(24) Share-based payment

Grant date

July 1, 2003

May 25, 2004

Number of options granted

6,677,450

9,192,800

Term

5 years

5 years

Vesting conditions

Two-year waiting period; the common share price must have risen by at least 10 % prior to the exercise date and must have outperformed the Dow Jones STOXX Utilities Price Index on ten consecutive days in the same period (this last condition does not apply if the common share price increases by at least 20 %).

Upon achievement of the above performance targets, the options can be exercised on a daily basis following expiration of the waiting period, with the exception of short blocking periods prior to the publication of corporate data. The number of options which may be exercised depends on the increase in the price of the common share compared to the exercise price determined when the options are granted. In the event of a 20 % price increase all of the options can be exercised; for a 15 or 10 % increase, 60 or 25 % of the options can be exercised, respectively.

Exercise price

€ 26.37

€ 35.45

Form of settlement

Cash settlement amounting to the difference between the share price upon exercise and the exercise price or provision of common shares (at the discretion of RWE AG). Settlement is limited to 50 % of the exercise price.

Grant date

Jan. 1, 2005

Jan. 1, 2006

Jan. 1, 2007

Jan. 1, 2008

Number of conditionally granted performance shares Glossary

2,551,800

2,444,191

1,468,132

1,668,836

Term

3

years

3 years

3 years

3 years

Pay-out conditions

Automatic pay-out if following a waiting period of three years an outperformance of at least 25 % compared to the Dow Jones STOXX Utilities Index peer group has been achieved, measured in terms of their index weighting as of the inception of the programme. Measurement of outperformance is carried out using Total Shareholder Return (TSR), which takes into account both the development of the share price and reinvested dividends.

Determination of payment

1.

Determination of the index weighting of the peer group companies which exhibit a lower TSR than RWE at the end of the term.

2.

Performance factor is calculated by squaring this percentage rate and multiplying it by 1.25.

3.

Total number of performance shares which can be paid out is calculated by multiplying the performance shares conditionally granted by the performance factor.

4.

Payment corresponds to the final number of performance shares Glossary valued at the average RWE share price during the last 20 trading days prior to expiration of the programme (with a ceiling of two times the value of the performance shares as of the grant date, for the 2006, 2007 and 2008 tranches, and three times the value for the 2005 tranche).

Change in corporate control/merger

•

If during the waiting period there is a change in corporate control, a compensation payment is made. This is calculated by multiplying the price paid in the acquisition of the RWE shares by the final number of performance shares. The latter shall be determined as per the regulations of the compensation plan with regard to the time when the bid for corporate control is submitted.

•

In the event of merger with another company, compensation shall be calculated on the basis of the expected value of the performance shares at the time of the merger multiplied by the prorated number of performance shares corresponding to the ratio between the total waiting period and the waiting period until the merger takes place.

Form of settlement

Cash settlement