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Assets.
The net worth of RWE AG is determined by the management of investments and the activities it undertakes for the Group companies. The holding company holds the shares in the operating companies and handles financing for them. This is reflected in corresponding accounts receivable from, and payable to, affiliates, which rose considerably due to an increased need for, and higher flows of, financial resources in individual companies. Working capital includes 31.7 million shares bought back in the first half of 2008.
The €3.5 billion in provisions for pensions included in the provisions are not limited to coverage for the vested benefits of the parent company’s staff, but also include coverage for the vested benefits of subsidiaries’ current and former employees. RWE AG was reimbursed for pension expenses by the companies concerned. This caused a corresponding reduction of income from investments.
As of December 31, 2008, RWE AG’s balance sheet total was higher than in 2007, but the equity ratio remained at 20.6 %.
Financial position.
RWE AG’s financial situation is determined by the procurement of funds for its subsidiaries’ ongoing business activities. The subsidiary RWE Finance B.V. handles most of RWE AG’s external refinancing on the capital market by issuing bonds backed by RWE AG. In a difficult capital market environment, we successfully placed two bonds with a total volume of €2.0 billion in November 2008 and two further bonds with a total volume of €3.0 billion at the beginning of February 2009. As of December 31, 2008, RWE bonds and commercial paper Glossary outstanding amounted to €10.2 billion and €0.8 billion, respectively. Proceeds from the sale of 39.5 % of American Water were used to pay down external financial debt.
Earnings position.
RWE AG’s earnings are largely determined by the earnings generated by its subsidiaries. Income from financial assets, which was primarily contributed by RWE Power AG and RWE Energy AG, was 9 % down year on year. Our earnings contributions were affected by the one-off effects of the valuation of participations. Furthermore, securities on RWE AG’s books had to be written down in connection with the financial crisis. Net interest improved again, because financial debt continued to decline over the course of the year under review. In contrast, the combined total of “other income” and “other expenses” fell. This was mainly because the tax paid by subsidiaries was lower and capital gains on the sale of securities were smaller than in 2007. The tax expense was also down year on year, largely due to the reduction in tax rates resulting from the German 2008 corporate tax reform and the release of a tax provision after a succesful lawsuit.
The Supervisory and Executive Boards of RWE AG will propose to the Annual General Meeting on April 22, 2009, that a dividend of €4.50 per share be paid for fiscal 2008. Relative to the Group’s recurrent net income, this results in a payout ratio of 71 %. It is therefore within the target range of 70 % to 80 % envisaged for the 2008 financial year.
