Udo Giegerich, Executive of Group Finance and Investor Relations - Implementation of Group Finance and Investor Relations at Uniper SE - DerTreasurer
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Implementation of Group Finance and Finance Magazine | November 10, 2016 Investor Relations at Uniper SE Udo Giegerich, Executive of Group Finance and Investor Relations
Table of contents
1. Overview
2. Uniper spin-off
3. Organizational structure
4. Rating and funding
5. Banking relationships
6. Investor story
7. Key challenges and outlook
2
1. Overview – General information
We are an experienced international energy company with a new name.
We are Uniper: An international energy
company with about 14,000 employees
and active in more than 40 countries.
Headquartered in Düsseldorf, Germany,
Uniper ranks among large generation and
trading companies in Europe, which is one
of the world’s most important energy
markets. Through our commodity-trading
and technology-services businesses, we
are also active in energy markets from the
Americas to Asia.
Our core markets are Germany,
the United Kingdom, Sweden,
France, the Benelux countries
and Russia.
3
1. Overview - Uniper‘s business portfolio
We are well positioned to play a key role in ensuring energy security.
• One of the largest European generators with 31 GW of
own, mostly dispatchable generation capacity
European • Diversified base across technologies and main NWE
Generation markets
• Strong capabilities in construction, operations and
maintenance
• A leading physical energy trader with global footprint
• Large gas midstream business in Europe with more than
Global 400 TWh gas LTC portfolio, own storage capacity of
Commodities 8.8 bcm and pipeline shareholdings
• Participation in giant Russian gas field
• Optimization of European Generation portfolio
• Number 3 privately-owned Russian generation company
International
• ~30% capacity increase since 2010
Power
• 11 GW of generation assets
4
1. Overview - Uniper‘s business portfolio
Well-diversified European generation portfolio with strong market position.
Net capacity by country and fuel type (GW)1,2 Net capacity by fuel type (GW)1,3
Sweden (# 2) 4.2
4.2 Other 4.2 Hydro
4.2
5.7 2.5
2.5 Nuclear
31.6
GW
UK (# 4) 11.7 Gas
11.7 9.0 Hard coal
Benelux(# 2)4 9.0
7.0 Germany (# 3)
3.7
12.0
Hungary (#5) Electricity production (TWh)1,3
France (# 3)
0.4 7.37.3
Other
2.1 15.3
15.3 Hydro
15.2 Gas
15.2
83.8 12.2 Nuclear
TWh6 12.2
Hydro Nuclear Hard Coal Gas Other
34.0
# Market position5 34.0 Hard Coal
Source: IHS (market position)
1. Net capacity for 2015 (accounting view); net generation capacity is reported for a power plant if it has been in operation within a year 2. Excluding Hydro LTCs 3.
Including Hydro LTCs with net capacities of 0.6 GW and production volume of 0.75 TWh in Austria and Switzerland 4. For Benelux: Market position for Netherlands
only 5. Market positions based on IHS figures for peers vs. actual numbers for Uniper; figures refer to 2014 (Hungary and France refer to 2013) 6. Deviation due to
rounding 5
1. Overview - Uniper‘s business portfolio
Diversified portfolio with a strong midstream gas footprint.
Gas Yuzhno Russkoye Coal & freight / LNG Power
25% stake in giant, producing Global physical coal trading and
Long-term supply portfolio Portfolio de-risking
natural gas field marketing and freight business
Portfolio optimization Stable production profile Contracted regas capacity Portfolio optimization
Ongoing build-up of global LNG
Gas storage capacity Asset-backed trading
arbitrage portfolio
Wholesale sales Wholesale sales
Gas pipeline participations Origination
6
1. Overview - Uniper‘s business portfolio
International Power driven by majority stake in one of the leading
Russian energy players.
Russia
Pricing zone 1
Pricing zone 2
Smolenskaya
Shaturskaya
Yaivinskaya
Surgutskaya Berezovskaya
10.7 GW net capacity (GW)¹
83.7% stake4 in one of the largest private Russian generators
Smolenskaya 0.6
Yaivinskaya 1.0
Shaturskaya 1.4 ~5% of Russian electricity production
2
Berezovskaya 2.3
Surgutskaya 5.5
3
~30% capacity increase since 2010
Old capacities New capacities
1. Net generation capacity for 2015 (accounting view); net generation capacity is reported for a power plant if it has been in operation within a year - excludes 20
MW of capacity in the Czech Republic which is held by E.ON Russia 2. Block 3 currently not operational after fire incident 3. Old capacities defined as capacities
commissioned prior to 2007 4. Stake in E.ON Russia JSC as of 31 December 2015 7
2. Uniper spin-off – Process and timeline
The spin-off project has been announced in Nov 14 and finalized in Sep 16.
Summer Day 1 AGM Day 2
2014 Nov 2014 Q2 2015 Jan 2016 June 9 Sept. 12
Management
Public Start of Uniper E.ON AGM
decision to Blueprints Spin-off +
announcement as new agrees to spin-
spin-off specified listing
of spin-off company off Uniper
business units
Phase 1 (Nov 14 – April 15) Strong conceptual focus
Design and detailing of Governance & Steering principles for NewCo and Future E.ON
Issue identification and measure definition for Carve-Out
Development of initial capital and transaction structure for Transaction
Announcement of new Management, Locations, and NewCo brand
Phase 2 (May 15 – Jan 16) Strong implementation focus
Transaction preparation and Carve-out implementation
Uniper and its Management as new stakeholder in the project
More operational topics and decisions
Implementation of Uniper on Day 1 (1 January 2016)
Phase 3 (from Jan 16 – Sep 16) Strong capital market focus
After achieving Day 1, the focus of the project was on the preparation and execution of the Uniper listing
Uniper organization required a new stakeholder concept
Phase 3 and the whole One2two project ended with the successful listing of Uniper (Day 2)
8
2. Uniper spin-off – Process and timeline
Day 2 marked an end to a 2-year period from announcement to spin-off.
Listing window in 16Q3
Day 1 AGM Day 2
Jan 1 April 26 June 9 June 10 Sept. 2 Sept. 5-9 Sept. 9 Sept. 12
Uniper starts E.ON AGM Start of Securities Entry into
Capital Markets International Uniper shares
as a new agrees to technical prospectus corporate
Day road show listed at FSE
company Uniper spin-off listing project published register
Listing and settlement process
• Entry into corporate register on 09/09
• Successful flow-back management
• Problems with communication from depository banks
(WM-Mitteilungen)
• Fractional shares settlement with perfect match of
numbers (98% settled until Oct 4)
• Risk of deviation from prospectus during settlement
process with regard to fractional shares handling by banks
9
2. Uniper spin-off – Activities and challenges
Several milestones had to be reached throughout the spin-off process.
Key activities until spin-off
Prospectus: Finalize prospectus and get approval by BaFin
Management presentation: Prepare management presentation + Q&As and executive interviews
Spin-off report: Receive audited spin-off report and get approval by the Annual General Meeting
Combined financials: Compile Combined Financials for 2015
Final capital structure: Set-up final capital structure
Equity story: Finalize equity story for E.ON/Uniper + roadshows
AGM process: Prepare shareholders’ vote at Annual General Meeting
Transaction documents: Finalize transaction documents (Listing agreement, comfort letters, etc.)
Rating: Get final rating from rating agency
Financing: Ensure financing of Uniper; set-up syndicated loan facilities
Technical transaction: Ensure all technical listing preconditions were met
Flowback management: Mitigate stock selling pressure from institutional investors
103. Organizational structure
Group Finance functions as the main point of contact for finance-topics.
Targets and responsibilities
Funding and refinancing of the Uniper Group and provision of sufficient liquidity on group and local
level Group (incl. market capitalization)
Managing the relationship to the banks as well as leading all financing discussions with banks
Managing all financial assets of the group and coordinating and administrating the pension vehicles
Pooling of all available liquidity on Uniper SE level through cash pooling or deposit agreements and
continuously improving the Working Capital management
Arranging the provision of collaterals (incl. covenants) and guarantees
Managing the currency and the interest rate position for the Uniper Group
Assuring an investment grade rating and generally improving the rating over time
Optimizing processes and systems/WSS
Investor Relations (after Q3/2016 presentation/quarterly notification)
113. Organizational structure
Group Finance consists of 4 highly dedicated, specialized sub-divisions.
The organization structure of Group Finance had to be set-up entirely anew (“blueprint structure”)
Around 2/3 of the current Group Finance & Investor Relations staff are former E.ON employees
Group Finance & Investor Relations (3.5 FTE)
Corporate Finance Asset Management Treasury Investor Relations
(5 FTE) (5.3 FTE)1 (12.1 FTE) (4.0 FTE)
Core activities: Core activities: Core activities: Core activities:
Group funding Investment trust Cash and liquidity Investor
Banking management management relationship/
relationships Pension fund Working capital communication
Group rating management management Investor meetings/
Project/Structured Derivatives FX Management Roadshows
Financing
1. Medium term FTE target after implementation of structure 124. Rating and funding – Rating
Uniper obtained its first rating from S&P on May 10.
Rating Anchor – Combination of business and financial risk profile
uniper Business risk: Fair
Standard Volatility Table Financial risk: Intermediate (S&P’s did not
consider disposals in their base case leading to
1 FFO/Debt in the 40s)
Anchor: bb+
Modifier: One notch uplift for credit metrics at high
end of the range
Rating: BBB- (stable outlook)
Target Ratios: BBB-: area of 40% | BBB: >55%
1. Note: Debt/EBITDA based on S&P definition
134. Rating and funding – Rating
Uniper obtained an investment grade rating by S&P with a stable outlook.
Outcome from S&P rating committee
Business risk “very well positioned” in ‘Fair’ category / “upper side of ‘Fair’ helped by prudent and
sound financial policy” (business risk long discussed in committee)
S&P did not consider any divestments in their base case
This leads to rating ratios in the area of 40% in line with a ‘intermediate’ financial risk profile (FRP)
and in combination with the business risk profile results in an bb+ anchor rating
Given that achieved ratios in S&P’s base case are in the upper end of the ‘intermediate’ FRP
(range: 30-45%), S&P assigns a comparable rating modifier (+1 notch) bringing the rating to BBB-
Accordingly, S&P sets the target ratio for the BBB- rating “in the 40% area” (exact wording tbc)
Stable outlook reflects S&P’s view that rating is “fairly robust” in current market environment
(but clearly a continuation/acceleration of recent developments would have an impact)
If disposals come and financial projections improve to a stable sustainable “at or above 55%” a
BBB (flat) rating is possible (rating ratios would need to be at the high end of ‘modest’ FRP and
usage of funds would be monitored (financial policy))
In addition to the rating of S&P, Uniper currently analyses the benefits/risks to get another rating
from an additional rating agency
144. Rating and Funding – Syndicated loan facility
First independent facilities agreement of 4.5 billion Euro agreed upon.
Ambitious timeline before AGM
Day 1 AGM Day 2
16Q1 April May 10 June 1 June 9 July July 27 Sept. 12
Relationship Kick-off €5bn Facilities E.ON AGM Facilities Syndication Spin-off +
S&P publishes
meetings + financing Agreement agrees to reduced by completed with financial
BBB- rating
rating process process signed Uniper spin-off €500m 15 banks independence
Tight timeline for signing from April until AGM
Underwriting Beauty contest with 6 banks; 4 selected; 3 signed
Challenges in the signing process for all participants
Club deal targeted with 14-18 banks (incl. underwriters)
Banking group Finally 15 national and international banks signed
€5.0bn Facilities Agreement initially underwritten
Size After loan size reduction to €4.5bn, the agreement consists of a term
loan facility of €2.0bn and a revolving credit facility of €2.5bn
Facilities Agreement reduced by €500mn at an early stage
Communication Required targeted communication to banks and general public4. Rating and Funding – Syndicated loan facility
Uniper’s inaugural financing consists of two separate loan facilities.
Refinancing Drawn shortly
E.ON Term Loan post listing and to
Intercompany Loan €2.0bn be repaid from
(repaid post Listing) (3y) both cash flow and
disposal proceeds
Will be drawn
Revolving Credit
Backup liquidity & from time to time
Facility (RCF)
Working Capital (~50/50 working
2.5bn €
(as of Listing) capital and backup
(3y+1+1)
facility)
Deutsche Bank, J.P. Morgan and UniCredit have underwritten (guaranteed) this facility
165. Banking relationships
Syndication of inaugural financing as “ticket” to join the banking group.
Core banking group Main business relationships
Barclays The participation in Uniper’s inaugural syndicated
BayernLB financing offers the relationship banks the opportunity
to be invited for Uniper’s side business going forward:
BNP Paribas
CITI 1. Strategic advise (M&A, equity, etc.)
2. Funding (DCM, project finance)
Commerzbank
3. Working capital & commodity/trade finance
Deutsche Bank
4. Risk management (FX, interest, etc.)
Goldman Sachs 5. Cash and transaction business
Helaba 6. Asset management (e.g. pensions)
ING
Side business will be exclusively distributed within
J.P. Morgan the banking group (except in case another bank has a
Lloyds Bank unique angle towards a specific topic)
Morgan Stanley Relationship meetings on a regular basis
SEB
Société Générale
UniCredit
176. Investor story – Stock listing
Public perception of Uniper has been rather negative prior to the listing.
Initial set-up
• Management team announced in 2015
• Separation of companies on Jan 1, 2016
• General outlook on business given
• Government decision on nuclear liabilities
16H1: Headwind from markets
• Commodity market downturn in 16Q1
• Negative outlook for utilities in general
• Write-downs after impairment test in 16Q2
Before listing day
• Wide range of forecast market capitalization
ranging from €2bn to €5bn+
• Featuring considerable market uncertainty
186. Investor story – Stock listing
Markets see Uniper as a solid investment with upside potential.
Stock market reception Facts & figures
• Around 25% of all Uniper shares • Initial price: 10.015 Euro
traded in the first week of trading • First close: 10.30 Euro
• High trading volumes achieved • First month: c.+15%
(daily volume between €10-20m) • First 30 days: c.+25%
• Stable share price in week 1
• Strong performance in first weeks
Source: ir.uniper.energy
Selected analysts’ opinions on Uniper SE
• Oct 13: Merill Lynch launches Uniper stocks with “Buy” – target price at 14.90€.
• Oct 19: Morgan Stanley suggest to “Overweight” Uniper – target price at 13.50€.
• Oct 20: Commerbank keeps Uniper at “Buy” with a target price of 11.80€.
• Oct 26: HSBC suggests to “Reduce” Uniper stocks – target price at 11.60€.
• Oct 28: Société Générale “Raises“ Uniper‘s target price to 13,40€.
Source: ir.uniper.energy
196. Investor story – Dividend policy
Our commitment to shareholders: Attractive FCF based dividend policy.
New dividend policy Illustration of dividend base
Proposed 2016 dividend payment of c.
€200m (implicit €0.55 / share)1
Adjusted Funds from Operations (Adj. FFO)
Maintenance / replacement
–
For subsequent years, payout based on Free investments
Cash from Operations
Free Cash from Operations (FCfO)
Total free cash post-dividends to be neutral
or positive
Dividends
1. Based on number of shares of 365,960,000 shares; dependent on distribution capacity of Uniper SE (based on German GAAP) as well as AGM and Supervisory
Board consent 206. Investor story – Dividend policy
Adjusted FFO as key KPI for future dividend base.
Adjusted Funds from Operations1 over time (€bn) From OCF to adjusted FFO
% Cash conversion 2
Operating Cash Flow
Cash conversion strongly impacted by gas LTC
+/– Working capital effects3
105%
– Dividends to minorities
79%
67% – Contributions to Swedish nuclear fund
– Pension service cost contributions
Adjusted Funds from Operations (Adj. FFO)
1.5 1.5 1.8
Putting historic FFO cash conversion into context
In terms of conversion rate to EBITDA gas LTC situation
has to be taken into account
Reported 2013-2015 EBITDA burdened by provisions
Adj. FFO benefitted from not yet renegotiated LTC
contracts
2013 2014 2015 2016 Adj. FFO also to be special year as strongly impacted
by gas LTC settlement
1. Adj. FFO 2. Defined as Adj. FFO / Adj. EBITDA 3. Changes in operating assets and liabilities and in income taxes adjusted by derivatives 217. Key challenges and outlook
We are currently tackling a couple of groundbreaking challenges.
Next challenges Financial target ratios Safeguarding rating
Integrate Investor Relations into
Group Finance Disposals
Further improve cash pooling At least €2bn of potential
Only one EUR bank/even only disposal proceeds identified
one account
Analyse to include GBP, SEK, Comfortably
RUB into cash pooling below 2.0x
Positive FCF post dividend
Replace clearing banks
Sufficient cash to be retained in
Working capital measures Corresponding
initial years
to leverage ratio
Optimize liquidity forecasting / below 1.0x
management
Streamlining procurement
activities Safeguarding necessary market
Reduce IT system (WSS) access through comfortable
complexity investment grade rating
Target Target net
economic financial
net debt / debt / Adj.
Adj. EBITDA EBITDA
227. Key challenges and outlook
Three-tiered action plan aimed at “sustaining value in challenging times“.
Uniper’s starting block in 16H1
High pro-forma economic net debt of Unfavourable market
Political pressure and exit from coal
€4.7bn at FYE15 environment in 16H1
Action plan announced in
April 2016
Cost Cash Portfolio
Targeted total cost reductions Group investments (€bn) Disposal volume
>€2bn
2015 2018 2015 2018 By 2018
Radical reduction of direct and Optimisation of working capital At least €2bn of potential disposal
indirect costs across the Group proceeds identified
Ambition to reduce investments to
Offset loss of earnings due to maintenance level Used for deleveraging and funding
commodity price collapse1 of growth projects
1. Referring to annualised foregone earnings from price declines of €8 - €10/MWh in continental Europe and the Nordics since 26/04/2015 and a total outright
volume of 25-27TWh in an unhedged scenarioUniper disclaimer: This presentation may contain forward-looking statements based on current assumptions and forecasts made by Uniper AG Closing statement management and other information currently available to Uniper. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of the company and the estimates given here. Uniper AG does not intend, and does not assume any liability whatsoever, to update these forward-looking statements or to conform them to future events or developments. If you need any further information, please contact us: Uniper AG E.ON-Platz 1 40479 Düsseldorf www.uniper.energy
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