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The broader framework for optimized capital management is determined by the strategic approach of the RWE Group, which is focused on increasing the value of our business over the long term, in the interests of our investors, employees and customers. To achieve this goal, RWE endeavours to constantly optimize its existing operations (“operational excellence”), to safeguard its market position through investment in growth and to broaden its portfolio via acquisitions that create value.
Within the framework of capital management, this strategic approach involves the use of a debt target to actively manage the balance sheet. The target is based on a new definition of net debt (net financial debt including all material non-current provisions, less the surplus of plan assets over benefit obligations) and a debt factor which is derived from this (net debt divided by EBITDA Glossary). The target value for fiscal 2010 for the debt factor is 2.8 to 3.4, and is set in harmony with a solid rating Glossary. At the end of the period under review, this factor was 2.2 (previous year: 2.1).
Maintaining a solid rating, as a sign of excellent credit quality, is important for the financial flexibility of the RWE Group. The rating is also influenced by a number of other qualitative and quantitative factors. These include aspects such as market conditions, competition, and the political framework, as well as indicators such as profitability and cash flow generation.
At present, the two leading rating Glossary agencies, Moody’s and Standard & Poor’s, assign investment-grade ratings (A1/A flat, both with a negative outlook) for the bonds issued by RWE AG and by RWE Finance B.V. with a guarantee by RWE AG. Moody’s is currently considering a possible downgrade. The two agencies give the rating P-1/A-1 for RWE’s short-term credit quality and the Commercial Paper Glossary Programme. The review of operations also contains information on the assessment of RWE’s creditworthiness by the rating agencies.
RWE AG is not subject to any capital requirements on the basis of its Articles of Incorporation.
