumption of our customers which is yet to be metered
and billed.
The securities held as current assets are carried
at the lower of cost and quoted market price.
Discounts and similar money-raising costs are
capitalized under the heading of prepaid expenses
and are depreciated in line with the utilization of
the individual credits.
Provisions for pensions and similar obligations are
calculated according to the projected unit credit
method. This benefit/years of service method does
not only take into account those retirement benefits and benefit entitlements known at the balance
sheet date, but also increases in salaries and retirement benefits to be expected in the future. Actuarial gains and losses falling outside the limits of
a 10 % corridor of the total benefit obligations
are distributed over the average remaining length
of service. The service cost is disclosed in the staff
costs, the proportion of interest of the transfer to
the provisions is shown in the financial results.
All other provisions take into account all the
obligations identifiable at the balance sheet date
which result from previous business transactions
or previous events and whose amount or due date
is not certain. The provisions are carried at their
settlement values and are not offset against
positive profit contributions. The settlement value
with the highest probability of realization is taken
as a starting point. Provisions are only created
when based on a legal or constructive obligation
to third parties.
The customers’ contributions to house connection
and construction costs in the Energy division,
which are carried on the liabilities side as deferred
income, are released in installments with an effect
on results over a period of 20 years – if necessary,
depending on the contract. Taxable subsidies and
non-taxable grants for fixed assets – usually from
the government – are reported on the balance sheet
as deferred income and are collected as other
operating income in line with the depreciation of
the assets.
All long-term provisions are recognized at their
settlement values discounted to the balance sheet
date. The settlement value also includes the cost
increases to be taken into account at the balance
sheet date. Excluded from this are pension provisions for which special regulations in accordance
with IAS 19 apply.
Derivative financial instruments are solely used
for hedging purposes, i.e. all derivatives are based
on an underlying transaction. The underlying
transactions are measured taking the completed
hedging transactions into account. Only the
underlying hedged transactions are recognized in
the balance sheet. Gains and losses from the
development of the market values of the hedging
transactions are netted against the results from
the underlying transactions, if possible (separate
valuation unit). Provisions are created for losses
in excess of this; excess profits are not disclosed.
Deferred taxes from temporary differences of
valuations in the trade and tax balance sheets of
the individual enterprises and from consolidation
procedures are disclosed separately. The deferred
tax assets also include tax reduction claims
resulting from the expected utilization of existing
loss carryforwards in subsequent years and whose
realization is guaranteed with sufficient certainty.
The deferred taxes are measured at the tax rates
that apply or are expected to apply in the individual
countries at the time of realization. In Germany,
the distribution rate is used as a basis. Deferred
corporation tax reduction claims from the tax
classification of the distributable equity are
carried as deferred tax assets while deferred
corporation tax obligations are carried as
deferred tax liabilities. Future corporation tax
reduction claims and corporation tax obligations
are disclosed as deferred tax assets or liabilities
for each Group enterprise. Otherwise, the tax
regulations valid or passed at the balance sheet
date apply.
Liabilities are generally stated at the amounts
repayable. Liabilities from finance lease
agreements are carried on the liabilities side in
the amount of the present value of the lease
payments.
Contingent liabilities are possible or present
obligations that arise from past events and for
which an outflow of resources is not probable.
They are not recorded in the balance sheet. The
obligation volumes specified for the contingent
liabilities correspond to the extent of liability
existing at the balance sheet date.
111
Notes
Notes to the Income Statement
(1) Net sales Net sales are recorded once the risk has
been transferred to the customer. This does not
apply to contract revenue from the application
of the percentage of completion method for longterm construction contracts. The mineral oil tax/
natural gas tax/electricity tax paid directly by the
enterprises of the Group are disclosed separately.
The segment reporting on pages 133 to 137 contains a breakdown by divisions and geographical
regions. Out of the E 47,918 million (previous
year: E 38,415 million) net sales in the reporting
year, E 8,392 million (previous year: E 3,731
million) are attributable to contract revenue from
construction contracts and E 5,254 million to
changes in the group of consolidated companies.
The change in currency parities gave rise to an
increase in sales of E 509 million compared with
the previous year.
(2) Mineral oil tax/natural gas tax/electricity tax
112
The mineral oil tax/natural gas tax/electricity tax
concern the taxes paid directly by enterprises of
the Group.
(3) Other operating income
This item includes income
from
■ the release of provisions of E 1,338 million
(previous year: E 487 million),
■ the disposal of fixed assets without financial
assets of E 238 million (previous year:
E 304 million),
■ the disposal and write-back of current assets
without securities of E 62 million (previous
year: E 60 million),
■ currency gains of E 205 million (previous year:
E 95 million).
Income from the disposal of financial assets is
disclosed under the results of investments if it
concerns investments; otherwise it is recorded in
the other financial results as is the income from
the disposal of current asset securities.
The increase in the income from the release of
provisions compared to the previous year mainly
results from the changeover to the updated
VDEW reference concept for nuclear power plant
decommissioning as well as from conceptual
changes in the retrofits for our Biblis nuclear
power plant.
The currency gains are opposed by currency losses
which are disclosed under the other operating
expenses. Furthermore, a large part of the currency
gains not yet realized at the balance sheet date
are offset by negative market values from matching hedging transactions.
E
72 million are attributable to changes in the
group of consolidated enterprises.
(4) Cost of materials
in
E
million
Cost of raw materials and consumables used
and of purchased merchandise
Cost of purchased services
The increase in the cost of materials is predominantly based on the higher cost prices for crude
oil and petroleum products as well as the firsttime consolidation of Turner. The cost of raw
materials and consumables used also contains the
transfers to the provisions for the management of
spent nuclear fuel assemblies as well as amounts
written off nuclear fuel assemblies of E 148 million (previous year: E 78 million) and E 113 million (previous year: E 50 million) in taxes for
foreign production companies in the petroleum
1999/2000
1998/1999
18,316
13,715
8,950
4,621
27,266
18,336
sector. Due to changes in the group of consolidated companies, the cost of materials has increased
by E 4,211 million.
In the year under review, the cost of materials
fell by E 20 million (previous year: E 64 million)
due to reversals of write-downs of inventories.
The reversals of write-downs affect the Petroleum
and Chemicals division; they are due to increased
market prices for crude oil and petroleum products.
(5) Staff costs
E
1999/2000
1998/1999
Wages and salaries
6,241
5,672
Cost of social security,
retirement and other benefits
1,699
1,448
7,940
7,120
in
million
The cost of retirement benefits is E 479 million
(previous year: E 254 million). It mainly consists
of the benefits earned in the fiscal year of E 249
million (previous year: E 229 million) as well as
adjustments for past service cost to the tune of
E 163 million, which mainly result from the newly
agreed early-retirement scheme.
Average number of employees for the year:
1999/2000
1998/1999
Wage earners
78,705
79,034
Salary earners
71,677
67,768
150,382
146,802
(11,199)
(10,650)
Number
of whom part-time and fixed-term employees
Apprentices
5,315
5,212
155,697
152,014
113
Notes
The workforce total no longer includes the
employees on parental leave; the previous-year
figures have been adjusted accordingly. The
employees of the Turner group are contained in
the total as of October 1, 1999; the employees
of the VR Telecommunications group have been
recorded until March 31, 2000, on a pro-rata basis
according to our share of 48.75 % (previous
year: 37.5 %). Due to changes in the group of
consolidated companies, the number of employees
grew by 5,960; the staff costs consequently rose
by E 613 million.
(6) Depreciation and amortization Property, plant
Changes in the group of consolidated companies
account for E 140 million. Impairment losses
amount to E 138 million (previous year: E 58
million). They primarily concern plants and systems
in the Environmental Services and Energy divisions.
and equipment have been depreciated by E 2,107
million (previous year: E 1,958 million); intangible assets have been amortized by E 312 million
(previous year: E 233 million). Thereof, E 207
million (previous year: E 135 million) referred to
goodwill from capital consolidation.
114
(7) Other operating expenses This item includes
expenses for
concessions and other contractual obligations of
E 375 million (previous year: E 364 million),
■ disposals of fixed assets of E 64 million
(previous year: E 69 million),
■ research and development of E 53 million
(previous year: E 65 million),
■ transfers to provisions for nuclear waste
management as well as for mining damage and
reclamation of E 114 million (previous year:
E 195 million), unless they concern the interest
shares of the provision transfers disclosed under
the financial results,
■ disposals of current assets and impairments
except for inventories and securities of E 189
million (previous year: E 140 million), including
general and itemized allowances for receivables,
■ maintenance including renewal obligations of
E 587 million (previous year: E 556 million),
■ insurances, commissions, freight and similar
sales costs of E 554 million (previous year:
E 560 million),
■ lease payments for plants and grids as well as
rents of E 287 million (previous year:
E 287 million)
■
finance leases of E 6 million
(previous year: E 3 million),
■ currency losses of E 222 million
(previous year: E 94 million),
■ other taxes of E 145 million (previous year:
E 77 million), primarily for property taxes.
■
Expenses of E 2,234 million (previous year:
591 million) have been incurred for restructuring measures. They chiefly referred to the creation
of provisions for early-retirement schemes, redundancy schemes and other personnel-related measures as well as decommissioning and site consolidation measures in addition to the realignment of
investments. Newly taken measures on the personnel
front, among others in the energy sector, accounted
for E 1,737 million. Moreover, the other operating
expenses mainly contain administration costs and
other general expenses, such as subscriptions, traveling expenses, advertising and data processing
expenditure as well as payments to the Foundation
“Remembrance, Responsibility, and the Future”
for the compensation of former forced laborers.
E
E
171 million are attributable to changes in the
consolidated group.
(8) Results of investments The results of investments
contain the profit contributions from investments
due to operative reasons. These represent almost
all the interests held in the unconsolidated enterprises including associates. The business activities
in
E
million
of these investments are closely linked to the
performance of the fully consolidated enterprises.
The results of investments include all income and
expenses which have arisen in connection with
these investments.
1999/2000
1998/1999
Income from profit transfer agreements
■
from unconsolidated subsidiaries
2
5
■
from associates accounted for using
the equity method
11
67
from other enterprises
11
8
24
80
■
Expenses from loss transfers
■
from unconsolidated subsidiaries
–
9
–
3
■
from associates accounted for using
the equity method
–
1
–
1
from other enterprises
–
11
–
10
–
21
–
14
■
115
Income from investments
■
from unconsolidated subsidiaries
18
23
■
from associates accounted for using
the equity method
69
326
■
from other enterprises
of which corporation tax imputation
Income from the disposal of investments
25
20
112
369
(73)
(59)
25
2,894
Expenses from the disposal of investments
–
13
–
12
Depreciation/amortization on investments
–
126
–
140
of which goodwill amortization at
equity enterprises
(–
96)
(–
80)
of which unconsolidated subsidiaries
(–
20)
(–
10)
Income from loans to investments
of which unconsolidated subsidiaries
Expenses from loans to investments
of which unconsolidated subsidiaries
Other
Results of investments
50
40
(1)
(1)
–
(–
4
–
2)
(–
2
1)
6
1
2,912
357
Notes
The income from the disposal of investments mainly
results from the sale of shares in E-Plus Mobilfunk
GmbH. From the enterprises accounted for using
the equity method, results of E – 17 million (previous year: E 312 million) were received in line with
the respective percentage of shares held.The results
of equity enterprises were mainly burdened by the
pro-rata loss of VEAG Vereinigte Energiewerke AG.
(9) Financial results The profit contributions in the
financial results are not of an operative nature.
The financial results are composed of the three
in
116
E
million
The write-downs of financial assets contained in
the results of investments amount to E 30 million
(previous year: E 62 million); thereof, E 3 million
(previous year: E 2 million) are accounted for by
loans to investments.
components “net interest”, “interest shares in
transfers to provisions” and “other financial
results”.
1999/2000
1998/1999
617
636
Interest and similar income
of which from unconsolidated subsidiaries
Interest and similar expenses
–
of which for unconsolidated subsidiaries
(–
E
million
268
9)
–
(–
239
10)
349
397
1999/2000
1998/1999
Net interest
in
(5)
(4)
Interest share in transfers to provisions
for pensions and similar obligations
–
639
–
565
Interest share in transfers to provisions
for nuclear waste management
as well as mining provisions
–
698
–
656
Interest share in transfers to other provisions
–
148
–
87
Interest shares in transfers to provisions
–
1,485
The interest shares in transfers to provisions
contain the annual accumulation amounts in
in
E
million
connection with the present value restatement
of the long-term provisions.
1999/2000
Other financial income
Other financial expenses
The other financial results contain all other
financial income and financial expenses which
cannot be allocated to the net interest or to the
interest shares in transfers to provisions. These
above all include income and expenses in connection with securities (e.g. current income from
1998/1999
475
678
–
432
–
890
Other financial results
Financial results
– 1,308
–
143
–
579
332
246
securities of E 458 million (previous year: E 236
million). The other financial expenses include
write-downs of loans and securities in the amount
of E 233 million (previous year: E 64 million)
mainly due to market value changes.
(10) Taxes on income
E
in
million
1999/2000
Current taxes on income
1998/1999
1,579
1,391
Deferred taxes
–
796
–
1,177
595
The current taxes on income contain tax refunds
of E 80 million (previous year: E 72 million)
which concern prior periods.
There were no major changes to the deferred
taxes on account of changed tax rates due to the
application of the distribution rate. The changes
in corporation tax rates adopted in the Federal
Republic of Germany after the balance sheet date
have to be attributed to the 2000/2001 fiscal
year and thus have not been considered. Due to
previously unrecognized tax loss carryforwards of
prior years, the current taxes on income are
E
402
reduced by E 37 million (previous year: E 277
million). The deferred tax expenses decrease by
The income tax expense develops from the
theoretical tax expense. A tax rate of 52.1 %
(previous year: 52.1 %) which results from
the domestic corporation tax profit retention
rate, the solidarity surcharge and the trade tax,
is applied to the profit before tax:
1999/2000
1998/1999
Profit before tax
2,151
2,722
Theoretical tax expense;
52.1 % (previous year: 52.1 %)
1,121
1,418
in
million
Differences to foreign tax rates
–
100
–
51
Tax effects on
■
tax-free foreign income
–
19
–
131
■
other tax-free income
–
43
–
16
■
expenses not
deductible for tax purposes
50
25
■
amortization of goodwill
from consolidation
108
70
■
accounting for associates under
the equity method (including goodwill
amortization for associates)
162
10
■
effects of the sale of
the telecommunications activities
732
–
■
other
E
1 million (previous year: E 4 million) due to previously unrecognized tax loss carryforwards to be
reassessed.
–
48
–
148
Effective tax expense
595
1,177
Effective tax rate (%)
27.7
43.2
117
Notes
(11) Minority interest
The minority interest of E 344
million (previous year: E 396 million) comprises
shares of E 371 million (previous year: E 442
million) in profits and of E 27 million (previous
year: E 46 million) in losses.
Notes to the Balance Sheet
(12) Fixed assets
The fixed asset items summarized in
the balance sheet are analyzed with a description
of their movements in the reporting year on
pages 102 and 103.
118
In the year under review, a total of E 505 million
(previous year: E 398 million) was spent on
research and development. E 57 million (previous
year: E 16 million) fulfilled the asset recognition
criteria.
Items of the tangible assets are subject to
restraints on disposal in the amount of E 264
million (previous year: E 352 million) in the form
of land charges and chattel mortgages. Of the
carrying amount of property, plant and equipment,
E 47 million (previous year: E 14 million) are
attributable to assets leased under finance leases.
The disposals of tangible assets resulted from the
sale, dismantling and decommissioning of plants.
As part of the creation of a hereditary building
right, the Print Media Academy of Heidelberger
Druckmaschinen AG, Heidelberg, was transferred
to a hereditary building right holder as of the end
of 1999. At the same time, a rental agreement
was concluded, including an option to renew the
lease and a contractually secured right of
preemption. This is a so-called “operating lease”
according to IAS 17. Also transferred to a hereditary building right holder was the global spare
parts center of Heidelberger Druckmaschinen AG
in Wiesloch, comprising a right of using the
hereditary building property, the building, high-
rack warehouse, small-part packaging system
and tablar warehouse. At the same time, a rental
agreement was concluded for the aforementioned
assets. The tablar warehouse and the small-part
packaging system fall under a so-called “finance
lease” according to IAS 17. These assets are
recognized as fixed assets in the amount of E 12
million. Depreciation is made on the basis of the
lease term. The building and the high-rack
warehouse have been leased under an “operating
lease agreement” so that these assets are not
reported in the balance sheet. The overall volume
of these assets transferred as part of a sale and
leaseback transaction amounts to E 87 million.
The additions to financial assets, excluding
securities, other loans and the equity value
adjustment, totaling E 2,096 million (previous
year: E 2,580 million) reflect the acquisitions
made in the reporting year of E 1,317 million
(previous year: E 1,863 million), as well as capital contributions and loans to subsidiaries and
investees. The fixed asset securities are predominantly special funds, long-term fixed-interest
securities and publicly quoted shares. They are
not subject to any restraints on disposal.
The quoted and market prices of the negotiable
financial assets exceed the carrying amounts
stated in the balance sheet by E 1,659 million
(previous year: E 1,547 million).
(13) Inventories
in
E
million
Nuclear fuel assemblies
Preliminary overburden of lignite mining
Raw materials and consumables used
Unfinished goods
Work in progress
Finished goods and merchandise
Prepayments
Due to changes in the group of consolidated companies, the inventories increased by E 35 million.
Out of the total amount of the inventories recognized at June 30, 2000, E 678 million (previous
year: E 906 million) are carried at their net realizable value. The market values of the stocks
measured using the LIFO method are E 128 mil-
06/30/2000
06/30/1999
147
193
58
67
1,137
1,162
469
424
257
336
1,117
1,072
97
128
3,282
3,382
lion (previous year: E 96 million) above the
carrying amounts reported in the balance sheet.
119
Inventories in the amount of E 2 million (previous
year: E 1 million) are subject to restraints on disposal; there are no other burdens.
(14) Accounts receivable and other assets
06/30/2000
thereof
RT* > 1 year
06/30/1999
thereof
RT*> 1 year
382
0
150
13
6,056
239
4,404
56
6,438
239
4,554
69
Accounts receivable from subsidiaries
191
34
179
9
Accounts receivable from investees
760
9
539
24
2,570
948
1,851
533
9,959
1,230
7,123
635
in E million
Accounts receivable for supplies and services
■
from Percentage of Completion (PoC)
■
others
Other assets
*) RT = remaining term
Due to changes in the group of consolidated companies, the accounts receivable and other assets
increased by E 1,174 million. E 114 million
(previous year: E 131 million) of the accounts
receivable from subsidiaries and E 524 million
(previous year: E 399 million) of the accounts
receivable from investees were attributable to
supplies and services.
Expenses totaling E 2,863 million (previous year:
E 2,326 million) are capitalized for construction
contracts, including profit contributions. In the
fiscal year, prepayments in the amount of E 2,481
million (previous year: E 2,176 million) were
collected for construction contracts. A profit of
E 115 million (previous year: E 111 million) was
earned on construction contracts.
Notes
The other assets include:
■ loans in the amount of E 73 million (previous
year: E 107 million),
■ tax refund claims of E 440 million (previous
year: E 417 million),
■ accrued interest of E 168 million (previous
year: E 156 million),
■ receivables from sales finance provided to
the printing machine sector of E 805 million
(previous year: E 347 million),
■
assets of foreign pension funds of
(previous year: E 0 million),
E
prepayments made for purposes other than
inventories of E 118 million (previous year:
E 92 million), as well as
■ receivables for investment grants and subsidies
of E 77 million (previous year: E 77 million).
■
The other assets contain lease payments receivable
from finance lease agreements of enterprises of the
printing machine sector. Printing machines and systems are the object of long-term lease agreements.
111 million
The lease agreements are based on the following parameters:
120
in
E
million
Total of lease payments
06/30/2000
06/30/1999
27
19
Lease payments already received
5
5
Interest share of lease payments outstanding
3
2
19
12
Present value of lease payments
outstanding (carrying amount)
The present value of the lease payments outstanding can be broken down as follows:
in
E
million
Due within 1 year
Due within 1 - 5 years
Due after 5 years
06/30/2000
06/30/1999
3
2
12
7
4
3
19
12
06/30/2000
06/30/1999
(15) Securities
in
E
million
Own shares
Other securities
The funds placed in securities primarily include
fixed-interest securities with a term of more than
three months. The quoted or market prices of the
–
2
7,339
6,618
7,339
6,620
E 66 million
(previous year: E 298 million) above the carrying
amounts reported on the balance sheet.
securities held as current assets are
(16) Cash and cash equivalents
Cash and cash equivalents exist as cash on hand, balances with
banks as well as fixed-interest securities which
can be sold at short notice, having a term of up
to three months. The cash and cash equivalents
are also disclosed in the cash flow statement.
The cash and cash equivalents are composed as follows:
in
E
million
06/30/2000
06/30/1999
2,757
2,901
55
79
2,812
2,980
Cash on hand and balances with banks
Securities (term under three months)
Cash and cash equivalents
(17) Deferred taxes
The deferred tax assets totaling
6,881 million (previous year: E 5,830 million)
include the following capitalized tax reduction
E
E
claims which result from the expected utilization
of previously unused tax loss carryforwards in
subsequent years:
06/30/2000
06/30/1999
Corporation tax (or comparable
foreign income tax)
239
202
Trade tax
159
69
398
271
in
million
The realization of these loss carryforwards is
guaranteed with sufficient certainty. The amounts
of the corporation and trade tax loss carryforwards
for which no deferred tax assets have been recognized total E 1,267 million and E 581 million
respectively (previous year: E 1,479 million and
E 1,113 million).
(18) Prepaid expenses
to
E
The accrued discount amounts
10 million (previous year: E 10 million).
E 2,958 million
(previous year: E 2,745 million) mainly arise
from temporary differences.
The deferred tax liabilities of
In the reporting year, E 59 million (previous year:
30 million) deferred taxes arising from the
translation of the financial statements of foreign
entities have been offset against equity.
E
121
Notes
(19) Equity/minority interest The subscribed capital
as well as the capital reserve refer to RWE AG.
In accordance with the resolution adopted by the
Annual General Meeting on November 18, 1999,
to smoothen the share capital in the course of the
euro conversion, capital was increased by
E 1,966,100.36 from corporate funds to
E 1,421,574,144.00 by converting a corresponding portion of the capital reserve. By resolution
of the Annual General Meeting of November 18,
1999, the Executive Board was authorized to
acquire up to 55,000,000 preference shares until
May 17, 2001. In the reporting year, 32,000,000
preference shares were acquired on the capital
market at an average acquisition price of E 29.37
per no-par-value share. These shares account for
E 81,920,000.00 (5.76 % of the subscribed
capital before capital reduction). In the course of
the capital reduction which became effective with
the Executive Board’s resolution of May 29, 2000,
calling in the repurchased preference shares, the
amount of the share capital attributable to these
shares was transferred to the capital reserve while
their acquisition cost was offset against the retained
earnings of RWE AG.
As a result, the structure of the subscribed capital has changed:
122
Common shares
Preference shares
Authorized capital in the amount of
19,344,728.33 (previous year: E
19,344,728.33) is available for issuing new
preference shares without voting rights in return
for cash contributions. New shares may only be
issued up to December 14, 2000, in the form of
employee shares.
E
In order to smoothen euro amounts and pursuant
to section 218 of the German Stock Corporation
Act, the Annual General Meeting, on November
18, 1999, adopted the resolution to increase the
contingent capital of E 51,129,188.12 to
E 51,200,000.00 to grant stock options for common bearer shares to members of the Executive
06/30/2000
Number
of shares
06/30/1999
Number
of shares
06/30/2000
E million
06/30/1999
E million
473,012,047
473,012,047
1,210
1,210
50,290,353
82,290,353
130
210
523,302,400
555,302,400
1,340
1,420
Board as well as other executives of RWE AG
and second-tier subsidiaries.
In the course of the stock option scheme adopted,
the Executive Board has been authorized to issue
non-transferable stock options for up to
20,000,000 common shares to the persons mentioned above up until March 9, 2004. There is a
three-year waiting period for the stock options
which will have a term of five years after their
respective issue.
The stock options can only be exercised if the
quoted market price of the common share – calculated on the basis of the total return approach –
The following options have been issued so far:
Originally
issued
Balance at
06/30/1999
Lapsed in
1999/2000
Balance at
06/30/2000
Tranche 1999
1,935,800
1,928,300
– 184,300
1,744,000
Tranche 2000
4,336,500
–
– 144,000
4,192,500
6,272,300
1,928,300
– 328,300
5,936,500
has increased by at least 6 % annually on
average (absolute performance) until exercised
and in the same period has not lagged more than
10 percentage points behind the Dow Jones
STOXX share index (relative performance). The
four-week exercise periods start with the 21st
trading day after the publication of the provisional
sales and earnings figures of the completed fiscal
year and after publication of the half-yearly
results.
The stock options can only be exercised against
payment of the exercise price. The exercise price
corresponds to the quoted market price of the
common share on the first trading day after
expiry of the relevant exercise period, minus a
markdown, which is composed of the absolute
and relative performance components. The
markdown is limited to 40 percentage points.
The exercise conditions stipulate that the stock
options can be used for already existing common
shares instead of new shares from the contingent
capital or that, in the place of common shares,
the markdown is paid in cash. If the persons
holding stock options are not employed by RWE
AG, the expenses connected with the exercise are
borne by the respective Group company.
Under the employee stock option scheme, eligible
staff were granted up to three non-transferable
stock options to each single common share of
RWE AG for each employee share purchased.
123
The following stock options with a term of 3 years have been issued so far:
Originally
issued
Balance at
06/30/1999
Lapsed in
1999/2000
Tranche 1999
1,445,040
1,445,040
–
55,239
1,389,801
Tranche 2000
1,476,366
–
–
10,530
1,465,836
2,921,406
1,445,040
–
65,769
2,855,637
Balance at
06/30/2000
The stock options can be exercised if the quoted
market price of the common share has risen to at
least 110 % of the initial price set. The employees
can then either purchase existing common shares
at a reduced price or be paid out the difference.
The advantage in assets is limited to 20 % of the
initial price.
shares) in the total amount of E 523,302,400.00
(previous year: E 555,251,120.00) and carryforward of the residual amount of E 171,487.45
(previous year: E 443,024.63) to the next accounting year. The tax credit for shareholders entitled
to imputation is E 0.43 per share (previous year:
E 0.43 per share).
The Group’s distributable profit is identical with
RWE AG’s distributable profit. The following proposal is made to the Annual General Meeting for
the appropriation of the distributable profit: payout
of a dividend of E 1.00 per share (previous year:
E 1.00 per share) on the 523,302,400 shares
entitled to dividends (previous year: 555,251,120
Minority interest shows the share ownership of
third parties in the Group enterprises. There are
high proportions of shares held by third parties in
particular in the energy utilities in Hungary as
well as in Lausitzer Braunkohle AG (LAUBAG),
Heidelberg, CONSOL and HOCHTIEF.
Notes
(20) Provisions
E
million
06/30/2000
06/30/1999
Provisions for pensions and similar obligations
11,536
11,030
2,063
2,051
9,698
848
9,943
– 1,036
8,850
8,907
Provisions for mining damage including
reclamation
2,958
2,874
Other provisions
9,675
6,979
35,082
31,841
in
Tax provisions
Provisions for nuclear waste management
less prepayments
Provisions for pensions and similar obligations
124
Provisions are made to cover obligations to pay
post-employment benefits and short-term employee
benefits to entitled current and former employees
and their surviving dependants. In particular the
obligations refer to retirement pensions in the form
of both basic and supplementary benefits. The
individual commitments are based on the differing
industry and country-specific benefit arrangements.
They are generally calculated according to the
employees’ length of service and salary. In view
of their benefit status, the insignificant obligations
of the US Group enterprises in respect of the
medical expenses of their employees after retiring
are also disclosed under the pension provisions.
The company pension scheme consists of defined
contribution plans and defined benefit plans. In
the case of defined contribution plans, the enterprise’s obligation is limited to the amount it contributes to the funds. The expenses are disclosed
under staff costs. In the reporting year contribu-
–
tions of E 64 million (previous year: E 25 million)
were paid to the defined contribution plans. In
the case of defined benefit plans, the enterprise’s
obligation is to provide the agreed benefits to the
current and former employees. The provisions for
defined benefit plans are valued according to the
projected unit credit method. The provision also
covers the obligations of the funds and is reduced
by the amount of the funds’ assets. The service cost
is disclosed under staff costs, the interest cost
under the financial results.
The amount of the provision was calculated
according to actuarial methods. A discount rate
of 6.0 % (previous year: 5.5 %) was used as a
basis. Salaries were assumed to increase annually
by 3.0 % (previous year: 3.5 %) and pensions by
2.0 % (previous year: 2.5 %). These assumptions
refer to employees in Germany for whom the
greater part of the pension obligation exists. For
the employees abroad, different country-specific
assumptions are applied.
The pension provision is derived as follows:
E
06/30/2000
06/30/1999
1,806
1,825
616
462
Deficit by the funds
1,190
1,363
Present value of unfunded benefit obligations
8,822
9,862
in
million
Present value of funded benefit obligations
Minus fair value of fund assets
10,012
11,225
Adjustment due to (unrecognized)
past service cost
Present value of benefit obligations
–
–
Adjustment due to (unrecognized)
actuarial gains/losses
1,524
–
195
11,030
11,536
E 1,524 million
(previous year: E – 195 million) not yet netted
primarily results from so-called gains and losses
in connection with changes in inventory and
differences to the actual income trends compared
The adjustment amount of
with the actuarial assumptions and to the interest
adjustments made. This amount is recognized as
income if it exceeds 10 % of the total benefit
obligations over the average remaining working
lives of the employees.
The assets allocated to funds developed as follows:
E
million
06/30/2000
06/30/1999
Fair value of fund assets at start of fiscal year
462
169
13
12
in
Expected return on fund assets
Contributions paid to funds
1
1
Benefits paid by funds
–
Actuarial gains/losses
(related to the assets allocated to funds)
9
–
9
–
–
Other changes (mainly changes in the
consolidated group and transfers)
149
289
Fair value of fund assets at end of fiscal year
616
462
The actual return on fund assets is
(previous year: E 24 million).
E
46 million
125
Notes
The expenses are broken down as follows:
E
06/30/2000
06/30/1999
Cost of the benefit obligations
accrued in the reporting year
249
229
Interest cost of the benefit obligations
already accrued
652
577
in
million
Expected return on fund assets
–
–
13
12
Adjustment due to recognized
past service cost
163
–
Adjustment due to recognized
actuarial gains/losses
3
–
1,054
794
The pension obligations of CONSOL also contain
a multi-employer plan. This obligation is reported
as a defined benefit plan on the balance sheet.
126
Movements in provisions
Balance at
07/01/1999
Transfer
Unused
amounts
reversed
Interest
shares in
transfers/
interest
rate
changes
Tax provisions
2,051
1,431
15
–
Provisions for nuclear waste management
less prepayments
8,907
181
648
Provisions for mining damage
including reclamation
2,874
144
6,979
20,811
in
E
Amounts
used
Balance at
06/30/2000
6
1,398
2,063
539
–
129
8,850
66
159
17
170
2,958
5,070
624
148
136
2,034
9,675
6,826
1,353
846
147
3,731
23,546
million
Other provisions
of which with a term of up to one year
Changes in
consolidated group,
currency adjustments,
reclassifications
–
(4,788)
of which changes to the consolidated group
Provisions for nuclear waste management
The waste management provisions in the nuclear
energy sector are based on obligations under public law and the operating licenses.
The provisions for the management of spent
nuclear fuel assemblies accrue over 19 years
according to consumption (energy component)
and service life (capacity component). They cover
the costs to be expected, especially the costs of
reprocessing on the basis of contractual
agreements and of direct final storage. The associated cost of transporting, treating and taking
(5,711)
(86)
back waste, including the cost of final storage
and the associated pre-financing costs calculated
on the basis of data from the Federal Office for
Radiation Protection are included accordingly.
The value of the uranium recovered during reprocessing has a reducing effect on the costs.
The provisions for the decommissioning of
nuclear power station facilities accrue by equal
installments over 19 years. The cost calculations
are based on outside expert opinions and assume
that the facilities concerned are eliminated
completely. The costs incurred during the interim
period preceding decommissioning operations are
also included. Furthermore, provisions were made
for other waste management measures (management of radioactive operational waste).
The waste management provisions in the nuclear
energy sector are stated as long-term provisions
with their settlement value discounted to the balance sheet date. An interest rate of 6.0 % (previous year: 5.5 %) is used as a discount rate.
Increases of the obligatory volume due to quantity
Provisions for mining damage including reclamation
These provisions are formed for the risks and
obligations concerning reclamation and those
arising from mining damage that has already
occurred or been caused. Such risks and
obligations are those that exist at the balance
sheet date and those that are identifiable at the
time of preparing the balance sheet. They have to
be created because of obligations under public
law that are based largely on the Federal Mining
Act and formulated, above all, in operation
schedules and water law permits. They are measured at the full costs to be expected or according
to estimated compensation payments. In so far as
the obligation is caused by coal extraction, the
settlement value is accrued on a pro-rata basis.
In the petroleum sector provisions are made
owing to obligations under public law for the
Other provisions
The other provisions mainly include obligations
arising from the personnel sector in the amount
of E 2,832 million (previous year: E 2,850 million),
commitments from restructuring of E 2,428 million
(previous year: E 312 million), purchase and sale
obligations of E 1,676 million (previous year:
E 970 million) as well as contingent liabilities
from the Energy division of E 688 million (previous year: E 885 million) and from the Petroleum
and Chemicals division of E 82 million (previous
year: E 79 million).
are carried at their present value. In the reporting
year these were E 181 million (previous year:
E 216 million). The allocations to the provisions
for nuclear waste management consist above all
of an interest share of E 539 million (previous
year: E 511 million). The reversals of provisions
mainly result from the switchover to the updated
VDEW reference concept for nuclear power plant
decommissioning and from conceptual changes in
the retrofits for our Biblis nuclear power plant.
backfilling of wells and the reclamation of
drilling and production sites. Their amount is
based on cost estimates derived from empirical
values and comparative rates determined by the
Association of the Oil and Natural Gas
Production Industry.
Provisions for mining damage including the
corresponding provisions in the petroleum sector
are long-term provisions which are recognized at
their settlement value discounted to the balance
sheet date. An interest rate of 6.0 % (previous
year: 5.5 %) is used as a discount rate. In the
reporting year, the allocations to the provisions
for mining damage of E 144 million (previous
year: E 179 million) resulted from an increase in
the obligatory volume. The interest share of the
allocations to the provisions for mining damage is
E 159 million (previous year: E 145 million).
The provisions for restructuring mainly comprise
personnel measures aimed at continuing
personnel reduction in a socially acceptable way.
The restructuring provisions, which total E 1,954
million, mainly refer to obligations resulting from
the new personnel measures adopted (incl. the
scheme for early retirement at the age of 51) at
RWE Energie and at Rheinbraun. The new
scheme replaces earlier arrangements and will
run until June 30, 2004. The scheme now covers
a total of 8,037 employees.
127
Notes
The provisions also refer to the additional measures needed to make the necessary personnel
reductions in the short term (e.g. redundancy
payments) as well as to projected decommissioning measures, the pooling of resources, site
consolidation and other costs arising in the wake
of the merger. In addition, provisions have become
necessary on account of the requirements imposed
by the German Cartel Office regarding the sale of
our shares in LAUBAG and VEAG.
The present value difference in the long-term provisions (without pension provisions) of E 1,016
million which is due to an increase in interest
rates will be recognized on a pro-rata basis over
the settlement period.
(21) Liabilities
06/30/2000
in
E
million
Loans
128
Loans against borrowers’ notes
11
thereof
RT* ≤ 1 y.
RT*> 5 y.
–
7
06/30/1999
13
thereof
RT* ≤ 1 y.
RT* > 5 y.
6
–
322
8
174
317
13
163
Accounts payable to banks
1,465
457
564
1,309
301
451
Accounts payable for supplies and services
5,026
4,973
–
3,175
3,057
–
291
259
–
433
400
–
Prepayments received
Accounts payable for bills accepted and drawn
14
12
–
14
14
–
307
205
71
267
153
54
Accounts payable to investees
4,867
4,864
–
529
350
158
Other liabilities
3,176
2,783
143
2,657
2,166
186
(1,027)
(1,027)
(–)
(875)
(875)
(–)
(276)
(199)
(–)
(191)
(182)
(–)
Accounts payable to subsidiaries
of which tax
of which under social security
15,479
*)
13,561
959
8,714
6,460
RT = remaining term
E 934 million of the long-term liabilities were
interest-bearing. The average interest burden of
the accounts payable to banks in the reporting
year was 6.4 % (previous year: 6.2 %).
Due to changes in the group of consolidated companies, the total liabilities rose by E 5,367million.
E 124 million (previous year: E 77 million) of
the accounts payable to subsidiaries and E 248
million (previous year: E 308 million) of the
accounts payable to investees refer to supplies
and services. In the case of individual long-term
construction contracts there is a balance on the
liabilities side of E 272 million in total (previous
year: E 76 million). The liabilities arising from
finance lease agreements amount to E 55 million.
The other liabilities from taxes also contain taxes
that Group companies have to pay for the account
of third parties. The principal component of the
other liabilities under social security is the outstanding amounts payable to the social security
institutions. The accounts payable to members of
the executive bodies are less than E 1 million as
in the previous year.
E 229 million (previous year: E 267 million)
of the liabilities are secured by mortgages and
E 144 million (previous year: E 143 million) by
similar rights.
1,012
(22) Deferred income
in
E
million
06/30/2000
06/30/1999
Investment grants to fixed assets
■
Taxable subsidies
33
34
■
Non-taxable grants
30
38
1,723
1,689
127
147
1,913
1,908
Customers’ contributions to house connection
and construction costs
Others
Of the total amount of deferred income, E 1,317
million (previous year: E 1,338 million) are not
recognized as income within one year.
129
(23) Earnings per share
The basic earnings per share
are calculated by dividing the net profit attributable to the shares by the average number of shares.
This figure may become diluted by so-called
potential shares (above all stock options and
convertible bonds). The options under the stock
option scheme of RWE do not have a dilutive effect
on profit. Thus, the diluted and the basic earnings
per share are equivalent. The same earnings per
share result for common and preference shares.
1999/2000
1998/1999
million
1,212
1,149
E
1.00
1.00
Number of shares outstanding
(weighted average)
in '000 shares
541,545
555,251
E
2.24
2.07
Net profit
Dividend per share
Earnings per share
E
Notes
(24) Contingent liabilities and financial obligations
in
E
million
Contingent liabilities resulting from
the issue and endorsement of bills
Contingent liabilities resulting from bill,
check and other guarantees
Contingent liabilities resulting from
warranty agreements
Contingent liabilities resulting from the granting
of collateral for liabilities of third parties
The investment contracts placed have led to
ordering commitments in the Group of E 1,066
130
million (previous year: E 1,551 million), of which
E 0 million (previous year: E 2 million) to
06/30/2000
06/30/1999
11
31
1,224
1,488
192
199
34
10
1,461
1,728
subsidiaries. Moreover, assurances as regards
acquisitions of investments existed in the amount
of E 31 million (previous year: E 672 million) at
June 30, 2000.
The obligations arising from lease and rent agreements fall due as follows:
Minimum lease payments
in
E
million
Due within 1 year
Due within 1 - 5 years
Due after 5 years
They largely refer to long-term rent agreements
for power generation and supply plants as well as
rent and lease obligations for storage and administration buildings.
Payment obligations for financial assets amounted to E 51 million (previous year: E 38 million).
Co-liability for payment obligations of third parties under section 24 of the Limited Liability
Companies Act totaled E 11 million (previous
year: E 29 million).
Long-term purchase and service agreements for
uranium, conversion, enrichment, production and
waste management exist in the Energy division.
In the Petroleum and Chemicals division, longterm commitments exist from contract processing
agreements. We have assured the Federal Agency
for Special Tasks Associated with Unification
(Bundesanstalt für vereinigungsbedingte Sonder-
Finance lease
Nominal value Present value
Operating lease
Nominal value
7
4
175
25
15
494
2
–
361
34
19
1,030
aufgaben), the former Treuhandanstalt privatization agency, that the contractual obligations in
connection with the acquisition of LAUBAG will
be fulfilled. We bear the customary commercial
liability for long-term contracts in the plant construction business.
The Tax Relief Act did not have any effect on the
1999/2000 fiscal year. The future effects cannot
yet be finally assessed. No significant burden is
expected to arise for the financial position and
performance of the Group.
In the context of the debate about the tax recognition of certain elements of the nuclear waste
management obligations under public law, the tax
authorities of North Rhine-Westphalia have
disputed some partial amounts in the form of
the operating and financing costs of final repositories. Until the fiscal courts reach a decision in
the representative proceedings, which are either
pending or have been agreed throughout the
industry, the relevant taxes are not being levied.
We shoulder the legal and contractual liability
from our membership in various joint ownerships
which exist in connection with power plant
projects, profit and loss transfer agreements and
for the provision of liability cover for nuclear
risks, among others.
Enterprises of the RWE Group are involved in
court cases connected with their operations.
However, RWE is not expecting any major negative repercussions from these court cases on the
economic and financial position of the RWE
Group. Additionally, enterprises of the RWE
Group are directly involved in various administrative and regulatory procedures (including authorization procedures) or are directly affected by
the results of the above in the Energy division.
The potential income from the pending legal
dispute with the state government of RhinelandPalatinate regarding differences of opinion
concerning the construction permit for the
Mülheim-Kärlich nuclear power plant is to be
renounced on account of the so-called nuclear
energy consensus which is yet to be implemented.
131
(25) Reporting on financial instruments
Financial
instruments include financial assets and liabilities
as well as contractual rights and obligations
regarding the exchange or transfer of financial
assets. A distinction is made between primary
and derivative financial instruments.
swaps. Binding internal directives define the
range of action, responsibilities and controls for
our Group companies. Accordingly, derivative
financial instruments must not be used for speculative purposes but only to hedge risks arising
from underlying transactions.
The primary financial instruments essentially
include, on the assets side, cash and cash equivalents, receivables and securities. On the liabilities
side, they predominantly refer to payables. The
balance of primary financial instruments is
disclosed in the balance sheet, the amount of the
financial assets represents the maximum credit
risk. If in the case of financial assets credit risks
are evident, these risks are recognized through
allowances.
We use the value-at-risk method to quantify the
market risk for financial instruments in line with
the international banking standard. On the basis
of historical market price fluctuations, a confidence
level of 95 % and a time horizon of 14 days, the
maximum expected loss which could arise from
changes in market prices is calculated and
continuously checked.
During its operating business activities, the
RWE Group is also exposed to interest rate risks,
currency risks and price risks. These risks are met
by hedging, for instance. Derivative financial
instruments are only used to hedge the following
risks: currency, price and interest rate risks from
operations as well as from trading, cash investments
and financing transactions. The instruments most
commonly used are foreign exchange forwards,
foreign exchange options, interest rate swaps,
interest-rate currency swaps, commodity futures
contracts as well as product and refinery margin
When interpreting the positive and negative market values for derivative financial instruments, it
must be taken into account that they are matched
by offsetting underlying transactions. The market
values of the derivative financial instruments are
not recognized on the assets side.
Separate valuation units between underlying and
hedging transactions are formed if underlying and
hedging transactions objectively and willingly
constitute a uniform benefit and function correlation so that gains and losses from underlying and
hedging transactions are highly likely to compensate each other.
Notes
The nominal volume of the hedging transactions
outlined below is specified without being offset. It
represents the total of all purchase and sales
amounts on which the transactions are based. The
level of the nominal volume enables estimates
regarding the scope of the use of derivatives, but
does not reflect the risk of the Group from the
use of derivatives.
Financial assets and liabilities in foreign currency
may involve currency risks. Such risks are
counteracted by derivative financial instruments.
The following foreign exchange hedging instruments are used:
Foreign exchange hedging
in
E
million
Foreign exchange forwards
Foreign exchange options
Other foreign exchange hedging instruments
Nominal volume
06/30/1999
06/30/2000
1,994
1,584
67
345
92
9
11
2,348
06/30/2000
Remaining term > 1 year
06/30/1999
Market value
06/30/1999
06/30/2000
54
–
27.0
–
71.5
49
0
–
7.4
–
1.3
9
11
–
1.9
–
0.6
1,687
125
65
–
36.3
–
73.4
Nominal volume
06/30/1999
06/30/2000
132
Interest-rate risks exist above all for
long-term items.
Interest rate hedging
in
E
million
06/30/2000
Remaining term > 1 year
06/30/1999
06/30/2000
Market value
06/30/1999
Interest rate options
505
286
302
280
6.0
17.7
Interest rate swaps
753
325
548
325
10.1
2.5
0
31
0
31
0
0
1,258
642
850
636
16.1
20.2
Other interest rate hedging instruments
In the divisions of Energy and Petroleum and
Chemicals in particular, derivative transactions
are concluded to hedge prices and margins. The
Price and margin hedging
in
E
million
increase in the nominal volume compared to the
previous year is mainly due to the start of trading
activities by RWE Energy Trading.
Nominal volume
06/30/1999
06/30/2000
06/30/2000
Remaining term > 1 year
06/30/1999
06/30/2000
Market value
06/30/1999
8.0
33.8
Options
1,908
422
–
8
Swaps
1,761
36
19
–
9.7
0.8
680
1
0
–
3.7
0.0
4,349
459
19
8
2.0
34.6
Commodity futures
The derivatives are exposed to risks equivalent to
the positive market values of the derivatives.
These risks are minimized by the high demands
on the credit standing of our counterparties. In
the reporting year and in the previous year, the
risk exposure was negligible. Market risks which
–
result from the fact that the value of a financial
instrument changes due to market fluctuations
are not relevant either for assessing the financial
position and performance due to the type and
scope of the transactions concluded.
(26) Segment reporting
In the RWE Group, segments
are distinguished on the basis of the services provided by the Group’s divisions. The segmentation
of divisions and geographical regions is based on
the internal reporting system.
The Energy division with its management companies RWE Energie AG and Rheinbraun AG, both
wholly-owned subsidiaries of RWE AG, is one of
the largest and most powerful European energy
suppliers. Moreover, RWE Energie is active in the
district heating business, in the gas supply
business as well as in the water supply business.
Rheinbraun is involved in lignite mining and processing as well as in the extraction of hard coal
and mineral raw materials. Effective April 1,
2000, the lignite-fired power plants of RWE
Energie AG have been spun off to Rheinbraun
AG.
The Petroleum and Chemicals division is managed
by RWE-DEA AG, a 99 % subsidiary of RWE
AG. It covers vertically integrated petroleum
enterprises with worldwide chemical activities.
The Environmental Services division under the
management of RWE Umwelt AG, a 100 %
subsidiary of RWE AG, provides a wide range of
services in the waste management sector.
The Industrial Systems division covers the
activities in the field of printing systems (Heidelberger Druckmaschinen) and those of TESSAG.
TESSAG (Technische Systeme & Services
Aktiengesellschaft) includes the companies of the
former LAHMEYER business lines as well as the
companies of the NUKEM group. The focus of
TESSAG’s operations is on energy-related services
and the production of energy-related components.
Heidelberger Druckmaschinen and TESSAG are
investments directly held by RWE, the shareholdings being 100 % in TESSAG and 56 % in
Heidelberger Druckmaschinen respectively.
The operations of HOCHTIEF AG, the third
largest construction enterprise in Europe, in
which RWE has a shareholding of altogether
62 %, ranges from site management as a general
contractor through systems leadership for major
projects to airport management.
Under “Other/holding company/consolidation”,
the consolidation effects, the holding company
and other activities not allocatable to the five
separately shown divisions are disclosed. These
also include the activities which have remained in
the Group in the field of telecommunications.
133
Notes
External sales
Divisions
E
1999/2000
1998/1999
1999/2000
1998/1999
Energy
13,536
13,674
110
61
Petroleum and Chemicals
18,008
13,601
57
42
Environmental Services
1,524
1,480
25
31
Industrial Systems
6,841
6,058
260
248
Construction and Civil Engineering
7,960
3,392
63
102
49
210
39
22
47,918
38,415
554
506
in
million
Other/holding company/consolidation
Depreciation/amortization
Divisions
in
134
Internal sales
E
million
Energy
Impairment losses
1999/2000
1998/1999
1999/2000
1998/1999
1,312
1,223
79
11
Petroleum and Chemicals
385
349
3
1
Environmental Services
154
158
48
11
Industrial Systems
271
219
–
4
Construction and Civil Engineering
103
88
8
–
56
96
–
31
2,281
2,133
138
58
Other/holding company/consolidation
Operating liabilities
Divisions
in
E
million
Energy
06/30/2000
06/30/1999
Gross liabilities
(acc. to balance sheet)
06/30/2000
06/30/1999
11,781
9,940
30,894
28,874
Petroleum and Chemicals
1,246
1,302
4,919
4,649
Environmental Services
1,327
1,542
1,578
1,810
Industrial Systems
1,991
2,055
4,662
3,894
Construction and Civil Engineering
4,282
3,014
4,417
2,648
Other/holding company/consolidation
1,957
– 2,956
8,961
3,333
22,584
14,897
55,431
45,208
Geographical regions
in
Germany
E
million
External sales by location
of customers
1999/2000
1998/1999
External sales by location
of enterprises
1999/2000
1998/1999
30,290
27,823
33,371
30,761
Europe excl. Germany
6,778
5,580
4,633
3,865
America
9,162
3,801
9,182
3,546
Asia
1,362
938
617
155
Australia
120
85
85
74
Africa
206
188
30
14
47,918
38,415
47,918
38,415
Sales by division
Operating result
Results of investments
in equity method enterprises
1999/2000
1998/1999
1999/2000
1998/1999
1999/2000
1998/1999
13,646
13,735
1,757
2,439
18,065
13,643
387
412
1,549
1,511
101
96
–
10
6
7,101
6,306
474
463
–
17
11
8,023
3,494
88
232
452
–
10
48,472
38,921
3,116
–
17
158
149
–
204
–
2,664
Cash flow
–
EBITDA
73
323
23
20
61
70
–
109
312
Operating assets
Gross assets
(acc. to balance sheet)
06/30/2000
06/30/1999
1999/2000
1998/1999
1999/2000
1998/1999
06/30/2000
06/30/1999
2,189
2,961
2,979
3,393
16,100
15,609
35,088
34,215
609
585
738
734
3,316
3,080
6,062
5,409
225
244
306
252
1,455
1,592
1,844
2,092
514
510
753
671
4,835
4,750
7,529
7,472
170
4,297
3,289
6,141
4,593
270
3,398
193
8,325
1,451
4,950
33,401
28,513
64,989
55,232
–
287
212
470
68
3,354
4,580
Carrying amounts of investments
in equity method enterprises
06/30/2000
06/30/1999
175
–
263
4,688
–
Investments in
financial assets
1999/2000
1998/1999
Capital expenditure for
intangible and tangible assets
1999/2000
1998/1999
2,176
1,863
532
496
1,428
1,500
142
171
36
121
693
519
83
97
78
113
163
162
94
116
192
226
388
298
628
572
445
20
119
73
4,233
142
813
1,604
36
112
7,356
2,961
2,096
2,580
2,827
2,664
Gross assets
(acc. to balance sheet)
06/30/2000
06/30/1999
Capital expenditure
1999/2000
1998/1999
50,188
44,755
3,219
4,297
3,824
4,099
617
615
9,947
5,998
997
229
765
140
59
95
240
230
26
3
25
10
5
5
64,989
55,232
4,923
5,244
135
Notes
Notes on the segment data:
The internal sales reflect the level of sales
between Group enterprises. Internal sales are
invoiced under the same conditions as for third
parties. The division sales are made up of the
total of external and internal sales.
■ The depreciation/amortization concerns the fixed
assets without securities and other loans. Writebacks were recognized in the Energy division
of E 6 million and in the Environmental
■
136
Services division of E 2 million (previous year:
E 3 million in the Construction and Civil
Engineering division).
■ The delimitation of the operating assets and the
operating liabilities results from the return-oncapital concept. These values are compatible
with the operating result, which is also used in
the Group for steering purposes (for steering in
the RWE Group cf. pages 52 to 55). In addition
to the operating assets and the operating liabilities, the consolidated values of the balance
sheet items for the gross assets and liabilities
are also disclosed in the segments.
■ The capital expenditure (including the expenses
for acquisitions of consolidated subsidiaries)
encompasses the additions to the fixed assets
without securities and other loans (minus equity
adjustments).
■
The results of investments in enterprises
accounted for using the equity method include
income and expenses from profit and loss transfer agreements, from investments as well as
goodwill amortization.
The operating result determined for steering purposes is different from the profit from operating
activities.
The operating result can be derived from the profit from operating activities as follows:
in
E
million
Profit from operating activities
+ Results of investments
– Non-operating result
+ Interest credit on prepayments received
Operating result
The reconciliation concerns the following items:
The results of investments contain all income
and expenses resulting in connection with the
operations-related investments. Thus, the results
of investments constitute an integral component
of the Group’s operating activities.
■ Income and expenses which from an accounting
viewpoint are unusual or which resulted from
exceptional items, impair the assessment of the
operating activities. They are reallocated to the
non-operating result which represents a separate
part of the return-on-capital concept (cf. page
141). The non-operating result also contains the
release of the negative goodwill.
■ Prepayments received for long-term construction contracts in the Construction and Civil
Engineering and Industrial Systems divisions
are not to be allocated to the financing
activities but are operational. That is why the
■
06/30/2000
06/30/1999
129
2,944
2,912
357
422
218
45
33
2,664
3,116
operating result of the divisions is corrected by
an interest credit on prepayments received. It is
now based on the net amount available for cash
investment. The assets to be financed therewith
are deducted from the prepayments. The
previous-year value has been adjusted.
In the reporting year, the profit from operating
activities in the Group was adjusted by the positive
non-operating result in the amount of E 422 million (previous year: E 218 million). The non-operating income concerns gains on disposals including
deconsolidation effects and the release of a negative goodwill in the Group totaling E 3.1 billion,
mainly from the sale of E-Plus (E 2.8 billion) as
well as the disposal of TeleColumbus and other
investments. Non-operating expenses of E 2.7
billion predominantly include restructuring measures as well as our share in the losses of VEAG in
connection with the provisions created for anticipated losses related to incomplete contracts. Also
disclosed in the non-operating result are the
allocations to provisions due to the German Cartel
Office requirements regarding the disposal of our
shares in LAUBAG and VEAG. In the previous year,
the non-operating income resulted above all from
gains on the disposal of real estate in the Construction and Civil Engineering division (E 165 million)
and the uranium ore mining activities of the Energy
division (E 51 million). Non-operating expenses
of approx. E 72 million resulted from the streamlining of the Iridium activities.
(27) Information on the cash flow statement
million (previous year: E 1,270 million); E 66
million (previous year: E 34 million) income
taxes were refunded.
■ After deduction of the non-cash items from
equity accounting, the results of investments
received (dividends) amount to E 342 million
(previous year: E 229 million).
The cash flow statement classifies cash flows by
operating, investing and financing activities.
Effects of the changes in the group of consolidated companies are eliminated; their influence on
cash and cash equivalents is shown separately as
is the influence of exchange rate changes.
The net cash from operating activities of E 3,241
million (previous year: E 4,782 million) could not
fully cover the net cash used in investing and
financing activities of E – 3,718 million (previous
year: E – 4,790 million).
In the fiscal year, E 556 million (previous year:
E 511 million) were paid out to RWE shareholders
and E 214 million (previous year: E 177 million)
to minority interests. The raising of new financial
debt by E 119 million (previous year: E 621 million) compares with repayments in the amount of
E 1,037 million (previous year: E 1,433 million).
The net cash from operating activities includes,
inter alia:
■ Interest income of E 601 million (previous
year: E 722 million) and interest expenses of
E 357 million (previous year: E 340 million).
■ The taxes on income paid amount to E 2,381
There are no restraints on disposal for cash and
cash equivalents.
In total, the following financial assets exist in the Group:
E
06/30/2000
06/30/1999
Cash and cash equivalents
2,812
2,980
Securities held as current assets
7,339
6,620
Securities held as fixed assets and other loans
7,076
5,847
935
688
Financial assets
18,162
16,135
Net financial assets
15,097
13,336
in
million
Other financial assets
The other financial assets primarily cover
financial receivables and components of other
assets. The net financial assets are made up of
the financial assets less financial liabilities.
137
Notes
Other disclosures
138
The information on the members of
the Executive Board and the Supervisory Board
pursuant to section 285, no. 10, of the German
Commercial Code is given on pages 145 to 148.
and 60,000 shares are accounted for by subsidiaries respectively (previous year: 120,000
shares). The details of the stock option scheme are
explained under equity (cf. pages 122 and 123).
Provided that the annual general meetings pass
the proposed dividends, the remuneration paid to
members of the Executive Board for the 1999/
2000 fiscal year is E 6,046,154.79 (previous year:
Former members of the Executive Board and their
surviving dependants received E 11,658,912.04
(previous year: E 4,127,817.09), of which
E 2,202,118.55 (previous year: E 935,209.92)
E
are accounted for by subsidiaries. E 61,096,842.34
(previous year: E 38,975,848.10) have been
accrued for pension liabilities to former members
of the Executive Board and their surviving dependants, of which E 19,785,955.92 (previous year:
E 9,457,466.65) are accounted for by
subsidiaries.
9,313,367.53), of which E 2,308,732.65
(previous year: E 4,884,845.65) are accounted
for by subsidiaries. Members of the Supervisory
Board shall receive E 1,493,512.88 (previous
year: E 1,027,548.40), of which E 119,221.21
(previous year: E 88,049.57) are accounted for
by subsidiaries. Under the stock option scheme of
RWE AG at the balance sheet date, the Executive
Board and former Executive Board members hold
non-transferable stock options on 460,000 and
140,000 common shares of RWE AG respectively
(previous year: 410,000 shares), of which 60,000
Events occurring after the balance sheet date
Information about events occurring after the balance sheet date can be found on pages 47 and 48.
This report contains individual future-related
statements concerning the further course of business, such as forecasts on the development of the
The Economic Advisory Board was paid
499,154.63 (previous year: E 458,322.04), of
which E 128,446.30 (previous year: E 90,191.89)
are accounted for by subsidiaries.
E
economic and political environment as well as
our own business. These statements are based on
carefully made assumptions on our part. However,
due to remaining risks and uncertainties, we cannot guarantee that they will turn out to be correct
in total or in individual parts.
Auditors’ Report
Auditors’ report
We have audited the consolidated financial statements of RWE AG for the period ended
June 30, 2000, consisting of income statement,
balance sheet, cash flow statement, statement of
changes in equity and notes. The preparation and
contents of the consolidated financial statements
in accordance with the International Accounting
Standards of the IASC (IAS) are the responsibility of the company’s Executive Board. Based on
the audit we have performed, it is our task to assess
whether the consolidated financial statements
comply with the IAS.
of the accounting principles used and of the
significant estimates made by the Executive Board
as well as an evaluation of the overall presentation
of the consolidated financial statements. We believe
that our audit provides a reasonable basis for our
opinion.
We have audited the consolidated financial statements in accordance with German auditing regulations, taking account of the German principles
of proper auditing as laid down by the Institute
of German Certified Public Accountants, as well
as with the International Standards on Auditing
(ISA). These standards require that we plan and
perform the audit so as to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement.
In the course of the audit, evidence relevant to
the amounts and disclosures in the consolidated
financial statements is examined on the basis of
random samples. The audit includes an assessment
Our audit, which according to German auditing
regulations also covered the Group management
report for the fiscal year ended June 30, 2000,
prepared by the Executive Board, did not result
in any objections. In our opinion, the Group management report overall adequately presents the
position of the Group as well as the risks of future
development. Additionally, we confirm that the
consolidated financial statements and the Group
management report for the fiscal year ended
June 30, 2000, meet the conditions for an exemption of RWE AG from preparing consolidated
financial statements and a Group management
report under German law.
In our opinion, based on our audit, the consolidated
financial statements in compliance with the IAS
give a true and fair view of the financial position
and performance of the Group as well as the cash
flows of the fiscal year.
Essen, September 14, 2000
PwC Deutsche Revision
Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft
P. Albrecht
Wirtschaftsprüfer
(Auditor)
H. Suhrbier
Wirtschaftsprüfer
(Auditor)
139
Derivation of the components of
RWE’s value management
Group operating result and assets
We calculate
the operating result from the profit from operating activities according to the income statement.
The exact method of derivation is shown on page
06/30/2000
06/30/1999
Average
18.8
18.7
18.7
8.4
4.3
6.4
= Operating fixed assets
27.2
23.0
25.1
Gross current assets 3)
15.2
12.4
13.8
9.0
6.9
7.9
RWE Group
Operating assets
in
E
billion
Tangible assets 1)
+ Investments and loans 2)
– Short-term
liabilities 4)
= Net working capital
140
136 in the notes. In the year under review the
consolidated operating result totaled about E 2.7
billion.
6.2
5.5
5.9
Operating assets according to balance sheet
33.4
28.5
31.0
Operating assets (adjusted)
29.2
28.5
28.9
1) Tangible assets including intangible assets
2) Excluding financial investments and other loans
3) Inventories (gross), accounts receivable for supplies and services, excluding offset prepayments; other assets excluding
cash investments, including prepaid expenses
4) Accounts payable for supplies and services, excluding prepayments received, tax provisions, other liabilities (excluding
financial liabilities), including deferred income (excluding customers’ contributions to house connection and construction
costs)
In fiscal 1999/2000 the Group’s average operating assets comprised E 25.1 billion fixed assets
and E 5.9 billion net working capital. The full
proceeds from the sale of E-Plus had not been
distributed to RWE AG by June 30, 2000; the
amount is therefore contained in the investments.
Since these assets were no longer counterbalanced by operating results, we notionally
adjusted the operating assets by E 4.2 billion to
E 29.2 billion in 1999/2000. This correction was
essential to obtain an expressive ROIC.
Capital costs
RWE Group
Operating assets and
capital costs by division
Operating
assets*
1999/2000
E billion
Interestbearing equity
1999/2000
E billion
Beta factor
Weighted
capital costs
1999/2000
%
Energy
15.9
3.1
0.9
5.5
Petroleum and Chemicals
3.2
0.9
1.1
8.7
Environmental Services
1.7
0.5
1.0
7.8
Industrial Systems
4.3
2.0
0.9/1.1
9.0
Technical Systems & Services
1.3
0.1
1.1
4.3
Printing Systems
3.0
1.9
0.9
10.8
5.4
1.7
1.0
6.6
5.6
0.9
5.4
Construction and Civil Engineering
All divisions
30.5
Group
28.9
*) Average, including operating liquidity
141
With interest-bearing equity of E 5.6 billion, the
Group’s capital costs totaled E 5.4 %. This figure
was calculated by offsetting deferred taxes
against equity.
Divisions’ operating result
RWE Group
Derivation of operating result
by division
in
E
billion
Energy
Result as per
income
statement 1)
1999/2000
–
0.1
Non-operating
result
Other 2)
Operating
result 3)
1999/2000
1999/2000
1999/2000
1.8
–
1.76
0.0
–
0.39
–
Petroleum and Chemicals
0.4
Environmental Services
0.1
–
0.0
0.0
0.11
Industrial Systems
0.4
–
0.1
–
0.51
0.0
–
0.1
–
0.05
0.4
–
0.0
–
0.46
0.0
0.1
0.21
–
1.9
0.1
2.98
0.4
0.0
2.66
Technical Systems & Services
Printing Systems
–
Construction and Civil Engineering
0.1
All divisions
0.9
Group
3.0
1) Profit on operating activities plus income from investments
2) Interest credit prepayments, interest on operating liquidity
3) Including interest on operating liquidity
Non-operating profit components of some E 1.8
billion have to be eliminated to determine the
operating result of the Energy division. This
refers almost exclusively to provisions for
restructuring. Only marginal adjustments were
necessary in the other divisions. As regards the
Group, non-operating income, largely from the
sale of E-Plus, is counterbalanced by non-operating expenses for reengineering. The non-operating
income totals about E 0.4 billion.
Principal Investments
at June 30, 2000
I. Consolidated subsidiaries
Investment in
acc. with section 16 of the
German Stock
Corporation Act
%
RWE Aktiengesellschaft, Essen
Equity of
the last
fiscal year
E
’000
4,470,539
Net profit/
loss of the
last fiscal year
E
’000
523,031
Net sales
1999/2000
E
Annual
average
number of
employees
million
1999/2000
–
290
Energy
RWE Energie Aktiengesellschaft, Essen
Rheinbraun Aktiengesellschaft, Cologne
142
100
1,556,036
–1)
6,736
16,659
–1)
1,383
12,499
100
1,068,885
Budapesti Elektromos Müvek Rt. (ELMÜ),
Budapest/Hungary
54
270,887
31,500
500
3,480
Consol Energy Inc., Wilmington/Delaware/USA;
Consol Energy group2) with 56 subsidiaries
in the USA, Belgium and Canada
72
265,515
107,832
2,110
7,115
Emscher Lippe Energie GmbH, Gelsenkirchen
79
79,484
9,938
307
858
envia Energie Sachsen Brandenburg AG, Chemnitz
63
678,350
69,621
1,148
3,624
Észak-magyarországi Áramszolgáltató Rt. (ÉMÁSZ),
Miskolc/Hungary
54
114,546
7,687
244
2,069
EWV Energie- und Wasser-Versorgung GmbH, Stolberg
54
29,427
2,185
218
712
Kernkraftwerke Gundremmingen Betriebsgesellschaft mbH,
Gundremmingen
75
1,245
31
165
821
Koblenzer Elektrizitätswerk und Verkehrs-AG, Koblenz
57
76,437
8,766
190
789
Kraftwerk Altwürttemberg AG, Ludwigsburg
80
42,924
3,417
175
400
Lausitzer Braunkohle AG (LAUBAG), Senftenberg
55
796,038
120
703
5,992
Lech-Elektrizitätswerke AG, Augsburg
90
181,667
21,822
579
1,460
Main-Kraftwerke AG, Frankfurt/Main
72
132,352
22,729
436
1,049
Mátrai Erömü Rt. (MÁTRA), Visonta/Hungary
50
167,426
19,503
132
3,653
RBB Vermögensverwaltungs GmbH, Cologne
100
56,295
10,527
2
–
Rheinbraun Engineering und Wasser GmbH, Cologne
100
22,782
1,697
9
–
Rheinische Baustoffwerke GmbH, Bergheim
rhenag Rheinische Energie AG, Cologne
100
8,016
54
228,840
RV Rheinbraun Handel und Dienstleistungen GmbH, Cologne
100
76,694
Société Luxembourgeoise de Centrales Nucléaires S.A.,
Luxembourg/Luxembourg
100
30,998
99
1,411,589
CONDEA Augusta S.p.A., Palermo/Italy
100
90,675
CONDEA Chemie GmbH, Hamburg
100
511
–1)
27,737
–1)
1,087
69
158
154
517
6
8
37
1
1,705
3,234
775
1,074
–
–
Petroleum and Chemicals
RWE-DEA Aktiengesellschaft für Mineraloel und Chemie,
Hamburg
CONDEA Vista
Company, Houston/Texas/USA2)
–1)
– 24,429
–1)
100
120,329
916
962
DEA Mineraloel AG, Hamburg
100
360,972
41,463
–1)
13,375
2,751
DEA petroleum marketing companies3)
20 companies in Germany, 2 companies abroad
100
106,959
–1)
2,549
992
I. Consolidated subsidiaries
Investment in
acc. with section 16 of the
German Stock
Corporation Act
%
Equity of
the last
fiscal year
RWE Umwelt Aktiengesellschaft, Essen
100
383,469
RWE Umwelt Aqua GmbH, Berlin
100
15,975
– 2,689
RWE Umwelt Services Deutschland GmbH, Essen
100
230,601
2,293
–
26
E
’000
Net profit/
loss of the
last fiscal year
E
’000
Net sales
1999/2000
E
Annual
average
number of
employees
million
1999/2000
–
102
5
120
Environmental Services
–1)
–1)
100
60
–
12
50
190,575
17,727
499
1,950
TESSAG Technische Systeme & Services AG,
Frankfurt/Main
100
180,405
16,424
276
2,218
Angewandte Solarenergie – ASE GmbH, Alzenau
100
13,830
43
242
2,029
11,465
676
1,129
811
1,305
RWE Umwelt Services International GmbH, Essen
Trienekens AG, Viersen
Industrial Systems
Heidelberger Druckmaschinen AG, Heidelberg
–1)
56
1,541,528
Heidelberger Druckmaschinen Vertrieb
Deutschland GmbH, Heidelberg
167,385
100
40,337
Heidelberg USA, Inc., Kennesaw, Georgia/USA2)
100
204,342
28,807
Heidelberg Web Systems, Inc.,
Dover/New Hampshire/USA2)
100
144,112
– 9,741
423
1,477
MAQUET AG, Rastatt
100
36,825
2,325
148
840
Piller-GmbH, Osterode am Harz
100
24,296
3,914
132
984
Rheinelektra Technik GmbH, Mannheim
100
11,692
– 9,265
242
1,817
Starkstrom-Gerätebau GmbH, Regensburg
100
9,247
64
60
418
100
9,152
– 9,314
660
495
62
1,194,998
72,000
2,386
11,974
–1)
GmbH, Duisburg3);
TESSAG Industrie-Anlagen
INA group with 2 subsidiaries in France and
Canada
Construction and Civil Engineering
HOCHTIEF Aktiengesellschaft, Essen
HOCHTIEF AirPort GmbH, Essen
100
109,310
–1)
32
52
HOCHTIEF Verkehrswegebau GmbH, Essen
100
12,792
– 1)
1
28
PRÜM-Türenwerk GmbH, Weinsheim
100
9,203
–1)
61
448
–1)
66
552
4,124
2,607
–
57
–
3
35
148
STREIF AG, Weinsheim
100
11,486
The Turner Corporation, Wilmington/Delaware/USA;
Turner group2) with 35 subsidiaries in the USA
and in Brazil, Great Britain and Singapore
100
353,738
RWE Telliance Aktiengesellschaft, Essen
100
154,678
RWE International Financial Services Ireland Ltd.,
Dublin/Ireland
100
265,077
4,080
Other subsidiaries
Victoria Mathias Verwaltungsgesellschaft mbH, Essen
1) Profit and loss transfer agreement
2) Data from the enterprise’s consolidated financial statements
3) Financial data summarized from the enterprises’ separate financial statements
100
542,176
–1)
10,304
–1)
143
Principal Investments
at June 30, 2000
II. Associates accounted for using the equity method
Investment in
acc. with section 16 of the
German Stock
Corporation Act
%
Equity of
the last
fiscal year
Motor-Columbus AG, Baden/Switzerland 1)
20
319,733
30,659
Niederrheinische Versorgung und Verkehr AG,
Mönchengladbach 1)
50
369,618
77
Stadtwerke Essen AG, Essen
29
121,602
8,149
TCP Petcoke Corporation, Dover/Delaware/USA
50
8,746
7,019
Thyssengas GmbH, Duisburg
75
125,905
23,008
30
130,750
15,656
26
1,144,834
– 954,429
FUCHS DEA Schmierstoffe GmbH & Co. KG, Mannheim
50
47,574
11,337
Oberrheinische Mineralölwerke GmbH, Karlsruhe
42
79,747
3,915
PCK Raffinerie GmbH, Schwedt/Oder
38
444,292
8,827
AVE Beteiligungsgesellschaft mbH, Hörsching/Austria
50
52,147
RWE/VIVENDI Berlinwasser Beteiligungs AG, Berlin
50
8,055
40
936,930
E
Net profit/
loss of the
last fiscal year
E
’000
’000
Energy
TIGÁZ Tiszántúli Gázszolgáltató Rt.,
Hajdúszoboszló/Hungary
VEAG Vereinigte Energiewerke
AG, Berlin 1)
Petroleum and Chemicals
144
Environmental Services
997
–
2,7322)
Construction and Civil Engineering
Athens International Airport S.A., Spata/Greece
Ballast Nedam
N.V., Amstelveen/Netherlands 1)
–
48
255,374
9,393
Flughafen Düsseldorf GmbH, Düsseldorf
50
25,565
17,298
KITCHELL CORPORATION, Phoenix/Arizona/USA 1)
35
54,715
7,930
Leighton Holdings Limited, Sydney/Australia 1)
50
391,511
74,067
48.75
2,346,279
834,689
Others
VR Telecommunications GmbH & Co.,
Norderfriedrichskoog 3)
1) Data from the enterprise’s consolidated financial statements
2) Short fiscal year
3) In the previous year joint venture company, proportionately consolidated
Supervisory Board
Dr. h.c. Friedel Neuber
Carl-Ludwig von Boehm-Bezing
Duisburg
Chairman
President and CEO,
Westdeutsche Landesbank Girozentrale
■ Babcock Borsig AG (Chair)
■ Deutsche Bahn AG
■ Douglas Holding AG
■ Preussag AG (Chair)
■ ThyssenKrupp AG
■ TUI Group GmbH
■ AXA S.A.
■ Bank Austria AG
Erwin Winkel*
Niederzier
Deputy Chairman since
September 23, 2000
Power systems electronics engineer
■ RWE Aktiengesellschaft für Beteiligungen
Bad Soden
Executive Vice President, Deutsche Bank AG
■ Deutsche Grundbesitz-Anlagengesellschaft mbH (Chair)
■ Deutsche Grundbesitz-Investmentgesellschaft mbH (Chair)
■ Eurohypo AG (Chair)
■ Messer Griesheim GmbH
■ Rütgers AG
■ Schiffshypothekenbank zu Lübeck AG (Chair)
■ Steigenberger Hotels AG
■ ThyssenKrupp AG
■ AKA Ausfuhrkredit-Gesellschaft mbH (Chair)
■ Deutsche Bank S.A.E. (Chair)
■ Deutsche Bank S.A./N.V. (Chair)
■ Deutsche Bank S.p.A.
■ Deutsche Grundbesitz Management GmbH
(Chair)
■ Deutsche Immobilien Leasing GmbH (Chair)
■ FIAT S.p.A.
■ Messer Industrie GmbH (Chair)
Dr. Diethart Breipohl
Alwin Fitting*
Westhofen
– until September 22, 2000 –
Deputy Chairman
Power plant engineer
■ NCO Vermögens-AG
Dr. Paul Achleitner
Frankfurt/Main
– since March 16, 2000 –
Executive Vice President, Allianz AG
■ ConSors Discount-Broker AG
■ RWE Aktiengesellschaft für Beteiligungen
(Chair)
■ Österreichische Industrieholding AG
Dr. Klaus Peter Balthasar
Klotten
– until March 28, 2000 –
Chief Administrative Officer,
Cochem-Zell rural district, until April 26, 2000
Executive Vice President, NCO Vermögens-AG,
from May 1, 2000
■ RW Holding AG
■ Hunsrück Touristik GmbH
■ Kreissparkasse Cochem-Zell (Chair)
■ Moselland-Touristik GmbH
Icking
– until March 15, 2000 –
Supervisory Board
■ Allianz AG
■ Bayerische Hypo- und Vereinsbank AG
■ Beiersdorf AG
■ Continental AG
■ KarstadtQuelle AG
■ mg technologies ag
■ KM Europa Metal AG
■ Crédit Lyonnais
■ Les Assurances Générales de France (AGF)
Dr. Friedhelm Gieske
Essen
Former President and CEO of RWE AG
■ KarstadtQuelle AG
■ MAN AG
■ Nationalbank AG
Erwin Hahn*
Bettingen
Electrician
Johann Heiß*
Landshut
Electrician
■ TESSAG Technische Systeme & Services AG
*) Employee representative on the Supervisory Board
■) Member of other mandatory Supervisory Boards
■) Member of comparable domestic and foreign supervisory bodies of business enterprises
145
Supervisory Board
Heinz-Eberhard Holl
Klaus Schmid*
Osnabrück
– since April 3, 2000 –
Chief Administrative Officer,
Osnabrück rural dictrict
■ Georgsmarienhütte GmbH
■ Georgsmarienhütte Holding GmbH
■ RWE Aktiengesellschaft für Beteiligungen
Rudolf Kersting
Kleve
Chief Administrative Officer, Kleve district
■ GVV-Kommunal Versicherung VVaG (Chair)
■ GVV-Privatversicherung AG (Chair)
Bischofswiesen
Coordinating Department Head,
Executive Board of IGM Trade Union, ret.
Dr. Manfred Schneider
Leverkusen
President and CEO, Bayer AG
■ Allianz AG
■ DaimlerChrysler AG
■ Metro AG
Ernst-W. Stuckert*
Hamburg
Commercial officer
Berthold Krell*
Klaus-Dieter Südhofer*
Wenden/Hünsborn
Chief fitter
■ RWE Energie AG
146
Dr. Walter Mende
Leverkusen
Attorney-at-Law
First Mayor of the city of Leverkusen
■ Kraftverkehr Wupper-Sieg AG
■ RW Holding AG (Chair)
■ Wirtschaftsförderung Leverkusen GmbH
Wilhelm Nowack
Essen
Managing Director of Büro Nowack Gesellschaft
für Projektplanungs GmbH
■ Messe Essen GmbH
■ Essener Entsorgungsbetriebe GmbH (Chair)
■ VEKS-Verwertung und Entsorgung KarnapStädte Holding GmbH (Chair)
Branko Rakidzija*
Ludwigsburg
– since August 22, 2000 –
Managing Director of Federal Supply and
Disposal Division at the Central Executive Board
of ÖTV Trade Union
■ E.ON Energie AG
■ E.ON Kernkraft GmbH
■ RWE Energie AG
Recklinghausen
Trade Union Secretary
Deputy Chairman, IG Bergbau, Chemie und
Energie Trade Union
■ BHW Holding AG
■ Rheinbraun AG
■ RAG AG
■ RAG Immobilien AG
■ RWE-DEA AG für Mineraloel und Chemie
Dr. Alfons Friedrich Titzrath
Cologne
Chairman of the Supervisory Board,
Dresdner Bank AG
■ Allianz AG
■ Celanese AG
■ Dresdner Bank AG (Chair)
■ Münchener Rückversicherungs-Gesellschaft AG
■ VAW aluminium AG
Ralf Zimmermann*
Rüsselsheim
– until July 31, 2000 –
Member of the Central Executive Board, ÖTV
Trade Union, until July 31, 2000
Executive Vice President, RWE Umwelt AG,
from August 1, 2000
■ BGAG Beteiligungsgesellschaft der
Gewerkschaften AG
■ LSG Lufthansa Service Holding AG
■ LSG Lufthansa Service Deutschland GmbH
Bernhard von Rothkirch*
Frechen
Chief engineer
*) Employee representative on the Supervisory Board
■) Member of other mandatory Supervisory Boards
■) Member of comparable domestic and foreign supervisory bodies of business enterprises
Executive Board
Dr. Dietmar Kuhnt
Dr. Dr. E.h. Dieter Henning
Essen
President and CEO, RWE AG
■ AfE Aktiengesellschaft für Energiewirtschaft
■ Allianz Versicherungs-AG
■ Dresdner Bank AG
■ Hapag-Lloyd AG
■ Heidelberger Druckmaschinen AG (Chair)
■ HOCHTIEF AG (Chair)
■ mg technologies ag
■ Preussag AG
■ Rheinbraun AG (Chair)
■ RWE-DEA AG für Mineraloel und Chemie
(Chair)
■ RWE Energie AG (Chair)
■ RWE Umwelt AG (Chair)
■ TESSAG Technische Systeme & Services AG
(Chair)
Prof. Dr. Clemens Börsig
Frankfurt/Main
Executive Vice President, Deutsche Bank AG,
from January 1, 2001
Executive Vice President, RWE AG
– until December 15, 1999 –
■ Gerling-Konzern Speziale KreditversicherungsAG
■ Heidelberger Druckmaschinen AG
■ Lucent Technologies Holding GmbH
■ Foreign & Colonial Eurotrust plc.
Dr. Dieter Dräger
Rellingen
President and CEO, RWE-DEA AG für
Mineraloel und Chemie
President and CEO, DEA Mineraloel AG
Executive Vice President, RWE AG
– until September 30, 1999 –
■ rhenag Rheinische Energie AG
■ CONDEA Augusta S.p.A.
■ CONDEA Vista Company
Thomas Geitner
Cologne
Executive Board Director, Vodafone Airtouch
Executive Vice President, Mannesmann AG
Executive Vice President, RWE AG
– until September 30, 1999 –
■ Babcock Borsig AG
■ Singulus Technologies AG
■ Telecel Commincaçõnes Pessoais, S.A.
■ Omnitel Pronto Italia S.p.A.
Düren
Former President and CEO of
Rheinbraun AG
Executive Vice President, RWE AG
– until September 30, 1999 –
■ Thyssen Krupp Engineering AG
Dr. Hans-Peter Keitel
Essen
President and CEO, HOCHTIEF AG
Executive Vice President, RWE AG
– until September 30, 1999 –
■ DEA Mineraloel AG
■ IVECO MAGIRUS AG
■ Nationalbank AG
■ TESSAG Technische Systeme & Services AG
■ Viterra AG
■ Ballast Nedam B.V.
■ Leighton Holdings Limited
■ Pilkington plc
■ The Turner Corporation
Dr. Richard R. Klein
Essen
Executive Vice President, RWE AG
■ Berlinwasser Holding AG
■ DEA Mineraloel AG
■ Maquet AG (Chair)
■ Rheinbraun AG
■ RWE Systems AG (Chair)
■ RWE Telliance AG
Hartmut Mehdorn
Heidelberg
President and CEO, Deutsche Bahn AG
Executive Vice President, RWE AG
– until September 30, 1999 –
■ DB Cargo AG (Chair)
■ DB Netz AG (Chair)
■ DB Regio AG (Chair)
■ DB Reise & Touristik AG (Chair)
■ DB Station & Service AG (Chair)
■ Lufthansa Technik AG
■ SAP AG
■) Member of other mandatory Supervisory Boards
■) Member of comparable domestic and foreign supervisory bodies of business enterprises
147
Executive Board
Manfred Remmel
Essen
President and CEO, RWE Energie AG
Executive Vice President, RWE AG
■ AXA Colonia Lebensversicherungs AG
■ DEA Mineraloel AG
■ Kraftwerk Altwürttemberg AG (Chair)
■ Lech-Elektrizitätswerke AG (Chair)
■ Main-Kraftwerke AG (Chair)
■ Rheinbraun AG
■ rhenag Rheinische Energie AG (Chair)
■ TESSAG Technische Systeme & Services AG
■ VEW AG
■ VEW Energie AG
■ VSE AG
■ Theater und Philharmonie GmbH
■ Thyssengas GmbH
Rudolf Schwan
Essen
Executive Vice President, RWE AG
– until September 30, 1999 –
148
Dr. Klaus Sturany
Dortmund
Executive Vice President, RWE AG
– since December 1, 1999 –
■ AfE Aktiengesellschaft für Energiewirtschaft
(Chair)
■ Commerzbank AG
■ DEA Mineraloel AG (Chair)
■ Hannover Rückversicherungs-AG
■ Heidelberger Druckmaschinen AG
■ HOCHTIEF AG
■ Rheinbraun AG
■ RWE-DEA Aktiengesellschaft für Mineraloel
und Chemie
■ RWE Energie AG
■ RWE Umwelt AG
■ TESSAG Technische Systeme & Services AG
Jan Zilius
Essen
Executive Vice President, RWE AG
■ Anhaltinische
Braunkohlesanierungsgesellschaft mbH
■ Energieversorgung Oberhausen AG
■ Rheinbraun AG
■ Rheinkraftwerk Albbruck-Dogern AG
■ rhenag Rheinische Energie AG
■ RWE Systems AG
■ Schluchseewerk AG
■ VEW Energie AG
■ VSE AG
■) Member of other mandatory Supervisory Boards
■) Member of comparable domestic and foreign supervisory bodies of business enterprises
Economic Advisory Board
Edmond Alphandéry
Paris
Président du Conseil de Surveillance
de CNP
Dr. F. Wilhelm Christians
Düsseldorf
Erwin Conradi
Baar
Delegate of the Administrative Board,
METRO Holding AG
Dr. Gerhard Cromme
Düsseldorf
President and CEO,
ThyssenKrupp AG
Jürgen Dormann
Schiltigheim
President and CEO, Aventis
Dr. Michael Frenzel
Hanover
President and CEO, PREUSSAG AG
Dr. Dr. h.c. Joachim Funk
Düsseldorf
Dr. h.c. Tyll Necker
Cologne
Vice President, Bundesverband der
Deutschen Industrie e.V.
Alfred Freiherr von Oppenheim
Cologne
Chairman of the Supervisory Board,
Sal. Oppenheim jr. & Cie. KGaA
Dr. Heinrich von Pierer
Munich
President and CEO, Siemens AG
Dr. Wolfgang Röller
Neu-Isenburg
Honorary Chairman of the Supervisory Board, Dresdner Bank AG
Hans Peter Schreib
Düsseldorf
Attorney-at-Law, Executive Vice
President, Deutsche Schutzvereinigung
für Wertpapierbesitz e.V.
Dr. Walter Seipp
Frankfurt am Main
Honorary Chairman of the Supervisory Board, Commerzbank AG
Dieter Kauffmann
Esslingen
President and CEO,
Schutzgemeinschaft der
Kleinaktionäre e.V.
Prof. Dr. Jürgen Strube
Ludwigshafen
President and CEO, BASF AG
Marcus Wallenberg
Dr. Dr. E.h. Günther Klätte
Essen
Former Executive Vice President of
Rheinisch-Westfälisches
Elektrizitätswerk AG
Professor Dr. E.h. Berthold Leibinger
Ditzingen
Managing Partner,
Trumpf GmbH & Co. KG
Professor Dr. Hubert Markl
Munich
President, Max-Planck-Gesellschaft
zur Förderung der Wissenschaften e.V.
Jérome Monod
Paris
– until May 31, 2000 –
Président du Conseil de Surveillance,
Suez-Lyonnaise des Eaux S.A.
Stockholm
Executive Vice President, Investor AB
Wilhelm Werhahn
Neuss
Executive Vice President, Messrs.
Wilh. Werhahn
Dr. Jürgen Wilhelm
Cologne
First Deputy Chairman of
Landschaftsversammlung and First
Deputy Chairman of Landschaftsausschuss of Landwirtschaftsverband
Rheinland
Dr. Mark Wössner
Gütersloh
Chairman of the Supervisory Board,
Bertelsmann AG
Dr. h.c. Wolfgang Ziemann
Essen
Former Executive Vice President of
RWE AG
149
Glossary
Cross Selling Sale of different products and services to a
single customer. Cross selling occurs, for example,
if gas is additionally sold to a customer who had
previously purchased only electricity.
Hydrocracking Petroleum refining process in which
hydrogen molecules are decomposed. Heavy components of crude oil whose demand is dwindling
are converted to light products, such as gasoline,
diesel fuel or light fuel oil.
Downstream In the petroleum business, downstream refers
to the chain of activities that embraces the supply
of crude oil to refineries, processing to obtain
petroleum and petrochemicals products, and the
sale of such products.
Drupa The world’s largest and premier trade fair for the
graphics industry. The Drupa takes place every
four or five years in Düsseldorf.
ICE (Inter-City Express) Transportation concept of the
German railroad operator to link the country’s
and Europe’s key metropolises with high-speed
routes and trains.
Key Account Significant (large) customer whose interests
are generally looked after by a personal manager.
150
Multi Utility A company that offers a variety of supply
EBITDA Earnings before interest, taxes, depreciation and
amortization. It reflects the cash flow generated
by a company’s operating business.
General Building Building construction rather than civil
services from a single source. In the context of its
Multi-Utility strategy, RWE is focusing on energy
and environmental services. The core businesses
are electricity, gas, water and waste water, waste
disposal and recycling, as well as energy-related
services.
engineering. Office blocks, hospitals and airport
terminals are typical general building projects.
Performance Used in the financial community to describe
CCGT (combined-cycle gas turbine) In a CCGT power
plant the thermal energy contained in the hot
exhaust air of a gas turbine is used in a subsequent
steam power generating process. Depending on the
plant’s size, this type of cogeneration can achieve
fuel efficiency of more than 85 %.
the development of a financial investment within
a certain period.
Portal An Internet access site via which users enter the
World Wide Web to use the information and product offerings of the portal provider or to follow
links to other services.
Projected unit credit method Provisions for pensions
and similar obligations are calculated by this
method (IAS 19). It pays due regard not only to
the pensions and vested interests accrued as of
the cutoff date, but also to anticipated increase
in salaries and pensions.
Standing Interpretations Committee (SIC) The SIC
rules on controversial accounting issues. Its interpretations are approved by the International
Accounting Standards Committee (IASC) and,
once adopted, are binding on all IAS users.
Upstream In the petroleum industry, the exploration and
production of oil and natural gas.
Venture capital Equity placed at the disposal of young,
innovative companies during the initial investment
phase. Among other things, investment decisions
are governed by the product concept, market potential and management capabilities.
Actuarial profits and losses The actuarial calculation of
pension provisions is largely based on forecast
parameters (such as the projected pattern of wages
and pensions). Actuarial profits and losses arise
if these assumptions are revised in the light of
actual developments.
151
Imprint
152
RWE Aktiengesellschaft
Opernplatz 1
D-45128 Essen
Telephone +49 (0)201 12-00
Fax
+49 (0)201 12-15199
E-mail
[email protected]
Annual reports, interim reports and further
information on RWE are available over the
Internet at www.rwe.com
or through our shareholders’ hotline.
Telephone
0 800/60 60 60 60
(Germany)
Telephone
00 800/60 60 60 60
(International)
Investor Relations:
Telephone +49 (0)201 12-15025
Fax
+49 (0)201 12-15265
E-mail
[email protected]
This Annual Report is published in German and
English.
Design
Corporate Communications:
Telephone +49 (0)201 12-15250
Fax
+49 (0)201 12-15094
Photos
Production
Lithography
Typesetting
Landor Associates GmbH,
Hamburg
RWE AG, Bernd Bodtländer
NETWØRK GmbH, Hamburg
w&co MediaServices
GmbH & Co. KG, Hamburg
PRINTAG GmbH & Co. KG,
Krefeld
Printed on Heidelberg Speedmaster on
non-chlorine-bleached paper.
Ten-year overview
RWE Group
1999/2000
1998/1999
1997/19981)
1996/1997
1995/1996
1994/1995
1993/1994
1992/1993
1991/1992
1990/1991
Sales and results
Net sales
Energy
Petroleum and Chemicals
Environmental Services
Industrial Systems
Construction and Civil
Engineering
Other activities
E
E
E
E
E
million
million
million
million
million
47,918
13,536
18,008
1,524
6,841
38,415
13,674
13,601
1,480
6,058
37,524
13,150
14,154
1,032
5,873
36,883
12,905
14,201
863
4,377
33,457
13,354
12,360
680
3,729
32,510
13,576
12,151
535
3,271
28,505
10,840
11,633
514
3,164
27,147
10,694
10,680
361
2,862
26,453
10,428
10,945
301
2,898
25,509
10,306
10,333
226
2,981
E
E
million
million
7,960
49
3,392
210
3,179
136
3,953
584
3,037
297
2,956
21
2,337
17
2,534
16
1,861
20
1,648
15
Profit before tax
E
million
2,151
2,722
2,581
1,732
1,627
1,528
1,024
1,033
1,140
1,508
Profit after tax
E
million
1,556
1,545
1,415
1,124
799
740
570
536
535
585
Net profit
E
million
1,212
1,149
998
666
612
555
471
450
448
441
Cash flow
E
million
3,354
4,580
4,702
4,834
4,446
4,419
4,142
3,757
3,847
3,696
Capital expenditure
E
million
4,923
5,244
3,244
5,086
3,672
3,469
3,564
2,816
3,253
2,769
Depreciation and fixed
asset disposals
E
million
4,707
3,202
3,356
3,073
2,901
3,174
2,381
2,135
2,429
2,240
Number
152,132
154,223
145,467
136,115
132,658
134,497
116,187
113,225
105,642
102,315
Cash flow/capital expenditure/
depreciation
Workforce/staff costs
Workforce (June 30)
E
million
7,940
7,120
6,612
6,629
6,597
6,459
5,621
5,412
4,999
4,445
Fixed assets
E
million
34,493
29,110
24,292
22,541
20,973
18,026
15,498
14,470
13,727
13,689
Current assets
E
million
23,615
20,292
20,323
18,696
17,770
19,428
16,711
15,856
14,002
13,142
Equity/minority interest
E
million
9,557
10,024
10,267
9,069
8,579
8,262
7,163
7,243
6,015
6,559
Long-term provisions
E
million
29,371
27,053
22,814
20,277
19,361
18,507
16,357
14,991
12,973
11,914
Other long-term debt
E
million
3,235
3,761
3,152
620
493
592
335
151
135
170
Short-term provisions and debt E million
19,868
11,649
10,530
11,272
10,310
10,093
8,353
7,941
8,606
8,189
million
64,989
55,232
48,500
41,237
38,743
37,454
32,209
30,326
27,729
26,832
Earnings per share
E
2.24
2.07
1.80
1.64
1.51
1.37
1.16
1.23
1.30
1.28
Cash flow per share
E
6.19
8.25
8.47
8.70
8.02
8.23
7.83
7.81
8.49
8.19
Return on equity
%
15.9
15.2
14.5
15.9
12.0
12.1
10.0
10.7
11.5
11.5
Return on sales
%
5.7
8.7
8.9
6.1
6.5
6.4
5.1
5.1
5.7
6.4
Equity ratio
%
14.7
18.1
21.2
22.0
22.1
22.1
22.2
23.9
21.7
24.4
Equity-to-fixed-assets ratio
%
122.2
140.3
149.2
132.9
135.60
139.0
139.1
138.8
139.3
136.2
Staff costs
Asset/capital structure
Balance sheet total
E
Key ratios
RWE Aktiengesellschaft
Subscribed capital
E
million
1,340
1,420
1,420
1,420
1,417
1,373
1,352
1,334
1,159
1,154
Net profit for the year
E
million
523
1,020
562
455
425
384
379
349
368
326
Dividend paid
E
million
555
511
455
425
384
379
296
278
254
0.82
0.77
0.72
0.72
0.61
0.61
0.56
1.17
1.09
1.02
0.87
0.96
0.88
523 3)
Dividend per share
E
1.00
1.00
Dividend incl. tax credit
per share
E
1.43
1.43
0.92
1.31
2)
1) from 1997/98 figures based on the International Accounting Standards (IAS)
2) including bonus
3) Less dividend paid for the own shares not entitled to a dividend held by the company at the time of adoption of the resolution concerning profit distribution
1.02
2)
Financial Calendar
Financial Calendar
2000/2001
Interim report
on the first quarter of fiscal 2000/01
11/23/2000
Annual General Meeting
11/23/2000
Interim report
on the first half of fiscal 2000/01
02/28/2001
Press conference
02/28/2001
Analysts’ conference
02/28/2001
RWE Aktiengesellschaft
Opernplatz 1
D-45128 Essen
Telephone +49 (0)201/12-00
Fax
+49 (0)201/12-15199
E-mail
[email protected]
Internet www.rwe.com