RWE AG
Annual Report 2019

Plain-text annual report

Our energy for a sustainable life Annual Report 2019 Our energy for a sustainable life Electricity. This is what we have been producing for over 120 years. And it hasn’t changed. But what has changed is that it is capable of so much more compared to when our company was founded in 1898. Electricity is indispensable for driving innovation and progress and it is ubiquitous in our daily lives. Charging mobile phones, taking the train to work and so much more would be impossible without electricity. It powers robots used on production lines, enables billions of digital processes, and propels entire fleets of electric vehicles. A lot has also changed in electricity generation. We now increasingly produce electricity by harnessing the energy all around us – from wind, sun and water. By contrast, we use less and less CO2-intensive coal. In doing so, we are channelling all our energy into achieving a goal that is more important today than ever before: sustainability. We have become a world leader in electricity generation from renewables as the result of an asset swap with E.ON. Right from the start, we will be investing in the expansion of renewable energy – a net 1.5 to 2 billion euros every year. In doing so, we will build onshore and offshore wind farms and explore new technologies enabling energy harnessed from the wind and sun to be stored so that it can be used when the wind isn’t blowing and it‘s dark outside. Until storage infrastructure has been expanded to entirely meet demand with green electricity, we will use our flexible power stations to guarantee security of supply. We want our electricity generation to be carbon neutral by no later than 2040. Who would have dreamt of this 120 years ago? We aim to be carbon neutral by 2040 This is ten years ahead of the schedule for the EU. If you’re wondering how we intend to go about this, we will rapidly expand renewables while making an exit from coal-fired electricity generation. Our accomplishments demonstrate how seriously we take this: since 2012 we have halved our CO2 emissions. We produce clean, secure and affordable electricity The electricity we generate from wind, sun, water and biomass is our energy for a sustainable life. However, it is also important to ensure the availability of this energy. And under no circumstances should it become a luxury. Here, we are doing all we can by spurring the development of high-capacity, economically viable energy storage. A global player in renewable energy Efforts to protect the climate shouldn’t stop at country borders. We also build wind and solar farms outside Europe, especially in North America and in the Asia-Pacific region. The USA is already our largest onshore wind market. €1.5 to 2 billion in net investments per year in renewable energy The new RWE focuses on wind, sun, water and biomass as energy sources. We want to make increasing use of them. We will set aside 1.5 to 2 billion euros to invest in this every year. As these are net figures, the funds of project partners will increase this capital expenditure. At a glance RWE Group – key figures 2019 2018 +/– Power generation billion kWh External revenue (excluding natural gas tax/electricity tax) Adjusted EBITDA Adjusted EBIT Income from continuing operations before tax Net income Cash flows from operating activities of continuing operations Capital expenditure Property, plant and equipment and intangible assets Financial assets Free cash flow € million € million € million € million € million € million € million € million € million € million 153.2 13,125 2,489 1,267 – 752 8,498 – 977 9,838 2,090 7,748 – 2,053 176.0 13,4061 1,538 619 49 335 4,611 1,260 1,079 181 3,439 Number of shares outstanding (annual average) thousands 614,745 614,745 Earnings per share Dividend per share € € 13.82 0.802 0.54 0.70 – 22.8 – 281 951 648 – 801 8,163 – 5,588 8,578 1,011 7,567 – 5,492 – 13.28 0.10 Net debt of continuing operations € million Workforce3 31 Dec 2019 31 Dec 2018 9,066 19,792 4,389 17,748 4,677 2,044 1 Figure adjusted due to changes in the recognition of revenues from derivative transactions. 2 Dividend proposal for RWE AG’s 2019 fiscal year, subject to the passing of a resolution by the 28 April 2020 Annual General Meeting. 3 Converted to full-time positions. 10 RWE Annual Report 2019Contents To our investors Interview with the CEO The Executive Board of RWE AG Supervisory Board report RWE on the capital market 1 1.1 1.2 1.3 1.4 Combined review of operations Strategy Innovation Economic environment Political environment 1.5 Major events 1.6 Notes on reporting 1.7 1.8 1.9 Business performance Financial position and net worth Notes to the financial statements of RWE AG (holding company) 1.10 Presentation of the RWE Group with 12 16 18 24 27 28 33 37 42 45 49 51 62 67 innogy as a purely financial investment 69 1.11 Disclosure relating to German takeover law 1.12 Remuneration report 1.13 Development of risks and opportunities 84 Five-year overview 1.14 Outlook 93 Imprint Financial calendar 70 72 Further information 2 Responsibility statement 3 3.1 3.2 3.3 3.4 3.5 Consolidated financial statements Income statement Statement of comprehensive income Balance sheet Cash flow statement Statement of changes in equity 3.6 Notes 3.7 List of shareholdings (part of the notes) 3.8 3.9 Boards (part of the notes) Independent auditor‘s report 3.10 Information on the auditor 96 97 98 99 100 101 102 104 176 207 212 220 221 222 223 “It will take a while for what the new RWE stands for to become engrained in the public mind.” Rolf Martin Schmitz on the ‘new’ RWE, the plans for attractive returns, reliable framework conditions and wide growth in renewable energy, and Germany’s planned public acceptance. RWE has returned to being a growth lignite phaseout company in which the concept of being international has been expanded from being European to being global. And Mr. Schmitz, RWE has gone through major changes since we have set ourselves a goal that places our actions in a the company was founded 122 years ago. And now it’s much broader context than the world of economics, as we transforming itself yet again. What’s different about the ‘new’ RWE? Our company has always risen to new challenges and want our electricity generation to be carbon neutral by 2040. In other words, our business will stop adding to CO2 in the atmosphere by then. So, as you can see, I can finish describing adapted to the expectations of society. So what we are the new RWE even before the end of the elevator ride. doing today is no different. One of the major challenges of our time is climate change. And the greatest expectation Becoming carbon neutral by 2040 sounds like a very that society has of us is that we move quickly to play our ambitious target. The EU has given itself ten years longer to part in combating it. We have therefore positioned our accomplish this. business to tackle climate change head on. So the ‘new’ It is indeed ambitious. You can’t become carbon neutral RWE is a company that is staying true to itself. overnight. It requires a lot of hard work and suitable framework conditions. Our message is clear: we are ready Assuming that you had to give an elevator pitch to describe to do the heavy lifting and will go the extra mile to meet the new RWE ... the target. ... I could put it in a nutshell fairly quickly. By executing a clever asset swap with E.ON, RWE has become a world- Is that credible? leading producer of electricity from renewables. The I’m sure that some people are distrustful or feel that transaction has given us a business characterised by change simply doesn’t happen quickly enough. But I would 12 RWE Annual Report 2019To our investors > Interview with the CEO like to remind them of what we have accomplished When it comes to renewables, nearly every country in the already. In the last seven years, RWE has cut its carbon world has viable locations. But the fact is that many of these dioxide emissions in half. I don’t know of any other markets lack suitable framework conditions or are simply company that can say this. Germany’s accelerated coal out of the question because our competitors have cultural phaseout will contribute to ensuring that our emissions in advantages. This applies to most countries in Latin America, 2030 will be just a quarter of what they were in 2012. And for example. ten years after that, we should have achieved our goal of generating all our electricity from renewables or hydrogen Renewable energy is really being hyped up now. Companies produced without carbon dioxide. If we do end up still like RWE are the hot tickets on the stock market. Are you using fossil fuels like natural gas to ensure security of afraid of dashing the hopes of investors? supply, we will take countermeasures to offset these We will do everything we can to make sure that this doesn’t emissions, for example through forestation. happen. Subsidy conditions for wind turbines and solar panels are much worse now than they were ten years ago. RWE has to invest huge sums in order to generate most of its What’s more, tenders have become more competitive. electricity from renewables. Do you have the necessary At the same time, there has been an incredible amount funds? of technological progress since then. This has made I don’t believe we will have any difficulty with financing. It’s generation assets much more affordable and efficient. important that we find enough attractive projects that As a result, despite the reduction in payments, renewable meet our return expectations. I’m confident that we can, energy is an attractive business ... especially given that we have set our sights beyond European borders. We will invest 1.5 to 2 billion euros to ... which – as you said – is becoming ever more competitive. expand renewable energy every year. As this is a net figure, That’s right. Unlike with lignite, when it comes to renewable it will be topped up by funds contributed by project partners. energy, we no longer have our own fuel to set us apart from By the end of 2022, we intend to increase our wind and the competition. In addition, the number of players solar generation capacity from nine to over thirteen competing for project subsidies is rising. Cost advantages gigawatts. A large share of the new capacity is already being and good project management are the key success factors built, including the wind farms Triton Knoll in the British in this business. On top of that, we must become a leader in North Sea and Big Raymond in Texas. On top of that, we technological innovations. hope to soon put Limondale online in Australia, which will be the largest solar farm on the continent. Hold on: you want to turn RWE into a tech company? To a certain degree, yes. What I would ask of our project Now that RWE is becoming more international, people developers and engineers is, “Always keep up with the pace might be minded to recall the company’s failed venture into of technology.” This is because renewables are in an era the US water business, although that lies far in the past. where the best technology decides who is successful. And What do you plan to do differently this time around? this also applies to energy storage. We simply have to lead I can only speculate on what went wrong, as I wasn’t at RWE from the front. Take floating platforms for wind turbines in those days. My impression is that RWE was still a very for instance. They would enable offshore wind farms to be German company back then. They acquired companies built even in very deep water. This could be done in the abroad and thought that it would be business as usual, the Mediterranean or off the steep coasts of Asia and the only difference being that everything was under the Americas. We’re working on intelligent and cost-effective umbrella of a new parent company. But that simply isn’t how variants of such platforms. If our efforts prove successful, things work. this could set us apart from the competition. Does that mean that you want to keep a tighter rein on the business outside Germany? We have to manage it so that everyone understands that each and every asset is important to us, be it a wind farm in Ohio or in the North Sea. This means that we have to be on site, understand every single detail of the business and contribute to shaping it. Naturally, we will be more successful in some regions than others. This is why it is so important that we determine exactly where we want to go. 13 RWE’s new purpose is ‘Our energy for a sustainable life’. Last prosperity of millions of people. We should pay our dues to year, more than 40 percent of the company’s electricity this old power production technology by bidding it farewell generation was from coal. How can this be reconciled? in style and with dignity. And as far as RWE is concerned, Let me start with the facts: we will stop generating electricity I would like to add that our early investments in renewable from coal early, by no later than 2038. We agreed a lignite energy were made with the money we earned with our lignite phaseout roadmap with the federal government, according and nuclear power stations. to which RWE will bear almost all of the initial burden. Quickly discarding a carbon-intensive generation technology while expanding renewable energy will make a very large contribution to ensuring a sustainable life. RWE will receive 2.6 billion euros in compensation for the early coal phaseout. However, the actual burdens are much higher. Why did you go along with this? That’s right – we will foot part of the bill for the exit from coal. And it’s true that this will take us to the limits of what is feasible. However, the fact that we found a compromise after months of negotiating with policymakers is also worth something. The agreed exit path gives us a reliable framework for our plans and optimisation measures. Most of all, however, it protects the interests of our 10,000 employees in the Rhenish lignite mining region. They will This brings us to the business performance in 2019. You receive adjustment allowances from the state so that they made two upward adjustments to the EBITDA outlook are not left in the lurch. If we hadn’t reached this during the year and nearly exceeded the last forecast. compromise, we would have been stuck in a legal tug of war We had originally forecast adjusted EBITDA for 2019 for years, with an uncertain outcome. Now we can look to coming in between 1.4 and 1.7 billion euros. We ended up the future and focus entirely on implementing the lignite achieving a figure of 2.5 billion euros. This was mainly due to phaseout smoothly, efficiently and in a socially acceptable the outstanding trading performance. Another positive manner. factor which we had not considered from the outset was the resumption of payments from the British capacity market. Do the miners in the Rhenish region also feel the same way? Furthermore, we benefited from the asset swap with E.ON. I’m sure not all of them do. But I think that the miners have After receiving approval from the European Commission, we less of an issue with RWE than they do with people who largely executed the transaction in September. Consequently, protest against lignite, some of whom violate the rules of the renewable energy business that we received from E.ON common decency and the law in every respect. Many feel contributed to our Group earnings for three-and-a-half abandoned by the state and some perhaps also by RWE. months. I think that’s completely understandable. But we mustn’t forget that lignite-fuelled electricity generation would have You signed the asset swap agreement with E.ON two years ended by the middle of this century anyway. Change is ago. When will the deal finally be completed? happening in nearly every sector – take the auto industry, for Fairly soon, I hope. Basically, the remaining steps are example. I’ve known the utility sector for decades. My motto formalities: the legal transfer of the innogy operations to us, is “Every energy has its time, and every time has its energy.” particularly the renewables business. However, these Perhaps the time has come to recognise the coal miners for activities are already included in our books. This means that all they have done for Germany in the past. They were the 2020 consolidated financial statements already fully instrumental to the economic miracle and the resulting reflect the new RWE. 14 RWE Annual Report 2019To our investors > Interview with the CEO You anticipate adjusted EBITDA of 2.7 to 3.0 billion euros for One last question: at the end of September 2019, you the current fiscal year. That would be even more than in launched the new RWE brand. Is the company’s image 2019. already benefiting from it? The rise will largely result from the inclusion in our earnings In some areas, yes. But it will take a while for what the new of E.ON’s renewable energy business for a full twelve RWE stands for to become ingrained in the public mind. months. The continued expansion of our wind and solar The capital markets were the first to understand the generation capacity will also have a positive impact. transformation that RWE is going through. In the two years However, we cannot expect to repeat the exceptional since the announcement of the deal with E.ON, our share performance of our energy trading business, from which we price has basically only moved in one direction: up. benefited in 2019, anytime soon. Conversely, when I speak with politicians, they are often surprised that we’re pulling in the same direction when it RWE’s financial reporting will be presented in a new segment comes to renewables. As regards the general public, we still structure from 2020 onwards. Your newly defined core have a lot of work ahead of us. In discussion forums and business excludes coal and nuclear energy. Why? debates, I hear time and again that many haven’t even We simply asked ourselves what parts of our business will realised how much we have changed. But sometimes I feel have a role to play in the energy world of tomorrow and as if people are now friendlier when they greet me. And that’s should therefore become a fixture in our portfolio. a good start. Renewables definitely fit the bill. Gas-fired power stations will also be needed in the foreseeable future to meet This interview was conducted by Burkhard Pahnke and demand during periods of insufficient electricity generation Jérôme Hördemann. from wind and solar farms. Of course, the same applies to pumped storage. In addition, we can continue operating our Amer 9 and Eemshaven hard coal-fired power plants in the Netherlands after the established end dates for coal if we fully convert them to biomass. And, our trading subsidiary RWE Supply & Trading, which is the Group’s commercial hub, is indispensable in terms of optimising our generation portfolio. All of these activities form our core business. Our German hard coal, lignite and nuclear power stations are not part of our core business, because clear exit paths have been defined for them. And we will not build any new coal-fired power plants, not even in countries where they would be widely accepted by the public. What growth prospects do you see for the new core business? The prospects for operating earnings growth are good, especially thanks to renewables. We expect to grow adjusted EBITDA by an average of eight percent in the next two years. And we also want our shareholders to benefit from this. We envisage paying a dividend of €0.85 per share for fiscal 2020, which would be five cents more than the dividend planned for 2019. After that, we intend to continually increase the dividend in line with the development of earnings in our core business. 15 The Executive Board of RWE AG Dr. Rolf Martin Schmitz Chief Executive Officer Dr. Markus Krebber Chief Financial Officer Born in 1957 in Mönchengladbach; doctorate in Born in 1973 in Kleve; Banker; doctorate in economics; engineering; Planning Engineer at STEAG AG from 1986 to Management Consultant at McKinsey & Company from 1988; various positions, including Head of Corporate 2000 to 2005; various management positions at Development and Economic Policy, at VEBA AG from 1988 Commerzbank AG from 2005 to 2012; Managing Director to 1998; Member of the Executive Board of rhenag and Chief Financial Officer of RWE Supply & Trading GmbH Rheinische Energie AG from 1998 to 2001; Member of the from November 2012 to August 2016; Chief Executive Board of Management of Thüga AG from 2001 to 2004; Officer of RWE Supply & Trading GmbH from March 2015 Chairman of the Board of Directors of E.ON Kraftwerke to May 2017; Chief Financial Officer of RWE AG since GmbH from 2004 to 2005; Chairman of the Executive October 2016. Board of RheinEnergie AG and Managing Director of Stadtwerke Köln from 2006 to 2009; Chief Operating Group-level responsibilities Officer National of RWE AG from May 2009 to September • Business Services 2010; Chief Operating Officer of RWE AG from October • Controlling & Risk Management 2010 to October 2016 and Deputy Chairman of the • Finance & Credit Risk Executive Board of RWE AG from July 2012 to October • Investor Relations 2016; Chairman of the Executive Board and Chief Executive • IT Officer of RWE AG since October 2016; concurrently Labour • Portfolio Management/Mergers & Acquisitions • Accounting • Tax Director of RWE AG since May 2017. Group-level responsibilities • Corporate Transformation • Internal Audit & Compliance • Group Communications & Public Affairs • Group Strategy • Human Resources • Legal & Insurance • Corporate Business Development 16 RWE Annual Report 2019To our investors > The Executive Board of RWE AG Supervisory Board report “Our shareholders benefit from a renewed RWE becoming the pacesetter of the energy transition. But most importantly, this benefits all of society and therefore all of us.” Mahatma Ghandi once said, “Be the change you want to see in the world.” At RWE, we have taken this to heart. As a result of the asset swap agreed with E.ON in March 2018, the company has become one of the world’s leading producers of electricity from renewables. In the process, the company is supporting climate protection policies and opening itself up to promising prospects. Fiscal 2019 was a pivotal year for the ‘new’ RWE. On 17 September, the European Commission gave the go-ahead to the asset swap, which the company began to implement the day after. E.ON received a majority stake in innogy, and RWE received E.ON’s renewable energy business soon thereafter. These and several other transactions have since been completed. The final step involves the legal transfer of some innogy operations to RWE, including the renewable energy business. This is scheduled to happen as soon as possible this year. Management announced the future course of the new RWE in September 2019. The key message was that the company wants to have converted enough of its electricity generation to achieve its goal of being carbon neutral by 2040, ten years earlier than envisaged by the EU. Playing on Ghandi’s quote, our company is changing faster than the world around it. This holds true not only for the future, as demonstrated by the following comparison: in the last seven years, RWE has reduced its carbon emissions by 51 %. This is roughly twice as much as what Europe has accomplished since 1990. RWE will expand its renewable energy production rapidly with a view to becoming carbon neutral. The second building block of our emission reduction strategy is an accelerated coal phaseout. Until recently, the German government and industry have been negotiating the details of this exit intensively. The starting point was the concept presented by the Growth, Structural Change and Employment Commission (‘Structural Change Commission’ for short) in January 2019, which envisages gradually putting an end to electricity generation from coal by 2038. It was clear early on that the initial burdens of the lignite phaseout would primarily be shouldered by RWE. After months of talks with policymakers, an agreement was reached in January 2020 on the roadmap for the power plant closures and the level of compensation. However, the compensation of €2.6 billion pledged by the government will not be enough to fully offset RWE’s burdens. At short notice, we convened a Supervisory Board meeting at which the Executive Board provided us with information on the compromise reached. What is important is that we now have clarity and the people affected know what they are up against. First and 18 RWE Annual Report 2019To our investors > Supervisory Board report foremost, this makes me think of the 10,000 people working in the Rhenish lignite mining region: they now have certainty and can rest assured that the coal phaseout will not put them at a loss. Now let me go into the work we did on the Supervisory Board last year. Once again, we fulfilled all of the duties imposed on us by German law and the Articles of Incorporation. We advised the Executive Board on running the company and monitored its actions attentively. Moreover, we were consulted on all fundamental decisions. The Executive Board informed us of all material aspects of business developments, the earnings situation as well as the risks and the management thereof both verbally and in writing. This was done regularly, extensively and in a timely fashion. Decisions were taken on the basis of detailed reports and draft resolutions submitted by the Executive Board. The Supervisory Board had ample opportunity to concern itself with these in its plenary sessions and its committees. We were also informed by the Executive Board of projects and transactions of special importance or urgency in several extraordinary meetings as well as in between meetings. We passed the resolutions required of us by German law or the Articles of Incorporation. Occasionally, we did so by circular. As Chairman of the Supervisory Board, I was constantly in touch with the Executive Board, allowing us to discuss major developments without delay. Main points of debate of the Supervisory Board meetings. Last year, the Supervisory Board convened for five ordinary and two extraordinary meetings, the subject matter of which I will outline in more detail later on. In our sessions, we were informed by the Executive Board in great detail of current affairs of significance to RWE. We also discussed matters in the absence of the Executive Board. The shareholder and the employee representatives on the Supervisory Board always met separately before these meetings, so that they had the opportunity to consult on agenda items and establish joint positions where necessary in advance of the plenary sessions. Our consultations centred on the recommendations of the Structural Change Commission and the talks between government and industry on implementing them in the Rhenish lignite mining area. The legislative process regarding the Dutch coal phaseout, the uphill battle for an orderly Brexit and the events concerning the British capacity market were also among the issues on which we concentrated. The asset swap with E.ON also drew the Supervisory Board’s special attention. We followed the approval procedure and the steps taken to execute the deal very closely. In addition, we discussed the RWE Group’s future strategy and its ambitious climate-protection goals. The following issues were discussed at our meetings: • Last year, our first meeting took place on 5 February. After the Structural Change Commission published its recommendations regarding Germany’s coal phaseout, we convened an extraordinary session in which we discussed the recommendations and their potential effects on RWE and the people working in the Rhenish lignite mining region. The compensation for RWE and the measures for a socially acceptable redundancy scheme were among the issues addressed. • At our ordinary meeting on 8 March 2019, we discussed and approved the 2018 financial statements of RWE AG, the consolidated financial statements, and the separate consolidated non-financial report. Furthermore, we adopted the agenda of the Annual General Meeting of 3 May 2019, at which a resolution was passed to convert RWE preferred shares to common shares. As the conversion required the convocation of a Preferred Shareholders Meeting, we also had to approve the agenda of that meeting. In our March session, we again discussed the final report of the Structural Change Commission. Moreover, I reported on the talks on corporate governance matters that I regularly conduct with major institutional investors. The last exchanges of this kind occurred at the end of 2018 and the beginning of 2019. Executive Board remuneration, the composition of the Executive Board and the Supervisory Board as well as succession planning were among the topics discussed. 19 • The ordinary meeting on 3 May 2019 centred on the last steps to prepare the Annual General Meeting and the Preferred Shareholders Meeting held on the same day, which I mentioned earlier. • At our ordinary meeting on 11 July 2019, we decided to subject the work of the Supervisory Board to an efficiency audit with the help of the business consultants Russell Reynolds Associates. In addition, we informed ourselves of how the most recent amendments to the German Corporate Governance Code (GCGC) will affect the system of remunerating RWE’s Executive Board. Furthermore, we debated the succession planning for the Executive Board and the Group’s position on completion of the asset swap with E.ON. • On 6 September 2019, we convened for another extraordinary meeting because a tender procedure for Polish offshore wind projects was about to be held and RWE’s participation was subject to Supervisory Board approval. Although other companies placed the winning bids on this occasion, the Group succeeded in entering the Polish offshore wind market in 2019, securing a project pipeline in the Baltic Sea with a total installed capacity of more than 1.5 GW. • Two weeks later, on 20 September, we met at an ordinary Supervisory Board meeting where we again discussed the succession plan for the Executive Board. One of the issues addressed was the general procedure followed in selecting and appointing new Executive Board members. We decided to seek the assistance of an external consultant in the future. RWE’s new strategy and new brand appearance were highlights of our deliberations. In addition, the Executive Board kept us abreast of the developments relating to the asset swap with E.ON. • We reviewed and adopted the company’s planning for fiscal 2020 at our ordinary meeting on 18 December 2019. We also dealt in depth with the new version of the GCGC. Together with the Executive Board, we approved an updated statement of compliance as well as the corporate governance declaration along with the Corporate Governance Report. Another topic of discussion was the German law on the implementation of the Second Shareholder Rights Directive (ARUG II), which entered into force on 1 January 2020 and introduces a series of new regulations affecting management board compensation, transactions with related parties, and the transparency duties of institutional investors, among other things. We analysed the outcome of the efficiency audit of our work that began in July in great depth and debated how Supervisory Board work can be even more effective in the future. I will report on this in more detail later on. Supervisory Board committees. Last year, the Supervisory Board had six standing committees, the members of which are listed on page 210. These committees are charged with preparing topics and resolutions for plenary sessions. Occasionally, they exercise decision-making powers conferred on them by the Supervisory Board. The Supervisory Board is informed of the work of the committees by their chairs at every ordinary meeting. In the year under review, a total of 14 committee meetings were held, about which I would now like to inform you. • The Executive Committee convened three times. In two extraordinary sessions, it discussed details concerning the execution of the asset swap with E.ON, which it had been authorised to do by the Supervisory Board in March 2018. As usual, the Committee discussed the company’s planning for fiscal 2020 as well as the outlook for the two subsequent years at its December meeting. • The Audit Committee was in session four times. It concerned itself in particular with the financial statements of RWE AG and the Group, together with the combined review of operations, the report for the first half of the year, the quarterly statements and the consolidated non-financial report. The Committee discussed the financial statements with the Executive Board before they were published and received reports on the outcome of the audits and audit-like reviews from the independent auditors. In doing so, it also paid attention to the quality of the financial statement audits. Furthermore, the body submitted a recommendation to the Supervisory Board regarding the election of the independent auditors for fiscal 2019, prepared the grant of the audit award to the independent auditors including the fee agreement, and set the priorities of the audit. As usual, the Committee was informed of the effectiveness of the accounting-related Internal Control System (ICS). This did not reveal any issues that would call the effectiveness of the ICS into question. Moreover, the Committee discussed the spot check performed by the German Financial Reporting Enforcement Panel on the financial 20 RWE Annual Report 2019To our investors > Supervisory Board report statements of RWE AG and the Group for fiscal 2018, which did not reveal any errors. Furthermore, the Committee dealt with the planning and findings of the internal audit, the RWE Group’s exposure to risk pursuant to the German Corporate Control and Transparency Act, data security, compliance matters as well as legal and tax issues. The independent auditors attended all of the Audit Committee meetings and also exchanged information with the Committee Chairman in between meetings. In-house experts were consulted when necessary. • The Personnel Affairs Committee held four meetings during the year being reviewed. The debates focused on the level of Executive Board compensation and the design of the Executive Board’s remuneration system as well as the future effects of ARUG II and the new GCGC on said system. In addition, the Committee concerned itself with planning for the successor to the CEO Rolf Martin Schmitz, whose contract expires in the middle of 2021. • The Nomination Committee convened twice in 2019. Both meetings focused on the new elections of the shareholder representatives to the Supervisory Board scheduled for 2021. A key issue, which I will revisit in more detail later on, was the requirement and skills matrix of the Supervisory Board, which is considered when selecting candidates. Another topic of discussion was the consequences of the German law on the implementation of ARUG II and the new GCGC recommendations for the elections. The Committee thoroughly debated whether to shorten and stagger the tenures of the shareholder representatives. The Nomination Committee and the Supervisory Board endorse this. So far, as is customary in Germany, RWE’s shareholder representatives have been elected simultaneously for five years at a time. We will make a case for limiting their tenures to a maximum of three years covering various periods. This will result in a certain degree of fluctuation every year. The advantage of this is that the Supervisory Board’s staffing could be adapted more rapidly to new requirements. This would also prevent too many people from leaving the Committee at the same time, resulting in a loss of valuable experience. • The members of the Strategy Committee held one session. This meeting focused on RWE’s earnings prospects and growth opportunities in renewable energy. • The Mediation Committee pursuant to Section 27, Paragraph 3 of the German Co-Determination Act did not have to meet in 2019. Conflicts of interest. The members of the Supervisory Board are obliged by law and the GCGC to immediately disclose any conflicts of interest they have. In March 2018, Monika Krebber and Erhard Schipporeit, who sat on the Supervisory Board of both RWE AG and innogy SE, filed notifications of conflicts of interest in respect of the decisions regarding the envisaged asset swap with E.ON. These conflicts of interest remained in 2019. Therefore, Ms. Krebber and Mr. Schipporeit did not receive any of the preparatory documents in relation to the relevant agenda items and did not participate in the relevant consultations or passing of resolutions. Monika Krebber also had a conflict of interest as it became apparent to her that she would transfer to E.ON due to the sale of the shareholding in innogy. Therefore, she requested not to be informed about RWE’s plans to reduce its financial investment in E.ON in September 2019. Efficiency audit. The Supervisory Board is obligated to review the efficiency of its work on a regular basis. This is mandated by the GCGC. We conducted such an audit in 2019 with the assistance of Russell Reynolds Associates. One of the aspects scrutinised was whether we as a body possess the expertise required to effectively monitor the new RWE. The efficiency audit found that, on the whole, our work procedures are goal-oriented and effective. The same applies to our co-operation with the Executive Board. However, certain measures were established to help us further improve the quality of our work on the Supervisory Board, which is already high. For example, we will expand the requirement matrix that will be applied when new candidates are selected for the Supervisory Board to include certain skills, in particular relating to technology and digitisation, as well as international experience. Furthermore, we want to place greater emphasis on know-how in the energy business, in particular with regard to renewable energy. 21 Attendance. The table below contains an overview of Supervisory Board member attendance at the meetings of this corporate body and its committees. As the Mediation Committee did not convene in 2019, it has been omitted from this table. Here is an example of how to interpret the numbers: ‘3/4’ means that the individual attended three of a body’s meetings although their tenure on the body would have allowed them to attend four of them. As can be seen from the overview, absences were an exception, and the rare cases of absence were for good reasons (e. g. a conflict of interest). Attendance at meetings in fiscal 2019 by Supervisory Board member Supervisory Board Executive Committee Audit Committee Personnel Affairs Committee Nomination Committee Strategy Committee Dr. Werner Brandt, Chairman Frank Bsirske, Deputy Chairman Michael Bochinsky Reiner Böhle (until 18 Sep 19) Sandra Bossemeyer Martin Bröker Anja Dubbert (since 27 Sep 19) Matthias Dürbaum (since 27 Sep 19) Ute Gerbaulet Prof. Dr. Hans-Peter Keitel Dr. h. c. Monika Kircher Monika Krebber (until 18 Sep 19) Harald Louis Dagmar Mühlenfeld Peter Ottmann Günther Schartz Dr. Erhard Schipporeit Dr. Wolfgang Schüssel Ullrich Sierau Ralf Sikorski Marion Weckes Leonhard Zubrowski 7/7 7/7 7/7 5/5 7/7 7/7 1/1 1/1 7/7 6/7 7/7 4/5 7/7 7/7 7/7 7/7 6/7 7/7 6/7 7/7 7/7 7/7 3/3 3/3 3/3 3/3 0/23 3/3 3/3 3/3 4/4 4/4 2/2 4/4 4/4 3/4 4/41 4/4 3/32 4/4 1/14 3/4 2/4 4/4 2/2 1/1 1/1 2/2 1/1 2/2 1/1 1/1 1/1 1 Dr. Werner Brandt attended meetings of the Audit Committee as a guest. 2 Dr. Monika Kircher has been a member of the Audit Committee since 1 April 2019. 3 Monika Krebber did not attend either of the meetings of the Executive Committee during her tenure due to potential conflicts of interest. 4 Dr. Wolfgang Schüssel resigned from the Audit Committee as of the end of 31 March 2019. Personnel matters. There were two changes in personnel on the Supervisory Board in the year under review: Monika Krebber and Reiner Böhle, both of whom were employee representatives, resigned from the Board on 18 September. Given that they are innogy employees, they left the Group when the company was acquired by E.ON, which forbade them by German law from remaining on the Supervisory Board of RWE AG. Anja Dubbert and Matthias Dürbaum were appointed their successors by the Essen District Court on 27 September. On behalf of the Supervisory Board, I thank Ms. Krebber and Mr. Böhle for their valuable work and for their commitment to RWE. 22 RWE Annual Report 2019To our investors > Supervisory Board report The staffing of some of our committees also changed. Wolfgang Schüssel resigned the mandate he held on the Audit Committee effective at the close of 31 March. Monika Kircher was appointed his successor per a Supervisory Board resolution dated 8 March. The resignations of Monika Krebber and Reiner Böhle from the Supervisory Board also required their seats on the Executive Committee and the Personnel Affairs Committee to be filled. In addition, Leonhard Zubrowski resigned from the Executive Committee at the close of 17 December. In its session on 18 December, the Supervisory Board elected Anja Dubbert and Matthias Dürbaum to the Executive Committee and Leonhard Zubrowski to the Personnel Affairs Committee. Financial statements for fiscal 2019. PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft audited and issued an unqualified auditor’s opinion on the 2019 financial statements of RWE AG, which were prepared by the Executive Board in compliance with the German Commercial Code, the financial statements of the Group, the combined review of operations for RWE AG and the Group, and the accounts, which were prepared pursuant to Section 315a of the German Commercial Code in compliance with International Financial Reporting Standards (IFRS). In addition, PricewaterhouseCoopers found that the Executive Board had established an appropriate early risk detection system. The company had been elected independent auditor by the Annual General Meeting on 3 May 2019 and commissioned by the Supervisory Board to audit the financial statements of RWE AG and the Group. The 2019 Annual Report and the audit reports as well as documents supporting the annual financial statements were submitted to the members of the Supervisory Board in good time. Furthermore, the Executive Board commented on the documents in the Supervisory Board’s balance sheet meeting of 6 March 2020. The independent auditors reported at this meeting on the material results of the audit and were available to provide supplementary information. The Audit Committee had previously concerned itself in depth with the financial statements of RWE AG and the Group, as well as audit reports, during its meeting on 5 March 2020, with the auditors present. It recommended that the Supervisory Board approve the financial statements as well as the appropriation of profits proposed by the Executive Board. The Supervisory Board reviewed the financial statements of RWE AG and the Group, the combined review of operations, the Executive Board’s proposal regarding the appropriation of distributable profit, and the consolidated non-financial report. No objections were raised as a result of this review. As recommended by the Audit Committee, the Supervisory Board approved the results of the audits of the financial statements of RWE AG and the Group and approved both financial statements. The 2019 financial statements are therefore adopted. The Supervisory Board concurs with the Executive Board’s proposal regarding the appropriation of profits, which envisages paying a dividend of €0.80 per share. Thanks to the employees of RWE. The changes we are experiencing at RWE present everyone involved with huge challenges which demand courage and tenacity as well as flexibility and creativity. RWE’s employees demonstrated that they can adapt to change, even if it has serious consequences for them. They therefore deserve the utmost respect. I would like to take this opportunity to express my sincere gratitude to them for this on behalf of the entire Supervisory Board. I have absolutely no doubt that RWE is on the right path. Proof of this can be found on the stock market: an investment in RWE common shares at the end of 2017 yielded a total return of over 100 % by the end of January 2020. Our shareholders benefit from a renewed RWE becoming the pacesetter of the energy transition. But most importantly, this benefits all of society and therefore all of us. With this motivation, we will also rise to the challenges that will inevitably arise in the future. On behalf of the Supervisory Board Werner Brandt Chairman Essen, 6 March 2020 23 RWE on the capital market The stock markets had a good year in 2019. Germany's blue chip index, the DAX, rose by 25 %, more than offsetting its weak performance in 2018. The biggest stimulus was provided by the expansionary monetary policy of leading central banks. Our share actually outperformed the DAX: it yielded a total return of 49 %, closing the year far above the sector average. This proves that the capital market rewarded us in particular for the progress made in implementing our asset swap with E.ON, which has transformed us into one of the leading producers of electricity from renewables. Total return of the RWE common share compared with the DAX and STOXX Europe 600 Utilities % (average weekly figures) 60 50 40 30 20 10 0 3 1 D ec 2 0 1 8 3 1 M ar 2 0 1 9 3 0 Jun 2 0 1 9 3 0 Sep 2 0 1 9 3 1 D ec 2 0 1 9 RWE common share DAX STOXX Europe 600 Utilities Source: Bloomberg. Stock market on the rise despite economic cooldown. better development than the sector index STOXX Europe Equity investors were able to celebrate high returns in 2019 600 Utilities (+ 30 %). The main reason for RWE’s strong after a weak year on stock markets in 2018. Germany’s performance was the progress made in the asset swap with leading index, the DAX, rose by 25 % to 13,249 points, the E.ON. Large parts of the transaction have been finalised, a biggest increase since 2013 when it rose by exactly the move that will see RWE become a world leading producer same percentage. This development came as a surprise to of electricity from renewable sources. Many investors and some experts, as the trade conflict between the USA and analysts see this as being a considerable value driver for the China and the Brexit saga caused considerable uncertainty RWE share. RWE’s successful business performance among investors. However, the DAX benefited from the fact together with the reinstatement of the British capacity that the European Central Bank further relaxed its monetary market had a positive effect on our share price, whilst the policy in the face of negative economic signals. Zero interest continued uncertainty concerning the framework conditions rates and partly negative yields on government bonds are of the German coal phaseout had a negative impact. After attracting more and more investors to the stock market. the Growth, Structural Change and Employment RWE common share posts total return of 49 %. Fiscal proposals and recommended appropriate compensation 2019 was a particularly good year on the stock market for for the power producers concerned in January 2019, the RWE shareholders. Our common share rose from €18.97 subsequent negotiations on the implementation between to €27.35. Including the dividend of €0.70 paid in May, this the government, states and industry ran through to 2020 Commission appointed by the government made specific resulted in a total return of 49 %, thereby clearly outperforming (see pages 42 et seqq.). the DAX for the third time running and displaying much 24 RWE Annual Report 2019To our investors > RWE on the capital market RWE share indicators Earnings per share1 Cash flows from operating activities of continuing operations per share1 Dividend per common share Dividend per preferred share3 Dividend payment Common share price End of fiscal year Highest closing price Lowest closing price Common share dividend yield4 Number of shares outstanding (annual average) € € € € € million € € € % 2019 13.82 – 1.59 0.802 – 4922 27.35 28.69 18.97 2.9 2018 0.54 7.50 0.70 0.70 430 18.97 22.48 15.10 3.7 2017 3.09 – 6.13 1.50 1.50 922 17.00 23.14 11.80 8.8 2016 – 9.29 3.83 – 0.13 5 11.82 15.95 10.17 – 2015 – 0.28 5.43 – 0.13 5 11.71 25.68 9.20 – thousands 614,745 614,745 614,745 614,745 614,745 Market capitalisation at the end of the year € billion 16.8 11.7 10.3 7.1 7.1 1 In relation to the annual average number of shares outstanding. 2 Dividend proposal for RWE AG’s 2019 fiscal year, subject to the passing of a resolution by the 28 April 2020 Annual General Meeting. 3 RWE preferred shares were converted to common shares in mid-2019 (see commentary below). 4 Ratio of the dividend per share to the share price at the end of the fiscal year. RWE converts preferred shares into common shares. Dividend proposal for fiscal 2019. The Supervisory Board In mid-2019, we converted all 39 million RWE preferred and the Executive Board of RWE AG will propose to the shares into voting common shares, thereby securing equal Annual General Meeting on 28 April 2020 a dividend of rights for every RWE shareholder. The conversion occurred €0.80 per share for the past fiscal year, a €0.10 gain on the 1:1 without any payments. The corresponding resolution previous year. The dividend proposal reflects RWE’s strong was passed on 3 May 2019 by the Group’s Annual General earnings. Meeting and Preferred Shareholders Meeting, acting on the proposal of the Executive Board and the Supervisory Broad international shareholder base. Based on our latest Board. On 28 June 2019, the required amendment to the survey, at the beginning of 2020, an estimated 86 % of the Articles of Incorporation was entered in the Commercial total of 614.7 million RWE shares were held by institutional Register at the Essen District Court and, after the close of investors and 14 % were owned by individuals (including trading, the preferred shares were delisted. In early July, the employees). Institutional investors from Germany owned custodians reclassified the RWE preferred shares of their 24 % of RWE (previous year: 25 %). In other countries in customers as RWE common shares. This increased the total Continental Europe, this investor group held 14 % of RWE’s number of common shares to 614.7 million. Institutional subscribed capital (previous year: 15 %). In North America, investors favour the ‘one share - one vote’ principle, which the United Kingdom and Ireland, it accounted for a combined RWE is now honouring. 44 % (previous year: 43 %). At the start of the year, RWE AG’s single-largest shareholder was the US asset management company BlackRock, which owned 7 % of our subscribed capital. KEB Holding, which is backed by the City of Dortmund, was in second place with just under 5 %, followed by the City of Essen in third place, with 3 %. 25 Shareholder structure of RWE AG1  1 % Employee shareholders  7 % BlackRock, Inc. 13 % Private shareholders  5 % KEB Holding AG  3 % City of Essen 71 % Other institutional shareholders 86 % Institutional shareholders: 24 % Germany 22 % USA/Canada 22 % UK/Ireland 14 % Continental Europe excluding Germany  4 % Rest of the world 1 As of 1 January 2020; percentages reflect shares in subscribed capital. Sources: RWE data and notifications from shareholders in accordance with the German Securities Trading Act. The free float of our common shares considered by RWE represented on numerous stock markets. Deutsche Börse in terms of index weighting was 100 % when RWE shares are traded on the Frankfurt Stock Exchange this report went to print. Normally, shares held by investors and other stock exchanges in Germany, as well as via accounting for at least a cumulative 5 % of the capital stock electronic platforms such as Xetra. They are also available on are not included in the free float. However, a higher threshold stock markets in the rest of Europe. In the USA, instead of of 25 % applies to asset management companies like our shares being traded, RWE is represented via American BlackRock. Depositary Receipts (ADRs) in a Level 1 ADR programme. ADRs are share certificates issued by US depositary banks, About 1 % of our stock is owned by our current and former representing a certain number of a foreign company’s staff members. We enable the personnel of our German deposited shares. Under RWE’s programme, one ADR and British subsidiaries to take shares in the company on represents one common share. preferential terms through employee share ownership plans. Last year, over 5,852 people, representing 36 % of all qualifying staff members, made use of this offer. They Ticker symbols of RWE common share bought a total of 333,000 common shares. We spent Reuters: Xetra €2,503,000 on the preferential terms and the administration of the programme. Reuters: Frankfurt Stock Exchange Bloomberg: Xetra Bloomberg: Frankfurt Stock Exchange German Securities Identification Number International Securities Identification Number (ISIN) American Depositary Receipt (CUSIP Number) 26 RWEG.DE RWEG.F RWE GY RWE GR 703712 DE0007037129 74975E303 RWE Annual Report 2019Combined review of operations 1.1 Strategy Last year saw the launch of the new RWE: our asset swap with E.ON has turned us into one of the world’s leading renewable energy companies. We are now an all-rounder in electricity generation and are leading the field in the creation of a sustainable energy system. For as long as necessary, we will ensure security of supply with our flexible power plants. Sustainable power production must be carbon neutral. We intend to meet this ambition as early as 2040. To this end, every year, we will invest billions in wind and solar power as well as in energy storage. And, we will play our part by exiting from coal-based electricity generation early in a socially acceptable manner. The new RWE: focus on sustainable power generation offshore wind. In addition to existing assets, we have and energy trading. Our company has repositioned itself acquired a large number of growth projects in various fundamentally over the last few years. At the beginning of stages of development. Here again, the focus is on wind, this transformation process, RWE was still an integrated followed by photovoltaics. Electricity production from utility, which was active along the entire energy value chain. renewables will clearly be our strongest income generator. Now, we are a company specialising in power production It will account for more than half of our adjusted EBITDA as and energy trading that wants to make a contribution to the early as 2020. substantial transformation of the energy sector on the strength of almost carbon-free electricity generation that is Our goal by 2040: RWE will become carbon neutral. We both secure and affordable. continued to develop our strategy concurrently to the implementation of the asset swap with E.ON and set The road to the new RWE began in 2016 when we pooled ourselves ambitious goals in terms of lowering our the Renewables, Grid & Infrastructure and Retail divisions in greenhouse gas emissions. RWE reduced its annual carbon a new subsidiary called innogy and took it to the stock dioxide emissions by 51 % from 2012 to 2019. By 2030, market. One-and-a-half years later, in early 2018, we we plan to have lowered them by 75 %. The phaseout of agreed an extensive asset swap with E.ON, which has since electricity generation from coal will play a central role. By largely been completed. As part of the transaction, we sold 2040, we want to have converted enough of our power our 76.8 % investment in innogy in September 2019 and plant portfolio to achieve our goal of being carbon neutral. received in return E.ON’s renewable energy business, a 16.67 % stake in E.ON, and the minority interests in our nuclear power stations Gundremmigen (25 %) and Emsland To this end, we will rapidly expand renewable energy, make more use of storage technologies and use CO2-neutral fuel to produce electricity. This strategic alignment is also (12.5 %) held by the E.ON subsidiary PreussenElektra. The reflected in RWE’s brand. Our purpose, ‘Our energy for a final step will be the legal transfer of certain innogy sustainable life’, is an expression of the determination of the operations back to RWE: the renewable energy business, RWE Group and its approximately 20,000 employees to the German and Czech gas storage facilities, and a 37.9 % ensure a sustainable energy system. stake in the Austrian energy utility Kelag. They have been recognised in the item ‘innogy – continuing operations’ in the Fast growth in wind and solar power. The most important consolidated financial statements. We provide detailed element of our strategy is shifting our focus to make commentary on the asset swap with E.ON on page 45. increased use of renewable energy sources. The asset swap with E.ON gives us an excellent starting position, which Outstanding starting position in renewable energy. The we will strengthen rapidly. We want to increase our wind renewable energy operations of E.ON and innogy under the and solar capacity, which totalled 8.7 GW (pro-rata) at the RWE umbrella have turned us into a world leading producer end of 2019, to over 13 GW by the end of 2022. We plan of electricity from renewable sources. At the end of 2019, to invest a net €1.5 billion to €2.0 billion on this every year. we had a renewable energy portfolio with a total capacity Reinvesting proceeds from the sale of stakes in projects of 9.9 GW. This is the generation capacity allocable to us on could actually cause the gross expenditure to be much a prorated basis, i. e. in accordance with the stakes that we higher. Our technological focus rests on wind energy and hold. Onshore and offshore wind farms account for the photovoltaics. Geographically, we will concentrate on largest share of this: 8.6 GW. We are the world No. 2 in markets in Europe, the Americas and the Asia-Pacific region. 28 RWE Annual Report 2019Combined review of operations > Strategy At present, our largest construction project is the 860 MW Conventional electricity generation: growing significance Triton Knoll offshore wind farm off the eastern coast of of gas as a source of energy. Building the storage England, for which innogy secured a guaranteed payment infrastructure required for a nationwide supply of green of £74.75/MWh. We are also building huge onshore wind electricity is a task that will take decades, not years to farms, e. g. Big Raymond and Cranell in the US state of accomplish. Therefore, power stations capable of offsetting Texas, which will have total capacities of 440 MW and fluctuating wind and solar power feed-ins will remain 220 MW, respectively. In 2020, we want to commission our necessary for the foreseeable future. With our conventional Limondale solar farm in New South Wales, Australia. With an generation capacity, we are making an indispensable installed capacity of 349 MWp, it will be the most powerful contribution to the reliable and tailored supply of electricity installation of its kind in the country. We will maintain the in our core markets in Germany, the United Kingdom and integrated business model pursued by innogy and E.ON to the Benelux region. Our gas-fired power stations, most of date, meaning that our new projects will cover the entire which are state-of-the-art, are especially well suited to value chain from development to construction and operation partner with renewable energy because they emit little carbon wherever possible. dioxide and their output can be adapted to load fluctuations in the grid very quickly. In terms of generation capacity, gas High-capacity storage: prerequisite for 100 % electricity is already our major conventional source of energy, and its generation from renewables. Expanding renewable energy share of our power plant portfolio is expected to increase is not enough. Electricity generated by wind and solar power further. However, we believe the greatest potential for greatly depends on the weather, time of day and season. growth is currently harboured by the acquisition of existing Sometimes, power produced from renewable sources only stations. New builds are usually unprofitable at present, covers a fraction of demand, and at other times, it exceeds unless the assets receive guaranteed payments under the local needs to such an extent that it actually has to be German Combined Heat and Power Act or as a result of throttled. Consequently, storage technologies are increasingly invitations to tender from the network operators. coming to the fore as renewable energy continues to be expanded. They do not yet meet the technical and economic Conversely, coal and nuclear power stations will increasingly requirements for large-scale use to secure supply. But we lose importance within our generation portfolio. In Germany, are working on changing the situation. In several research nuclear energy is subject to a phaseout roadmap, which and development projects, we are dedicating ourselves to stipulates a latest possible shutdown date for every single Power-to-Gas technologies, which convert green electricity plant. Two RWE nuclear power stations are still online: to hydrogen and then use this gas as a carbon-neutral Gundremmingen C and Emsland. We can operate these commodity. For example, we joined forces with gas network operators and industrial enterprises in the Get H2 initiative to put the production, storage, transport and use of assets until the end of 2021 and the end of 2022, respectively, after which they must be closed. Thereafter, our nuclear operations will largely be limited to safe and hydrogen to the test on an industrial scale at our power efficient dismantling. In addition, we are exploring how to plant site in Lingen (see page 36). In addition to Power-to-Gas continue to make use of the locations of our power plants in and thermal or mechanical storage concepts, batteries can the energy business. also help to mitigate fluctuations in renewable energy. RWE is already involved in the development and construction of Permission to use coal as a source of energy is also likely to battery storage facilities, which is a business we are expanding. end in the foreseeable future. All three countries in which RWE has coal-fired power stations already have concrete phaseout roadmaps. The United Kingdom has set its sights on the earliest exit year, which is 2024. Aberthaw B, the last RWE hard coal-fired power plant in operation there, was taken offline in December 2019 so that it can be decommissioned early. 29 The Netherlands intend to phase out coal by the end of Supply & Trading – commercial hub for the generation 2029. This has been enshrined in law since last year. We business. Energy trading is part of RWE’s core business. currently have two hard coal-fired power plants there, It forms the economic link between the elements of our Amer 9 and Eemshaven, which will have to be converted to value chain, the regional markets and the various energy run on alternative fuels or shut down after 2024 and 2029, commodities. It is overseen by the Group company respectively. Thanks to state subsidies, we have begun to co-fire biomass in both these stations. Moreover, we will explore whether we can run them solely on this energy fuel in the long run. RWE Supply & Trading, which focuses on trading electricity, gas, coal, oil, biomass, and CO2 certificates. RWE Supply & Trading mainly conducts these activities from Europe as well as via subsidiaries in New York, Singapore and Beijing. Another of the Group company’s activities At the beginning of 2020, the German government consists of marketing the electricity from RWE power presented a draft law on the country’s exit from coal, which stations and procuring the fuel and emission allowances orients itself towards the recommendations of the Growth, required to produce it. The objective here is to limit price Structural Change and Employment Commission. The risks. On top of that, RWE Supply & Trading is in charge of the roadmap envisages the country gradually reducing the commercial optimisation of our power plant dispatch. number of coal power plants to zero by 2038. The draft law However, the generation segments are entitled to the also mandates the early closure of lignite-fired power resulting earnings, which is why we report them in those stations in the Rhenish coal mining region, on which we segments. Companies outside of the RWE Group can also reached an agreement with the government following benefit from the expertise of our trading business. They are lengthy negotiations. Detailed information can be found on offered a wide range of products and services, running the pages 42 et seqq. The exit roadmap makes it possible to gamut from traditional energy supply contracts and have a reliable regulatory framework, within which we can comprehensive energy management solutions to work towards carbon-neutral electricity generation by sophisticated risk management concepts. In addition, 2040. However, it also poses major social and operational RWE Supply & Trading makes minor investments in energy challenges, mainly relating to our lignite business in the assets or energy companies, for which value-enhancing Rhineland. For example, we have to end our opencast measures can be taken in order to realise high returns mining activities in Hambach early, which will be extremely upon resale (referred to as principal investments). At the expensive as this will involve maintaining Hambach Forest. end of 2019, RWE Supply & Trading had a portfolio of seven Furthermore, we are forced to implement major layoffs principal investments, four of which are in the USA. and redundancy programmes for the affected employees. We managed to negotiate a total of €2.6 billion in Intermediary trading and storage of gas harbour compensation with the government, but we will have to additional earnings potential. Another string to cover some of the additional costs ourselves. RWE Supply & Trading’s bow is the gas business. This is an area in which the company aims to establish itself as a Germany’s coal phaseout will accelerate structural change leading European intermediary. The company already in the Rhenish lignite mining region substantially. We intend supplies gas to numerous companies inside and outside of the to play an active role in shaping this change and help to RWE Group. To this end, it enters into long-term supply ensure that the energy industry continues to prosper in the agreements with producers, organises gas transportation region. Some recultivation land is very well suited for the by booking pipelines and optimises the timing of deliveries expansion of renewable energy. Three innogy onshore wind using leased gas storage facilities. The greater the size farms are already located there. We also intend to continue and diversification of the procurement and supply developing our power plant sites. For example, there are portfolios, the greater the chances to commercially optimise plans to build an innovation, technology and commercial them. RWE Supply & Trading also concludes transactions park in Frimmersdorf and the surrounding area. We will involving liquefied natural gas (LNG). The main objective is perform test drillings at the Weisweiler site within the scope to take advantage of differences in price between regional of an EU project in order to determine whether the location’s gas markets which are not connected via pipelines. geothermal activity is suitable for generating district heat (see pages 34 et seq.). In addition, we will thoroughly explore Power-to-Gas technology at the Niederaussem Innovation Centre, where we have been operating an electrolyser for producing hydrogen since 2013. 30 RWE Annual Report 2019Combined review of operations > Strategy The asset swap with E.ON further expands our gas business. New Group structure: coal and nuclear pooled in single We will receive eleven gas storage facilities from our former segment. We will present the RWE Group in a new structure subsidiary innogy: five in Germany with a total capacity of from 2020 onwards. One major change compared to 2019 1.6 billion cubic metres and six in the Czech Republic with a is that we will dissolve the interim ‘innogy – continuing total capacity of 2.7 billion cubic metres. In 2020, we will operations’ and ‘acquired E.ON operations’ segments and start reporting income from the management of these break down the generation business solely by energy assets in the Supply & Trading segment. Due to regulatory source. We have pooled our German lignite, hard coal and restrictions these storage facilities will not be owned by nuclear power stations in a single segment. As these RWE Supply & Trading, but by legally independent Group technologies are subject to exit roadmaps mandated by the companies, which lease them to companies such as state, plant dismantling and opencast mine recultivation will RWE Supply & Trading. The lessees use the storage facilities gain importance relative to electricity generation. Additional for timing arbitrage transactions. They are filled in the warm information on the new segment breakdown can be found months, when little gas is needed to heat buildings, and on pages 94 et seq. The old structure, which forms the basis gradually emptied in the cold season, when demand is high. for our financial reporting on fiscal 2019, is set out on The income achieved through such arbitrage transactions pages 49 et seq. and, in turn, storage capacity auctions depends on the seasonal differences in gas prices. The differences in price RWE AG’s management system. Ensuring sustainable between summer and winter gas are much smaller today growth in shareholder value is at the heart of our business than they have been in the past. This applies above all to policy. To manage the Group’s activities, RWE AG deploys a the German market, which currently has an oversupply of groupwide planning and controlling system, which ensures storage capacity. A recovery of margins is not in sight. that resources are used efficiently, and provides timely, However, we believe that periods of scarcity and price spikes detailed insight into the current and prospective will become more frequent again in the long run, in part due development of the company’s assets, financial position to rising demand for gas used to generate electricity. This is and net worth. Based on the targets set by the Executive something from which we would benefit two-fold, both as Board and management’s expectations regarding the user and as owner of the storage facilities. development of the business, once a year we formulate our medium-term plan, in which we forecast the development of Attractive investment portfolio increases financial key financial indicators. This plan contains the budget strength. RWE’s business operations are supplemented figures for the following fiscal year and planned figures for by a portfolio of financial investments in energy companies, the years thereafter. The Executive Board submits the plan which we believe will be a reliable source of substantial to the Supervisory Board, which reviews and approves it. The income. The largest position is the stake in E.ON, which we Supervisory Board occasionally requests adjustments to be received as part of the asset swap. It amounted to 16.7 % made prior to giving its approval. During the fiscal year, we when it was acquired in September 2019. We reduced it to produce internal forecasts linked to the budget. The 15 % shortly thereafter. Our investment portfolio also Executive Boards of RWE AG and the main operating units includes a 25.1 % share of the German transmission system meet regularly to analyse the interim and annual financial operator Amprion and the 37.9 % interest in the Austrian statements and update the forecasts. In the event that the utility Kelag mentioned earlier, which is part of the continuing updated forecast figures deviate significantly from the innogy operations. Kelag’s strong position in hydroelectric budget figures, the underlying reasons are analysed and power makes the company a perfect fit for our renewable countermeasures are taken if necessary. We also energy strategy. immediately notify the capital market if published forecasts need to be modified. 31 Important key performance indicators used in managing including provisions for mining damage and the financial our business are adjusted EBITDA, adjusted EBIT, adjusted assets used to cover them in net debt from fiscal 2020 net income, and net debt. EBITDA is defined as earnings onwards. In managing our indebtedness, we orientate before interest, taxes, depreciation and amortisation. ourselves towards the leverage factor, the ratio of net debt In order to improve its explanatory power in relation to the to adjusted EBITDA. In the future, we will calculate this ratio development of ordinary activities, we remove non-operating solely based on income achieved in our core business, the or aperiodic effects: capital gains or losses, temporary definition of which is provided on pages 94 et seq. effects from the fair valuation of derivatives, impairments and other material special items are shown in the Sustainable management – more than just reducing non-operating result. Subtracting operating depreciation emissions. We can only succeed over the long term if we and amortisation from adjusted EBITDA yields adjusted ensure society’s acceptance by embracing our corporate EBIT. Net income corrected to exclude all major special items responsibility (CR). Today, CR is a top priority. It relates to (adjusted net income), is another key operating indicator. multifaceted environmental, economic and social matters and therefore goes far beyond the reduction of greenhouse Until 2019, for management purposes, we also used key gas emissions. To optimise our assessment of the figures reflecting innogy as a purely financial investment in expectations which society has of us, we constantly seek to accounting terms. innogy was considered on the income engage in dialogue with stakeholder groups. These are statement only with the dividend due RWE. This approach, primarily shareholders, employees, politicians, associations, which deviates from IFRS consolidation principles, is non-government organisations and civic initiatives. The explained in further detail on page 69. It enabled us to stimulus we receive by interacting with our stakeholders present innogy’s role adequately. Another advantage of the helps us to determine the focal points of our CR activities. In greater independence of accounting regulations was that addition to reducing our emissions, we take a number of we did not have to make any methodological adjustments further matters very seriously. These include the health of when implementing the asset swap with E.ON. Therefore, our staff, biodiversity at our sites, the diversity of our this approach was also applied to determine the key workforce and the attractiveness of RWE as an employer. earnings figures forming the basis of the Executive Board’s We have set ourselves specific goals in respect of numerous variable remuneration. CR issues and measure the degree to which we achieve them using KPIs. In so doing, we create transparency while We primarily use the internal rate of return for evaluating making our sustainability strategy more binding. This is also the attractiveness of investment projects. The Group’s achieved by the fact that the degree to which CR targets are financial position is analysed using cash flows from met has a direct effect on the remuneration of the Executive operating activities, amongst other things. We also attach Board of RWE AG (see page 80). special importance to the development of free cash flow. It is the result of deducting capital expenditure from cash Further information on our goals and measures in relation flows from operating activities and adding to them to CR can be found in our separate consolidated proceeds from divestments and asset disposals. Net debt is non-financial report in accordance with Section 315b, another indicator of RWE’s financial strength. The starting Paragraph 3 of the German Commercial Code, which will point for calculating it is RWE’s net financial position, to be published separately from the combined review of which provisions for pensions and similar obligations, for operations as part of our CR Report in April 2020. The nuclear waste management, for mining damage (e. g. the CR Report is entitled ’Our responsibility‘ and can be recultivation of opencast mining sites) and for the accessed on the internet at www.rwe.com/cr-report. dismantling of wind farms are added. However, we will stop 32 RWE Annual Report 2019Combined review of operations > Innovation 1.2 Innovation Few other industrial sectors are in the throes of as great a transformation as that affecting the energy industry. Armed with innovative spirit, curiosity and drive, we are helping to shape this change, prompting us to have launched or helped progress 190 innovation projects this past year alone. A total of 370 employees and numerous industrial and research partners were involved in these projects. And as varied as they may be, they have one goal in common: overcoming the technical and economic challenges of the energy transition. With around 290 inventions, we are amongst the working on concepts for floating wind turbines, which can be pioneers of European utilities. RWE is innovative in many secured to the seabed using anchor chains. This opens up ways. We are motivated both by a desire to remain competitive the possibility of utilising deeper waters as sites for turbines, in an ever-changing environment as well as a passion to be making completely new regions available for wind power, a driving force propelling this transition. With the help of our such as the Mediterranean and steeply sloping coasts in innovation projects, we are looking to develop solutions that Asia and America in particular. According to WindEurope, help us advance power generation from renewable sources the European wind industry association, in about 80 % of all and harness the potential of our conventional power plants areas where wind speeds are suitable for electricity in order to facilitate a successful energy transition. generation, the sea is simply too deep for conventional forms of offshore wind. With 1,070 patents and patent applications, based on close to 290 inventions, we are in the leading pack of European Floating technology is still in its infancy. Commercially utilities. Last year, we worked on approximately 190 projects available turbines are usually used, but the floating in the field of research and development (R & D). About foundations are custom-made and expensive. Together with 370 of our staff were solely dedicated to these activities or oil company Shell and Danish company Stiesdal Offshore contributed to them in addition to performing their normal Technologies (SOT), innogy is currently testing a modular tasks. In most R & D projects, we co-operate with other concept called TetraSpar, which the project partners believe companies or research institutions, meaning we generally will enable considerable cost savings. SOT has developed a only bear a portion of the project costs. In 2019, the tubular steel support structure which is kept stable in the RWE Group’s operating R & D spending amounted to water by a keel. As it has a modular design, the individual €21 million (previous year: €18 million). innogy is only parts of the support structure can be prefabricated at included in all of these figures based on the operations we different locations. One advantage this technology holds are continuing. over other floating concepts is that it is possible to construct the floating base and mount a turbine to it – all within the In the following we present a small selection of current harbour. innovation projects. They illustrate the range of challenges we are facing in light of the energy transition and signify the The project team’s model-scale tests on a floating creativity with which we are tackling these issues. installation, conducted in wind and wave tunnels, have largely been completed and production of individual test The floating TetraSpar turbine: new solution for offshore installation components is already under way. In 2020, the wind expansion. RWE is the world No. 2 in offshore wind first TetraSpar base is due to be assembled and launched in power production. Traditional offshore wind turbines have the Danish port of Grenaa, before a 3.6 MW wind turbine one thing in common: they are firmly secured to the seabed is mounted upon it. Tugboats will then take the entire and therefore located in waters with a maximum depth of installation to the test site ten kilometres off the Norwegian 50 metres, with 70 metres likely to be possible in the coast near Stavanger, where it will be attached to the medium term. The reason for this limitation is that the need seabed 200 metres below with three anchor chains, before for building materials increases in tandem with the need to finally being connected to the power grid via a cable. The make stronger structures which can withstand wind and floating turbine will be equipped with a large number of waves in much deeper waters. The associated construction sensors to measure whether its behaviour in real life costs would be considerable, rendering the wind farms conditions is in line with our predictions based on uneconomical. However, in order to harness the potential of calculations and tests. In TetraSpar, we hope to have found wind power more effectively, companies are currently a concept that will allow us to venture into entirely new wind power territories using floating technology. 33 Weatherproofing wind farms: lower repair costs thanks specialists teach the software to work autonomously and to rotor blade coating. Wind turbine blades are constantly distinguish between normal and irregular wind turbine exposed to the elements. This applies in particular to the behaviour based on existing data sets. The ideal combination leading edge of the blades where dust, water droplets and, of hardware and software will then be installed in individual at offshore sites, even sea salt strike the coating and, over turbine models or even entire onshore and offshore fleets. time, permeate to the layers below. The damage caused by With the help of our condition monitoring systems, we have the erosion must regularly be repaired at great expense. already been able to considerably reduce the number of This is precisely where we want to make a change, true to unplanned maintenance outages. the saying “Prevention is better than cure.” Heat from under the ground: new tasks for our Weisweiler For some time now, manufacturers have been making site. One regenerative energy source simply brimming with materials that can be applied to the edges of the blades to promise is deep geothermal energy. Not only does it offer protect them from erosion. Three types of material are promising prospects for energy supply, but possibly also for available for this purpose: special paints, adhesive strips the future of the Rhenish lignite mining region. As part of an and precast foams – all of which have already been tested R & D initiative under the umbrella of EU funding project in our laboratory, using products from ten manufacturers. INTERREG, we are currently researching whether and how At the offshore wind farms Gwynt y Môr off the coast of we can extract geothermal energy, stored deep in the Wales and Rödsand 2 near Lolland in Denmark, these ground under our Weisweiler power station to the east of investigations are being continued under real life conditions. Aachen. In concrete terms, the objective is to pump hot In offshore locations, the number, size and salt content of water from deep underneath the earth’s crust to the water droplets in the air is particularly high, making these surface. The heat could then be captured by a heat material tests even more crucial. The main objective is to exchanger and fed into the Aachen district heating network, establish how easily these materials can be applied under while the thermal water would be pumped back into the marine weather conditions and how they might affect the ground via a second borehole. This would make it possible aerodynamics of the turbines. to supply Greater Aachen with green energy from the Rhenish coal mining region and Weisweiler to maintain its Testing is expected to continue until 2021, by which time place as a key location for the energy industry. It would also we want to have identified the material with the best cost- offer the workforce secure prospects, even once the benefit ratio. We could then apply it to rotor blades during planned phaseout of lignite-fired electricity generation is regular maintenance, avoiding unneccessary downtime. In complete. addition, when building wind farms, we will make sure that the blades are precoated with the ideal protective layer. Ten partners have come together as part of our DGE Rollout NWE project (development of deep geothermal energy in Wind turbines under observation: condition monitoring north-western Europe) under the direction of North Rhine- systems. Once a wind turbine has been installed, it must Westphalia’s Geological Service. RWE Power is contributing be regularly serviced and maintained. Damage should be the on-site energy infrastructure at Weisweiler, and the detected, assessed and repaired as quickly as possible to know-how of its employees to the project. District heating prevent turbine downtime. In order to ensure a safe and pipelines already run from our power plant to Aachen, some ideally seamless operation of a given wind farm, we use 20 kilometres away. The first project phase will be dedicated condition monitoring systems. The systems use sensors to to the underground exploration of the conditions in record rotation speeds, vibrations, ambient temperatures Weisweiler. In the second half of 2020, we want to use a test and much more. Measurements are taken around the clock, well to reach a depth of more than 1,000 metres. If it then and that information is stored, so that software can transpires that the use of geothermal energy is evaluate the data later. economically viable, this would mark the birth of a Weisweiler geothermal energy site. The state of North As part of our R & D activities, we are working on improving Rhine-Westphalia has set itself the goal of ensuring that a the interaction between the sensors (hardware) and the 2038 phaseout of coal-fired electricity generation coincides analysis methods (software). We are exploring which with a massive expansion of renewable energy capacity. It is hardware is particularly well suited for data acquisition, envisaged that the Rhenish region will serve as a model for for example. We improve the software using machine how a region in Europe can best transform its energy learning approaches, among other things. Engineers and IT system into a modern, innovative and climate-friendly one. 34 RWE Annual Report 2019Combined review of operations > Innovation Geothermal energy is of particular interest in this regard As part of the StoreToPower project, RWE has joined forces because it is available around the clock, regardless of with the German Aerospace Centre and the Aachen weather conditions. With its mining traditions and its high University of Applied Sciences. Together, the partners are professional and technical standards, North Rhine- seeking to retrofit a thermal storage module as a test Westphalia ticks all the necessary boxes to create a facility on the premises of a large lignite-fired power plant successful geothermal energy hub. In Belgium and the unit in the Rhenish region, thus proving the technical viability Netherlands, district heating networks, greenhouses, of the concept. The state of North Rhine-Westphalia is industrial plants and thermal baths already benefit from already backing the planning work financially and has this environmentally friendly energy stored below the included StoreToPower as a key project in its programme of earth’s crust. urgent operations called ‘The Rhenish region of the future’. In July 2019, the project cleared an important hurdle: the StoreToPower: converting coal-fired power stations into Federal Ministry of Economics and Energy listed it as one of thermal storage power plants. StoreToPower is another 20 projects that are eligible to apply for funding within the project aimed at tackling the impending structural change scope of the ideas competition entitled ‘Real Laboratories in the Rhenish lignite mining region whilst also securing the of the Energy Transition’. The contest is aimed at ensuring area as a key location for the energy industry. As the name that sustainable energy technologies can be tested under implies, the focus is on electricity storage. One of the major real life conditions and on an industrial scale. challenges of the energy transition is that wind turbines and solar panels are not reliable sources of electricity. The more these systems replace conventional power plants, the more Innovative CO2 application: synthetic fuel from carbon dioxide. For some time now, we have been working on urgently we need storage solutions that make it possible to reconcile the considerable fluctuations of electricity generated from renewable sources with demand profiles. various processes that allow us to separate carbon dioxide from power plant flue gases (CO2 scrubbing). At our innovation centre in Niederaussem in the Rhenish lignite mining region, we have developed one of the world’s How we transition from phasing out coal to phasing in energy storage solutions is the key question when it comes to StoreToPower. As part of this initiative, we are looking to use a lignite-fired power station as a thermal storage power plant. This will not involve a complete redesign of the plant: in coal-fired power stations, heat is generated by burning pioneering technologies in this field together with BASF and Linde. Our CO2 scrubbing pilot plant has already proven its capabilities over years of extensive testing. Since 2009, it has completed more than 80,000 operating hours, achieving CO2 scrubbing efficiencies of 90 %. We use carbon dioxide from the pilot plant to produce synthetic fuel coal. This heat is used to produce steam. Under high and feedstock for the chemical industry, which can be used pressure, the steam drives a turbine, which produces to replace fossil fuels such as crude oil and natural gas. To electricity via a generator. In a coal-fired power station this end, we have initiated five projects, all of which qualify which has been converted into a heat storage power plant, for EU funding. Two examples are presented below. the heat needed for steam generation can be produced with alternatives to coal, namely wind and solar power. Whenever excess amounts of green electricity are available, As part of the first project, MefCO2 (Methanol from CO2), which has already been completed, we produced methanol they could be used to heat a thermal storage tank. Later, from carbon dioxide and hydrogen. The hydrogen in turn when wind and solar power is in short supply, the stored was produced by electrolysis using water and electricity. A heat can be used to generate steam to drive the turbine. wide variety of chemical products are based on methanol, The modules of the thermal storage system can be one of the most commonly manufactured chemicals in the gradually built next to existing power plant units. In this way, world. It is also suitable as a long-term storage medium for the steam generated in the green storage plant can renewable energy, provided the hydrogen used to generate progressively be used to replace large portions of the steam it is produced using green electricity and the methanol itself otherwise generated using lignite. This continues until the is subsequently used to generate electricity. power station operates exclusively as a thermal storage power plant using renewable energy sources once the phaseout of coal-fired power generation has been completed. 35 A second project, ALIGN-CCUS, has been under way at Lignite-fired power plants: lower mercury emissions Niederaussem since 2017. Backing is provided by both the thanks to rotary hearth furnace coke. In our efforts to EU and the German Ministry for Economic Affairs and generate electricity with ever lower emissions, we are not Energy. A total of 30 industrial enterprises and research only targeting the greenhouse gas carbon dioxide but also institutions from five European countries are involved in the pollutants such as mercury. We are already able to project. They are looking to show that it is possible to create successfully separate and extract most of the mercury an entire value chain, from carbon capture to its use and contained within flue gases, meaning our plants are already storage. The project involves converting carbon dioxide and well below the current legal emission thresholds. However, hydrogen into dimethyl ether (DME), which can be used as a new EU regulations will impose much stricter limits on our low-carbon, low-nitrogen-oxide diesel substitute. Our pilot lignite-fired power plants from summer 2021 onwards. So, plant in Niederaussem became operational in early 2020. the fact that we have been working intensively for years now Every day, we produce up to 50 kilogrammes of DME from on ways to further reduce mercury emissions cost-effectively carbon dioxide and hydrogen, which is used as a fuel for very much works in our favour. We have specifically been the production of peak-load electricity in a stationary giving much consideration to a process which makes use of diesel generator at Niederaussem. ALIGN-CCUS is another furnace coke extracted from lignite. We are already using example of how generation shortages from renewable energy could be cushioned moving forward. All CO2 conversion projects serve to further our understanding of this substance to extract mercury at our refining plants, where we process lignite into briquettes or lignite dust for the cement and lime industry. Tests carried out in 2018 at a new technologies and products whilst gaining experience pilot plant at the Niederaussem Innovation Centre with new partners, thus laying the groundwork for the next demonstrated that furnace coke can also be used to reduce step: the construction and operation of a demonstration plant emissions from power plants. In Niederaussem, we injected where the processes can be tested on an industrial scale. furnace coke into the smokestack of a lignite block. The GET H2: blueprint for entry into the hydrogen business. As demonstrated by the MefCO2 and ALIGN-CCUS projects, hydrogen plays a key role in using carbon dioxide. However, its importance for the energy industry goes far beyond this application. After all, hydrogen (H2) can be used in a myriad of ways, for instance to generate electricity and heat, as a result showed that the mercury attached itself to the fine furnace coke particles so that both materials could be extracted by the electrostatic precipitator and subsequently disposed of. The experiments led to a significant reduction in mercury emissions, which encouraged us to apply the method on a large scale and under real life conditions. To this end, we built a demonstration plant, which is also fuel to power cars, or as a commodity for industry. Another connected to one of the power station units at Niederaussem. advantage of hydrogen is that it can be obtained by During an extensive series of tests between February and electrolysis from electricity and water and is therefore a July 2019, the method proved its value and effectiveness candidate for renewable energy storage. Producing, once again. We now plan to install it in further lignite units, transporting and using hydrogen take centre stage in the GET H2 initiative, for which we joined forces with numerous industrial and research partners. The objective of GET H2 is to build a nationwide hydrogen infrastructure in Germany. This initiative will kick off with a project at our power plant which would otherwise not be able to comply with the impending new limitations. In the meantime, we are using the demonstration plant to explore ways in which we can further perfect the technology. site in Lingen, where we intend to produce green hydrogen Detailed information on these projects and our other R & D for industrial processes on a large scale. Furthermore, there ventures can be found at www.rwe.com/innovation and at are plans to repurpose an existing gas pipeline from Lingen www.innogy.com/innovation > Renewable Energy. to the Ruhr region to transport hydrogen. This undertaking is still in the planning stage and is subject to economic feasibility. 36 RWE Annual Report 2019Combined review of operations > Economic environment 1.3 Economic environment World economic growth slowed in 2019. Initial estimates have German GDP posting a marginal rise, with industrial output on the decline, resulting in a drop in electricity consumption. Following a multi-year upturn, prices of thermal coal and natural gas dropped on international markets. Despite this, average electricity forward prices in Germany and the Netherlands were higher than in 2018. A major factor was the rise in the price of CO2 emission allowances witnessed since 2017. This was also a major reason why the margins of low-emission gas power plants improved, whereas those of hard coal-fired power stations worsened. Eurozone posts only slight growth. The economy Decrease in demand for electricity in Germany. Electricity experienced a tangible cool-down in the past fiscal year. consumption trends largely depend on the economic cycle, Based on preliminary estimates, global economic output which weakened significantly in our European markets. rose by 2.5 %, which was less than in 2018 (3.3 %). The Furthermore, less electricity was needed for heating due to Eurozone may well have posted just over 1 % economic the weather. Preliminary data from the German Association growth, with Germany recording a gain of merely 0.6 %. of Energy and Water Industries (BDEW) indicate that Due to its dependency on exports, the country, which is the electricity consumption in Germany was down 2 % in 2019. largest economy in the currency area, is significantly affected Expert estimates for the UK have the country recording a by international trade conflicts. By contrast, the decline of a similar order, whereas there was apparently no Netherlands, recording an estimated increase of 1.7 %, major change versus 2018 in the Netherlands. Power usage occupied one of the top spots among Eurozone countries. in the USA is likely to have dropped by more than 2 %, In the United Kingdom, our most important market outside despite the country’s robust economy. This was in part of the currency union, the economy displayed robust because the summer temperatures were below the unusually development, despite the UK’s exit from the EU with effect high level recorded in the preceding year, resulting in a from 31 January 2020. Based on the latest figures, the commensurate decline in electricity consumption for air country’s GDP rose by more than 1 %. Since the acquisition conditioning. of E.ON’s renewables business, the USA has also become one of RWE’s core markets. Economic research institutes estimate that the US economy expanded by more than 2 %. One-year forward prices of gas on the TTF wholesale market €/MWh (average weekly figures) 2018 forward 2019 forward 2020 forward 26 24 22 20 18 16 14 12 2017 2018 2019 Source: Bloomberg. 37 Mild weather causes natural gas spot prices to collapse. Declining demand curbs hard coal prices. Spot prices The utilisation and earnings of our power plants are heavily paid for hard coal used in power plants (steam coal) also dependent on how fuel and emission allowance prices declined substantially. Deliveries to the ARA ports (ARA = develop. Natural gas, our most important tradable energy Amsterdam, Rotterdam, Antwerp) including freight and source, was characterised by extremely low spot prices in insurance were settled for an average of US$61/metric ton 2019. Quotations at the Title Transfer Facility (TTF) – the (€54), US$31 less than in the previous year. The background Continental European trading hub – averaged €14/MWh, to this is that little use was made of coal-fired power €9 less than a year before. Unusually low demand for heating stations in Europe, leading to a corresponding reduction of gas caused by the mild 2018/2019 winter played an steam coal consumption. Furthermore, import restrictions important role. Moreover, the European market was flooded in China and the reactivation of Japanese nuclear power with liquefied natural gas (LNG), putting even more pressure plants curtailed demand from Asia. Quotations on the on prices. Increased gas consumption due to the improved forward market also dropped owing to the aforementioned capacity utilisation of gas-fired power stations was unable factors. In 2019, the one-year forward (API 2 Index) cost an to offset this. Gas forward prices also dropped, although not average of US$70/metric ton (€62), US$17 less than in the to the same extent. In the year under review, the 2020 TTF preceding year. forward cost €18/MWh compared to the €21/MWh paid for the 2019 forward in 2018. One-year forward prices of hard coal deliveries to Amsterdam/Rotterdam/Antwerp US$/metric ton (average weekly figures) 2018 forward 2019 forward 2020 forward 100 90 80 70 60 50 2017 2018 2019 Source: RWE Supply & Trading. 38 RWE Annual Report 2019 Combined review of operations > Economic environment Forward prices of CO2 emission allowances (European Union Allowances) €/metric ton of CO2 (average weekly figures) December 2018 forward December 2019 forward December 2020 forward 30 25 20 15 10 5 0 2017 2018 2019 Source: RWE Supply & Trading. Reform of European Emissions Trading System causes rapid increase in CO2 certificate prices. An important cost factor of electricity generation from fossil fuel-fired power stations is the procurement of CO2 emission allowances, which have increased substantially in price the following year. The considerable rise in price is due to the fundamental reform of the EU Emissions Trading System. The new regulations, some of which have started having an impact at the beginning of 2019, should result in a gradual reduction of the oversupply of emission since the middle of 2017. An EU Allowance (EUA), which allowances on the market. Many participants in emissions confers the right to emit one metric ton of carbon dioxide, trading therefore expect a shortage of available EUAs and cost €25 on average, €9 more than in 2018. These figures made early purchases. This resulted in a massive surge in relate to contracts for delivery that mature in December of prices even before the reform package was implemented. One-year forward prices of base-load electricity on the wholesale market €/MWh (average weekly figures) 2018 forward 2019 forward 2020 forward 80 70 60 50 40 30 20 2017 2018 2019 Germany Netherlands United Kingdom Source: RWE Supply & Trading. 39 Significant decline in electricity spot prices. The drop in the price of coal and gas weighed on quotations on Rise in price of CO2 emission allowances puts coal power plant margins under pressure. Power plant wholesale electricity markets, whereas the rise in the price margins are calculated by taking the price per unit of of emission allowances had a counteracting effect. Base- load power traded for an average of €38/MWh on the German spot market, €6 less than in the previous year. Spot electricity generated and deducting the costs of the fuel and CO2 emission allowances required for said electricity generation. As a rule, we procure the fuel for our hard coal prices declined by £14 to £43/MWh (€49) in the UK and by and gas-fired power stations in liquid markets at prevailing €12 to €41/MWh in the Netherlands. The situation on conditions. The generation costs of the plants can therefore forward markets was as follows: the German 2020 fluctuate considerably. In the case of gas-fired power base-load forward cost an average of €48/MWh, €4 more stations, margins are known as clean spark spreads and than what was paid for the 2019 forward in the previous when it comes to hard coal-fired plants, they are referred to year. The Netherlands recorded a slight increase in the price as clean dark spreads. of the one-year forward of €1 to €50/MWh, with the UK recording a decrease of £2 to £52/MWh (€59). Clean spark spreads1 forward trading €/MWh (average weekly figures) 2018 forward 2019 forward 2020 forward 10 5 0 – 5 – 10 2017 2018 2019 Germany Netherlands United Kingdom Source: RWE Supply & Trading. 1 Price of base-load electricity minus the cost of gas and CO2 emission allowances based on a power plant efficiency of 50 %; including CO2 tax in the UK. Clean dark spreads1 forward trading €/MWh (average weekly figures) 2018 forward 2019 forward 2020 forward 15 10 5 0 – 5 – 10 2017 2018 2019 Germany Netherlands United Kingdom Source: RWE Supply & Trading. 1 Price of base-load electricity minus the cost of hard coal and CO2 emission allowances based on a power plant efficiency of 40 %; including CO2 tax in the UK. 40 RWE Annual Report 2019Combined review of operations > Economic environment The graphs on page 40 illustrate the development of the Wind conditions better than in 2018. The availability aforementioned spreads in our main generation markets and profitability of plants that produce electricity from since 2017, based on the respective year-forward renewable energy sources greatly depend on weather transactions. In 2019, clean spark spreads in Germany and conditions. This is why wind speeds are extremely important the Netherlands were above the previous year’s average, to us. In 2019, they occasionally exceeded the long-term whereas they remained slightly below it in the UK. The UK average at our production sites in Poland, Spain and Italy, and the Netherlands saw significant declines in clean dark whereas they remained below it at most of our UK and some spreads versus 2018, with Germany recording a slight of our US locations. Wind speeds in the other regions in increase. which we are active were largely normal. Compared to 2018, by and large, wind speeds measured at our locations in Fuel costs for lignite-fired and nuclear power stations are 2019 were similar or higher. Only in parts of the USA and generally more stable as we obtain lignite from our own Sweden was a decline recorded. The utilisation of run-of-river opencast mines and source uranium via long-term contracts power stations strongly depends on precipitation and melt at firm conditions. The rise in German wholesale electricity water volumes. In Germany, where most of our run-of-river prices caused realisable nuclear energy margins to improve. power plants are located, these volumes were slightly below As regards lignite-fired power stations, the positive price the long-term average. However, they were marginally effect was contrasted by substantial additional costs resulting from more expensive CO2 emission allowances. higher than in 2018. RWE: slightly higher margins of base-load forward contracts for 2019. We sell forward most of the output of our power stations and secure the prices of the required fuel and emission allowances in order to reduce short-term volume and price risks. Therefore, our generation margins in the year under review strongly depended on the conditions at which we concluded forward contracts for 2019 in earlier years. For electricity from lignite and nuclear power stations, we realised marginally higher prices with such transactions. In sum, this led to slightly better margins than with the transactions for 2018. Forward sales of electricity from gas and hard coal-fired power stations are typically concluded with less lead time. Therefore, the electricity prices realised for 2019 were higher, but there were also cost increases due to the notable fuel price hike which had an affect until 2018. In addition, the rise in the price of emission allowances also left its mark. The margins on electricity sales for 2019 of our gas-fired power stations in Germany, the UK and the Netherlands improved year on year despite these burdens. By contrast, our hard coal-fired power plants recorded declining margins in all the markets mentioned. 41 1.4 Political environment Climate protection remains at the top of the political agenda. The European Commission presented the ‘Green Deal’, a package of measures aiming for a significant reduction of greenhouse gas emissions across all sectors. The ultimate goal is to make the EU climate neutral by 2050. Policymakers in our home market, Germany, are also spurring climate protection. In January 2020, the federal government submitted a draft law on the exit from coal, which envisages gradually phasing out electricity generation from coal by 2038. The draft requires our lignite power stations and opencast mines to be closed ahead of schedule. The compensation that we would receive in exchange would clearly fall short of offsetting the actual burden. However, we welcome the fact that the framework conditions for our power plants will become more reliable and that the necessary redundancies will be mitigated in a socially acceptable manner. EU Commission presents ‘Green Deal’: Europe to become participate in such mechanisms to a very limited degree. carbon neutral by 2050. The new European Commission under President Ursula von der Leyen put forward its ‘European Green Deal’ on 11 December 2019. The One prerequisite for this is that they do not emit more than 350 kg of CO2 per kilowatt of installed capacity per year. Consequently, coal-fired power plants can no longer programme contains a list of measures to lower greenhouse participate in a general capacity market with full utilisation, gas emissions across various sectors. The Commission is but can participate in reserve schemes which only involve a pursuing two goals with the Green Deal: the first sees low number of operating hours. The emission caps for new Europe becoming carbon neutral by 2050. The second goal power stations entered into effect on 1 January 2020. focuses on 2030, the deadline by which the EU should have Transitional regulations apply to existing generation decreased its greenhouse gas emissions by 50–55 % facilities until the middle of 2025. Existing capacity compared to 1990. Previously, the aim was to reduce agreements will remain unaffected by the threshold values. emissions by 40 %. The new targets are set to be achieved through far-reaching reforms to industry, energy supply, German coal phaseout plan: RWE to shoulder the lion’s transport and agriculture. The EU Commission is planning share of initial burdens in exchange for €2.6 billion in comprehensive legislative changes and a number of compensation. In Germany, our main electricity generation different programmes in order to provide for the market, the stage is now set for an early phaseout of accelerated expansion of renewable energy, a new strategy coal-fired power production. In January 2019, the Growth, for the industrial sector, import barriers for goods produced Structural Change and Employment Commission (Structural using processes that are harmful to the climate as well as a Change Commission), which was appointed by the federal strategy for clean transport, among other things. Regions government, made a concrete proposal to achieve climate which are most affected by these measures will be protection goals within the energy sector. The panel, made supported by way of a ‘Just Transition Fund’. The EU wants to up of representatives from industry, trade unions, science, enshrine the goal of becoming carbon neutral by 2050 in associations, citizen groups and environmental law. This will be followed by the legislative process to organisations, called for a coal phaseout by no later than increase the target for 2030, which will most likely begin this 2038. In addition, the Commission presented a roadmap summer. Depending on the outcome, the rules of the for plant closures and voted in favour of power plant European Emissions Trading System would then have to be operators being allocated appropriate compensation. revised and the number of certificates placed on the market The amount of compensation is either to be determined by would have to be reduced. auction (hard coal) or via negotiations (lignite). Redundancies for operational reasons as well as inappropriate social and EU limits participation of coal-fired power plants in economic disadvantages to employees are to be avoided as capacity mechanisms. The European Parliament and the much as possible. The Commission also requested that the Council of Ministers passed a reform of EU electricity Hambach Forest be preserved. We published a detailed market legislation in March and May 2019, respectively. overview of the panel’s recommendations on page 33 of Some of the new rules took effect from 1 January 2020 our 2018 Annual Report. (Electricity Market Regulation). Other provisions (Electricity Market Directive) will have to be transposed into national The suggestions of the Structural Change Commission were law by the member states by the end of 2020. One core predominantly well-received by politicians and other component of the reform is guidelines on designing stakeholders. After they were published, the government, capacity market mechanisms. The new Electricity Market Regulation envisages that power stations with CO2 emissions of more than 550 g/kWh will only be allowed to the affected federal states and the power plant and opencast mine operators started negotiating the implementation of the recommendations in the lignite 42 RWE Annual Report 2019Combined review of operations > Political environment industry. These talks led to a consensus in early 2020. On industry’s need for the Garzweiler opencast mine to remain this basis, the Federal Cabinet published a draft Coal operational should be reflected in the Coal Phaseout Act. Phaseout Act on 29 January 2020, thus launching the parliamentary procedure. Once it has been completed, the The lignite phaseout will place a considerable financial government will be authorised to conclude public-law burden on our company. The draft law envisages RWE contracts with operators of lignite assets which protect their receiving €2.6 billion compensation over the next 15 years. legitimate interests. We recognised the entire amount as an asset in the 2019 consolidated financial statements. The federal government According to the draft law, RWE will shoulder the lion’s share is of the opinion that this satisfies all our claims. However, of the initial burdens of the lignite phaseout. It envisages an the damage we will actually incur will clearly exceed additional 3 GW of lignite-fired generation capacity being €2.6 billion. A large part of the expected burden is reflected taken off the market by 2022, with around 2.8 GW of this in the consolidated financial statements. We have total figure being allocable to us. According to the draft law, transferred €2,022 million to our mining provisions to cover the first 300 MW block will be decommissioned in the the additional operating costs and the earlier recultivation Rhenish lignite mining area as early as the end of 2020, (including interest effects). Impairments of our lignite power followed closely by three additional 300 MW units in the stations and opencast mines have resulted in burdens totalling following year, and another 300 MW facility as well as two €527 million. Moreover, we have set aside €347 million for 600 MW blocks in 2022. The power stations in Neurath and socially acceptable redundancy schemes. Future outlays Niederaussem will be most heavily affected by these plans, ensuring the continued operation of our power plants and along with Weisweiler, albeit to a lesser extent. We will also opencast mines under these new conditions are only be ceasing production of lignite briquettes at the Frechen partially considered in our consolidated financial site, thus decommissioning 120 MW of electricty generation statements. capacity. Intended recipients of state compensation in addition to We will gradually reduce our lignite-fired generation RWE include the affected workforce. According to current capacity even further until the end of the decade, by which figures, over 3,000 of the 10,000 jobs in our lignite business time it will have dropped considerably. In 2025, a 300 MW will be cut in the short term; by 2030, this figure could increase block will be taken off the grid in Weisweiler. The two on-site to around 6,000. Among other things, the proposed 600 MW units will then follow suit in 2028 and 2029, legislation provides for an adjustment allowance and respectively. The Inden opencast mine, which exclusively compensation for any disadvantages concerning statutory supplies Weisweiler with coal, will then also be pensions. It is envisaged that these be paid by the state. decommissioned. One of the two remaining 600 MW blocks is set to be shut down at the end of 2029, with the other The draft legislation also regulates the details of the hard being placed on security standby for four years starting on coal phaseout. The federal government is of the opinion 1 January 2030. From 2030 onwards, this will only leave that auctions should decide which hard coal capacities our three most modern lignite units at 1,000 MW apiece on are taken off the grid and how much their operators receive the market. They will most likely remain operational until the in compensation. The draft law envisages annual tender end of 2038. procedures from 2020 to 2026. However, operator bids will be subject to specific caps which are set to be lowered The closures will have considerable consequences for the from €165,000/MW to €49,000/MW during the opencast mines. More than half of the lignite reserves, i. e. aforementioned period. Thereafter, the proposed legislation 1.1 billion metric tons, which had been approved for mining, provides for closures without compensation. If the tenders will now remain underground. In addition, at the behest of do not result in enough capacity being decommissioned, the Structural Change Commission and politicians, starting in 2024, power plant operators could be ordered to Hambach Forest will be preserved. Of our three opencast shut down stations without compensation. Company mines in the Rhenish lignite mining region – Inden, Hambach representatives, trade unions and numerous federal states and Garzweiler – only the latter will remain operational from have levelled criticism at this draft legislation and demand 2030 onwards to supply the remaining assets with fuel. This that it be amended, in particular with regard to combined will mean a complete overhaul of our opencast mining heat and power generation. operations and recultivation activities, especially in Hambach. We will initiate the necessary steps as agreed with The legislative process for the coal phaseout is expected to the North Rhine-Westphalian state government. The energy last until mid-2020. Furthermore, we will be concluding a 43 public-law contract with the German government on the energy. Measures in the energy sector involve the basis of the Act, which will protect our interests with regard accelerated expansion of offshore wind power: the federal to the regulations made. Thereafter, the compensation has government is now aiming for a total capacity of 20 GW to be approved by the European Commission under state by 2030 instead of the 15 GW targeted originally. The aid law. Programme envisages that municipalities in which wind turbines are built receive additional financial benefits. In German government seeks to provide coal regions with addition, there are plans to abolish the subsidy cap on new up to €40 billion in subsidies. In August 2019, the Federal photovoltaic installations. Based on the current rules, such Cabinet adopted a draft law to strengthen the coal regions assets will stop receiving feed-in payments once the country structurally. However, the Lower House and the Upper House has built 52 GW in solar capacity. postponed their consultation in order to discuss the planned legislation in conjunction with the Coal Phaseout Act. The Netherlands wants to phase out coal-fired electricity draft of the Structural Reinforcement Act envisages the generation by 2030. In 2019, the Dutch Lower and Upper federal government providing up to €14 billion in financial House passed a law envisaging the end of the country’s support to the lignite mining regions for investments of electricity production from coal in this decade. According to particular importance through to 2038, with 37 % going to the law, by 2025 at the latest, coal may no longer be used the Rhenish coal mining region. The funds can be used by as fuel in power stations built in the 1990s. For plants the states, e. g. to invest in industrial infrastructure and constructed later than this, the ban would come into effect public transport. The government intends to flank this by in 2030. Compensation payments for the power utilities supporting the regions through its own measures. A total of affected are not foreseen in the law. At present, there are €26 billion has been budgeted for this and earmarked for five hard coal-fired power stations still operating in the measures such as the expansion of the rail and road networks Netherlands. Two of these belong to us: Amer 9 and and the creation of research hubs. Eemshaven, which have a net installed capacity of 631 MW and 1,554 MW. They would have to stop firing coal at the German government presents Climate Protection end of 2024 and 2029 according to the law. After that, Programme 2030 and adopts Climate Protection Act. these stations could only be operated with other fuels. October saw the Federal Cabinet adopt the Climate After taking the first retrofitting measures, we have started Protection Programme 2030. In the same month, it passed co-firing with biomass in both plants. We are receiving the draft of a nationwide climate protection law, which was subsidies for this to finance the capital expenditure and adopted by the Lower House and Upper House in December additional costs incurred to purchase fuel. Conversion to following several amendments. The objective of the Climate 100 % biomass-firing would involve significant additional Protection Programme and the Climate Protection Act is to expenses. However, the government refuses to provide ensure that the national emission reduction goals for 2030 further subsidies. We believe that our ownership rights are are achieved. These targets will be enshrined in law for the being violated by the Dutch coal phaseout due to the lack first time in the Climate Protection Act. The Climate of compensation. Therefore, we are considering taking Protection Programme 2030 describes the tools and legal action. measures with which these goals should be achieved. For example, the government plans to introduce CO2 pricing in sectors which are not covered by the European Emissions Trading System (e. g. transportation and heating). This will first be introduced at the national level starting in 2021. Going forward, the government wants to push for the introduction of an EU-wide, cross-sector emissions trading scheme with a moderate price floor. The idea is to offset CO2 surcharges paid by consumers on petrol, diesel and other combustibles by providing relief in other areas through measures such as the increase in commuter allowances, which will come into effect in 2021. The Climate Protection Programme contains a number of measures in the areas of building, transportation, agriculture, forestry, industry and 44 RWE Annual Report 2019 Combined review of operations > Major events 1.5 Major events The past fiscal year took us a major step closer to the ‘new’ RWE. In mid-September, the EU gave us the go-ahead for our asset swap with E.ON. Major parts of the transaction were executed soon thereafter. Further highlights in 2019 were the tender won for the subsidisation of the Sofia offshore wind project in the UK and the European Commission’s reapproval of the British capacity market. In this chapter, we present the major events that occurred in 2019 and the beginning of 2020. We focus on events that have not been commented on in detail elsewhere in this report. Events in the fiscal year Asset swap with E.ON largely executed: RWE transfers provider and infrastructure investor Macquarie, MIRA, stake in innogy and receives renewables business from exercised its right of first refusal. We therefore transferred E.ON. In September 2019, RWE and E.ON completed major the shares in IGH to MIRA and not to E.ON. This sale was parts of the asset swap agreed in March 2018. The completed with effect from 30 September. The price prerequisite for this was the final approval of the transaction totalled about €1.8 billion and therefore matched the by the European Commission, which was granted on conditions at which we had purchased the stake from 17 September. E.ON received our 76.8 % interest in innogy innogy. Therefore, on the whole, the IGH transaction was on the following day and conducted a capital increase in neutral for us in financial terms. exchange for contributions in kind immediately thereafter. The approximately 440 million newly created shares were Also as part of the asset swap, in August 2019, RWE issued to RWE. This gave us a 16.7 % stake in E.ON, but by acquired innogy’s 49 % stake in VSE, the energy utility based late September/early October we reduced it to 15.0 % by in Košice, Slovakia. We plan to transfer the shareholding to selling off shares. In addition, as of the end of 30 September, E.ON at the conditions at which we acquired it. The purchase E.ON transferred its renewable energy activities and price payable by E.ON was considered when netting the minority interests in the RWE nuclear power plants payment claims from the asset swap in September. The Gundremmingen (25 %) and Emsland (12.5 %) from its stake in VSE is still included in our Group figures: we state it subsidiary PreussenElektra to us. We paid E.ON €1.5 billion as as a ‘discontinued operation’. financial consideration also at the end of September. The transaction will be fully implemented once E.ON transfers When settling the financial receivables and liabilities from back to us parts of the innogy portfolio which are already the asset swap, a loan was considered, which we had assigned to our operations commercially and are granted innogy in the run-up to the IPO in October 2016. recognised in our Group figures: the renewable energy It amounted to €700 million and would have come due in business, the German and Czech gas storage facilities, and October 2020. By netting it against other payment claims, a 37.9 % stake in the Austrian energy utility Kelag. This transfer E.ON refunded us the principal with accrued interest early. shall take place as soon as possible in the current year. The asset swap also envisaged RWE acquiring the majority financial position, net worth and earnings in the past fiscal stake in the Czech gas network operator innogy Grid year, which we present on pages 51 et seqq. In addition, the Holding (IGH) from innogy and transferring it to E.ON acquisition of E.ON’s renewable energy business changed thereafter. We acquired the 50.04 % shareholding in the structure of our financial reporting. Details on this can The asset swap with E.ON had substantial effects on our February 2019. However, the co-owner of IGH, the be found on pages 49 et seq. consortium managed by the Australian financial service 45 European Commission gives go-ahead to reinstate 200 kilometres from the English coast has very good wind British capacity market. After a thorough investigation, in conditions and moderate water depths. All of the approvals October 2019 the European Commission reapproved the required for the wind farm have been obtained and the final British capacity market. This established the prerequisite for investment decision is expected to be reached in 2020. payments to be resumed following a lengthy suspension Based on current planning, the first wind turbines could be and for postponed capacity auctions to be held. The commissioned in 2024/2025. The wind farm would then be Commission holds the view that the capacity market rules fully operational in 2026. comply with EU state aid regulations. It had originally reached this conclusion in July 2014, but the Court of the In the United Kingdom, renewable energy has been European Union found that the review conducted at the supported via contracts for difference (CfDs) since April 2015. time had not been extensive enough. Therefore, the judges If the price realised by the plant operators on the wholesale had declared the first approval invalid in November 2018. market is below the feed-in tariff, they are paid the Thereafter, the British capacity market was suspended, difference. If it exceeds the tariff, the operators are obliged with the participating power generators not receiving any to make a payment. Projects receiving CfDs are selected as payments. This caused RWE to temporarily forego follows: if the budget set aside for a certain generation contractually secured capacity payments of around technology is big enough, all applicants receive a CfD. If it is €50 million for 2018 and about €180 million for 2019. too small, a tender process decides which bidders win a We were paid these amounts retrospectively in January contract. The September 2019 auction was the third since 2020 and recognised them in our earnings for the 2019 the introduction of the CfD scheme in the United Kingdom. fiscal year. Entry into the Polish offshore wind business. In the future, In mid-2019, i. e. whilst the capacity market was still on we will also invest in Polish offshore wind farms. Our subsidiary hold, British grid operator National Grid held a capacity RWE Renewables International purchased a project pipeline auction for the delivery period from 1 October 2019 to with a total capacity of over 1.5 GW from several private 30 September 2020. Power plants with a total capacity of owners and developers. The four projects are set to be 3.6 GW qualified for a very low payment of £0.77/kW. An implemented on the Słupsk Sandbank in the Baltic Sea. We invitation to tender for the same delivery period had already already operate several onshore wind farms in Poland. taken place at the end of 2015. At this auction, stations with a combined 46.4 GW, including 8.0 GW belonging to RWE, Neurath C lignite unit placed on security standby. At won a contract for a payment of £18/kW. The second the end of September, we took the 300 MW Unit C of the auction was held to close remaining capacity gaps. Two Neurath lignite-fired power plant offline, placing it on small RWE power plants submitted bids, but will not receive legally mandated security standby. This was mainly for any payments. environmental reasons. The German Electricity Market Act obliged the country’s energy sector to take a total of eight Large-scale project in the UK North Sea: innogy secures lignite units with a combined capacity of 2.7 GW off the contract for Sofia wind farm. Our offshore wind growth system between 2016 and 2019. However, these blocks prospects continued to improve in 2019. innogy was are to serve as the last resort to ensure security of supply for awarded a remuneration contract for the Sofia project in an four years each, after which they will be shut down for good. auction in September. This venture involves building wind RWE is participating in the lignite security standby scheme turbines in the UK North Sea with a total capacity of 1.4 GW. with five 300 MW units. By the end of September 2017, we The investment volume is an estimated £3 billion, including had already shut down units P and Q of the Frimmersdorf the grid connection. The state will guarantee £39.65/MWh power plant, with Niederaussem E and F following suit a plus adjustments for inflation. The contract period extends year later. over 15 years. Sofia’s location on Dogger Bank nearly 46 RWE Annual Report 2019Combined review of operations > Major events Decision on Hambach Forest: Cologne Administrative In July 2019, we decided to decommission the Aberthaw B Court rejects lawsuit by BUND. On 12 March 2019, the hard coal-fired power plant in Wales early. The station, Cologne Administrative Court ruled that Hambach Forest is which has a net installed capacity of 1,560 MW, was taken not a potential special area of conservation according to offline in December. Its obligations from the British capacity the EU Directive on the conservation of natural habitats market through to the end of September 2021 were and of wild fauna and flora. Consequently, the lawsuit filed transferred to third parties with a small proportion being by the environmental activist group Bund für Umwelt und transferred to other units within RWE’s power plant fleet. Naturschutz Deutschland e. V. (BUND) was rejected. In the Aberthaw B was commissioned in 1971 and has thus opinion of the judges, the approval of the 2018–2020 main contributed to security of supply in the United Kingdom for operational plan for the Hambach opencast mine by the nearly half a century. The closure will bring RWE’s electricity Arnsberg District Council was legal. This plan includes the generation from coal in the United Kingdom to an end. clearance of Hambach Forest. However, its admissibility must be confirmed by the Münster Higher Administrative RWE sells Belgian CHP station. At the end of February Court, which in October 2018 had ordered that clearance 2019, we sold the Inesco CHP station in Belgium to the UK be suspended. Meanwhile, it looks likely that Hambach Forest chemicals group INEOS. This gas-fired power plant is will be preserved. As explained on pages 42 et seqq., we located in a chemical park operated by INEOS near Antwerp agreed with the German government on an accelerated and has a generation capacity of 133 MW. In addition to phaseout of electricity generation from lignite and an early electricity, it also supplies steam and demineralised water to closure of the Hambach opencast mine. the companies in the chemical park. One of the reasons for our decision to sell the station was its tight integration in the RWE ends hard coal firing in Bergkamen, Werne and business activities of INEOS. Aberthaw. Last year, we discontinued a number of hard coal operations. Firstly, we sold our 51 % shareholding in the German government takes over interim storage for highly Bergkamen power station to Essen-based energy utility radioactive waste from RWE. As of 1 January 2019, our STEAG. The buyer previously owned 49 % of the plant and interim storage facilities for highly radioactive waste on the exercised a contractual purchase option. The transaction sites of our Emsland, Biblis and Gundremmingen nuclear entered into effect on 1 January 2019. The Bergkamen power plants were transferred to BGZ, the state-owned hard coal-fired power station has been in operation since company responsible for interim storage. A year later, with 1981, with a net capacity of 720 MW. RWE was responsible effect from 1 January 2020, BGZ took over another two for the commercial management of this plant, while STEAG interim storage facilities for low- and intermediate-level handled technical operations. The disposal of the stake radioactive waste in Biblis. The legal basis for this is the law goes hand in hand with the termination of a contract that on the reassignment of responsibility for nuclear waste obliged us to purchase electricity produced by the station. disposal, which was passed at the end of 2016, pursuant to which the government took charge of processing and At the end of March 2019, we decommissioned the hard financing interim and final nuclear waste storage. In exchange, coal-fired part of the combined Unit K at the Gersteinwerk German power plant operators gave the government station in Werne (Westphalia). The shutdown was motivated €24.1 billion in 2017, which was paid into a public-law fund by upcoming maintenance work, which would not have been for financing nuclear waste disposal. Responsibility for shutting cost-effective. Unit K consists of a topping gas turbine (K1) down and safely dismantling the stations remains with the with a net capacity of 112 MW and the (now decommissioned) companies. They are also accountable for packing the steam turbine (K2), which ran on steam generated by firing radioactive waste properly before it is handed over to BGZ. hard coal and had a capacity of 620 MW. Electricity is still being produced at Gersteinwerk, albeit only from gas. The station’s current available capacity amounts to 965 MW. 47 Events after the close of the fiscal year German cabinet submits draft coal phaseout law. In late British capacity market auction for 2022/2023: RWE January 2020, the German cabinet adopted a draft law on secures payments for 6.5 GW in generation capacity. the reduction and end of electricity generation from coal. In Early 2020 saw several auctions for the British capacity this document, the government specifies how it intends to market. The first round of bids, which took place at the end implement the recommendations of the Growth, Structural of January, related to the delivery period from 1 October 2022 Change and Employment Commission regarding the to 30 September 2023. With the exception of some small German coal phaseout. As proposed by the Commission, generation assets, all RWE power stations represented in it is envisaged that Germany gradually stop generating the auction qualified for a capacity payment. Together, they electricity from coal by 2038. The draft law contains a have a secured capacity of 6.5 GW. However, at £6.44/kW timeline for this. There is also a roadmap for shutting down (before being adjusted for inflation), the capacity payment lignite-fired power stations, which the government agreed established in the auction lagged behind the market’s with the affected states and energy companies beforehand. expectations. We have been awarded €2.6 billion in compensation for the early closure of power plants and opencast mines in the At the beginning of February, a second auction was held, Rhenish lignite mining region. However, we estimate that our which related to the delivery period from 1 October 2020 to actual financial burdens will be much higher. The draft law 30 September 2021. An earlier auction for this delivery stipulates that hard coal power plants participate in calls for period had already taken place in December 2016, at which tenders in which their operators can apply for compensation RWE stations with a total capacity of 8.0 GW (including for early closures of their stations. Detailed information on Aberthaw) qualified for a payment of £22.50/kW. Contracts this topic can be found on pages 42 et seqq. for an additional 1.0 GW in generation capacity for a payment of £1.00/kW were won at the recent auction. RWE RWE acquires state-of-the-art gas-fired power plant in entered a small asset, which did not submit a successful bid. the east of England. We cemented our position as a leading generator of electricity from gas in the UK. In mid-February The British government has scheduled a further auction for 2020, we bought the King’s Lynn gas-fired power station in early March 2020, in order to secure the generation Norfolk (eastern England) from the British energy utility capacity needed for the period from 1 October 2023 to Centrica for £101 million. The station has a net installed 30 September 2024. The results were not known when the capacity of 382 MW and boasts a high efficiency of 57 %. review of operations was prepared. Its operating mode can be adapted flexibly in response to demand. A remuneration contract secures fixed capacity payments for King’s Lynn from October 2020 to September 2035. Recently, the power plant was modernised extensively and equipped with a new gas turbine. 48 RWE Annual Report 2019Combined review of operations > Notes on reporting 1.6 Notes on reporting We executed major parts of our asset swap with E.ON in September 2019. This affected both our key financials as well as our financial reporting. The renewable energy business we received from E.ON has been included in our consolidated financial statements as a new segment. Therefore, the presentation of our business performance in 2019 is based on a Group structure with five segments, which we describe in detail in this chapter. Effects of the asset swap with E.ON on our financial Fiscal 2019: Group structure featuring five segments. reporting. In September 2019, we executed a large part of In our 2019 financial reporting, we divide the RWE Group our asset swap with E.ON, on which we provide detailed into the following five segments: (1) Lignite & Nuclear, information on page 45. We present how the transaction is (2) European Power, (3) Supply & Trading, (4) innogy – reflected in our financial reporting on the past fiscal year continuing operations, and (5) Operations acquired from below: E.ON. The individual segments are as follows: • innogy’s grid and retail businesses remaining with E.ON • Lignite & Nuclear: This segment encompasses our for good and the 50.04 % stake in the Czech gas network German electricity generation from lignite and nuclear operator IGH sold to the MIRA consortium were power as well as our lignite production in the Rhineland. deconsolidated as of 18 and 30 September, respectively. Operating responsibility for these activities lies with RWE These activities were recognised in the items Power. The segment also includes our investments in the ‘discontinued operations’ in the income statement and Dutch nuclear power plant operator EPZ (30 %) and the ‘assets/liabilities held for sale’ on the balance sheet. As German company URANIT (50 %), which holds a 33 % such, our figures also include the 49 % interest in the stake in Urenco, a uranium enrichment specialist. Slovak energy utility VSE, which we intend to transfer to E.ON. • European Power: This is where we report on our electricity • The innogy operations we are continuing – encompassing production from gas, hard coal and biomass, which the renewable energy business, the German and Czech focuses on Germany, the United Kingdom and the Benelux gas storage facilities and the 37.9 % shareholding in the region. The segment also includes our 70 % stake in the Austrian energy utility Kelag – legally belong to E.ON for Turkish gas-fired power station Denizli, some hydroelectric the time being, but are assigned to us in our financial power plants in Germany and Luxembourg, and RWE reporting. Therefore, they continue to contribute to RWE’s Technology International, which specialises in project earnings, cash flows and debt. We will receive these management and engineering services. All of these activities from E.ON in 2020 as soon as the formal activities are overseen by RWE Generation. requirements for this have been met. • Supply & Trading: This division encompasses the • We present the renewable energy business received from operations of RWE Supply & Trading, the business activities E.ON at the end of September in the newly established of which are presented on pages 30 et seq. The company segment ‘Operations acquired from E.ON’. We started specialises in independent commodity trading, acts as an including it in our Group figures on 18 September 2019 intermediary for gas, and supplies large industrial and although it was legally transferred on a different date. We corporate customers with energy. Furthermore, it markets started recognising the stakes in the Gundremmingen the electricity of our generation companies and optimises and Emsland nuclear power plants we received from the the Group’s power plant dispatch commercially; however, E.ON subsidiary PreussenElektra in the Lignite & Nuclear earnings achieved through the latter activities are reported segment with effect from 30 September 2019. in the Lignite & Nuclear and European Power segments. 49 • innogy – continuing operations: The main element in this Forward-looking statements. This annual report segment is innogy’s renewable energy business. The contains forward-looking statements regarding the future company ranks among the leading producers of electricity development of the RWE Group and its companies as well from renewable sources, with a strong focus on Europe – as of the economic and political environment. These in particular Germany and the United Kingdom – and with statements are assessments that we have made based on footholds in North America and Australia. The focus in information available to us at the time this document was terms of energy sources rests on wind, followed by hydro prepared. In the event that the underlying assumptions and solar. This segment also includes the German and do not materialise or unforeseen risks arise, actual Czech gas storage facilities as well as the 37.9 % interest developments can deviate from the developments in the Austria-based energy utility Kelag. expected at present. Therefore, we cannot assume responsibility for the correctness of these statements. • Operations acquired from E.ON: This is where we present the renewable energy operations we received from E.ON. References to the internet. The contents of pages on the Its geographical focus is on North America and Europe. internet and publications to which we refer in the review By far its main source of energy is wind, supplemented of operations are not part of the review of operations and by smaller solar and energy storage activities. After their are merely intended to provide additional information. acquisition in September 2019, we pooled these operations The corporate governance declaration in accordance with in RWE Renewables GmbH, which was founded in 2018. Section 289f as well as Section 315d of the German Commercial Code is an exception. Group companies with cross-segment tasks like the Group holding company RWE AG are stated under ‘other, consolidation’. This item also includes our 25.1 % stake in the German transmission system operator Amprion and consolidation effects. Adoption of IFRS 16: higher net debt, higher depreciation. We began applying the new accounting standard IFRS 16 Leases in fiscal 2019. Consequently, leases are now reported on the balance sheet, unless they are short-term (up to twelve months) or relate to low-value assets. The lessee must recognise a right-of-use asset and a corresponding lease liability in the amount of the present value of the future lease payments. Further details on this can be found on page 115 in the Notes. This methodological change leads to an increase in the balance-sheet total and net debt. On the income statement, depreciation increases and the financial result declines, but these effects are offset by fairly similar changes in adjusted EBITDA, leaving net income almost unchanged. Prior-year figures were not adjusted. 50 RWE Annual Report 2019Combined review of operations > Business performance 1.7 Business performance Business in 2019 was so successful that we made substantial upward corrections to our earnings forecast during the year. We closed the year with an adjusted EBITDA of €2.5 billion, far above the previous year’s level. The main driver was our exceptionally strong trading performance. In addition, we benefited from the acquisition of E.ON’s renewable energy business and the resumption of the capacity payments for our British power stations. Besides recording a substantial increase in our earnings position, we saw a significant decrease in our carbon footprint, which shrank by one quarter compared to 2018. Business performance in 2019: what we forecast and what we accomplished Outlook vs. actual € million 2018 actual Original forecast for 20191 Adjusted forecast for 20191 2019 actual Forecast fulfilled? Adjusted EBITDA 1,538 1,400 – 1,700 2,200 – 2,500 2,489 Lignite & Nuclear European Power Supply & Trading innogy – continuing operations Operations acquired from E.ON 356 334 183 699 – 300 – 400 250 – 350 100 – 300 800 – 900 – 300 – 400 450 – 550 Significantly above 300 800 – 900 200 – 300 374 453 702 833 253 1 We announced our original forecast for 2019 on pages 83 et seq. of the 2018 Annual Report, which was published on 14 March 2019. The forecast was updated twice thereafter. The column ‘Adjusted forecast for 2019‘ reflects the latest update; see page 16 of the interim statement on the first three quarters of 2019, which was published on 14 November 2019. Electricity generation 13 % down on previous year. In the power station and the end of production from coal at financial year that just came to a close, the RWE Group Gersteinwerk in Werne (see page 47). Downtime caused produced 153.2 billion kWh of electricity, of which 33 % was by overhauls led to a drop in nuclear energy generation from gas, 32 % from lignite, 9 % from hard coal, 14 % from (– 0.6 billion kWh). By contrast, gas-fired power plants nuclear, and 11 % from renewables. Our electricity produced more electricity (+ 3.6 billion kWh), benefiting from production was 13 % lower than in the previous year. We improved market conditions. We posted an even bigger gain recorded the steepest decrease at our lignite-fired power in renewable energy (+ 6.5 billion kWh), which was primarily stations (– 18.9 billion kWh). Market conditions and attributable to the E.ON operations we acquired in overhauls played a role in the reduction in operating hours September 2019. They produced 4.5 billion kWh of of stations, as did the preliminary halt to the clearance of electricity in the three-and-half months during which they Hambach Forest, which limited our lignite production. belonged to the RWE Group. In addition, we started biomass Moreover, we switched off Niederaussem Units E and F at co-firing at our Dutch Amer 9 and Eemshaven hard coal the end of September 2018 (295 MW and 299 MW, power stations. At innogy, the commissioning of new wind respectively) followed by Neurath’s Unit C (292 MW) a year turbines had a positive effect, while more favourable later, and put them into the statutory security standby weather conditions improved the use of existing capacity. scheme. Furthermore, the Hungary-based power producer Mátra stopped contributing to our generation, because we In addition to our in-house generation, we procure electricity sold our 51 % stake in the company in 2018. Electricity from suppliers outside of the Group. In the year being generation from hard coal also experienced a substantial reviewed, these purchases totalled 46.4 billion kWh drop (– 13.2 billion kWh), with unfavourable market (previous year: 49.0 billion kWh). In-house generation and conditions and power plant outages for overhauls also power purchases combined for 199.6 billion kWh (previous coming to bear here. Further declines in volume resulted year: 225.0 billion kWh). from the sale of our majority interest in the Bergkamen 51 Power generation Renewables Pumped storage, batteries Gas Lignite Hard coal Nuclear Total1 Billion kWh 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 Lignite & Nuclear – – – – 0.2 – 48.3 67.2 – – 21.2 21.8 70.1 89.2 European Power 2.2 1.1 1.8 2.1 50.6 47.2 of which: Germany2 United Kingdom Netherlands/Belgium Turkey innogy – continuing operations Operations acquired from E.ON 0.2 0.4 1.6 – 0.7 0.4 – – 9.7 8.8 4.5 – 1.8 2.1 7.8 5.5 – – – – – – – – – – 33.5 33.2 6.6 2.7 5.5 3.0 – – – – – – – – – – – – 14.2 27.4 – – – – – – 4.7 13.0 0.7 0.5 8.8 13.9 – – – – – – – – – – – – – – 68.9 78.0 – – – – – – 14.6 21.5 34.6 34.1 17.0 19.4 2.7 3.0 9.7 8.8 4.5 – RWE Group 16.4 9.9 1.8 2.1 50.8 47.2 48.3 67.2 14.2 27.4 21.2 21.8 153.2 176.0 1 Including capacity not attributable to any of the energy sources mentioned (e. g. oil-fired power stations). 2 Including electricity from generation assets not owned by RWE that we can deploy at our discretion on the basis of long-term use agreements. In 2019, 3.6 billion kWh were purchased (previous year: 5.0 billion kWh), of which 1.5 billion kWh were from hard coal-fired power stations (previous year: 2.3 billion kWh). Rise in generation capacity thanks to asset swap with In terms of generation capacity, gas is our major source of E.ON. At the end of 2019, we had a total installed power energy. At the end of 2019, it accounted for 33 %. Lignite generation capacity of 42.9 GW, giving us a leading market was in second place with 24 %, followed by renewables with position in Europe. This figure includes power plants that we 21 %. Disregarding the five lignite units we placed in security took offline temporarily for economic reasons and the five stand-by, renewables, consisting of wind, hydro, biomass lignite units we put into security standby. Our generation and photovoltaics, are already in second place in the capacity grew by 1.9 GW over the course of the past year. RWE Group. A detailed overview of our generation capacity This was attributable to renewables, which accounted for an based on renewables is provided on the next page. installed capacity of 9.2 GW at the end of 2019. This figure was calculated applying IFRS consolidation principles, which The geographic focus of our generation business is Germany, explains why it deviates from the disclosure on page 28. It where 55 % of our installed capacity is located. The United was 5.3 GW higher than the previous year’s figure, above all Kingdom and the Netherlands follow, accounting for shares due to the acquisition of E.ON’s renewable energy business. of 21 % and 12 %, respectively. As a result of the acquisition In addition, we converted the Dutch Amer 9 and Eemshaven of E.ON’s renewable energy business, the USA has become hard coal-fired power stations to co-fire biomass and our fourth most important generation site. Nearly half of our commissioned new wind turbines. Conversely, we recorded a onshore wind turbines are situated there, making the USA significant drop in hard coal-fired capacity, which declined our single-largest market for renewable energy. by 3.2 GW. This was mainly due to the shutdown of Aberthaw B in Wales and parts of Gersteinwerk as well as the sale of our 51 % stake in the Bergkamen power plant (see page 47). The aforementioned retrofits of Amer 9 and Eemshaven for biomass co-firing also contributed to the reduction in installed hard coal-fired capacity. 52 RWE Annual Report 2019Combined review of operations > Business performance Power generation capacity As of 31 Dec 2019, in MW Renewables Pumped storage, batteries Gas Lignite Hard coal Nuclear Total1 – 400 10,255 – 2,770 13,459 Lignite & Nuclear European Power of which: Germany2 United Kingdom Netherlands /Belgium Turkey innogy – continuing operations Operations acquired from E.ON RWE Group 7 670 55 55 560 – 3,639 4,864 9,180 2,336 13,553 2,336 3,767 – – – – 20 6,676 2,323 787 – – – – – – – – – 3,977 2,341 – 1,636 – – – – – – – – – – Total1 31 Dec 2018 13,459 23,906 9,872 8,595 4,652 787 20,879 8,538 7,035 4,519 787 3,639 3,571 4,884 – 2,3583 13,953 10,255 3,977 2,770 42,8633 40,9373 1 Including capacity not attributable to any of the energy sources mentioned (e. g. oil-fired power stations). 2 Including capacity not owned by RWE that we can deploy at our discretion on the basis of long-term use agreements. As of the end of 2019, as in the previous year, it amounted to a net 2,986 MW, including hard coal-fired power stations with a total capacity of 783 MW. 3 Including insignificant capacity at RWE Supply & Trading. Generation capacity based on renewables As of 31 Dec 2019, in MW Offshore wind Onshore wind Germany United Kingdom Netherlands Poland Spain Italy USA Others 597 1,272 – – – – – 48 666 706 295 385 447 475 2,824 126 RWE Group 1,917 5,924 Solar Hydro Biomass Total Total 2 – – 1 – – 125 – 128 435 82 11 – 12 – – 61 601 6 55 549 – – – – – 1,706 2,115 855 386 459 475 2,949 235 31 Dec 2018 1,366 1,165 517 242 459 90 – 73 610 9,180 3,912 Significant decline in CO2 emissions. Last year, our power stations emitted 88.1 million metric tons of carbon dioxide. We purchase nearly all of the emission allowances we need on the market. Since the beginning of the third This was 29.9 million metric tons, or 25 %, less than in 2018. emissions trading period, which started on 1 January 2013, The main reason for the decline was the substantial reduction in electricity generation from lignite and hard coal last year. We posted a decline not only in our absolute but the countries of Western Europe have only allocated free CO2 certificates to energy utilities in exceptional cases. Of our emissions in EU countries (87.1 million metric tons) in also our specific emissions, i. e. carbon dioxide emissions per the year being reviewed, we were only able to cover megawatt hour of electricity generated, which dropped 1.1 million metric tons with such state allocations. from 0.67 to 0.58 metric tons. 53 Emissions balance Million metric tons of CO2 Lignite & Nuclear European Power of which: Germany1 United Kingdom Netherlands /Belgium Turkey2 innogy – continuing operations Operations acquired from E.ON CO2 emissions Free allocation of CO2 certificates Shortage of CO2 certificates 2019 57.7 30.4 7.4 12.9 9.1 1.0 – – 2018 79.4 38.6 13.0 12.4 12.1 1.1 – – 2019 2018 0.6 0.5 0.5 – – – – – 0.7 0.6 0.6 – – – – – 2019 57.1 28.9 6.9 12.9 9.1 – – – 2018 78.7 36.9 12.4 12.4 12.1 – – – RWE Group 88.1 118.0 1.1 1.3 86.0 115.6 1 Including figures relating to generation capacity not owned by RWE that we can deploy at our discretion on the basis of long-term use agreements. In 2019, these stations emitted a total of 1.3 million metric tons of CO2 (previous year: 2.0 million metric tons). 2 As Turkey does not participate in European emissions trading, we do not need emission allowances to cover CO2 emissions in that country. 64.8 million metric tons of lignite produced. Our generation Electricity and gas sales down year on year. Last year, we companies procure the fuel used by their power stations sold 192.0 billion kWh of electricity and 56.6 billion kWh of either directly on the market or via RWE Supply & Trading. gas. In 2018, these figures stood at 216.1 billion kWh and We source lignite from proprietary opencast mines. In our 67.0 billion kWh, respectively. Most of these transactions Rhenish mining area west of Cologne, we produced were concluded in the Supply & Trading segment. Electricity 64.8 million metric tons of lignite last year. This was sales experienced a drop of 11 %, largely due to declining 21.5 million metric tons less than in the preceding year, in in-house production, which resulted in a drop in electricity part due to the halt to the clearance of Hambach Forest from RWE power stations sold by RWE Supply & Trading and the resulting curtailment of our opencast mining on the wholesale market. Gas deliveries were down 16 %. activities. We used the lion’s share, or 53.8 million metric tons, This was mainly because we now classify gas sales by of lignite to generate electricity. The remainder was used to RWE Supply & Trading in the Czech Republic merely as pure manufacture refined products (e. g. lignite briquettes) and, to trading transactions. The change in accounting occurred a limited extent, to generate process steam and district heat. with effect from 1 July 2019. Since then, the affected transactions have no longer been considered in our sales volume or revenue. External revenue1 € million Lignite & Nuclear European Power Supply & Trading innogy – continuing operations Operations acquired from E.ON Other, consolidation RWE Group (excluding natural gas tax /electricity tax) Natural gas tax /electricity tax RWE Group 2019 2018 +/– 1,003 1,062 9,514 1,164 374 8 1,132 925 10,208 1,124 – 17 13,125 13,406 152 141 13,277 13,547 – 129 137 – 694 40 374 – 9 – 281 11 – 270 1 Some prior-year figures have been adjusted, mainly due to changes in the recognition of revenue from derivative transactions (see page 98 in the Notes). 54 RWE Annual Report 2019Combined review of operations > Business performance External revenue by product1 € million Electricity revenue of which: Lignite & Nuclear European Power Supply & Trading innogy – continuing operations Operations acquired from E.ON Gas revenue of which: European Power Supply & Trading innogy – continuing operations Other revenue 2019 2018 +/– 10,272 10,121 151 282 620 303 542 8,259 8,478 869 242 799 – 1,156 1,547 12 17 1,094 1,484 50 47 1,697 1,738 – 21 78 – 219 70 242 – 391 – 5 – 390 3 – 41 RWE Group (excluding natural gas tax/electricity tax) 13,125 13,406 – 281 1 Some prior-year figures have been adjusted, mainly due to changes in the recognition of revenue from derivative transactions (see page 98 in the Notes). Immaterial electricity revenue in the ‘other, consolidation’ item is not stated separately. External revenue marginally down. In 2019, the RWE therefore no longer considered in revenue. We recorded Group’s external revenue declined by 2 % to €13,125 million €10,272 million in revenue from our main product, (excluding natural gas tax and electricity tax). The drop electricity, corresponding to a marginal gain year on year. was primarily due to the 25 % decline in gas revenue to The backdrop to this is that RWE Supply & Trading realised €1,156 million. As mentioned earlier, since 1 July 2019 gas higher prices for electricity on the wholesale market, sales by RWE Supply & Trading in the Czech Republic have whereas the reduction in sales volume had a counteracting been recognised as pure trading transactions and are effect. Adjusted EBITDA € million Lignite & Nuclear European Power1 Supply & Trading innogy – continuing operations Operations acquired from E.ON Other, consolidation RWE Group 1 In the period under review, €368 million was attributable to the UK (previous year: €102 million). 2019 2018 +/– 374 453 702 833 253 – 126 2,489 356 334 183 699 – – 34 1,538 18 119 519 134 253 – 92 951 55 Adjusted EBITDA jumps 62 %. Our adjusted earnings made that had been withheld during the suspension of before interest, taxes, depreciation and amortisation the capacity market. Although we received the payments (adjusted EBITDA) amounted to €2,489 million. This was at at the beginning of 2020, the reimbursement was the upper end of the range of €2.2 billion to €2.5 billion we reflected in earnings in the year being reviewed. We had forecast in November 2019 (see page 16 of the interim not planned for this in our original outlook for 2019. The statement on the first three quarters of 2019). Our March reimbursement was the main reason why the segment’s 2019 forecast envisaged adjusted EBITDA of €1.4 billion to adjusted EBITDA was 36 % up year on year. However, €1.7 billion (see pages 83 et seq. of the 2018 Annual Report). there were also some negative effects, e. g. from a We clearly exceeded this expectation. Our exceptional signifcant drop in the margins and utilisation of our hard trading performance played a major role. Furthermore, we coal-fired power stations. benefited from the reinstatement of the British capacity market and the acquisition of E.ON’s renewable energy • Supply & Trading: Here, adjusted EBITDA totalled business, neither of which had been considered in our first €702 million, which was substantially above the originally forecast. Our adjusted EBITDA rose by 62 % compared to forecast range of €100 million to €300 million. The the previous year, largely driven by the aforementioned previous year’s figure (€183 million) was also clearly factors. In addition, earnings from the continuing innogy exceeded. The exceptional trading performance was operations were significantly higher year on year, as we had the main driver. The gas and LNG business of expected. RWE Supply & Trading also displayed encouraging development. Furthermore, a burden experienced in The following developments were observed in the segments: 2018 resulting from a value adjustment recognised for an equity stake did not recur. • Lignite & Nuclear: This division’s adjusted EBITDA totalled €374 million, which is within the forecast range of • innogy – continuing operations: Adjusted EBITDA posted €300 million to €400 million. It represents an increase of by the innogy business remaining with RWE amounted to 5 % compared to the previous year. A positive effect was €833 million, which was within the anticipated range of felt from our realisation of slightly higher wholesale prices €800 million to €900 million. It was 19 % higher than in for the generation from our lignite-fired and nuclear 2018. The overall increase in the use of innogy wind farms power stations than in 2018. We had already sold forward due to the weather played a role. In addition, income from nearly all of the production of these plants in earlier renewable energy assets that do not receive fixed feed-in years. The acquisition of the minority interests in the subsidises rose, driven by an increase in realised Gundremmingen and Emsland power plants also electricity prices. The continued expansion of wind power contributed to the rise in earnings. This was contrasted capacity also had a positive impact on earnings. by the negative effects of power plant outages for maintenance and the preliminary halt to the clearance of • Operations acquired from E.ON: We included the Hambach Forest. renewable energy business transferred from E.ON to RWE in our consolidated financial statements as of • European Power: We recorded €453 million in adjusted 18 September 2019. In the last three-and-a-half months EBITDA in this segment. This clearly exceeded the range of the year, it posted €253 million in adjusted EBITDA. of €250 million to €350 million forecast in March 2019. This confirmed our November 2019 forecast, which The reinstatement of the British capacity market came to envisaged a range of €200 million to €300 million. Our bear here, which resulted in retrospective payments being March 2019 outlook did not consider the acquisition of the E.ON business. 56 RWE Annual Report 2019Combined review of operations > Business performance Adjusted EBIT € million Lignite & Nuclear European Power1 Supply & Trading innogy – continuing operations Operations acquired from E.ON Other, consolidation RWE Group 2019 2018 +/– 12 132 691 443 116 – 127 1,267 77 37 177 349 – – 21 619 – 65 95 514 94 116 – 106 648 1 In the year under review, €198 million was attributable to the UK (previous year: –€48 million). Adjusted EBIT more than twice as high as in 2018. Reconciliation to net income: positive one-off effect due Adjusted EBITDA minus operating depreciation and to asset swap with E.ON. The reconciliation from adjusted amortisation results in adjusted EBIT which, at €1,267 million, EBIT to net income was greatly affected by the asset swap was within the range of €1.1 billion to €1.4 billion forecast in with E.ON. A €8.3 billion book gain on the deconsolidation of November 2019. The originally anticipated range of innogy’s grid and retail business and the stake in IGH came €0.4 billion to €0.7 billion was clearly exceeded. The deviation to bear in particular. It was the reason why we closed fiscal was caused by the same factors that came to bear on 2019 with unusually high net income. adjusted EBITDA. Adjusted EBIT more than doubled versus 2018 (€619 million). Non-operating result € million Disposal result Impact of derivatives on earnings Other Non-operating result 2019 2018 +/– 48 81 – 1,210 – 1,081 – 25 – 146 10 – 161 73 227 – 1,220 – 920 The non-operating result, in which we recognise certain pursuant to IFRS, financial instruments used to hedge effects that are not related to operations or to the period price risks are accounted for at fair value at the being reviewed, totalled – €1,081 million, which was much corresponding balance-sheet date, whereas transactions less than in 2018 (previous year: – €161 million). Its which are hedged with them are only recognised as a components were as follows: profit or loss when they are realised. • Disposals of investments and assets resulted in earnings • Income stated under ‘other’ totalled – €1,210 million of €48 million (previous year: – €25 million). This was (previous year: €10 million). This reflects a large portion of largely due to the book gains on the sale of the Belgian the curtailments that will result from the German lignite gas-fired power plant Inesco and property that was no phaseout. Impairments recognised for power plants and longer needed. opencast mines as well as transfers to provisions for mining damage reduced income by €2,087 million. • The valuation of derivatives had an effect of €81 million Furthermore, a €347 million provision was formed for (previous year: – €146 million). However, such effects on redundancy schemes. A counteracting effect came from earnings are temporary and are due to the fact that, our €2.6 billion claim for damages from the government, 57 which we also recognised in the non-operating result. The which was subjected to an impairment test because the expected early decommissioning of German hard coal- insolvency of a service provider required the maintenance fired power stations required additions to provisions and concept to be revised fundamentally. The test led to an impairments totalling €432 million. However, these were impairment of €225 million. This took account of the fact contrasted by write-ups on gas-fired power plants and a that the wind farm, which was completed in 2015, is pumped storage power station of €363 million. The being subsidised according to the acceleration model. Dutch coal phaseout, which has been enshrined in law, This model envisages a very high starting payment, which was taken into account by recognising power plant is limited to eight years. This is why the fair value of the impairments of €693 million. Another impairment loss wind farm declines faster than what the straight-line related to the German Nordsee Ost offshore wind farm, depreciation pursuant to IFRS reflects. Financial result € million Interest income Interest expenses Net interest Interest accretion to non-current provisions Other financial result Financial result 2019 2018 185 – 258 – 73 – 881 16 – 938 166 – 180 – 14 – 264 – 131 – 409 +/– 19 – 78 – 59 – 617 147 – 529 Our financial result totalled – €938 million, deteriorating by Owing to the curtailments of the non-operating result and €529 million compared to 2018. Its components changed as the financial result, we are stating earnings before taxes follows: from our continuing operations of – €752 million (previous year: €49 million). This goes hand in hand with €92 million • Net interest declined by €59 million to – €73 million due in tax income, which is less than what could have been to higher interest expenses, in part as a result of the initial expected based on the (theoretically) normal effective tax application of IFRS 16 (see page 50). Furthermore, the rate. This is because we did not capitalise any deferred taxes interest expenses include fees paid to top up our credit in the RWE AG tax group unless they were offset by deferred line in 2019. tax liabilities, because we will probably not be able to use the deferred tax claims in the foreseeable future. A • The interest accretion to non-current provisions reduced counteracting effect came from a reduction of our tax risk the result by €881 million, much more than in the provision. After taxes, our continuing operations generated previous year (– €264 million). The main reason for this is income of – €660 million (previous year: – €54 million). that the real discount rate used to calculate provisions for mining damage had to be lowered and the associated Income from discontinued operations, which encompass rise in the present value of obligations was partially innogy’s grid and retail businesses as well as the stakes in recognised as an expense in the interest accretion. The IGH and VSE, amounted to €9,816 million (previous year: reason for the interest adjustment is the expected €1,127 million). The high figure is due to our sale of these premature end to electricity generation from lignite activities, except for the interest in VSE, in September 2019, within the scope of the German coal phaseout. which resulted in a deconsolidation gain of €8,258 million. The assets we sold had been recognised on the consolidated • The ‘other financial result’ improved to €16 million balance sheet at their historic carrying amounts, whereas (previous year: – €131 million) in part thanks to gains on the purchase prices were derived from their fair values, our portfolio of securities after losses in the previous year. most of which were much higher. Income from operating 58 RWE Annual Report 2019Combined review of operations > Business performance Reconciliation to net income € million Adjusted EBITDA Operating depreciation, amortisation and impairment losses Adjusted EBIT Non-operating result Financial result Income from continuing operations before taxes Taxes on income Income from continuing operations Income from discontinued operations Income of which: Non-controlling interests RWE AG hybrid capital investors’ interest Net income/income attributable to RWE AG shareholders 2019 2018 +/– 2,489 – 1,222 1,267 – 1,081 – 938 – 752 92 – 660 9,816 9,156 643 15 8,498 1,538 – 919 619 – 161 – 409 49 – 103 – 54 1,127 1,073 679 59 335 951 – 303 648 – 920 – 529 – 801 195 – 606 8,689 8,083 – 36 – 44 8,163 activities of discontinued operations totalled €1,558 million, The portion of earnings attributable to RWE hybrid capital rising substantially year on year although only VSE investors amounted to €15 million (previous year: contributed to Group earnings for all twelve months of €59 million). This sum corresponds to the finance costs 2019. The increase was due to IFRS accounting policies, related to our £750 million hybrid bond, which was called on which stipulate that no depreciation or amortisation may 20 March 2019. As this bond did not have a predefined be recognised for discontinued operations since they were maturity, the proceeds we recorded from it were classified stated separately as of 30 June 2018. as equity pursuant to IFRS. RWE’s other hybrid capital is classified as debt, and we recognise the interest accrued on Non-controlling interests in income declined by €36 million it in the financial result. to €643 million. The main reason for this is that post-tax income from continuing innogy operations declined, driving Due to the aforementioned developments, we closed the down the share in income allocable to the minority year with exceptionally high net income, which amounted to shareholders of these activities. €8,498 million (previous year: €335 million). Based on the 614.7 million RWE shares outstanding, this corresponds to earnings per share of €13.82 (previous year: €0.54). 59 Capital expenditure on property, plant and equipment and on intangible assets € million 2019 2018 +/– Lignite & Nuclear European Power Supply & Trading innogy – continuing operations Operations acquired from E.ON Other , consolidation RWE Group Capital expenditure on financial assets € million Lignite & Nuclear European Power Supply & Trading innogy – continuing operations Operations acquired from E.ON Other, consolidation RWE Group 342 252 11 1,215 267 3 230 245 13 592 – – 1 112 7 – 2 623 267 4 2,090 1,079 1,011 2019 2018 +/– 78 2 68 23 20 7,557 7,748 – 4 37 141 – – 1 181 78 – 2 31 – 118 20 7,558 7,567 Significant rise in capital expenditure due to asset nearly twice as high as in 2018. Among other things, this swap with E.ON. At €9,838 million, our capital expenditure can be traced back to the construction of the British was exceptionally high (previous year: €1,260 million). This offshore wind farm Triton Knoll and the Australian solar farm was primarily due to the asset swap with E.ON. As a result, Limondale. Further details on these two large-scale projects our capital spending on financial assets amounted to can be found on page 38 of the 2018 Annual Report. The €7,748 million (previous year: €181 million). €4.0 billion of inclusion of E.ON’s renewable energy business and power this sum was attributable to the purchase of the 16.7 % plant maintenance also contributed to the increase in capital stake in E.ON, while €3.6 billion was allocable to the expenditure on property, plant and equipment. Furthermore, acquisition of its renewable energy business. As expected, the adoption of IFRS 16 came to bear, as it resulted in the our capital expenditure on property, plant and equipment capitalisation of rights of use for leased assets. also grew substantially. Totalling €2,090 million, it was 60 RWE Annual Report 2019Combined review of operations > Business performance Workforce 1 Lignite & Nuclear European Power Supply & Trading innogy – continuing operations Operations acquired from E.ON Other2 RWE Group 31 Dec 2019 31 Dec 2018 11,150 11,292 2,927 1,337 2,505 1,559 314 2,738 1,267 2,192 – 259 +/– – 142 189 70 313 1,559 55 19,792 17,748 2,044 1 Converted to full-time positions. 2 This item exclusively comprises employees of the holding company RWE AG. Much higher headcount due to acquisition of E.ON added 1,559 employees, 763 of whom are in the USA. In renewable energy business. As of 31 December 2019, the purely operating terms, i. e. disregarding the effects of RWE Group’s continuing operations had 19,792 people on acquisitions and disposals, our headcount rose by 485, the payroll, of which 15,056 were employed in Germany with the expansion of innogy’s offshore wind capacity being and 4,736 worked at locations abroad. Part-time positions a major factor. Personnel figures do not include apprentices were calculated in these figures on a pro-rata basis. or trainees. At the end of 2019, 701 young adults were Compared to the end of 2018, the workforce expanded by learning a profession at RWE, compared to 666 in the 2,044 staff members. This was predominantly due to the previous year. acquisition of E.ON’s renewable energy business, which 61 1.8 Financial position and net worth The asset swap with E.ON made RWE more financially robust. Due to the deconsolidation of innogy’s grid and retail activities, our net debt in 2019 more than halved to €9.3 billion. The asset swap also had a positive effect on the equity ratio, which rose by 9.4 percentage points to 27.2 %. Our solid financial and asset positions are reflected in the ratings issued by Moody’s and Fitch, with both agencies classifying our creditworthiness as investment grade. Responsibility for procuring funds. RWE AG regained sole • Furthermore, we have access to a syndicated credit line, responsibility for financing within the RWE Group when we which serves to secure liquidity. We increased our credit sold our investment in innogy. Although we held a majority line from €3 billion to €5 billion in April 2019 by stake in innogy, the company was operationally independent concluding a new agreement. This was prompted by the and therefore took care of the financing of the activities for transaction with E.ON, because it increased the operating which it was responsible. As the parent company, RWE AG is activities for which we are responsible. The new credit line responsible for acquiring funds from banks or the money was granted to us by a consortium of 27 international and capital market. Subsidiaries only raise debt capital banks. It consists of two tranches: one tranche of directly in specific cases, for example if it is advantageous €3 billion with a tenor of five years and one of €2 billion economically to make use of local credit and capital with a tenor of two years. With the agreement of the markets. RWE AG also acts as a co-ordinator when banks, the former tranche can be extended twice for one subsidiaries assume contingent liabilities. This allows for year at a time. The latter tranche can be extended once, central management and monitoring of financial risks. for one year, without requiring approval from the banks. Moreover, it strengthens our position when negotiating with So far, RWE has not used the syndicated credit line. banks, business partners, suppliers and customers. Tools for raising debt capital. We cover a major portion 2019, RWE bonds with a total value of €1.1 billion were of our financing needs with earnings from our operating outstanding. Essentially, these were three hybrid bonds: activities. In addition, we have a wide range of tools to procure one of €539 million (2.75 % coupon; earliest possible Bond volume drops to €1.1 billion. As of 31 December debt capital. redemption in October 2020), one of €282 million (3.5 %; April 2025) and one of US$317 million (6.625 %; • Our Debt Issuance Programme (DIP) gives us latitude in March 2026). Due to early buybacks in October 2017, the procuring debt capital for the long term. A DIP is a amounts are lower than the issue volumes (€700 million, framework prospectus for the flexible issuance of bonds. €550 million and US$500 million). A fourth hybrid bond with Our current programme allows us to make issuances with a coupon of 7 % and a nominal value of £750 million was a total nominal value of €10 billion. However, RWE AG has redeemed at the first call date, on 20 March 2019, without not issued a bond since 2015. replacing it with new hybrid capital. Therefore, the volume of RWE AG bonds as of the balance-sheet date was notably • We have a Commercial Paper Programme for short-term lower than at the end of 2018 (€1.9 billion). refinancing that enables us to raise funds equivalent to up to US$5 billion on the money market. We only used a portion of these funds in the past fiscal year. At times, a maximum of €3.4 billion in commercial paper was outstanding. 62 RWE Annual Report 2019Combined review of operations > Financial position and net worth Credit rating of RWE AG (as of 31 Dec 2019) Non-current financial liabilities Senior debt Subordinated debt (hybrid bonds) Current financial liabilities Outlook Moody’s Baa3 Ba2 P–3 Stable Fitch BBB BB+ F2 Stable Borrowing costs down to 1.4 %. In 2019, the cost of debt Solid investment grade rating. The level of our borrowing for RWE was 1.4 %. It was calculated for our average costs partially depends on the rating agencies’ assessment liabilities from bonds, commercial paper and bank loans of our creditworthiness. We have commissioned Moody’s held during the year. The £750 million bond redeemed in and Fitch to provide such credit ratings. Moody’s gives our March 2019 was not considered, as it was classified as long-term creditworthiness a rating of ‘Baa3’, which was equity pursuant to IFRS. The cost of debt declined confirmed in October 2019 after an extensive review. Fitch considerably compared to 2018 (2.9 %). This was because we made more use of commercial paper with favourable interest rates to refinance our business in the reporting year. rates us one grade better at ‘BBB’. Both agencies thus attest to our investment grade creditworthiness – each with a stable rating outlook. Cash flow statement1 € million Funds from operations Change in working capital Cash flows from operating activities of continuing operations Cash flows from investing activities of continuing operations Cash flows from financing activities of continuing operations Effects of changes in foreign exchange rates and other changes in value on cash and cash equivalents Total net changes in cash and cash equivalents 2019 2018 +/– 1,809 – 2,786 – 977 474 189 13 – 301 138 4,473 4,611 – 2,999 – 1,559 13 66 1,671 – 7,259 – 5,588 3,473 1,748 – – 367 Cash flows from operating activities of continuing operations – 977 4,611 – 5,588 Minus capital expenditure2 Plus proceeds from divestitures/asset disposals2 Free cash flow 1 All items relate solely to continuing operations. 2 This item solely relates to transactions with an effect on cash. – 1,771 – 1,246 695 74 – 525 621 – 2,053 3,439 – 5,492 Operating cash flows: high outflows from the realisation commodity forward transactions, for which we had received of commodity forward transactions. Despite a significant high variation margins before 2019. Variation margins are improvement in our funds from operations, our cash flows payments with which transaction partners offset profit and from operating activities of continuing operations declined loss positions resulting from the daily revaluation of active to – €977 million (previous year: €4,611 million). This was contracts. However, their influence on cash flows is mainly due to transactions reflected in the change in net temporary and ends once the forward transactions are working capital. For example, there were substantial cash realised. outflows in the period under review from the realisation of 63 Investing activities of continuing operations resulted in a net an outflow of €869 million. On top of that, we made cash inflow of €474 million. This was mainly due to income dividend payments to RWE shareholders, hybrid investors from the sale of securities, whereas capital expenditure on and co-owners of fully consolidated RWE companies property, plant and equipment and financial assets had a amounting to €560 million. counteracting effect. In the previous year, we recorded a cash outflow of €2,999 million in part due to substantial On balance, the aforementioned cash flows from operating, purchases of securities. investing and financing activities decreased our cash and cash equivalents by €301 million. Cash flows from financing activities of continuing operations amounted to €189 million (previous year: – €1,559 million). Our free cash flow amounted to – €2,053 million. This was In the year under review, we took on more financial debt far below the previous year’s level (€3,439 million), primarily than we repaid. This resulted in a net inflow of €1,678 million due to declining operating cash flows. which was contrasted by the redemption of the £750 million hybrid bond not included in financial liabilities, which led to Net debt € million Cash and cash equivalents Marketable securities Other financial assets Financial assets Bonds, other notes payable, bank debt, commercial paper Hedging of bond currency risk Other financial liabilities Financial liabilities Correction of hybrid capital Plus 50 % of the hybrid capital stated as equity Minus 50 % of the hybrid capital stated as debt Net financial assets (including correction of hybrid capital) Provisions for pensions and similar obligations Surplus of plan assets over benefit obligations Provisions for nuclear waste management Provisions for mining damage Provisions for dismantling wind farms Net debt of continuing operations Net debt of discontinued operations Net debt 31 Dec 2019 31 Dec 2018 +/– 3,192 3,523 4,983 3,523 3,863 2,809 11,698 10,195 2,466 1,657 7 3,268 5,741 – 562 – – 562 6,519 3,446 – 153 6,723 4,618 951 9,066 12 1,107 2,776 – 88 470 – 558 7,507 3,287 – 213 5,944 2,516 362 4,389 – 331 – 340 2,174 1,503 809 – 5 2,161 2,965 – 474 – 470 – 4 – 988 159 60 779 2,102 589 4,677 232 14,950 – 14,718 9,298 19,339 – 10,041 64 RWE Annual Report 2019Combined review of operations > Financial position and net worth Notable debt reduction due to deconsolidation of Slightly lower off-balance-sheet obligations from innogy’s grid and retail businesses. As of 31 December electricity and fuel. Net debt does not include our 2019, our net debt amounted to €9.3 billion. This represents off-balance-sheet obligations, which largely stem from a decline of €10.0 billion compared to the end of the long-term fuel and electricity purchase agreements. As of previous year. The asset swap with E.ON played a major role. the balance-sheet date, payment obligations from material procurement contracts amounted to €27.1 billion for fuel Net debt of discontinued operations dropped by (previous year: €27.9 billion) and €7.1 billion for electricity €14.7 billion to €0.2 billion. This was due to the (previous year: €7.8 billion). These figures are based on deconsolidation of innogy’s grid and retail businesses, assumptions regarding the prospective development of which were sold to E.ON, and of the 50.04 % stake in Czech commodity prices. For further information on our off- gas network operator IGH, which we sold to the MIRA balance-sheet obligations, please see page 168 in the Notes. consortium. The remainder was attributable to our stake in Slovakian energy provider VSE, which we acquired from Group balance sheet: equity ratio increased to 27.2 %. innogy in 2019 and plan to sell on to E.ON. The asset swap with E.ON had a notable impact on the Group balance sheet. This was the main reason why the Conversely, as expected, net debt of continuing operations balance-sheet total decreased by €15.9 billion to rose considerably, by €4.7 billion to €9.1 billion. The €64.2 billion compared to the end of 2018. Due to the negative free cash flow came to bear here. Effects from the deconsolidation of the innogy operations continued by E.ON asset swap with E.ON factored in at €3.0 billion, of which and the stake in IGH, assets held for sale dropped from €1.5 billion was attributable to the net debt which we €40.5 billion to €1.3 billion and liabilities held for sale fell assumed from E.ON’s renewable energy business, from €32.8 billion to €0.5 billion. By contrast, the first-time €0.7 billion was attributable to additional nuclear provisions consolidation of the acquired E.ON activities inflated the and another €0.7 billion to the purchase price for VSE paid balance sheet by €12.2 billion. The RWE Group’s equity to innogy. The German coal phaseout also affected net increased by €3.2 billion. As of the cut-off date for the debt. It was the main reason why provisions for mining financial statements, its share in the balance-sheet total damage rose by €2.1 billion. We are claiming €2.6 billion in (equity ratio) was 27.2 %, 9.4 percentage points higher than compensation from the government, which should cover at the end of the previous year. The main reason was the the majority of the financial damage we will suffer from the substantial gain on the deconsolidation of innogy’s grid and coal phaseout. This is recognised in other financial assets retail businesses. This was counteracted by the fact that the and had a counteracting effect. The adoption of IFRS 16 non-controlling interests decreased. Our dividend payments drove up net debt by €0.4 billion. Another €0.4 billion stems and the redemption of the £750 million hybrid bond also from our redemption of the £750 million hybrid bond, contributed to the reduction in equity. eliminating the advantage of classifying half of it as equity. However, at the same time, innogy repaid a loan to us which was about as high as the redemption amount. This resulted from an agreement that our former subsidiary had reached with us prior to its IPO in 2016 (see page 52 of the 2016 Annual Report). 65 Group balance-sheet structure 31 Dec 2019 31 Dec 2018 Assets Non-current assets of which: Intangible assets Property, plant and equipment Current assets of which: Trade accounts receivable Receivables and other assets Marketable securities Assets held for sale Total Equity and liabilities Equity Non-current liabilities of which: Provisions1 Financial liabilities Current liabilities of which: Provisions1 Financial liabilities Trade accounts payable Other liabilities Liabilities held for sale Total 1 Prior-year figures adjusted: see commentary on page 116 in the Notes. € million % € million % 35,951 56.0 18,595 23.2 4,809 19,097 28,241 3,621 15,311 3,258 1,274 7.5 29.7 44.0 5.6 23.9 5.1 2.0 64,192 100.0 17,448 27,018 18,936 3,924 19,726 2,638 1,810 2,987 11,781 510 27.2 42.1 29.5 6.1 30.7 4.1 2.8 4.7 18.4 0.8 64,192 100.0 2,193 12,409 61,513 1,963 10,291 3,609 40,496 80,108 14,257 20,007 14,366 1,998 45,844 2,572 766 2,429 7,281 32,796 80,108 2.7 15.5 76.8 2.5 12.8 4.5 50.6 100.0 17.8 25.0 17.9 2.5 57.2 3.2 1.0 3.0 9.1 40.9 100.0 66 RWE Annual Report 2019Combined review of operations > Notes to the financial statements of RWE AG (holding company) 1.9 Notes to the financial statements of RWE AG (holding company) The financial statements of RWE AG primarily reflect the business performance of its subsidiaries. Thanks to its strong trading performance, RWE Supply & Trading contributed in particular to the Group parent’s earnings last year. However, there were also some burdens, for example as a result of impairments triggered by the Dutch coal phaseout. At €514 million, RWE AG’s net profit was slightly higher than in 2018. We intend to raise the dividend and therefore propose a payment of €0.80 per share to the Annual General Meeting taking place in April 2020. Financial statements. RWE AG prepares its financial Germany, which publishes them in the Federal Gazette. statements in compliance with the rules set out in the The financial statements of RWE AG can be ordered German Commercial Code and the German Stock directly from us and are also available on the internet at Corporation Act. The financial statements are submitted www.rwe.com/reports. to Bundesanzeiger Verlag GmbH, located in Cologne, Balance sheet of RWE AG (abridged) € million Assets Financial assets Accounts receivable from affiliated companies Other accounts receivable and other assets Marketable securities and cash and cash equivalents Total assets Equity and liabilities Equity Provisions Accounts payable to affiliated companies Other liabilities Total equity and liabilities Income statement of RWE AG (abridged) € million Income from financial assets Net interest Other income and expenses Taxes on income Net profit Transfer to other retained earnings Distributable profit 67 31 Dec 2019 31 Dec 2018 20,628 10,233 6,056 2,929 25,166 3,669 479 4,864 39,846 34,178 5,738 2,237 5,654 2,700 29,213 23,169 2,658 2,655 39,846 34,178 2019 2018 1,758 31 – 1,550 275 514 – 22 492 1,091 – 391 – 227 – 1 472 – 42 430 Assets. RWE AG had €39.8 billion in total assets as of • The ‘other income and expenses’ line item deteriorated by 31 December 2019, compared to €34.2 billion in the prior €1,323 million to – €1,550 million. The main reason for year. This is mainly due to the effects of the asset swap with this was an impairment recognised for financial accounts E.ON. For example, RWE transferred the renewable energy receivable from a Dutch subsidiary, the earnings business received from E.ON to a subsidiary, resulting in a prospects of which deteriorated considerably due to the corresponding account receivable from that company. coal phaseout mandated by law. Furthermore, IT projects Conversely, the sale of the stake in innogy held by another drove up expenses at RWE AG. subsidiary led to a liability vis-à-vis that company. However, some developments reduced the balance-sheet total. • In the year under review, we recorded tax income of Among other things, securities and cash and cash €275 million, largely because we reduced our tax risk equivalents were down. Here, the cash outflows from provision and received tax refunds for earlier years. the realisation of commodity forwards relating to RWE AG had recorded a tax expense of €1 million in 2018. RWE Supply & Trading set out on page 63 came to bear. At the end of 2019, the equity ratio was 14.4 %. Due to the rise • The presented earnings figures lead to net profit of in total assets, it was lower than in the previous year (16.5 %). €514 million. This represents an improvement of €42 million compared to 2018. Financial position. RWE AG is set up solidly in economic terms and has a number of financing tools at its disposal • The distributable profit of €492 million corresponds to that it can use flexibly. This is reflected in our credit ratings, the planned payment of a dividend of €0.80 per share to which are investment grade. A detailed presentation of our shareholders. RWE’s financial position and financing activity in the year under review has been made on pages 62 et seqq. Outlook for 2020. RWE AG’s earnings prospects will largely depend on the business performance of its subsidiaries. Earnings position. RWE AG’s earnings position improved Our current assessment makes us confident of being able slightly compared to 2018. The main items on the income to achieve a net profit in 2020 that is slightly higher than statement developed as follows: in 2019. • Income from financial assets rose by €667 million to Corporate governance declaration in accordance with €1,758 million. The exceptional energy trading Section 289f and Section 315d of the German performance was a major driver. In addition, the business Commercial Code. On 14 February 2020, the Executive activities received from E.ON contributed to earnings for Board and the Supervisory Board of RWE AG issued a the first time. However, there were also some curtailing corporate governance declaration in accordance with factors such as the significant deterioration of market Section 289f and Section 315d of the German Commercial conditions for hard coal-fired power plants faced by Code. The declaration contains the Corporate RWE Generation. Governance Report for the first time and has been published on the internet at www.rwe.com/corporate- • Net interest also improved considerably, advancing by governance-declaration. €422 million to €31 million. This was due to substantial capital gains from pension fund management. 68 RWE Annual Report 2019Combined review of operations > Presentation of the RWE Group with innogy as a purely financial investment 1.10 Presentation of the RWE Group with innogy as a purely financial investment For fiscal 2019, we are also presenting Group figures reflecting our former subsidiary innogy as a purely financial investment for the last time. We do not apply the principles of consolidation pursuant to IFRS to determine these figures. In doing so, we do not consider innogy based on its earnings, but on the dividend we are paid. Applying this method leads to adjusted EBITDA of €2.1 billion and adjusted net income of €1.2 billion for the Group. This is much more than we had predicted originally. The main reasons for this were our strong trading performance and the reinstatement of the British capacity market. Former subsidiary innogy: full consolidation of limited This largely disregards the effects of the asset swap with informational value. International Financial Reporting E.ON (e. g. the acquisition of the renewable energy business). Standards (IFRS) stipulate that we fully consolidate Therefore, the figures give some insight into the business companies that are directly or indirectly controlled by trend that is virtually untainted by the exceptional effects of RWE AG in the Group’s financial statements. This means the transaction. We also use these figures to measure that the revenue, expenses, cash flows, assets, liabilities, etc. performance in determining Executive Board remuneration. of the affected activities are included in the Group’s figures. This approach also had to be applied to innogy. However, it Adjusted EBITDA and adjusted net income higher than did not reflect the way in which we managed our former forecast. The overview below presents some key earnings subsidiary. We held innogy as a purely financial investment, figures that were calculated applying the method described which was allowed to operate as an independent business above. The figure determined for adjusted EBITDA in 2019 entity. was €2,106 million (previous year: €1,521 million) and adjusted net income amounted to €1,210 million (previous Adjusted figures. Therefore, we applied a second method, year: €591 million). Our outlook of November 2019 which deviated from IFRS consolidation principles, to envisaged ranges of €1.8 billion to €2.1 billion and calculate the figures for the Group, which reflected the €0.9 billion to €1.2 billion, respectively (see page 16 of the status of our subsidiary more accurately. In doing so, the interim statement on the first three quarters of 2019) . In stake in innogy was recognised on the balance sheet under our first earnings forecast of March 2019, we had ‘other financial assets’. In RWE’s earnings figures, innogy was envisaged adjusted EBITDA of €1.2 billion to €1.5 billion considered only with the dividend payable to us. We treated and adjusted net income of €0.3 billion to €0.6 billion (see the transactions of the rest of the Group with innogy as page 84 of the 2018 Annual Report). We clearly exceeded transactions with third parties. Since we sold our stake in these expectations. This was primarily due to the innogy to E.ON in September 2019, we have stopped exceptional trading performance of RWE Supply & Trading preparing balance sheets applying the above method, but and the effect on earnings of the reinstatement of the we applied it one last time to calculate earnings for 2019. British capacity market. Key figures for the RWE Group including innogy as a financial investment that is not fully consolidated1 € million Adjusted EBITDA Adjusted EBIT Adjusted net income 2019 2018 +/– 2,106 1,412 1,210 1,521 953 591 585 459 619 1 Figures not calculated in compliance with IFRS. In addition to the issues mentioned above, this relates to the following items, amongst others: all supply and service agreements of the Group with innogy have been accounted for as pending transactions, even if they would have had to be recognised at fair value. Provisions for impending losses from these transactions have not been formed. Supply and service agreements with external third parties and associated provisions have been accounted for as in the IFRS consolidated financial statements. The same applies to the accounting effects of hedges and deferred taxes. Earnings for 2019 do not contain the actual innogy dividend of €1.40 per share, but include the theoretical value of €1.64, which was the basis for the conditions of the asset swap with E.ON. 69 1.11 Disclosure relating to German takeover law The following disclosure is in accordance with Section 315a, Paragraph 1 and Section 289a, Paragraph 1 of the German Commercial Code as well as with Section 176, Paragraph 1, Sentence 1 of the German Stock Corporation Act. The information relates to company-specific regulations, for example relating to adjustments to the capital structure by the Executive Board or a change of control of the company. At RWE, these provisions are in line with the standards of German listed companies. Composition of subscribed capital. RWE AG’s capital stock the Articles of Incorporation that only concern the wording amounts to €1,573,748,744.44 and is divided among without changing the content. 614,745,499 no-par-value common shares in the name of the bearer. As set out on page 25, our 39,000,000 preferred RWE AG authorisation to implement share buybacks. shares were converted to common shares in the middle of Pursuant to a resolution passed by the Annual General 2019. Since then, all RWE shares have granted their bearer Meeting on 26 April 2018, RWE AG is authorised until the same rights. 25 April 2023 to conduct share buybacks accounting for up to 10 % of the capital stock as of the effective date of Shares in capital accounting for more than 10 % of voting the resolution or as of the exercise date of the authorisation rights. As of 31 December 2019, no holding in RWE AG if the capital stock is lower on this date. At the Executive exceeded 10 % of the voting rights. Board’s discretion, the acquisition can be made on the stock exchange or via a public purchase offer. Limitation of share transfers. Within the scope of the employee share plan of RWE AG, 305,216 RWE common Shares purchased in this way may then be cancelled. shares were issued to staff in Germany in the financial year Furthermore, they may be transferred to third parties or that just ended. The securities must be held until sold otherwise in connection with mergers or acquisitions of 31 December 2020. companies, parts of companies, operations, or of stakes in companies. Shares that are not sold on the stock exchange We also have employee stock purchase plans in the UK. or through a tender to all shareholders may only be sold for Staff members of RWE Generation UK plc, RWE Technology cash. Moreover, in such cases, the sale price may not be UK Limited and RWE Supply & Trading GmbH UK Branch significantly lower than the price at which the shares are qualify for them. The shares are subject to a five-year listed on the stock market. The company may transfer holding period starting from their respective issue dates. shares bought back to the holders of option or convertible A total of 27,742 RWE common shares were purchased bonds and also use the shares to fulfil its obligations under the UK plans. resulting from employee share schemes. In the aforementioned cases, shareholder subscription rights are Appointment and dismissal of Executive Board waived. These authorisations may be exercised in full or in members/amendments to the Articles of Incorporation. part, or once or several times for partial amounts. Executive Board members are appointed and dismissed in accordance with Section 84 et seq. of the German Stock Executive Board authorisation to issue new shares. Corporation Act in conjunction with Section 31 of the German Pursuant to the resolution passed by the Annual General Co-Determination Act. Amendments to the Articles of Meeting on 26 April 2018, the Executive Board is authorised Incorporation are made pursuant to Section 179 et seqq. to increase the company’s capital stock, subject to the of the German Stock Corporation Act in conjunction with Supervisory Board’s approval, by up to €314,749,693.44 Article 16, Paragraph 5 of the Articles of Incorporation of until 25 April 2023, through the issuance of up to RWE AG. According to the aforementioned provision in the 122,949,099 new bearer common shares in return for Articles of Incorporation, unless otherwise required by law contributions in cash or in kind (authorised capital). These or the Articles of Incorporation, the Annual General authorisations may be exercised in full or in part, or once or Meeting shall adopt all resolutions by a simple majority of the several times for partial amounts. votes cast or – if a capital majority is required – by the simple majority of the capital stock represented when the resolution is passed. Pursuant to Article 10, Paragraph 9 of the Articles of Incorporation, the Supervisory Board is authorised to pass resolutions in favour of amendments to 70 RWE Annual Report 2019Combined review of operations > Disclosure relating to German takeover law In principle, shareholders are entitled to subscription rights. RWE AG’s €5 billion syndicated credit line also includes a However, subject to the approval of the Supervisory Board, change-of-control clause, which essentially has the following the Executive Board may waive them in the following cases: content: in the event of a change of control or majority at RWE, • They may be waived in order to prevent the number of shall enter into negotiations with us on a continuation of the shares allocated from the subscription resulting in credit line. Should we fail to reach an agreement with the fractional amounts (fractions of shares). majority of them within 30 days from such a change of drawings are suspended until further notice. The lenders control, the lenders may cancel the line of credit. • Subscription rights may be waived in order to issue shares in exchange for contributions in kind for the purposes of Effects of a change of control on Executive Board and mergers or acquisitions of companies, parts of executive remuneration. Members of the Executive Board of companies, operations, or of stakes in companies. RWE AG have the special right to terminate their employment contract in the event that shareholders or third parties obtain • Subscription rights may be waived in the event of a cash control over the company and this would be linked to capital increase if the price at which the new shares are significant disadvantages for the Executive Board members. issued is not significantly lower than the price at which In such a case, they are free to resign for cause from their shares are quoted on the stock market and the portion of position within six months of the change of control by giving the capital stock accounted for by the new shares, for which three months’ notice. In addition, they can request the subscription rights are waived, does not exceed 10 % in total. termination of their employment contract and receive a • Furthermore, subscription rights may be waived in order one-off payment. to offer shares to potential holders of convertible or The amount of the one-off payment shall correspond to option bonds commensurate to the rights to which they the compensation that would have been due until the end would be entitled on conversion of the bond or on exercise of the contractually agreed term of service, but no more of the option. than three times the total contractual annual remuneration. Share-based payment is not included in this. This is in line The Executive Board is authorised, subject to the approval with the recommendations of the German Corporate of the Supervisory Board, to determine the further details Governance Code applicable to the year under review. and conditions of the share issuance. In sum, the capital stock may not be increased by more stipulates for the Executive Board and executives of RWE AG than 20 % through the issuance of new shares waiving and subordinated associated companies that in the event The Strategic Performance Plan presented on page 75 et seq. subscription rights. of a change of control the granted performance shares, which have already been finally determined but not yet paid Effects of a change of control on debt financing. Our out, shall be paid out early. The payout amount shall debt financing instruments often contain clauses that take correspond to the number of performance shares multiplied effect in the event of a change of control. The following by the sum of the average closing price of the RWE common rule applies to a small residual amount of a senior bond share on the last 30 trading days prior to the announcement remaining with us, which was the only bond that could not be of the change of control and the amount of dividend paid fully transferred to innogy in 2016: in the event of a change out per share until then, calculated starting from the time of control in conjunction with a drop in RWE AG’s credit when the number of performance shares was finally rating below investment-grade status, creditors may granted. All performance shares granted on a preliminary demand immediate redemption. In such cases, RWE AG has basis at the time of the change of control shall expire without the right to cancel its subordinated hybrid bonds within the replacement or compensation. defined change of control period; if this does not occur, the annual compensation payable on the hybrid bonds increases by 500 basis points. 71 1.12 Remuneration report The capital market expects companies to have performance-linked remuneration systems which bring the interests of management in line with those of the company’s owners. Another demand is that Executive Board members be rewarded if their company applies the principles of sustainable development and takes its responsibility vis-à-vis society seriously. RWE’s remuneration system meets these requirements. Despite this, we want to refine it and have already worked closely with investors to this end. This year, the Supervisory Board of RWE AG will finalise the new rules and present them to the 2021 Annual General Meeting for a vote. Structure of Supervisory Board remuneration The remuneration of the Supervisory Board is governed by In addition to the remuneration paid, out-of-pocket expenses the provisions of the Articles of Incorporation of RWE AG. are refunded to the members of the Supervisory Board. Accordingly, the Chairman of the Supervisory Board receives Some Supervisory Board members also receive income fixed remuneration of €300,000 per fiscal year. His Deputy from the exercise of Supervisory Board mandates at receives €200,000 per fiscal year. The other members of subsidiaries of RWE AG. the Supervisory Board receive fixed remuneration of €100,000 and additional compensation for committee The members of the Supervisory Board imposed on mandates according to the following rules. themselves the obligation, subject to any commitment to relinquish their pay, to use 25 % of the total annual Members of the Audit Committee receive additional compensation (before taxes) to buy RWE shares and to hold remuneration of €40,000. This payment is increased to them for the duration of their membership of the Supervisory €80,000 for the Chair of this committee. With the exception Board of RWE AG. Last year, all of the members who do of the Nomination Committee, the members of which do not relinquish their compensation met this self-imposed not receive additional remuneration, the members and the obligation for their compensation for 2018. For the new Chairs of all the other Supervisory Board committees receive members who joined the Board in 2019, this self-imposed an additional €20,000 and €40,000 in remuneration, obligation begins when the remuneration for fiscal 2019 is respectively. Remuneration for a committee mandate is only paid at the beginning of 2020. paid if the committee is active at least once in the fiscal year. Supervisory Board members who concurrently hold several offices in this body only receive compensation for the highest- paid position. Remuneration is prorated if a Supervisory Board member only performs a function for part of a fiscal year. Level of Supervisory Board remuneration In total, the remuneration of the Supervisory Board remuneration paid for mandates on committees of the (excluding out-of-pocket expenses) amounted to Supervisory Board and €543,000 (previous year: €3,304,000 in fiscal 2019 (previous year: €3,480,000). €720,000) was remuneration paid for mandates at Of this sum, €465,000 (previous year: €460,000) was subsidiaries. 72 RWE Annual Report 2019Combined review of operations > Remuneration report The remuneration of all individuals who have served on the Supervisory Board in 2018 and/or 2019 is shown in the following table. Supervisory Board remuneration1 Fixed remuneration Remuneration for committee offices Remuneration for mandates at subsidiaries2 Total remuneration3 € ‘000 2019 2018 2019 2018 2019 2018 2019 2018 Dr. Werner Brandt, Chairman Frank Bsirske, Deputy Chairman Michael Bochinsky (since 1 Aug 2018) Reiner Böhle (until 18 Sep 2019) Sandra Bossemeyer Martin Bröker (since 1 Sep 2018) Anja Dubbert (since 27 Sep 2019) Matthias Dürbaum (since 27 Sep 2019) 300 200 100 72 100 100 26 26 300 200 42 100 100 33 – – Ute Gerbaulet 100 100 Reinhold Gispert (until 31 Jul 2018) Andreas Henrich (until 31 Aug 2018) Prof. Dr. Hans-Peter Keitel Dr. h. c. Monika Kircher Monika Krebber (until 18 Sep 2019) Harald Louis Dagmar Mühlenfeld Peter Ottmann Günther Schartz Dr. Erhard Schipporeit Dr. Wolfgang Schüssel Ullrich Sierau Ralf Sikorski Marion Weckes Leonhard Zubrowski Total3 – – 100 100 72 100 100 100 100 100 100 100 100 100 100 58 67 100 100 100 100 100 100 100 100 100 100 100 100 100 – – 40 14 20 – 1 1 – – – 20 30 14 20 20 20 20 80 25 40 40 40 20 – – 17 20 20 – – – – 23 – 20 – 20 20 20 20 20 80 40 40 40 40 20 – 143 – 200 – – – – – – – – – – – 86 20 – – – – – – – – – – – – – – 120 20 – – – 215 300 – – 50 – 30 – – 50 – 30 300 343 140 86 120 100 27 27 300 400 59 120 120 33 – – 100 100 – – 120 130 172 140 120 120 120 395 125 140 190 140 150 81 67 120 100 240 140 120 120 120 480 140 140 190 140 150 2,296 2,300 465 460 543 720 3,304 3,480 1 Supervisory Board members who joined or retired from the corporate body during the year receive prorated remuneration. 2 Remuneration for exercising mandates at subsidiaries is only included for periods of membership of the Supervisory Board of RWE AG. 3 The commercial rounding of certain figures can result in inaccurate sum totals. 73 Structure of Executive Board remuneration Fundamentals. The structure and level of the Executive Recipients of Executive Board remuneration. In the Board’s remuneration are determined by the Supervisory financial year that just ended, Rolf Martin Schmitz and Board of RWE AG and reviewed on a regular basis to Markus Krebber received compensation for their work on determine whether they are appropriate and in line with the the Executive Board of RWE AG. Rolf Martin Schmitz has market. The remuneration system described in the following been a member of the Executive Board since 1 May 2009 has been applied since 1 October 2016. It is made up of and its Chairman since 15 October 2016. His contract non-performance-based and performance-based expires on 30 June 2021. Markus Krebber was appointed components. The former consists of the fixed salary, the to this corporate body with effect from 1 October 2016 and pension instalment as well as fringe benefits. The has been in charge of finance since 15 October 2016. His performance- based components include the bonus and a tenure on the Executive Board runs through to share-based payment, the latter of which is a long-term 30 September 2024. compensation component. Non-performance-based Executive Board remuneration Fixed compensation and pension instalments. The on retirement, but not before the Executive Board member members of the Executive Board of RWE AG receive a fixed turns 62. Members of the Executive Board of RWE reach the annual salary, which is paid in twelve monthly instalments. established age limit when they are 63 years old. They can As a second fixed remuneration component, they are entitled to a pension instalment for every year of service, which is determined on an individual basis, unless – as is the case be reappointed for one year at a time thereafter, but may not hold office beyond their 65th birthday. with Rolf Martin Schmitz – they belonged to the Executive When retiring, Executive Board members can choose a Board before the pension instalment was introduced and one-time payment or a maximum of nine instalments. They have therefore received a pension commitment (see and their surviving dependants do not receive any further page 78). benefits. Vested retirement benefits from earlier activities within the RWE Group remain unaffected by this. The pension instalment is paid in cash or retained in part or in full in exchange for a pension commitment of equal Fringe benefits. Non-performance-based compensation value through a gross compensation conversion. RWE has components also include fringe benefits, primarily concluded a reinsurance policy to finance the pension consisting of company cars and accident insurance commitment. The accumulated capital may be drawn upon premiums. Performance-based Executive Board remuneration Bonus. Executive Board members receive a bonus which is page 69. This means that innogy, the subsidiary acquired by based on the economic performance of the company and E.ON in September 2019, is considered only in terms of the the degree to which they achieve their individual goals and dividend payment it owes to RWE. The rules of Executive the collective goals of the Executive Board. The starting Board remuneration stipulate that the Supervisory Board point for calculating the bonus is what is referred to as the may modify adjusted EBIT to make this figure more suitable ‘company bonus’, which depends on the level of EBIT of for measuring performance. Such adjustments can relate to relevance to remuneration in the relevant fiscal year. The gains on disposals, changes in provisions, as well as basis for determining this figure is adjusted EBIT (EBIT minus impairments and their consequences. This converts the non-operating result). We calculated adjusted EBIT for adjusted EBIT to EBIT of relevance to remuneration. 2019 and the preceding year using the method set out on 74 RWE Annual Report 2019Combined review of operations > Remuneration report The company bonus is determined as follows: the compensation and the performance of the share price over Supervisory Board sets a target as well as a floor and a the long term motivates the Executive Board to consider the ceiling for EBIT of relevance to remuneration at the interests of the company’s owners when taking decisions. beginning of every fiscal year. After the end of the fiscal year, Another of the SPP’s success factors is net income of the actual level of adjusted EBIT and EBIT of relevance to relevance to remuneration of the fiscal year in question. This remuneration resulting from the modifications explained key figure is derived from adjusted net income, which is earlier are determined. If the latter is identical to the EBIT arrived at by deducting the non-operating result and other target, the target achievement is 100 %. In this case, the exceptional items including their effects on income taxes company bonus equals the contractually agreed baseline from net income. Like adjusted EBIT, we calculated it using bonus. If EBIT of relevance to remuneration is exactly at the the method described on page 69, with innogy being pre-defined floor, target achievement is 50 %; if it is at the considered only in terms of the dividend payment it owes ceiling, target achievement is 150 %. Target achievement is RWE. The conditions of the SPP allow the Supervisory Board adjusted linearly between the two limits. If EBIT of relevance to make limited modifications to adjusted net income in to remuneration is below the floor, no company bonus is predefined cases in order to arrive at net income of paid. If the ceiling is exceeded, the maximum target relevance to remuneration. Such modifications may be achievement remains 150 %. made as long as they reflect the impact of unforeseeable events such as capital measures, acquisitions, sales and To calculate the individual bonus, the company bonus is regulatory changes. multiplied by a factor reflecting the personal performance of the Executive Board member in question. This The SPP is based on performance shares with a term performance factor depends on the achievement of: (vesting period) made up of the fiscal year to which they (1) individual goals, (2) general collective goals, and relate and the three subsequent years. The Executive Board (3) collective goals in relation to corporate responsibility and members receive a grant letter for each tranche, in which employee motivation. The aforementioned target they are informed of their personal gross allocation amount. categories are each weighted by one-third. Degrees of The preliminary number of performance shares is achievement can range between 0 % and 200 %. However, calculated by dividing the grant amount by the average the derivable performance factor is limited to between 80 % closing quotation of the RWE share over the last 30 days of and 120 %. This means that the performance factor for an trading on Xetra before the grant. Executive Board member with a 150 % target achievement is only 120 %. Only after the end of the fiscal year is the number of fully granted performance shares determined. It depends on the After the end of every fiscal year, the Supervisory Board net income of relevance to remuneration in the fiscal year in evaluates the individual performance of the Executive question. The actual figure is compared to a pre-defined Board members relative to the three categories above and target figure. The procedure is similar to the approach taken determines their individual performance factor. This is done when determining the company bonus. The Supervisory in line with the binding goals and targets which it sets at the Board pre-defines a target, a floor and a ceiling for net beginning of the financial year. The bonus determined in this income of relevance to remuneration, orienting itself manner is paid out in full to the Executive Board members towards the approved medium-term plan in doing so. If the after the end of the fiscal year. target figure is achieved exactly, 100 % of the conditionally granted performance shares is fully allocated. If net income Share-based payment. Executive Board members are of relevance to remuneration is exactly at the floor, 50 % of granted a payment under the Strategic Performance Plan the conditionally granted performance shares is fully (SPP), which rewards the achievement of long-term goals. allocated; if it is at the ceiling, the final grant amounts to The key determinant of success is the total return of the 150 %. At a level below the floor, all of the conditionally RWE common share, which is made up of the share price granted performance shares from the tranche lapse. If the and the dividend (performance). The link between ceiling is exceeded, the maximum grant remains 150 %. 75 The finally granted performance shares are fully paid out Remuneration for exercising mandates. During the past in cash to the Executive Board member after the end of the fiscal year, members of the RWE AG Executive Board were four-year vesting period. The level of the payment depends paid to exercise supervisory board mandates at affiliates. on the performance of the RWE common share. It corresponds This income is deducted from the bonus and therefore does to the final number of performance shares multiplied by the not increase the total remuneration. sum of the average closing quotation of the RWE common share over the 30 days of trading on Xetra leading to the Remuneration broken down by component. Assuming end of the vesting period and the dividends accumulated in that both the company and the Executive Board members the last three years. However, a cap applies in this case as achieve their performance targets to a degree of 100 %, the well: even in the event of an extremely good share compensation structure roughly breaks down as follows: the performance, the payment is limited to a maximum of base salary accounts for around 30 % of total remuneration. 200 % of the initial gross grant amount. Approximately 30 % is allocable to short-term variable remuneration, i. e. the bonus. As a long-term compensation The members of the Executive Board are obliged to reinvest component, the SPP accounts for about 40 % of total 25 % of the payment (after taxes) in RWE shares. The shares remuneration. must be held until at least the end of the third year after conclusion of the vesting period. Limitation of Executive Board remuneration. As set out earlier, the level of variable compensation components is The performance shares remain unaffected after an limited. The company bonus amounts to a maximum of Executive Board member leaves the body at the end of 150 % of the contractually agreed bonus budget. Multiplying their contract and are paid out as planned at the end of the this by the individual performance factor (80 % to 120 %), it vesting period. If an Executive Board member voluntarily is possible to reach a maximum of 180 % of the bonus leaves the company early or is dismissed with good cause, budget. With regard to share-based payment under the all performance shares which have not yet reached the end SPP, payout of the performance shares after the of the vesting period lapse. The SPP also contains a completion of the vesting period is limited to a maximum of provision which gives the Supervisory Board the power to 200 % of the grant budget. Due to the above maximum punish infractions by Executive Board members, for values, there is also a cap on total compensation (see the example serious violations of the company’s Code of diagram on the next page). Conduct, by reducing or completely voiding ongoing SPP tranches. When the SPP was introduced in 2016, the Supervisory Board established a transitional tranche for 2016 and three further regular tranches for 2017, 2018 and 2019. In doing so, it also determined target figures for adjusted net income and the aforementioned ceilings and floors. The SPP conditions stipulate that the Supervisory Board may retrospectively adjust the target and threshold values only to a very limited extent in precisely defined cases. Such adjustments are permissible if they take account of the effects of capital measures, acquisitions, divestments and regulatory changes, which were not yet known or unforeseeable when the figures were determined. One major modification was made relating to the 2018 and 2019 tranches: instead of deriving adjusted net income from net income according to IFRS, it was calculated using the method explained earlier, with innogy being considered only in terms of the dividend it owes RWE. Accordingly, the target figures for the ceiling and floor of net income of relevance to remuneration were also adjusted retrospectively. 76 RWE Annual Report 2019Combined review of operations > Remuneration report Range of Executive Board remuneration Budget: 100 % Strategic Performance Plan (100 %) Bonus (100 %) 40 % 30 % Floor: 30 % Ceiling: 164 % Strategic Performance Plan (Maximum: 200 %) 80 % Bonus (Maximum: 180 %) 54 % Fixed salary 30 % Fixed salary 30 % Fixed salary 30 % Payment dates. Executive Board members receive their period, the performance shares from the SPP are paid out fixed salary in twelve monthly instalments. The pension during the month of the Annual General Meeting held in the instalment is paid out at the end of the year, insofar as it is following year. As explained earlier, Executive Board not converted into a pension commitment. After the fiscal members must invest 25 % of the payment in RWE common year, the Supervisory Board determines the target shares and may not sell these shares until after three achievement for the company bonus and the individual additional calendar years have passed from completion of performance factor. The bonus is paid out in the month of the four-year vesting period. As a result, it takes a total of the Annual General Meeting (AGM) which attends to the seven years for Executive Board members to obtain the full financial statements of RWE AG. After the end of the vesting amount of their compensation. Executive Board remuneration payment timeline for a fiscal year Bonus Payment in the month in which the AGM is held Strategic Performance Plan Payment at the beginning of the year 25 % reinvestment in RWE shares End of the minimum holding period Pension instalment Payment at year-end Fixed salary Monthly payment Fiscal year Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 77 Pension scheme. Until the introduction of the pension based payments under the SPP are not included in this instalment as of 1 January 2011 described earlier, pension payment. benefits were granted to the members of the Executive Board. Of the Executive Board members in 2019, this only In the event of a change of control, all of the fully granted applies to Rolf Martin Schmitz; the pension commitment performance shares under the SPP that have not been paid made to him in 2009 will remain unchanged. It entitles him out are paid out early. All performance shares granted to life-long retirement benefits in the event of retirement under the SPP on a preliminary basis lapse on the date of from the Executive Board of RWE AG upon turning 59, the change of control. permanent disability, early termination or non-extension of his employment contract by the company. In the event of Early termination of Executive Board mandate and death, his surviving dependants are entitled to benefits. severance cap. Following a recommendation of the The amount of Rolf Martin Schmitz’s qualifying income and German Corporate Governance Code (GCGC), the the level of benefits determined by the duration of service Executive Board’s employment contracts include a are taken as a basis for his individual pension and surviving provision stipulating that if an Executive Board mandate is dependants’ benefits. otherwise terminated early without due cause, a severance payment of no more than the remuneration due until the Change of control. If shareholders or third parties obtain end of the employment contract and no more than two total control over the company and this results in major annual compensations including fringe benefits is made disadvantages for the Executive Board members, they (severance cap). have a special right of termination. They have the right to resign from the Executive Board and to request that their Refinement of the remuneration system planned. Last employment contract be terminated in combination with a year, we discussed ways to refine the Executive Board’s one-off payment within six months of the change of control. remuneration system with representatives of institutional investors. One of the objectives was to meet the demands of A change of control as defined by this provision occurs when the world’s capital markets, which have become more one or several shareholders or third parties acting jointly exigent over time. With the help of investor feedback, we account for at least 30 % of the voting rights in the company, started revising major parts of the system. However, we or if any of the aforementioned can exert a controlling have maintained its basic structure. The new features are influence on the company in another manner. A change of set to be approved by the Supervisory Board of RWE AG this control also occurs if the company is merged with another year and applied to all new employment contracts legal entity, unless the value of the other legal entity is less thereafter. Furthermore, we intend to put them up for a vote than 50 % of the value of RWE AG. at the 2021 Annual General Meeting. On termination of their employment contract, Executive The Supervisory Board passed a resolution to continue the Board members receive a one-off payment equalling the Strategic Performance Plan, which used to encompass compensation due until the end of the term of their contract. tranches only for 2016 to 2019 without any changes for However, this amount will not be higher than three times the time being. Accordingly, new target ceilings and floors their total contractual annual remuneration. The share- have been established for net income of relevance to remuneration. Level of Executive Board remuneration The remuneration of the Executive Board of RWE AG is The previous year’s figure was €6,880,000. The calculated in compliance with the rules set out in the remuneration components are shown in the following table. German Commercial Code. The members of the Executive Board received €7,571 ,000 in total remuneration for their work in fiscal 2019. 78 RWE Annual Report 2019Combined review of operations > Remuneration report Level of Executive Board remuneration (according to HGB) € ‘000 Non-performance-based of which: Fixed remuneration Pension instalments1 Fringe benefits Performance-based Bonus (short-term) of which: credited remuneration for mandates2 Value of performance shares at grant3 (long-term) Total remuneration Dr. Rolf Martin Schmitz Dr. Markus Krebber Total 2019 1,183 2018 1,180 1,160 1,160 – 23 3,032 1,782 – 20 2,636 1,386 2019 1,085 763 300 22 2,271 1,171 2018 1,066 750 300 16 1,998 898 2019 2,268 2018 2,246 1,923 1,910 300 45 5,303 2,953 300 36 4,634 2,284 115 115 146 180 261 295 1,250 4,215 1,250 3,816 1,100 3,356 1,100 3,064 2,350 7,571 2,350 6,880 1 The pension instalment paid to Markus Krebber is part of his remuneration under the German Commercial Code (HGB), but this does not apply to the annual service cost of the pension commitment to Rolf Martin Schmitz. 2 Income from the exercise of Supervisory Board offices within the Group are fully deducted from the bonus. 3 The German Commercial Code mandates the statement of the value of the grant at the beginning of the fiscal year. EBIT of relevance to remuneration, the basis for calculating therefore eliminated from the actual figure. The EBIT target the bonus, amounted to €1,207 million in the fiscal year derived from the medium-term plan was €786 million that just ended. It differs from adjusted EBIT (€1,412 million) (target achievement of 100 %), with a floor of €186 million in that we make certain modifications to it to neutralise (target achievement of 50 %) and a ceiling of €1,386 million effects that are not considered in the target figures. For (target achievement of 150 %). These figures result in a example, when determining the target figure, we did not target achievement of 135 % for 2019. This means that the consider any income from the potential reinstatement of company bonus was 35 % higher than the bonus budget the British capacity market. The effect on income of the established at the beginning of the year. delayed capacity payments for 2018 and 2019 was Calculation of the 2019 company bonus Adjusted EBIT Adjustments1 EBIT of relevance to remuneration Target Ceiling Floor 1 See commentary above. 2019 € million 1,412 – 205 1,207 786 1,386 186 Target achievement  % – – 135 100 150 50 79 The Supervisory Board found that the Executive Board generation portfolio, occupational safety, and adherence to overachieved the individual and collective targets. The main compliance, environmental and social standards. The only success factors were the rapid implementation of the asset target that was missed concerned the number of work- swap with E.ON and the progress made in transforming related accidents which, at 2.1 for every one million hours RWE into a leading renewable energy company. The worked, exceeded the predefined upper limit of 1.9. compromise reached with the German government on the lignite phaseout and the Executive Board’s further Each of the Executive Board members had a target development of RWE’s strategy to reflect the future of achievement of 153 %. Due to the cap, the individual renewable energy and electricity generation from coal were performance factor was 120 %. Multiplying this figure by the also rewarded. The above-average performance of the RWE company bonus (135 %) results in a factor of 162 %. The share and investor feedback demonstrated that the capital latter translates into the individual bonus, which amounted market welcomes the new strategy. Requirements in relation to €1,782,000 for Rolf Martin Schmitz and €1,171,000 for to employee motivation, which is regularly measured using Markus Krebber. These sums correspond to 1.62 times the internal surveys, were also met to a degree of at least predetermined budgeted figures of €1,100,000 (Schmitz) 100 %. With one exception, this also applies to the CR targets, which primarily related to the CO2 intensity of the and €723,000 (Krebber). Calculation of the 2019 tranche of the Strategic Performance Plan Adjusted net income Adjustments1 Net income of relevance to remuneration Target Ceiling Floor 1 See commentary. 2019 € million 1,210 – 363 847 51 351 – 249 Target achievement  % – – 150 100 150 50 The German Commercial Code stipulates that the long- Net income of relevance to remuneration is adjusted net term performance-based remuneration component is the income (€1,210 million) minus several exceptional items. value of the performance shares granted on a preliminary For example, we recognised significant impairments for basis at the beginning of a fiscal year. As set out on page 75, power stations in the 2016 consolidated financial the level of the full grant depends on the development of net statements, which had not yet been included in the income of relevance to remuneration in the fiscal year medium-term plan at the time and cause depreciation and compared to a predefined target. The latter was set by the amortisation to be much lower now. We eliminated this Supervisory Board at €51 million for 2019 (grant of 100 %). effect on depreciation and amortisation. The same applies The floor was - €249 million (grant of 50 %) and the ceiling to the income we received in the British generation business was €351 million (grant of 150 %). The amount actually due to the retroactive capacity payments we received for achieved was €847 million (after modifications), which 2018. corresponds to a target achievement of 150 %. This means that the final grant of performance shares for 2019 was 50 % higher than the preliminary grant. 80 RWE Annual Report 2019Combined review of operations > Remuneration report Long-term incentive payment: Strategic Performance Plan Tranche Grant date Fair value at grant date Share price (average) Dr. Rolf Martin Schmitz Year 2019 2018 2017 2016 1 Jan 2019 1 Jan 2018 1 Jan 2017 1 Jan 2016 € ‘000 € 1,250 19.10 1,250 18.80 1,250 11.62 769 13.78 Number of performance shares allocated on a provisional basis 65,445 66,489 107,573 55,787 Measurement date of performance conditions 31 Dec 2019 31 Dec 2018 31 Dec 2017 31 Dec 2017 Target achievement in relation to net income of relevance to remuneration % 150 123 115 115 Final number of fully granted performance shares 98,168 81,781 123,709 64,155 End of vesting period 31 Dec 2022 31 Dec 2021 31 Dec 2020 31 Dec 2019 Long-term incentive payment: Strategic Performance Plan Tranche Grant date Fair value at grant date Share price (average) Number of performance shares allocated on a provisional basis Dr. Markus Krebber Year 2019 2018 2017 2016 1 Jan 2019 1 Jan 2018 1 Jan 2017 1 Jan 2016 € ‘000 € 1,100 19.10 1,100 18.80 988 11.62 247 13.78 57,592 58,511 84,983 17,915 Measurement date of performance conditions 31 Dec 2019 31 Dec 2018 31 Dec 2017 31 Dec 2017 Target achievement in relation to net income of relevance to remuneration % 150 123 115 115 Final number of fully granted performance shares 86,388 71,969 97,730 20,602 End of the vesting period 31 Dec 2022 31 Dec 2021 31 Dec 2020 31 Dec 2019 The table below shows the increase in provisions to cover obligations from share-based payments under the SPP. Addition of provisions for long-term share-based incentive payments € ‘000 Dr. Rolf Martin Schmitz Dr. Markus Krebber Total 2019 2018 2,726 1,982 4,708 1,413 934 2,347 Obligations under the former pension scheme. The (previous year: €10,534,000). The pension obligation for service cost of pension obligations to Rolf Martin Schmitz 2019 increased by €1,360,000 (previous year: amounted to €554,000 in 2019 (previous year: €1,248,000). €536,000). This is not a remuneration component in accordance with the German Commercial Code. As of Based on the emoluments qualifying for a pension as of year-end, the net present value of the defined benefit 31 December 2019, the projected annual pension of obligation determined in accordance with IFRS amounted Rolf Martin Schmitz on retiring from the company as of to €14,997,000 (previous year: €13,370,000). The present the expiry of his appointment amounted to €556,000 value of the pension obligation determined according to (same as in the previous year). This includes vested pension the German Commercial Code totalled €11,894,000 benefits due from former employers transferred to RWE AG. 81 Recommendations of the German Corporate Governance Code In presenting the remuneration system, we also follow the • The term ‘benefits received’ defines the extent to which recommendations of the version of the GCGC applicable to the management board member has already received 2019, which was published on 7 February 2017. In line with payments. In this regard, the relevant aspect is the time at the GCGC, the total remuneration of management board which the amount being paid is sufficiently certain and members comprises the monetary compensation elements, not the actual time of the payment. pension commitments, other awards, fringe benefits of all kinds and benefits from third parties which were granted or This distinction made in the Code can be illustrated with paid in the financial year with regard to management board the example of the bonus: the contractually agreed and work. Item 4.2.5, Paragraph 3 of the Code lists the promised budgeted bonus for the fiscal year in question is compensation components that should be disclosed. Unlike considered ‘granted’. Conversely, the benefits received German commercial law, the GCGC stipulates that the table shows the bonus level which will actually be paid with a annual service cost of pension benefits is also part of total high degree of probability. In this regard, it is irrelevant that remuneration. the payment will not be made until the following year. The payment date is deemed to have been reached when the The GCGC provides specific examples for the indicators and results needed to determine target recommended presentation of management board achievement (and therefore the bonus) are known with compensation based on model tables, which distinguishes sufficient certainty. The Code assumes that this is already between ‘benefits granted’ and ‘benefits received’. the case at the end of the year. As a result, the Executive Board bonuses are stated in the reporting year in the benefits • According to the GCGC, benefits or compensation are received table. granted when a binding commitment to such is made to the management board member. In deviation from In the following, we present the compensation of the German commercial law, it is not relevant to what extent Executive Board of RWE AG based on the sample tables the management board member has already provided recommended by the GCGC. the services being remunerated. Benefits granted € ‘000 Fixed remuneration Pension instalment Fringe benefits Dr. Rolf Martin Schmitz Chief Executive Officer since 15 October 2016 Dr. Markus Krebber Chief Financial Officer since 15 October 2016 2019 (Min.) 2019 (Max.) 2019 2018 1,160 1,160 1,160 1,160 – 23 – 23 – 23 – 20 2019 (Min.) 763 300 22 2019 (Max.) 763 300 22 2019 2018 763 300 22 750 300 16 Total fixed remuneration 1,183 1,183 1,183 1,180 1,085 1,085 1,085 1,066 One-year variable remuneration (bonus) Multi-year variable remuneration (SPP) 2018 tranche (term: 2018 – 2021) 2019 tranche (term: 2019 – 2022) Total variable remuneration 0 0 – 0 0 1,980 1,782 1,386 2,500 1,250 1,250 – – 1,250 2,500 1,250 – 4,480 3,032 2,636 0 0 – 0 0 1,302 1,171 898 2,200 1,100 1,100 – – 1,100 2,200 1,100 – 3,502 2,271 1,998 Total variable and fixed remuneration 1,183 5,663 4,215 3,816 1,085 4,587 3,356 3,064 Service cost 554 554 554 536 – – – – Total remuneration 1,737 6,217 4,769 4,352 1,085 4,587 3,356 3,064 82 RWE Annual Report 2019Combined review of operations > Remuneration report Benefits received € ‘000 Fixed remuneration Pension instalment Fringe benefits Total fixed remuneration One-year variable remuneration (bonus) Multi-year variable remuneration (SPP) Payment from the 2016 tranche Total variable remuneration Total variable and fixed remuneration Service cost Total remuneration Dr. Rolf Martin Schmitz Chief Executive Officer since 15 October 2016 Dr. Markus Krebber Chief Financial Officer since 15 October 2016 2019 1,160 – 23 1,183 1,782 1,538 1,538 3,320 4,503 554 5,057 2018 1,160 – 20 1,180 1,386 – – 1,386 2,566 536 3,102 2019 2018 763 300 22 1,085 1,171 494 494 1,665 2,750 – 750 300 16 1,066 898 – – 898 1,964 – 2,750 1,964 83 1.13 Development of risks and opportunities RWE’s risk exposure continued to improve in 2019. It was important to us that the European Commission gave the go-ahead for the asset swap with E.ON. The renewable energy business gives us a new operating mainstay with a high level of regulated income. This makes us more profitable and crisis-proof. Despite this, RWE remains exposed to risks. For example, the adverse effects of the German coal phaseout may be more significant than expected. This and further material risks are identified, assessed and managed using our proven Group risk management system, which helps us to keep RWE on course despite the persistent uncertainties in our business. Distribution of risk management tasks at RWE. • The Internal Audit & Compliance Department monitors Responsibility for Group risk management lies with RWE AG. compliance with RWE’s Code of Conduct, focusing on The parent company’s Executive Board monitors and avoiding corruption. It reports to the CEO of RWE AG or, if manages the overall risk of the RWE Group. In addition, it members of the Executive Board are affected, directly to determines the general risk appetite of RWE and defines the Chairman of the Supervisory Board and the Chairman upper limits for single risk positions. At the level below the of the Audit Committee. Executive Board, the Controlling & Risk Management Department has the task of applying and developing the • Risks from changes in commodity prices are monitored risk management system. It derives detailed limits for the by RWE Supply & Trading in so far as they relate to the individual business fields and operating units from the risk conventional electricity generation, energy trading and caps set by the Executive Board. Its tasks also include gas businesses. checking the identified risks for completeness and plausibility and aggregating them. In so doing, it receives • Strategies to limit market risks in conventional electricity support from the Risk Management Committee, which is generation must be approved by the Commodity composed of the heads of the following five RWE AG Management Committee. The members of this expert departments: Controlling & Risk Management (Chair), panel are the CFO of RWE AG, individuals from the Finance & Credit Risk, Accounting, Legal & Insurance, and management team of RWE Supply & Trading and a Corporate Business Development. The Controlling & Risk representative of the Controlling & Risk Management Management Department provides the Executive Board and Department. the Supervisory Board of RWE AG with regular reports on the company’s risk exposure. • In October 2019, we also set up such a committee for market risks associated with renewable energy. The A number of additional organisational units and committees Renewables Commodity Management Committee have been entrusted with risk management tasks: consists of the CFO of RWE AG, members of the management of RWE Renewables GmbH and a • Financial risks and credit risks are managed by the representative of the Controlling & Risk Management Finance & Credit Risk Department, which reports directly Department. to the CFO of RWE AG. • The strategic guidelines for the management of financial • The Accounting Department, which also reports to the assets (including the funds of RWE Pensionstreuhand e. V.) CFO, sees to it that financial reporting is free of material are determined by the Asset Management Committee. misstatements. It has an accounting-related internal The following individuals belong to it: the CFO of control system for this purpose. A committee consisting of RWE AG, the Managing Director in charge of finance at officers from Accounting and other departments of RWE Supply & Trading, the heads of the following relevance to accounting assists in securing the quality of departments: Controlling & Risk Management, financial reporting. More detailed information can be Finance & Credit Risk, Portfolio Management/ found on page 92. Mergers & Acquisitions and – from the last department in the list – the head of Financial Asset Management. 84 RWE Annual Report 2019Combined review of operations > Development of risks and opportunities Under the expert management of the aforementioned Risk management as a continuous process. Risks and organisational units, RWE AG and its operating subsidiaries opportunities are defined as negative or positive deviations are responsible for identifying risks early, assessing them from expected figures. Their management is an integral and correctly and managing them in compliance with corporate continuous part of operating processes. We assess risks standards. Internal Audit regularly assesses the quality and every six months, using a bottom-up analysis. We also functionality of our risk management system. monitor risk exposure between the regular survey dates. The Executive Board of RWE AG is immediately notified of any material changes. Our executive and supervisory bodies are updated on the Group’s risks once a quarter. RWE AG risk matrix Potential damage1 Category V Category IV Category III Category II Category I 1 % ≤ P ≤ 10 % 10 % < P ≤ 20 % 20 % < P ≤ 50 % P > 50 % Low risk Medium risk High risk Probability of occurrence (P) Potential damage1 € million Earnings risks Potential impact on net income2 Indebtedness/equity risks Potential impact on net debt2 and equity2 Category V ≥ 8,000 Category IV ≥ 1,500 and < 8,000 Category III ≥ 600 and < 1,500 Category II Category I ≥ 300 and < 600 < 300 ≥ 8,000 ≥ 4,000 and < 8,000 ≥ 2,000 and < 4,000 ≥ 1,000 and < 2,000 < 1,000 1 Aggregated for 2020 to 2022. 2 Since the sale of innogy, we have returned to the definition of net income, net debt and equity according to IFRS consolidation principles. These figures were previously determined using the method presented on page 69, with innogy being recognised as a purely financial investment. 85 Our risk analysis normally covers the three-year horizon of that share the same cause are aggregated to a single risk our medium-term plan, but can extend beyond that in if possible. To clearly assign them to the matrix fields, we individual cases. We measure the potential damage based have established thresholds for net income, net debt and on the possible effects on net income, net debt and equity. equity, which are oriented towards the RWE Group’s ability to Hedging measures are considered. We define the potential bear risks. They are presented in the table below the matrix. damage as the deviation from the budgeted figure in Depending on their position in the matrix, we distinguish question, accumulated over the three-year planning between low, medium and high risks. Based on this systematic horizon. We analyse the material risks using a matrix (see risk identification, we determine whether there is a need for chart on the preceding page) in which they are categorised action and initiate measures to mitigate the risks if necessary. by potential damage and probability of occurrence. Risks Risk classes Market risks Regulatory and political risks Legal risks Operational risks Financial risks Creditworthiness of business partners Other risks Classification of the highest single risk 31 Dec 2019 31 Dec 2018 Medium High Low Medium Medium Medium Low Medium High Medium Medium Medium Medium High Main risks for the RWE Group. Depending on their causes, In this section, we provide commentary on the main risks our risks can be classified into seven groups, which are and opportunities and explain what measures have been shown in the table above. The highest individual risk taken to counter the threat of negative developments. determines the classification of the risk of the entire risk class. Only the regulatory and political risks are currently • Market risks. In most of the countries in which we are classified as ‘high’. They primarily result from the coal active the energy sector is characterised by the free phaseout in Germany. It is already apparent that the formation of prices. Declines in quotations on wholesale compensation we have been awarded will not fully cover the electricity markets can cause generation assets to financial damage we will sustain as a result of the early become less profitable. This relates to power plants as closure of lignite power plants and opencast mines. In fact, well as wind farms and other renewable energy assets the difference between the compensation and the actual that are not subsidised with fixed feed-in payments. damage could increase if the burdens are greater than Declines in electricity prices can cause us to recognise planned. Furthermore, regulatory pressure on our lignite impairments. business may continue to rise despite the exit agreement. We no longer see any high risks in the ‘other risks’ category. Power purchase agreements with firm conditions expose In the previous year, we had factored in the potential failure us to the risk of having to pay more for electricity than we of the asset swap with E.ON. Since the transaction was can earn when selling it on the market. This may force us approved and implemented to a substantial extent, ‘other to form provisions to cover this risk. We have identified risks’ are now classified as ‘low’. such a risk inherent in the two contracts we concluded to purchase electricity from the 1,055 MW Datteln 4 hard coal-fired power plant in 2005 and 2006. Based on the 86 RWE Annual Report 2019 Combined review of operations > Development of risks and opportunities estimates of its operator Uniper, the station will go online Our risk management system for energy trading is firmly in the summer of 2020, ten years later than planned. We aligned with best practice as applied to the trading intend to adapt or cancel the purchase agreements and businesses of banks. As part of this, transactions with third have therefore taken legal recourse. parties are concluded only if the associated risks are within approved limits. There are guidelines governing the Wholesale electricity prices in our most important treatment of commodity price risks and associated credit generation markets, i. e. Germany, the UK and the risks. Our subsidiaries constantly monitor their commodity Netherlands, are far above the lows recorded in 2016. positions. Risks associated with trades conducted by This is primarily due to the development of the prices of fuel and CO2 emission allowances. It cannot be ruled out that electricity prices come under significant pressure RWE Supply & Trading for its own account are monitored daily. again. The continued expansion of renewable energy The Value at Risk (VaR) is of central importance for risk could be a contributing factor. However, there is also a measurement in energy trading. It specifies the maximum chance that prices develop in our favour, not least due to loss from a risk position not exceeded with a the German nuclear and coal phaseouts. The reduction of predetermined probability over a predefined period of secured generation capacity could lead to more frequent time. The VaR figures within the RWE Group are based on shortages along with high electricity prices. a confidence interval of 95 %. The assumed holding We assess the price risks to which we are exposed on the probability of 95 %, the daily loss will not exceed the VaR. period for a position is one day. This means that, with a procurement and supply markets taking account of current forward prices and expected volatility. For our The VaR for the price risks of commodity positions in the power plants, we limit these risks by selling most of our trading business of RWE Supply & Trading may not rise electricity forward and securing the prices of the fuel and CO2 emission allowances needed for its generation. above €40 million. In the past financial year, it averaged €12 million, and the daily maximum was €22 million. In addition, limits derived from the aforementioned VaR We also use financial instruments to hedge our thresholds have been set for every trading desk. commodity positions. In the consolidated financial Furthermore, we develop extreme scenarios and factor statements, such instruments, including those serving the them into stress tests, determine their consequences for purpose of limiting interest and currency risks, are earnings, and take countermeasures if we deem the risks usually presented through the statement of on-balance- to be too high. sheet hedges. More detailed information on this can be found on pages 113 et seqq. in the Notes. The management of our gas portfolio and the liquefied natural gas (LNG) business is pooled in a new RWE Supply & Trading plays a central role when it comes organisational unit at RWE Supply & Trading. We to managing commodity price risks. It functions as the established a VaR cap of €14 million for these activities. Group’s interface to the global wholesale markets for The average VaR in 2019 was €6 million, and the daily electricity and energy commodities. On behalf of our power maximum was €8 million. plant companies, RWE Supply & Trading markets large portions of our generation position and purchases the fuel and CO2 certificates needed to produce electricity. The role of RWE Supply & Trading as internal transaction We also apply the VaR concept to measure the extent to which the commodity price risks that we are exposed to outside the trading business can affect the RWE Group’s partner makes it easier for us to limit the risks associated adjusted EBITDA. To this end, we calculate the overall risk with price volatility on energy markets. However, the for the Group on the basis of the commodity risk positions trading transactions are not exclusively intended to of the individual companies; this overall risk mainly stems reduce risks. In compliance with risk thresholds, the from power generation. As the majority of our generation company also takes commodity positions to achieve position is already fully hedged for 2020, only minor a profit. market price risks remain for this year. Opportunities for additional profits arise, because we are able to flexibly adapt our power plant deployment to short-term market developments. 87 In the UK generation business, our earnings not only As much as the most recent decisions to phase out coal depend on the development of the price of electricity, fuel place a burden on us, they can contribute to de-escalating and emission allowances, but also on the level of the the dispute over coal-based electricity generation, payments we receive for participating in the national thereby increasing the planning security of power plant capacity market. The payments are determined in annual operators. However, the risk of regulatory pressure rising auctions and fluctuate depending on supply and despite this remains, for example through the introduction demand. of price floors for carbon dioxide or the determination of extremely restrictive pollutant emission limits. We are also exposed to market risks in the gas storage business, which has gained importance for us as a result We are also exposed to risks in the field of nuclear energy, of the transaction with E.ON. As set out on page 31, the albeit to a much lesser extent than in the past. Since we realisable margins depend significantly on the seasonal made contributions to the German nuclear energy fund in differences in the price of gas. If the price differences are the middle of 2017, the state has assumed complete large, they can be taken advantage of to generate responsibility for the interim and final storage of our substantial income. The German gas storage business is radioactive waste. However, we are still exposed to cost currently characterised by overcapacity and substantial risks associated with disposal tasks which remain within pressure on margins. However, we are confident that our remit. For example, it cannot be ruled out that the market conditions will improve in the long run. dismantling of nuclear power stations will be more expensive than estimated and we will therefore have to Our biggest market risks remain unchanged in the establish higher provisions. However, we also see the ‘medium’ category. opportunity to leverage synergies and cut costs. • Regulatory and political risks. Energy supply is a long- Our risk exposure in the British capacity market also term business and companies involved in this industry are improved. The market had been suspended in November dependent on a stable, reliable framework, which has 2018, because the Court of the European Union had recently ceased to exist especially in conventional declared its approval issued by the European Commission electricity generation. Ambitious emission reduction in 2014 null and void. Following an extensive review, targets have caused the governments in our core the Commission reapproved the capacity market in markets to intervene in the energy sector repeatedly. The October 2019. This meant that capacity payments could most recent examples of this are the decisions to phase be resumed and the retained payments could be made out coal-fired power generation in Germany and the retrospectively. Netherlands, on which we provide detailed information on pages 42 et seqq. After intense negotiations, we reached Even in the present political environment, we are exposed an agreement with the government on the early closure to risks associated with, for instance, approvals when of our lignite-fired power plants and opencast mines. In building and operating production facilities. This exchange, we were promised compensation, but it will not particularly affects our opencast mines and power fully cover our expected financial burdens. Furthermore, stations. The danger here is that approvals are granted there is a risk of the actual burdens being more substantial late or not at all and that granted approvals are than planned, and, in turn, the earnings shortfalls as well. withdrawn temporarily or for good. One example is the Legislation on the coal phaseout in the Netherlands does preliminary halt to the clearance of Hambach Forest not provide for compensating the affected power ordered by the Münster Higher Administrative Court in producers at all. Despite this, we are pushing for October 2018, which curtailed the continued operation compensation for our financial disadvantages and will of the Hambach opencast mine. However, the suit take legal recourse if necessary. pending before the Münster Higher Administrative Court should lose importance as we have reached an agreement on the preservation of the forest with the government. 88 RWE Annual Report 2019Combined review of operations > Development of risks and opportunities In Germany, we do not have to pay an apportionment We currently have low exposure to legal risks. At the end of under the Renewable Energy Act (EEG) for electricity that 2019, a claim for damages filed against us due to a failed we consume ourselves in our power stations and joint venture with the Russian Sintez Group was dismissed. opencast mines. However, the legal situation surrounding This eliminated our sole legal risk in the ‘medium’ category. the own electricity privilege is vague and requires clarification on certain points from the country’s highest • Operational risks. RWE operates technologically court, for example with regard to the EEG exemption of complex, interconnected production facilities such as leased assets. There is a danger that the options to conventional power stations, opencast mines and large- benefit from the own electricity privilege may be limited scale onshore and offshore wind farms. Damage and and that back payments may even have to be made for outages can result in substantial lost earnings. During previous years. their construction and modernisation, delays and cost increases can occur, for example due to accidents, By acquiring the renewable energy businesses of E.ON material defects, late deliveries or time-consuming and innogy, we are positioning ourselves in an area of the approval processes. Furthermore, renewable energy energy sector that is characterised by fairly stable assets run the risk of delayed commissioning being framework conditions and wide public acceptance. disadvantageous to subsidisation. We counter the However, there are regulatory risks in this area as well. described risks through diligent plant and project Adjustments to state subsidy schemes can lead to management as well as high safety standards. We also reductions in payments and new projects losing their regularly inspect and maintain our facilities. If appeal. This can lead to investment undertakings being economically viable, we take out insurance policies. broken off. It is also conceivable that firmly pledged state payments may be cut retrospectively. In the dialogue we In relation to capital expenditure, there is a risk that the maintain with policymakers, we point out that reliable return may fall short of expectations and prices paid for framework conditions are the basic precondition for acquisitions may retrospectively prove to be too high. companies to invest in building sustainable, climate- friendly Before we take investment decisions, we conduct energy infrastructure. extensive analyses to try and map the financial and strategic effects as realistically as possible. Moreover, Although our exposure to regulatory and political risks has RWE has specific accountability provisions and approval decreased, we continue to classify them as ‘high’. We processes in place to prepare and implement the ascribe the greatest importance to the burdens resulting decisions. from the German coal phaseout, which cannot be offset by compensatory payments from the state. Our business processes are supported by secure data processing systems. Nevertheless, we cannot rule out a • Legal risks. Individual RWE Group companies are lack of availability of IT infrastructure or a breach in data involved in litigation and arbitration proceedings due to security. Our high security standards are designed to their operations or the acquisition of companies. Out-of- prevent this. In addition, we regularly invest in hardware court claims have been filed against some of them. and software upgrades. Furthermore, Group companies are directly involved in various procedures with public authorities or are at least As in the previous year, our operating risks are classified affected by their outcomes. To the extent necessary, we as ‘medium’. have accrued provisions for possible losses resulting from pending proceedings before ordinary courts and arbitration courts. Risks may also result from exemptions and warranties that we granted in connection with the sale of assets. Exemptions ensure that the seller covers the risks that are identified within the scope of due diligence, the probability of occurrence of which is, however, uncertain. In contrast, warranties cover risks that are unknown at the time of sale. These hedging instruments are standard procedure in sales of companies and equity holdings. 89 • Financial risks. Market interest rates, currency exchange Collateral pledged for forward transactions can have a rates, share prices and collateral pledged for forward significant effect on our liquidity. Its level is determined by transactions can have a substantial effect on our the extent to which the contractually agreed prices deviate financial position. We are exposed to various interest rate from market quotations as of the respective cut-off date. risks. For example, rises in interest rates can lead to These differences can be substantial, especially on volatile reductions in the price of the securities we hold. This markets. In recent times, the prices of commodities of primarily relates to fixed-interest bonds. Last year, the VaR for the interest rate-related price risk of capital investments was €5 million on average at RWE AG. importance to us have fluctuated considerably, in particular those of CO2 emission allowances. This development exposes us to risks. However, this also increases the probability of receiving substantial Moreover, increases in interest rates cause our financing collateral from contracting parties, resulting in a costs to rise. We measure this risk using the Cash Flow at temporary increase in our equity. Risk (CFaR), applying a confidence level of 95 % and a holding period of one year. Our average CFaR at RWE AG Risks and opportunities from changes in the price of in 2019 was €18 million. securities are controlled by a professional fund management system. Range of action, responsibilities Furthermore, market interest rates have an effect on our and controls are set out in internal guidelines which the provisions, as they are the point of reference for the Group companies are obliged to adhere to when discount rates used for determining the net present concluding financial transactions. All financial values of obligations. This means that, all other things transactions are recorded using special software and are being equal, provisions rise when market interest rates fall monitored by RWE AG. and vice versa. On pages 144 et seqq. of the Notes, we present the effects of changes in interest rates on the net The conditions at which we can finance our business on present values of our pension obligations and on the the debt capital market are in part dependent on the nuclear and mining provisions. credit ratings we receive from international rating agencies. As set out on page 63, Moody’s and Fitch place We are exposed to foreign exchange risks primarily owing our creditworthiness in the investment grade category to our business activities in the UK and the USA. with a stable outlook. However, the agencies may change Furthermore, energy commodities such as coal and oil their assessments and lower our credit rating, which can are traded in US dollars. Companies which are overseen result in additional costs if we have to raise debt capital. by RWE AG have their currency risks managed by the This would probably also increase the liquidity parent company. RWE AG aggregates the risks to a net requirement when pledging collateral for forward financial position for each currency and hedges it if transactions. necessary. In the year being reviewed, the average VaR for RWE AG’s foreign currency position was €2 million. Our growth strategy in the renewables business envisages annual spending of €1.5 billion to €2.0 billion plus The securities we hold in our portfolio include shares. The proceeds from the sale of shares in projects. This exposes single-largest position is currently the 15 % stake in E.ON, us to the risk of a timing offset between fund procurement which had a fair value of €3.8 billion as of the end of and fund usage: we are often bound to firm time frames 2019. Substantial changes in the quotation of the E.ON when spending capital, but the divestments necessary to share can affect our financial power significantly. Besides refinance them can be delayed or fail. In such cases, our the stake in E.ON, our assets under management include net debt would rise – at least temporarily. other substantial shareholdings. In 2019, the average VaR for the share price risk of these equities (without the As in the previous year, we classify our financial risks as stake in E.ON) was €5 million. ‘medium’. 90 RWE Annual Report 2019 Combined review of operations > Development of risks and opportunities • Creditworthiness of business partners. Our business Germany’s coal phaseout in particular has negative relations with key accounts, suppliers, trading partners consequences for us. The state compensation that we have and financial institutions expose us to credit risks. been offered does not fully cover the foreseeable damage. Therefore, we track the creditworthiness of our This discrepancy could become more significant if the transaction partners closely and assess their credit burdens we actually experience exceed our expectations. standing based on internal ratings, both before and We welcome the planning security gained due to the exit during the business relationship. Transactions that exceed roadmap. In the renewable energy business, we are also certain approval thresholds and all trading transactions exposed to regulatory risks, albeit to a lesser extent. Cuts in are subject to credit limits, which we determine before the state subsidies could cause investment projects to stop transaction is concluded and adjust if necessary, for being worthwhile. Retrospective intervention in the subsidy instance in the event of a change in creditworthiness. At scheme could even render existing assets unprofitable. We times, we request cash collateral or bank guarantees. In have not identified any further material regulatory risks for the trading and financing business, credit risks and the the time being. Brexit is also highly unlikely to have a utilisation of the limits are measured daily. substantial impact on our business. We agree on collateral when concluding over-the-counter Besides the regulatory environment, market conditions can trading transactions. Furthermore, we enter into also change substantially. This exposes us to risks in framework agreements, e. g. those of the European particular in power production. Decreases in wholesale Federation of Energy Traders (EFET). For financial electricity prices can shrink our margins. However, prices derivatives, we make use of the German master and margins can also display positive development. In agreement for forward financial transactions or the Germany, our main market, we could benefit from master agreement of the International Swaps and temporary price spikes, which may become more frequent Derivatives Association (ISDA). given the expected shortage of conventional generation As in the past, our risks stemming from the capacity. creditworthiness of our business partners do not exceed Through extensive restructuring, ambitious efficiency- the category ‘medium’. enhancing measures and strict investing discipline, we have established a solid financial foundation for the RWE Group. • Other risks. This risk class includes reputation risks and By analysing the effects of risks on our liquidity and pursuing risks associated with non-compliance and criminal a conservative financing strategy, we ensure that we can offences. Until September 2019, this category covered meet our payment obligations punctually. We have the possibility of a failure of the asset swap with E.ON. This considerable liquid funds and great leeway in terms of debt risk, which we had classified as ‘high’ due to its huge financing, thanks to the Debt Issuance Programme, the potential damage, has since been eliminated. As a result, Commercial Paper Programme and the syndicated credit the overall risk in this category is now ‘low’. line. We budget our liquidity with foresight, based on the short, medium and long-term funding needs of our Group RWE’s risks and opportunities: general assessment by companies, and have a significant amount of minimum management. As demonstrated by the commentary in this liquidity on a daily basis. chapter, RWE’s overall risk exposure improved. The risk of our asset swap with E.ON failing has been eliminated and Thanks to our comprehensive risk management system and our operating activities will become more stable and the measures for safeguarding our financial and earning crisis-proof thanks to the large contribution to earnings power described earlier, we are confident that we can made by renewable energy. The reinstatement of the British manage the current risks to RWE. At the same time, we are capacity market is also having a positive effect. establishing the prerequisites for ensuring that this remains Nevertheless, we remain exposed to substantial risks. the case in the future. 91 Accounting-related internal control system: statements processing. The representatives of the finance, human in accordance with Section 289, Paragraph 4, and resources, procurement, trading and IT functions document Section 315, Paragraph 4 of the German Commercial whether the agreed ICS quality standards are adhered to by Code. Risks associated with financial reporting reflect the their respective areas. Our Internal Audit Department is also fact that our annual, consolidated and interim financial involved in the ICS reviews. The results of the reviews are statements may contain misrepresentations that could documented in a report to the Executive Board of RWE AG. have a significant influence on the decisions made by their addressees. For example, stated earnings that are too high The review conducted in 2019 once again demonstrated could cause capital investors to invest in the company. Our that the ICS is effective. The tests related to RWE without accounting-related Internal Control System (ICS) aims to innogy. However, our subsidiary, which has been sold in the detect potential errors and misrepresentations that result meantime, applied the audit procedure described above from non-compliance with accounting standards. The analogously. The results obtained were considered in the foundations of the ICS are our basic principles – which are assessment of the ICS of RWE. set out in RWE’s Code of Conduct and, first and foremost, include our ambition to provide complete, objective, correct, Within the scope of external reporting, the members of the clear and timely information – as well as our groupwide Executive Board of RWE AG take a half-year and full-year guidelines. Building on this, minimum requirements for the balance-sheet oath, confirming that the prescribed accounting-related IT systems are designed to ensure the accounting standards have been adhered to and that the reliability of data collection and processing. financial statements give a true and fair view of the net worth, financial position and earnings. When in session, the RWE AG is responsible for the design and monitoring of Supervisory Board‘s Audit Committee regularly concerns the ICS. These tasks are performed by our Accounting itself with the effectiveness of the ICS. Once a year, the Department. In doing so, it can rely on a groupwide set of Executive Board of RWE AG submits a report on this to the rules. On top of this, we created a committee, the objective Committee. of which is to ensure that the ICS is applied throughout the Group following uniform principles and meeting high ambitions in terms of correctness and transparency. The ICS Committee consists of representatives from the Accounting, Controlling & Risk Management and Internal Audit & Compliance departments, along with officers from the areas of human resources, procurement, trading, finance, taxes and IT, all of whom play an important role in accounting. We subject the ICS to a comprehensive review every year. As a first step, we examine whether the risk situation is presented appropriately and whether suitable controls are in place for the identified risks. In a second step, we test the effectiveness of the controls. If the ICS reviews pertain to accounting-related processes, e. g., the preparation of financial statements or consolidation, they are conducted by employees from the Accounting Department. The appropriateness and effectiveness of the controls are certified by an accounting firm for processes handled by service centres on our behalf, for example invoice 92 RWE Annual Report 2019Combined review of operations > Outlook 1.14 Outlook Our earnings forecast for 2020 already reflects the new RWE entirely. The renewable energy business that we acquired from E.ON in September 2019 is now contributing to the Group’s earnings for a full year for the first time. This will have a positive impact on adjusted EBITDA, which we estimate will amount to between €2.7 billion and €3.0 billion. This would be substantially above the €2.5 billion achieved last year. Here, we will benefit from the progressive expansion of our wind and solar power capacity. By contrast, we will probably not match the extraordinarily good energy trading performance achieved in 2019. Experts predict steady growth. Initial forecasts see the Electricity production for 2020 nearly completely sold world economy expanding by about 2.5 % in 2020, roughly forward. The development of commodity prices will depend as much as last year. The economic outlook for the on a number of factors that are very difficult to predict. Eurozone is also similar to the development in 2019, with However, it will only have a minor impact on our earnings in estimated growth of some 1 %. Experts anticipate a similar the current year, because we have sold forward nearly all gain in Germany, whereas growth in the Netherlands may well once again exceed the average of the Eurozone countries. The UK’s prospects largely depend on whether the our electricity generation for 2020 and have secured the prices of the required fuel and CO2 emission allowances. These transactions have been concluded up to three years country manages to maintain its close economic relations in advance. Therefore, the realised electricity prices can with the EU after Brexit. If so, UK GDP could post an increase differ from the current market quotations significantly. The of 1 %. The US economy is expected to expand by some 2 %. price realised for the electricity generated by our German Power consumption expected to stagnate. Our forward with long lead times, was higher for 2020 than for lignite-fired and nuclear power stations, which we sold expectations regarding this year’s electricity usage are 2019. based on the above economic outlooks. If the German economy grows as expected, demand for electricity in our Focus on completing the asset swap with E.ON and the home country should be flat relative to 2019. The agreement on the lignite phaseout. This year, we want to precondition for this is that the decline in industrial output bring the asset swap with E.ON to a rapid conclusion. Once witnessed in 2019 comes to a halt. However, as in other the continuing operations have been transferred to us, the RWE markets, Germany is also expected to feel the new RWE will also be complete in legal terms. The German dampening effects of energy savings. Electricity usage in coal phaseout will remain a central topic. Now that we have the UK should also be on a par year on year, whereas it will reached an agreement with the federal government on the probably post a slight rise in the Netherlands due to the exit conditions for our lignite power stations and opencast country’s more dynamic economy. Despite the favourable mines, the next step is to convert this agreement into a growth forecast for the USA, we anticipate that the country’s public law contract. This is the only way to give our Rhenish demand for electricity will stagnate because we expect the lignite business and its 10,000 workers certainty. need for energy for air conditioning to decline further. This is based on the assumption that summer temperatures will Financial reporting for 2020 reflects the new RWE. This be normal and therefore slightly lower than in 2019. year’s financial reporting reflects the new RWE from the outset. The renewable energy business transferred from E.ON to RWE in September 2019 and the minority interests in our Gundremmingen and Emsland nuclear power stations we received in the same month will contribute to the Group’s earnings for a full year in 2020 for the first time. The innogy operations which we will continue remain included in our figures although, legally, they still belong to the E.ON Group for the time being. 93 Earnings forecast1 € million Adjusted EBITDA of which: Core business of which: Offshore Wind Onshore Wind / Solar Hydro / Biomass / Gas Supply & Trading Coal / Nuclear Adjusted EBIT Adjusted net income 1 New segment structure; prior-year figures adjusted. 2019 actual Outlook for 2020 2,489 2,183 614 295 671 731 307 1,267 – 2,700 – 3,000 2,150 – 2,450 900 – 1,100 500 – 600 550 – 650 150 – 350 500 – 600 1,200 – 1,500 850 – 1,150 Starting in 2020, we have a new segment structure. We We anticipate adjusted net income of €850 million to eliminated the provisional items ‘innogy – continuing €1,150 million. This figure differs from net income operations’ and ‘acquired E.ON operations’ and reassigned according to IFRS in that the non-operating result, which the generation activities based on energy source. Going reflects exceptional items, and other major non-recurrent forward, we will distribute our business among the following effects as well as the applicable taxes are deducted from it. five segments: (1) Offshore Wind, (2) Onshore Wind / Solar, We did not calculate adjusted net income for the last two (3) Hydro / Biomass / Gas, (4) Supply & Trading and years because this figure would have been of limited (5) Coal / Nuclear. Segments (1) to (4) represent our core informational value due to the significant one-off effects of business. In (5), we have pooled our German electricity the asset swap with E.ON. generation from lignite, hard coal and nuclear fuel. These technologies must follow exit paths established by the The positive earnings trend is primarily due to the government, as a result of which plant dismantling and renewable energy business acquired from E.ON. As we have opencast mine recultivation will gain importance relative to been including it in our figures since 18 September 2019, it power production. Figures for 2019 will be adapted to the will contribute a full twelve months of earnings to our Group new segment structure to enable comparability. in 2020 for the first time. By contrast, RWE Supply & Trading will probably not be able to match the exceptional trading Adjusted EBITDA for fiscal 2020 forecast between performance posted last year. €2.7 billion and €3.0 billion. Our operating result should continue to improve. We expect adjusted EBITDA for 2020 Our outlook broken down by segment is as follows: in the order of €2,700 million to €3,000 million (previous year: €2,489 million), with around €2,150 million to • Offshore Wind: We anticipate that our offshore wind farm €2,450 million coming from the core business. Including business in 2020 will post adjusted EBITDA of anticipated operating depreciation and amortisation of €900 million to €1,100 million. This would represent a about €1,500 million, the Group’s adjusted EBIT is estimated significant increase over last year’s figure (€614 million), to total between €1,200 million and €1,500 million (previous which only considered three-and-a-half months of the year: €1,267 million). The earnings figures do not include acquired E.ON operations. the income from our 15 % shareholding in E.ON, which we recognise in the financial result. 94 RWE Annual Report 2019Combined review of operations > Outlook • Onshore Wind / Solar: Adjusted EBITDA recorded by our Capital expenditure on property, plant and equipment onshore wind power and photovoltaic activities is expected markedly up on previous year. Capital expenditure on to total between €500 million and €600 million, clearly property, plant and equipment and intangible assets is exceeding last year’s figure (€295 million). In addition to estimated to be much higher than in 2019 (€2,090 million). the full-year inclusion of the E.ON business for the first The full-year inclusion of the renewable energy business time, the commissioning of new generation capacity will received from E.ON will come to bear here. However, capital also contribute to the rise in earnings. expenditure on property, plant and equipment in our core business will probably increase even without this effect, • Hydro / Biomass / Gas: This segment encompasses our because we are building several large-scale wind farms, run-of-river, pumped storage, biomass and gas power for example, Triton Knoll in the British North Sea and stations. It also includes the Dutch Amer 9 and Eemshaven Big Raymond in Texas. We plan to spend €200 million to hard coal power plants, because we are increasingly €300 million outside of the core business in the Coal / Nuclear co-firing them with biomass. Furthermore, the Aberthaw segment. These funds are primarily being used to maintain hard coal-fired power station, which was decommissioned our power plants and opencast mines. at the end of 2019, is still considered in this segment. Our 37.9 % stake in Kelag, the Austrian energy utility Net debt not to exceed three times EBITDA. One of our specialising in hydroelectric power, is also reported here. key management parameters is the ratio of net debt to We expect adjusted EBITDA generated in this segment to adjusted EBITDA of the core business, also referred to as the total between €550 million and €650 million in 2020. leverage factor. This key figure is more indicative than total This would represent a decline compared to 2019 liabilities because it also reflects earning power and (€671 million). Lower payments from the British capacity therefore our ability to meet our debt obligations. We set market are the main reason. Last year, we benefited from the upper limit for the leverage factor at 3.0, which we retrospective capacity payments for 2018. intend to comply with over the long term. This involves a new definition of net debt: in the future, it will no longer contain • Supply & Trading: Starting in 2020, this segment also our provisions for mining damage, which essentially cover includes innogy’s German and Czech gas storage our obligations to recultivate opencast mining areas. The facilities. We expect Supply & Trading to achieve annual same applies to the assets we use to cover these provisions. average adjusted EBITDA in the order of €250 million These assets include our 15 % stake in E.ON and the over the long term. This figure should usually range €2.6 billion claim for damages from the lignite phaseout, between €150 million and €350 million. Following the which was recognised in net debt in 2019. exceptionally strong earnings posted in 2019 (€731 million), we anticipate a figure within the aforementioned range Dividend for 2020. RWE AG’s dividend policy will remain in 2020. in line with the principle of economic sustainability. The Executive Board intends to pay a dividend of €0.85 per share • Coal / Nuclear: Our German lignite, hard coal and nuclear for fiscal 2020, which is slightly higher than for 2019. It is power stations as well as lignite production in the Rhenish envisaged that the dividend payment will continue rising coal mining region are subsumed here. We expect steadily in line with the development of our core business in adjusted EBITDA in this segment to amount to €500 million the following years. to €600 million, clearly surpassing the figure achieved last year (€307 million). This is due to higher generation margins and the full-year impact on earnings of the acquired minority stakes in the Gundremmingen and Emsland nuclear power plants. 95 2 Responsibility Statement To the best of our knowledge, and in accordance with the applicable reporting principles, the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group, and the Group review of operations includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group. Essen, 27 February 2020 The Executive Board Schmitz Krebber 96 RWE Annual Report 2019 Consolidated financial statements 3.1 Income statement € million Revenue (including natural gas tax /electricity tax) Natural gas tax /electricity tax Revenue Other operating income Cost of materials Staff costs Depreciation, amortisation and impairment losses Other operating expenses Income from investments accounted for using the equity method Other income from investments Financial income Finance costs Income from continuing operations before tax Taxes on income Income from continuing operations Income from discontinued operations Income of which: non-controlling interests of which: RWE AG hybrid capital investors’ interest Note (1) (1) (1) (2) (3) (4) (5), (10) (6) (7), (12) (7) (8) (8) (9) of which: net income/income attributable to RWE AG shareholders Basic and diluted earnings per share in € (26) of which: from continuing operations in € of which: from discontinued operations in € 2019 13,277 152 13,125 4,756 9,078 2,526 3,166 3,254 321 8 688 1,626 – 752 – 92 – 660 9,816 9,156 643 15 8,498 13.82 –1.13 14.95 20181 13,547 141 13,406 630 9,998 1,895 948 906 211 – 42 472 881 49 103 – 54 1,127 1,073 679 59 335 0.54 – 0.32 0.86 1 Figures restated: Due to changes in the recognition of revenue and the cost of materials, which primarily related to derivative transactions, these two items decreased by €90 million each in the 2018 reporting period. Furthermore, the implementation of the failed own use IFRS IC agenda decision drove up revenue by €108 million and drove down the cost of materials by €149 million. This did not affect earnings because other operating expenses and other operating income declined by €44 million and €301 million in this context. 98 RWE Annual Report 2019Consolidated financial statements > Statement of comprehensive income 3.2 Statement of comprehensive income Figures stated after taxes – € million Income Actuarial gains and losses of defined benefit pension plans and similar obligations Income and expenses of investments accounted for using the equity method (pro rata) Fair valuation of equity instruments Income and expenses recognised in equity, not to be reclassified through profit or loss Currency translation adjustment Fair valuation of debt instruments Fair valuation of financial instruments used for hedging purposes Note (12) (20) (27) Income and expenses of investments accounted for using the equity method (pro rata) (12), (20) Income and expenses recognised in equity, to be reclassified through profit or loss in the future Other comprehensive income Total comprehensive income of which: attributable to RWE AG shareholders of which: attributable to RWE AG hybrid capital investors of which: attributable to non-controlling interests 2019 9,156 2018 1,073 – 639 – 1,183 130 279 – 230 1,060 27 479 – 15 1,551 1,321 10,477 9,687 15 775 13 −105 – 1,275 −8 −18 3,170 – 1 3,143 1,868 2,941 2,350 59 532 99 3.3 Balance sheet Assets € million Non-current assets Intangible assets Property, plant and equipment Investments accounted for using the equity method Other non-current financial assets Financial receivables Other receivables and other assets Income tax assets Deferred taxes Current assets Inventories Financial receivables Trade accounts receivable Other receivables and other assets Income tax assets Marketable securities Cash and cash equivalents Assets held for sale Equity and liabilities € million Equity RWE AG shareholders’ interest RWE AG hybrid capital investors’ interest Non-controlling interests Non-current liabilities Provisions Financial liabilities Income tax liabilities Other liabilities Deferred taxes Current liabilities Provisions Financial liabilities Trade accounts payable Income tax liabilities Other liabilities Liabilities held for sale Note 31 Dec 2019 31 Dec 2018 (10) (11) (12) (13) (14) (15) (16) (17) (14) (15) (18) (19) 4,809 19,097 3,236 4,391 128 3,320 264 706 2,193 12,409 1,467 400 110 946 246 824 35,951 18,595 1,585 2,359 3,621 12,756 196 3,258 3,192 1,274 28,241 64,192 1,631 2,782 1,963 7,408 101 3,609 3,523 40,496 61,513 80,108 Note 31 Dec 2019 31 Dec 2018 (20) (22) (23) (24) (25) (16) (22) (23) (24) (25) 16,945 503 17,448 8,736 940 4,581 14,257 18,936 14,3661 3,924 1,050 849 2,259 1,998 1,4971 508 1,638 27,018 20,007 2,638 1,810 2,987 193 11,588 510 19,726 64,192 2,5721 766 2,429 811 7,200 32,796 45,844 80,108 1 Figures restated: Due to the IFRS IC agenda decision of September 2019, tax balances previously stated as tax provisions are now recognised in income tax liabilities. 100 RWE Annual Report 2019 Consolidated financial statements > Cash flow statement 3.4 Cash flow statement € million Income Note (30) Depreciation, amortisation, impairment losses /write-backs Changes in provisions Changes in deferred taxes Income from disposal of non-current assets and marketable securities Other non-cash income /expenses Changes in working capital Cash flows from operating activities of continuing operations Cash flows from operating activities of discontinued operations Cash flows from operating activities Intangible assets/property, plant and equipment Capital expenditure Proceeds from disposal of assets Acquisitions, investments Capital expenditure Proceeds from disposal of assets /divestitures 2019 – 660 2,754 2,825 44 – 77 – 3,077 – 2,786 – 977 – 546 – 1,523 2018 – 54 958 – 418 – 97 – 6 – 245 4,473 4,611 2,037 6,648 – 1,767 – 1,050 72 – 4 623 35 – 196 39 Changes in marketable securities and cash investments 1,592 – 1,704 Cash flows from investing activities of continuing operations (before initial/subsequent transfer to plan assets) Initial /subsequent transfer to plan assets Cash flows from investing activities of continuing operations (after initial/subsequent transfer to plan assets) Cash flows from investing activities of discontinued operations Cash flows from investing activities (after initial/subsequent transfer to plan assets) Net change in equity (incl. non-controlling interests) Changes in hybrid capital Dividends paid to RWE AG shareholders and non-controlling interests Issuance of financial debt Repayment of financial debt Cash flows from financing activities of continuing operations Cash flows from financing activities of discontinued operations Cash flows from financing activities Net cash change in cash and cash equivalents Effects of changes in foreign exchange rates and other changes in value on cash and cash equivalents Net change in cash and cash equivalents Cash and cash equivalents at beginning of the reporting period of which: reported as ‘Assets held for sale’ Cash and cash equivalents at beginning of the reporting period as per the consolidated balance sheet Cash and cash equivalents at the end of the reporting period of which: reported as ‘Assets held for sale’ Cash and cash equivalents at end of the reporting period as per the consolidated balance sheet 101 516 – 42 474 – 1,203 – 729 – 60 – 869 – 560 15,876 – 14,198 189 35 224 – 2,028 15 – 2,013 5,225 1,702 3,523 3,212 20 – 2,876 – 123 – 2,999 – 1,405 – 4,404 721 – 1,025 1,580 – 2,835 – 1,559 569 – 990 1,254 13 1,267 3,958 25 3,933 5,225 1,702 3,192 3,523 3.5 Statement of changes in equity Statement of changes in equity € million Subscribed capital of RWE AG Addi tional paid-in capital of RWE AG Retained earnings and distributable profit Note (20) Balance at 1 Jan 2018 Capital paid out Dividends paid1 Income Other comprehensive income Total comprehensive income Other changes Balance at 31 Dec 2018 Capital paid out/paid in Dividends paid1 Income Other comprehensive income Total comprehensive income Other changes Balance at 31 Dec 2019 1 Following reclassification of non-controlling interests to liabilities held for sale as per IAS 32. 1,574 2,385 2,393 36 6,723 – 922 335 – 1,126 – 791 459 1,139 – 430 8,498 – 125 8,373 – 174 8,908 1,574 2,385 1,574 2,385 Accumulated other comprehensive Income Currency trans lation adjust ments Fair value measurement of financial instruments RWE AG Non-controlling Total interests RWE AG share- holders’ interest hybrid capital investors’ interest Used for hedging purposes Debt instruments measured at fair value through comprehensive other income 31 304 – 19 – 19 285 793 793 1,078 – 14 – 14 17 28 28 45 3,174 3,174 126 3,336 493 493 – 874 2,955 – 922 335 2,015 2,350 585 8,736 – 430 8,498 1,189 9,687 – 1,048 16,945 940 – 60 59 59 1 940 – 869 – 61 15 15 – 25 4,283 – 29 – 506 679 – 147 532 301 4,581 6 – 460 643 132 775 – 4,399 503 11,946 – 29 – 1,488 1,073 1,868 2,941 887 14,257 – 863 – 951 9,156 1,321 10,477 – 5,472 17,448 102 RWE Annual Report 2019Note (20) Balance at 1 Jan 2018 Capital paid out Dividends paid1 Income Other comprehensive income Total comprehensive income Other changes Balance at 31 Dec 2018 Capital paid out/paid in Dividends paid1 Income Other comprehensive income Total comprehensive income Other changes Balance at 31 Dec 2019 Statement of changes in equity € million Subscribed Addi tional paid-in capital of RWE AG capital of RWE AG Retained earnings and distributable profit Consolidated financial statements > Statement of changes in equity Accumulated other comprehensive Income Currency trans lation adjust ments Fair value measurement of financial instruments Debt instruments measured at fair value through other comprehensive income Used for hedging purposes RWE AG share- holders’ interest RWE AG hybrid capital investors’ interest Non-controlling interests Total 940 – 60 59 59 1 940 – 869 – 61 15 15 – 25 4,283 – 29 – 506 679 – 147 532 301 4,581 6 – 460 643 132 775 – 4,399 503 11,946 – 29 – 1,488 1,073 1,868 2,941 887 14,257 – 863 – 951 9,156 1,321 10,477 – 5,472 17,448 1,574 2,385 2,393 304 31 36 6,723 1,574 2,385 – 922 335 – 1,126 – 791 459 1,139 – 430 8,498 – 125 8,373 – 174 8,908 – 19 – 19 285 793 793 1,078 – 14 – 14 17 28 28 45 3,174 3,174 126 3,336 493 493 – 874 2,955 1 Following reclassification of non-controlling interests to liabilities held for sale as per IAS 32. 1,574 2,385 – 922 335 2,015 2,350 585 8,736 – 430 8,498 1,189 9,687 – 1,048 16,945 103 3.6 Notes Basis of presentation RWE AG, headquartered at Altenessener Straße 35 in 45141 Essen, euros (€ million). Due to calculation procedures, rounding differences Germany, is the parent company of the RWE Group (‘RWE’ or ‘Group’). may occur. RWE is a producer of power using renewable and conventional technologies operating mainly in Europe and the USA. These consolidated financial statements were prepared for the fiscal year from 1 January to 31 December 2019. The consolidated financial statements for the period ended 31 December 2019 were approved for publication on 27 Febru- The Executive Board of RWE AG is responsible for the preparation, ary 2020 by the Executive Board of RWE AG. The statements completeness and accuracy of the consolidated financial state- were prepared in accordance with the International Financial ments and the Group review of operations, which is combined with Reporting Standards (IFRSs) applicable in the European Union the review of operations of RWE AG. (EU), as well as in accordance with the supplementary accounting regulations applicable pursuant to Sec. 315e, Para. 1 of the German We employ internal control systems, uniform groupwide directives, Commercial Code (HGB). The previous year’s figures were calculated and programmes for basic and advanced staff training to ensure according to the same principles. that the consolidated financial statements and combined review of A statement of changes in equity has been disclosed in addition to regulations and the internal guidelines as well as the reliability and the income statement, the statement of comprehensive income, the viability of the control systems are continuously monitored balance sheet and the cash flow statement. The Notes also include throughout the Group. operations are adequately prepared. Compliance with legal segment reporting. Several balance sheet and income statement items have been Transparency Act (KonTraG), the Group’s risk management system combined in the interests of clarity. These items are stated and enables the Executive Board to identify risks at an early stage and explained separately in the Notes to the financial statements. The take countermeasures, if necessary. In line with the requirements of the German Corporate Control and income statement is structured according to the nature of expense method. The consolidated financial statements, the combined review of operations, and the independent auditors’ report are discussed in The consolidated financial statements have been prepared in euros. detail by the Audit Committee and at the Supervisory Board’s Unless specified otherwise, all amounts are stated in millions of meeting on financial statements with the independent auditors present. The results of the Supervisory Board’s examination are presented in the report of the Supervisory Board on page 20 et seqq. 104 RWE Annual Report 2019Consolidated financial statements > Notes Scope of consolidation In addition to RWE AG, the consolidated financial statements contain The number of fully consolidated companies changed compared to all material German and foreign companies which RWE AG controls the previous year, primarily due to the acquisition of the E.ON directly or indirectly. In determining whether there is control, in operations that were taken over (first-time consolidations) and the addition to voting rights, other rights in the company contracts or disposal of the discontinued innogy operations (deconsolidations). articles of incorporation and potential voting rights are also taken into consideration. The number of companies accounted for using the equity method decreased in fiscal 2018 due to the asset swap agreed upon with Material associates are accounted for using the equity method, and E.ON and the associated assignment to discontinuing operations. principal joint arrangements are accounted for using the equity method or as joint operations. Furthermore, two companies are presented as joint operations (previous year: six). Of these, Greater Gabbard Offshore Winds Associates are companies on which RWE AG exercises a significant Limited, UK, is a material joint operation of the RWE Group. Greater influence on the basis of voting rights between 20 % and 50 % or Gabbard holds a 500 MW offshore wind farm, which the continued on the basis of contractual agreements. In classifying joint innogy operations operate together with Scottish and Southern arrangements which are structured as independent vehicles, as Energy (SSE) Renewables Holdings. Innogy Renewables UK owns joint operations or as joint ventures, other facts and circumstances – 50 % of the shares and receives 50 % of the power generated in particular delivery relationships between the independent vehicle (including green power certificates). The wind farm is a key element in and the parties participating in such – are taken into consideration, the offshore portfolio of the segment innogy – continuing operations. in addition to the legal form and contractual agreements. First-time consolidation and deconsolidation generally take place Investments in subsidiaries, joint ventures, joint operations or when control is obtained or lost. associates which are of secondary importance from a Group perspective are accounted for in accordance with IFRS 9. Sales of shares which led to a change of control resulted in sales proceeds from disposals amounting to €18 million, which were The list of Group shareholdings pursuant to Sec. 313, Para. 2 of the reported in other operating income (previous year: –€46 million). German Commercial Code (HGB) is presented on page 176 et seqq. Furthermore, the €8,258 million deconsolidation gain on the sale of The following summaries show the changes in the number of fully from discontinued operations’ line item on the income statement. the discontinued innogy operations was recognised in the ‘income consolidated companies and joint ventures and investments accounted for using the equity method: Within the framework of purchases and sales of subsidiaries and Germany Abroad Total sales prices amounted to €14,296 million (previous year: other business units which resulted in a change of control, purchase prices amounted to €3,592 million (previous year: €27 million) and Number of fully consolidated companies 1 Jan 2019 First-time consolidation 141 7 215 105 356 112 Deconsolidation – 90 – 115 – 205 Mergers 31 Dec 2019 – 4 201 – 4 259 58 Number of companies accounted for using the equity method 1 Jan 2019 Acquisitions 31 Dec 2019 Germany Abroad Total 9 2 11 12 8 20 21 10 31 €13 million). The sales prices were paid using equity interests (previous year: solely cash) and offset against other payments within the scope of the transaction agreed with E.ON. The latter also applies to the purchase prices with the exception of €25 million which was paid in cash and cash equivalents (in the previous year, all purchase prices were paid in cash). In relation to this, cash and cash equivalents (excluding assets held for sale) were acquired in the amount of €113 million (previous year: €0 million) and were disposed of in the amount of €1,250 million (previous year: €0 million). 105 Acquisitions Acquired E.ON operations If all business combinations in the period under review had been effected as of 1 January 2019, the Group’s adjusted EBITDA would have amounted to €2,982 million and the Group’s revenue would On 18 September 2019, as part of the extensive asset swap agreed have amounted to €13,904 million. upon with E.ON SE on 12 March 2018, RWE gained control of major parts of E.ON’s former renewable energy business. The acquired operations are active in onshore and offshore wind as well as in the photovoltaic business in Europe and the USA. Disposals and discontinued operations innogy – discontinued operations The assets and liabilities acquired within the scope of the transaction are presented in the following table: On 18 September 2019, RWE sold the parts of innogy stated as Balance-sheet items € million Non-current assets Intangible assets Property, plant and equipment Other non-current assets Current assets Non-current liabilities Provisions Financial liabilities Other non-current liabilities Current liabilities Net assets Purchase price Goodwill ‘innogy – discontinued operations’ since 30 June 2018 to E.ON SE as part of the extensive asset swap contractually agreed upon with E.ON SE on 12 March 2018. This largely related to the lion’s share of the grid and retail business. IFRS carrying amounts (fair value) at initial consolidation 10,292 The transaction also involved E.ON acquiring the stake in the Czech 1,951 6,332 2,009 distribution system operator innogy Grid Holding (IGH) previously held by innogy. RWE had acquired innogy SE’s majority interest in IGH in the middle of February 2019 to this end. The execution of the agreement with E.ON triggered a right of first refusal of IGH 1,886 co-shareholder Macquarie Infrastructure and Real Assets (MIRA) 3,979 613 2,447 919 5,260 2,939 3,592 653 managed consortium of investors. MIRA exercised this right of first refusal on 29 April 2019. As a result, MIRA purchased the 50.04 % stake at the terms and conditions at which it would have been sold by RWE to a third party, which in this case would have been E.ON. The sale to MIRA closed on 30 September 2019. Due to the unchanged overall plan to divest the grid and retail business, IGH was stated under ‘innogy – discontinued operations’ until it was deconsolidated on 30 September 2019. In late August 2019, RWE acquired innogy’s stake in the investment in the Slovak power and gas utility Východoslovenská energetika Holding a.s., (VSEH), which is fully consolidated and also stated as The fair value of the receivables included in non-current and current part of the discontinued operations the stake in VSEH was not yet assets amounted to €1,663 million (of which €834 million were transferred to E.ON on 18 September 2019. However, since the financial receivables and €829 million were trade accounts envisaged sale of the VSE Group is part of the overall plan to divest receivable) and corresponded to the gross amount of the receivables the grid and retail business, the VSE Group will continue to be stated that are fully recoverable. under the discontinued operations as of 31 December 2019, the discontinued operations are thus solely comprised of the VSE Group. The acquired E.ON operations have contributed €374 million to the Group’s revenue and €86 million to the Group’s earnings since they The elimination bookings within the scope of the consolidation of were consolidated for the first time. expenses and income for the intragroup deliveries and services existing so far, which will be continuing either with innogy or with The purchase price amounted to €3,592 million. The payment of third parties after the deconsolidation of the innogy assets that are the purchase price was made using €25 million in cash and cash to be transferred, were fully assigned to the discontinued operations. equivalents, with the remainder being offset against other payments within the scope of the transaction agreed upon with E.ON. Goodwill is primarily based on expected future use and synergy effects. The initial accounting of the business combination has not been finalised due to the complex structure and the size of the transac- tion, in particular because the material information could not be exchanged until the antitrust restrictions had been removed. 106 RWE Annual Report 2019 Consolidated financial statements > Notes Major key figures of the activities of the discontinued operations are Key figures of discontinued operations 2019 2018 presented in the following tables: 31 Dec 2019 Disposals Q3 2019 31 Dec 2018 Key figures of discontinued operations € million Non-current assets € million Revenue1 Other income2 Expenses3 Income of discontinued operations before tax Taxes on income 23,890 34,077 1,518 1,503 23,214 33,877 2,194 1,703 636 576 Intangible assets 405 10,434 10,716 Deconsolidation gain 8,258 Property, plant and equipment Other non-current assets 734 14,147 14,000 8 5,085 5,363 Income of discontinued operations 9,816 1,127 1 Including income with continuing operations in the amount of €1,402 million (previous year: €2,570 million). 2 Including income with continuing operations in the amount of 1,147 29,666 30,079 €108 million (previous year: €266 million). 3 Including expenses with continuing operations in the amount of €9,772 million (previous year: €13,835 million). Current assets 127 12,763 10,417 Non-current liabilities Provisions The deconsolidation gain amounted to €8,258 million and is stated in the ‘Income from discontinued operations’ line item in the income statement. It includes a deconsolidation gain of €140 million from 9 5,212 4,557 the sale of IGH. Financial liabilities 225 13,521 14,147 Other non-current liabilities 131 365 2,622 3,065 21,355 21,769 In the previous year, accumulated other comprehensive income from discontinued operations amounted to – €773 million. Of the share of total comprehensive income attributable to RWE AG shareholders, €218 million (previous year: €2,267 million) were Current liabilities 145 13,443 11,027 allocable to continuing operations and €9,469 million (previous year: €83 million) were allocable to discontinued operations. The impairment test performed for the discontinued operations as a whole in accordance with IFRS 5 as of 31 December 2019 did not reveal a need for impairment. Due to contractual arrangements, RWE retains control of the main activities of the innogy operations remaining with RWE over the long term (the renewable energy business, the gas storage business and the stake in the Austrian power utility Kelag). Furthermore, RWE is entitled to the proceeds from the development of the value of these business activities since 1 January 2018. Therefore, they are still fully consolidated at RWE and stated as part of the ‘innogy – continuing operations’ segment. 107 Consolidation principles Expenses and income as well as receivables and payables between consolidated companies are eliminated; intra-group profits and The financial statements of German and foreign companies losses are eliminated. included in the scope of the Group’s financial statements are prepared using uniform accounting policies. On principle, subsidiar- For investments accounted for using the equity method, goodwill is ies whose fiscal years do not end on the Group’s balance-sheet date not reported separately, but rather included in the value recognised (31 December) prepare interim financial statements as of this date. for the investment. In other respects, the consolidation principles Three subsidiaries have a different balance-sheet date of 31 March described above apply analogously. If impairment losses on the (previous year: three). Different fiscal years compared to the equity value become necessary, we report such under income from calendar year stem from tax-related reasons or country-specific investments accounted for using the equity method. The financial regulations. statements of investments accounted for using the equity method are prepared using uniform accounting policies. Business combinations are reported according to the acquisition method. This means that capital consolidation takes place by offsetting the purchase price, including the amount of the non- controlling interests, against the acquired subsidiary’s revalued net Foreign currency translation assets at the time of acquisition. In doing so, the non-controlling In their individual financial statements, the companies measure interests can either be measured at the prorated value of the non-monetary foreign currency items at the balance-sheet date subsidiary’s identifiable net assets or at fair value. The subsidiary’s using the exchange rate in effect on the date they were initially identifiable assets, liabilities and contingent liabilities are measured recognised. Monetary items are converted using the exchange rate at full fair value, regardless of the amount of the non-controlling valid on the balance-sheet date. Exchange rate gains and losses interests. Intangible assets are reported separately from goodwill if from the measurement of monetary balance-sheet items in foreign they are separable from the company or if they stem from a currency occurring up to the balance-sheet date are recognised on contractual or other right. In accordance with IFRS 3, no new the income statement. restructuring provisions are recognised within the scope of the purchase price allocation. If the purchase price exceeds the Functional foreign currency translation is applied when converting revalued prorated net assets of the acquired subsidiary, the the financial statements of companies outside of the Eurozone. As difference is capitalised as goodwill. If the purchase price is lower, the principal foreign enterprises included in the consolidated financial the difference is included in income. statements conduct their business activities independently in their In the event of deconsolidation, the related goodwill is derecognised euros in the consolidated financial statements using the average with an effect on income. Changes in the ownership share which do exchange rate prevailing on the balance-sheet date. This also not alter the ability to control the subsidiary are recognised without applies for goodwill, which is viewed as an asset of the economically an effect on income. By contrast, if there is a change in control, the autonomous foreign entity. We report differences to previous-year remaining shares are revalued with an effect on income. translations in other comprehensive income without an effect on national currencies, their balance-sheet items are translated into income. Expense and income items are translated using annual average exchange rates. When translating the adjusted equity of foreign companies accounted for using the equity method, we follow the same procedure. 108 RWE Annual Report 2019Consolidated financial statements > Notes The following exchange rates (among others) were used as a basis for foreign currency translations: Exchange rates in € 1 US dollar 1 pound sterling 100 Czech korunas 1 Polish zloty 1 Danish crown 1 Swedish crown 1 Norwegian crown Average Year-end 2019 2018 31 Dec 2019 31 Dec 2018 0.89 1.14 3.90 0.23 0.13 0.09 0.10 0.85 1.13 3.89 0.23 0.13 0.10 0.10 0.89 1.18 3.94 0.23 0.13 0.10 0.10 0.87 1.12 3.89 0.23 0.13 0.10 0.10 Accounting policies If the intangible asset is a part of a cash-generating unit, the impairment loss is calculated based on the recoverable amount of Intangible assets are accounted for at amortised cost. With the this unit. If goodwill was allocated to a cash-generating unit and exception of goodwill, all intangible assets have finite useful lives the carrying amount of the unit exceeds the recoverable amount, and are amortised using the straight-line method. Useful lives and the allocated goodwill is initially written down by the difference. methods of amortisation are reviewed on an annual basis. Impairment losses which must be recognised in addition to this are taken into account by reducing the carrying amount of the other Software for commercial and technical applications is amortised assets of the cash-generating unit on a prorated basis. If the reason over three to five years. ‘Operating rights’ refer to the entirety of the for an impairment loss recognised in prior periods has ceased to permits and approvals required for the operation of a power plant. exist, a write-back to intangible assets is performed. The increased Such rights are generally amortised over the economic life of the carrying amount resulting from the write-back may not, however, power plant, using the straight-line method. Capitalised customer exceed the amortised cost. Impairment losses on goodwill are not relations are amortised over a maximum period of up to ten years. reversed. Goodwill is not amortised; instead it is subjected to an impairment Property, plant and equipment is stated at depreciated cost. test once every year, or more frequently if there are indications of Borrowing costs are capitalised as part of the asset’s cost, if they are impairment. incurred directly in connection with the acquisition or production of a ‘qualified asset’. What characterises a qualified asset is that a Development costs are capitalised if a newly developed product considerable period of time is required to prepare it for use or sale. or process can be clearly defined, is technically feasible and it is the If necessary, the cost of property, plant and equipment may contain company’s intention to either use the product or process itself or the estimated expenses for the decommissioning of plants or site market it. Furthermore, asset recognition requires that there be a restoration. Maintenance and repair costs are recognised as expenses. sufficient level of certainty that the development costs lead to future cash inflows. Capitalised development costs are amortised over the With the exception of land and leasehold rights, as a rule, property, period during which the products are expected to be sold. Research plant and equipment is depreciated using the straight-line method, expenditures are recognised as expenses in the period in which they unless in exceptional cases another depreciation method is better are incurred. suited to the usage pattern. The depreciation methods are reviewed annually. We calculate the depreciation of RWE’s typical property, An impairment loss is recognised for an intangible asset if the recov- plant and equipment according to the following useful lives, which erable amount of the asset is less than its carrying amount. A special apply throughout the Group and are also reviewed annually: regulation applies for cases when the asset is part of a cash-generat- ing unit. Such units are defined as the smallest identifiable group of assets which generates cash inflows; these inflows must be largely independent of cash inflows from other assets or groups of asset. 109 Useful life in years Buildings Technical plants Thermal power plants Wind turbines Gas and water storage facilities Mining facilities Mining developments Other renewable generation facilities The initial measurement of other financial assets occurs at the settlement date. Shares in non-consolidated subsidiaries and in associates or joint ventures are recognised at fair value through profit or loss as long as such can be determined reliably. Other invest- ments are also recognised at fair value. The option to state changes 7 – 50 6 – 40 Up to 25 in fair value in other comprehensive income is exercised for some of 10 – 60 3 – 25 44 – 52 5 – 50 these equity instruments. Non-current securities are accounted for at fair value and changes in value are recognised through profit or loss or other comprehensive income depending on their classifica- tion. Gains and losses on sales of equity instruments, for which the option to state changes in fair value in other comprehensive income is exercised, remain in equity and are not reclassified to the income statement. An impairment in the amount of the expected credit Within the scope of the annual useful life review, the useful lives of losses is recognised through profit or loss for debt instruments that wind turbines were adjusted to up to 25 years (previously up to are recognised at fair value through other comprehensive income. 23 years). This change in estimate was made prospectively as of 1 October 2019. This resulted in a reduction of depreciation and Receivables are comprised of financial receivables, trade amortisation of €4 million for 2019. Depreciation and amortisation accounts receivable and other receivables. Aside from financial are expected to be reduced by €17 million for 2020. derivatives, receivables and other assets are stated at amortised cost minus a risk provision in the amount of the expected losses. Property, plant and equipment also include right-of-use assets resulting from leases of which RWE is the lessee. These right-of-use Loans reported under financial receivables are stated at amortised assets are measured at cost. The cost results from the present value cost minus a risk provision in the amount of the expected losses. of the lease instalments, adjusted by advance payments, initial Loans with interest rates common in the market are shown on the direct costs and potential dismantling obligations and corrected for balance sheet at nominal value; as a rule, however, non-interest or received lease incentives. Right-of-use assets are depreciated using low-interest loans are disclosed at their present value discounted the straight-line method over the lease term or the expected useful using an interest rate commensurate with the risks involved. life, whichever is shorter. For short-term leases and leases for low-value assets, lease CO2 emission allowances and certificates for renewable energies are accounted for as intangible assets and reported under other instalments are recognised as an expense over the lease term. For assets. Allowances which are purchased and allowances allocated operating leases of which RWE is the lessor, the minimum lease free of charge are both stated at cost and are not amortised. instalments are recognised as income over the lease term. Impairment losses and write-backs on property, plant and equipment amount in the separate IFRS financial statements and tax bases, are recognised according to the principles described for intangible and from consolidation procedures. Deferred tax assets also include Deferred taxes result from temporary differences in the carrying assets. tax reduction claims resulting from the expected utilisation of existing loss carryforwards in subsequent years. Deferred taxes are Investments accounted for using the equity method are initially capitalised if it is sufficiently certain that the related economic accounted for at cost and thereafter based on the carrying amount advantages can be used. Their amount is assessed with regard to of their prorated net assets. The carrying amounts are increased or the tax rates applicable or expected to be applicable in the specific reduced annually by prorated profits or losses, dividends and all country at the time of realisation. The tax regulations valid or other changes in equity. Goodwill is not reported separately, but adopted as of the balance-sheet date are key considerations in this rather included in the recognised value of the investment. Goodwill regard. Deferred tax assets and deferred tax liabilities are netted out is not amortised. An impairment loss is recognised for investments for each company and/or tax group. accounted for using the equity method, if the recoverable amount is less than the carrying amount. 110 RWE Annual Report 2019 Consolidated financial statements > Notes Inventories are assets which are held for sale in the ordinary course Cash and cash equivalents consist of cash on hand, demand of business (finished goods and goods for resale), which are in the deposits and current fixed-interest securities with a maturity of process of production (work in progress – goods and services) or three months or less from the date of acquisition. which are consumed in the production process or in the rendering of services (raw materials including nuclear fuel assemblies and Assets are stated under Assets held for sale if they can be sold in excavated earth for lignite mining). their present condition and their sale is highly probable within the Insofar as inventories are not acquired primarily for the purpose of asset groups (‘disposal groups’) or operations (‘discontinued realising a profit on a short-term resale transaction, they are carried operations’). Liabilities intended to be sold in a transaction together at the lower of cost or net realisable value. Production costs reflect with assets are a part of a disposal group or discontinued operations, the full costs directly related to production; they are determined and are reported separately under Liabilities held for sale. next twelve months. Such assets may be certain non-current assets, based on normal capacity utilisation and, in addition to directly allocable costs, they also include adequate portions of required Non-current assets held for sale are no longer depreciated or materials and production overheads. They also include production- amortised. They are recognised at fair value less costs to sell, as related depreciation. Borrowing costs, however, are not capitalised long as this amount is lower than the carrying amount. as part of the cost. The determination of cost is generally based on average values. The usage of excavated earth for lignite mining is Gains or losses on the valuation of specific assets held for sale and of calculated using the ‘first in – first out’ method (FIFO). disposal groups are stated under income from continuing operations If the net realisable value of inventories written down in earlier discontinued operations and on certain assets of a discontinued periods has increased, the reversal of the write-down is recognised operation, which are not subject to the valuation rules pursuant to as a reduction of the cost of materials. IFRS 5, are stated under income from discontinued operations. until final completion of the sale. Gains or losses on the valuation of Nuclear fuel assemblies are stated at depreciated cost. Deprecia- The stock option plans are accounted for as cash-settled share- tion is determined by operation and capacity, based on consump- based payment. At the balance-sheet date, a provision is recog- tion and the reactor’s useful life. nised in the amount of the prorated fair value of the payment Inventories which are acquired primarily for the purpose of realising on income. The fair value of options is determined using generally a profit on a short-term resale transaction are recognised at fair accepted valuation methodologies. obligation. Changes in the fair value are recognised with an effect value less costs to sell. Changes in value are recognised with an effect on income. Provisions are recognised for all legal or constructive obligations to third parties which exist on the balance-sheet date and stem Securities classified as current marketable securities essentially from past events which will probably lead to an outflow of resources, consist of marketable securities held in special funds as well as and the amount of which can be reliably estimated. Provisions are fixed-interest securities which have a maturity of more than three carried at their prospective settlement amount and are not offset months and less than one year from the date of acquisition. Securities against reimbursement claims. If a provision involves a large held in special funds are measured at fair value through profit or number of items, the obligation is estimated by weighting all possible loss or at fair value through other comprehensive income. The outcomes by their probability of occurrence (expected value method). transaction costs directly associated with the acquisition of these securities are included in the initial measurement, which occurs on All non-current provisions are recognised at their prospective their settlement date. Unrealised gains and losses are recognised settlement amount, which is discounted as of the balance-sheet through profit or loss or other comprehensive income, with due date. In the determination of the settlement amount, any cost consideration of any deferred taxes depending on the underlying increases likely to occur up until the time of settlement are taken valuation category. An impairment in the amount of the expected into account. credit losses is recognised through profit or loss for debt instru- ments that are stated at fair value through other comprehensive income. Changes included in other comprehensive income are recognised through profit or loss on disposal of such instruments. 111 If necessary, the cost of property, plant and equipment may contain Waste management provisions in the nuclear energy sector are the estimated expenses for the decommissioning of plants or site based on obligations under public law, in particular the German restoration. Decommissioning, restoration and similar provisions Atomic Energy Act, and on restrictions from operating licenses. are recognised for these expenses. If changes in the discount rate These provisions are measured using estimates, which are based or changes in the estimated timing or amount of the payments on and defined in contracts as well as on information from internal result in changes in the provisions, the carrying amount of the and external specialists (e. g. experts). respective asset is increased or decreased by the corresponding amount. If the decrease in the provision exceeds the carrying Obligations existing as of the balance-sheet date and identifiable amount, the excess is recognised immediately through profit or loss. when the balance sheet is being prepared are recognised as provisions for mining damage to cover land recultivation and As a rule, releases of provisions are credited to the expense account remediation of mining damage that has already occurred or been on which the provision was originally recognised. caused. The provisions must be recognised due to obligations under public law, such as the German Federal Mining Act, and formulated, Provisions for pensions and similar obligations are recognised for above all, in operating schedules and water law permits. Provisions defined benefit plans. These are obligations of the company to pay are generally fully related to the degree of mining in question. Such future and ongoing post-employment benefits to entitled current provisions are measured at full expected cost or according to and former employees and their surviving dependents. In particular, estimated compensation payments. Cost estimates are based on the obligations refer to retirement pensions. Individual commit- external expert opinions to a significant extent. ments are generally oriented to the employees’ length of service and compensation. A provision is recognised to cover the obligation to submit CO2 emission allowances and certificates for renewable energies to the Provisions for defined benefit plans are based on the actuarial present value of the respective obligation. This is measured using the projected unit credit method. This method not only takes into respective authorities; this provision is primarily measured at the secured forward price of the CO2 allowances or certificates for renewable energies. If a portion of the obligation is not covered with account the pension benefits and benefit entitlements known as of allowances that are available or have been purchased forward, the the balance-sheet date, but also anticipated future increases in provision for this portion is measured using the market price of the salaries and pension benefits. The calculation is based on actuarial emission allowances or certificates for renewable energies on the reports, taking into account appropriate biometric parameters (for reporting date. Germany, in particular the ‘Richttafeln 2018 G’ by Klaus Heubeck, and the Standard SAPS Table S2PA of the current year for the United Liabilities consist of financial liabilities, trade accounts payable, Kingdom, taking into consideration future changes in mortality rates). income tax liabilities and other liabilities. Upon initial recognition, The provision derives from the balance of the actuarial present these are generally stated at fair value including transaction costs value of the obligations and the fair value of the plan assets. The and are carried at amortised cost in the periods thereafter (except service cost is disclosed in staff costs. Net interest is included in the for derivative financial instruments). Lease liabilities are measured financial result. at the present value of the future lease payments. For subsequent measurements, the lease payments are divided into the financing Gains and losses on the revaluation of net defined benefit liability or costs and repayment portion of the outstanding debt. Financing asset are fully recognised in the fiscal year in which they occur. costs are distributed over the lease term in such a manner that a They are reported outside of profit or loss, as a component of other steady interest rate is created for the outstanding debt. If uncertain comprehensive income in the statement of comprehensive income, income tax items are recognised in income tax liabilities because and are immediately assigned to retained earnings. They remain they are probable, the former are generally measured at the most outside profit or loss in subsequent periods as well. likely amount. Measurement at expected value is only considered in In the case of defined contribution plans, the enterprise’s obligation exceptional cases. is limited to the amount it contributes to the plan. Contributions to Moreover, other liabilities also include contract liabilities. the plan are reported under staff costs. A contract liability is the obligation of the Group to transfer goods or services to a customer, for which we have already received consideration or for which the consideration is already due. 112 RWE Annual Report 2019Consolidated financial statements > Notes Derivative financial instruments are recognised as assets or Only the effective portion of a hedge is recognised in accordance liabilities and measured at fair value, regardless of their purpose. with the preceding rules. The ineffective portion is recognised Changes in this value are recognised with an effect on income, immediately on the income statement with an effect on income. unless the instruments are used for hedge accounting purposes. In such cases, recognition of changes in the fair value depends on the Contracts on the receipt or delivery of non-financial items in type of hedging transaction. accordance with the company’s expected purchase, sale or usage requirements (own-use contracts) are not accounted for as Fair value hedges are used to hedge assets or liabilities carried on derivative financial instruments, but rather as executory contracts. the balance sheet against the risk of a change in their fair value. If the contracts contain embedded derivatives, the derivatives are The following applies: changes in the fair value of the hedging accounted separately from the host contract, insofar as the instrument and the fair value of the respective underlying transactions economic characteristics and risks of the embedded derivatives are recognised in the same line item on the income statement. are not closely related to the economic characteristics and risks of Hedges of unrecognised firm commitments are also recognised as the host contract. Written options to buy or sell a non-financial item fair value hedges. Changes in the fair value of the firm commitments which can be settled in cash are not own-use contracts. with regard to the hedged risk result in the recognition of an asset or liability with an effect on income. Contingent liabilities are possible obligations to third parties or existing obligations which will probably not lead to an outflow of Cash flow hedges are used to hedge the risk of variability in future economic benefits or the amount of which cannot be measured cash flows related to an asset or liability carried on the balance reliably. Contingent liabilities are only recognised on the balance sheet or related to a highly probable forecast transaction. If a cash sheet if they were assumed within the framework of a business flow hedge exists, unrealised gains and losses from the hedging combination. The amounts disclosed in the Notes correspond to the instrument are initially stated as other comprehensive income. Such exposure at the balance-sheet date. gains or losses are only included on the income statement when the hedged underlying transaction has an effect on income. If forecast Management judgements in the application of accounting policies. transactions are hedged and such transactions lead to the recogni- Management judgements are required in the application of tion of a financial asset or financial liability in subsequent periods, accounting policies. In particular, this pertains to the following the amounts that were recognised in equity until this point in time aspects: are recognised on the income statement in the period during which the asset or liability affects the income statement. If the transac- • With regard to certain contracts, a decision must be made as to tions result in the recognition of non-financial assets or liabilities, whether they are to be treated as derivatives or as so-called for example the acquisition of property, plant and equipment, the own-use contracts, and be accounted for as executory contracts. amounts recognised in equity without an effect on income are • Financial assets are classified by contractual cash flows and included in the initial cost of the asset or liability. applied business model. Whereas the contractual cash flows are determined by the characteristics of the financial instruments, The purpose of hedges of a net investment in foreign operations the business model is based on the Group’s internal require- (net investment hedges) is to hedge the currency risk from invest- ments relating to the portfolios of financial instruments. ments with foreign functional currencies. Unrealised gains and • With regard to assets held for sale, it must be determined if they losses from such hedges are recognised in other comprehensive can be sold in their current condition and if the sale of such is income until disposal of the foreign operation. highly probable in the next twelve months. If both conditions apply, Hedging relationships must be documented in detail and meet the measured as assets or liabilities held for sale, respectively. the assets and any related liabilities must be reported and following effectiveness requirements: • there is an economic relationship between the hedged item and consolidated financial statements pursuant to IFRS requires the hedging instrument, assumptions and estimates to be made, which have an impact on • the value change of hedging relationship is not dominated by the recognised value of the assets and liabilities carried on the the credit risk, and balance sheet, on income and expenses and on the disclosure of Management estimates and judgements. Preparation of • the hedge ratio is the same as that resulting from the quantities contingent liabilities. used within the scope of risk management. 113 Amongst other things, these assumptions and estimates relate to As of the date of preparation of the consolidated financial state- the accounting and measurement of provisions. With regard to ments, it is not presumed that there will be any material changes non-current provisions, the discount factor to be applied is an compared to the assumptions and estimates. important estimate, in addition to the amount and timing of future cash flows. The discount factor for pension obligations is deter- Capital management. The focus of RWE’s financing policy is on mined on the basis of yields on high-quality, fixed-rate corporate ensuring uninterrupted access to the capital market. The goal is to bonds on the financial markets as of the balance-sheet date. be in a position to refinance maturing debts and finance the operating activities at all times. Maintaining a solid rating and a The rules governing valuation allowances for financial assets under positive operating cash flow serve this purpose. IFRS 9 stipulate that the expected credit losses must be determined. The valuation allowance is based on information from within and The management of RWE’s capital structure is oriented towards net outside the Group. debt. It is calculated by adding material non-current provisions to and deducting the net assets of funded pension obligations from The impairment test for goodwill and non-current assets is based net financial debt. RWE’s liabilities of relevance to net debt primarily on certain assumptions pertaining to the future, which are regularly consist of hybrid bonds and provisions for pensions, nuclear waste adjusted. Property, plant and equipment is tested for indications of management, mining, and wind farms. impairment on each cut-off date. Power plants are grouped together as a cash-generating unit if their significantly. This was in part due to the execution of the transaction production capacity and fuel needs are centrally managed as part with E.ON (see page 106 et seq.). In addition, the net debt of the of a portfolio, and it is not possible to ascribe individual contracts continuing operations was greatly affected by the loss of variation During the reporting period, RWE’s capital structure changed and cash flows to the specific power plants. Upon first-time consolidation of an acquired company, the identifiable margins on forward transactions with electricity, commodities and CO2 certificates. Variation margins are payments with which transaction partners mutually collateralise profit and loss positions assets, liabilities and contingent liabilities are recognised at fair resulting from the daily revaluation of active contracts. However, their value. Determination of the fair value is based on valuation methods influence on cash flows is temporary and ends once the transac- which require a projection of anticipated future cash flows. tions are realised. Both of these effects resulted in a significant Deferred tax assets are recognised if realisation of future tax benefits financial assets of continuing operations totalling €6.0 billion as of is probable. Actual future development of income for tax purposes 31 December 2019 (previous year: €7.4 billion). Furthermore, net and hence the realisability of deferred tax assets, however, may debt provisions rose by €3.7 billion to €15.6 billion (previous year: deviate from the estimation made when the deferred taxes are €11.9 billion). On average, provisions have a very long duration; their decrease in financial assets and contributed to a decline in net capitalised. level is primarily determined by external factors such as the general level of interest rates. A precise calculation of net debt and net Further information on the assumptions and estimates upon which financial debt is presented on page 32 of the review of operations. these consolidated financial statements are based can be found in the explanations of the individual items. RWE’s credit rating is influenced by a number of qualitative and All assumptions and estimates are based on the circumstances and cash flows and debt as well as market conditions, competition, forecasts prevailing on the balance-sheet date. Furthermore, as of and the political framework. Our hybrid bonds also have a positive the balance-sheet date, realistic assessments of overall economic effect on our rating. The leading rating agencies, Moody’s and Fitch, conditions in the sectors and regions in which RWE conducts classify part of hybrid capital as equity. quantitative factors. These include aspects such as the amount of operations are taken into consideration with regard to the prospective development of business. Actual amounts may RWE’s creditworthiness is currently rated ‘Baa3’ by Moody’s and deviate from the estimated amounts if the overall conditions ‘BBB’ by Fitch. Our rating thus remains in the investment-grade develop differently than expected. In such cases, the assumptions, range. The short-term credit ratings for RWE are ‘P-3’ and ‘F2’, and, if necessary, the carrying amounts of the affected assets and respectively. liabilities are adjusted. 114 RWE Annual Report 2019Consolidated financial statements > Notes Changes in accounting regulations The obligations from operating leases as of 31 December 2018 lead to the following reconciliation to the opening balance of lease The International Accounting Standards Board (IASB) and the IFRS liabilities as of 1 January 2019: Interpretations Committee (IFRS IC) have implemented new IFRSs and approved amendments of existing IFRSs and a new interpreta- tion, which became effective for the RWE Group as of fiscal 2019: IFRS 16 Leases (2016) replaces IAS 17 Leases and the related interpretations IFRIC 4, SIC-15 and SIC-27. RWE applied the modified retrospective method when applying the new lease accounting rules for the first time. Comparable information for fiscal 2018 was not adjusted. RWE maintained the existing lease assessment in accordance with IAS 17 and IFRIC 4 for existing contracts. Furthermore, RWE is making use of exemptions allowing for leases relating to short-term or low-value assets not to be recognised on the balance sheet as a right-of-use asset. The transition to IFRS 16 did not have an effect on equity. Initial application of IFRS 16: reconciliation Obligations from operating leases as of 31 Dec 2018 Simplified application for short-term leases Lease instalments related to contractually agreed leases that have not yet commenced Other differences Nominal value of lease liabilities as of 1 Jan 2019 Effect of discounting lease liabilities The initial adoption of IFRS 16 had the following effects on the continued operations of the RWE Group: Right-of-use assets in the amount of €353 million and net debt-increasing lease liabilities in Lease liabilities recognised as of 1 Jan 2019 due to the initial application of IFRS 16 the same amount were stated as of 1 January 2019. Taking Finance lease liabilities as of 31 Dec 2018 account of the discontinued operation which have been deconsoli- Total lease liabilities as of 1 Jan 2019 dated in the meantime, the initial adoption of IFRS 16 led to an increase in the balance-sheet total of €2,251 million. At the transition date, RWE did not apply the new rules to leases with a € million 572 – 10 – 67 – 3 492 – 139 353 241 594 term expiring within the first twelve months from the date of The ‘Other differences’ line item mainly consists of non-lease first-time adoption. These contracts are accounted for as short- components exempted from recognition in the lease liabilities and term leases and the lease payments are recognized in the current differences due to changed term assessments pursuant to IFRS 16. costs of the period. Likewise, initial direct costs are not considered Lease liabilities are discounted using the term and currency-specific in the initial measurement of the right-of-use asset. Pursuant to incremental borrowing rate. The weighted average incremental IFRS 16, right-of-use assets are recognised as property, plant and borrowing rate was 3.7 % on the IFRS 16 initial application date. equipment and amortised over the shorter of the term of the lease or the useful life using the straight-line method. Obligations entered The following amendments to standards and new interpretations into within the scope of leases are measured at the present value of mandatory for the RWE Group from fiscal 2019 onwards did not the future lease payments and recognised as financial liabilities. have any material effects on RWE’s consolidated financial statements: The lease payments are divided into principal and interest components using the effective interest method. In the period under • Annual Improvements to IFRS Standards 2015–2017 Cycle review, as a result of the introduction of IFRS 16, depreciation and (2017), amortisation increased by €58 million and interest expenses • Amendments to IFRS 9: Prepayment Features with Negative increased by €17 million in the period under review. The discontinu- Compensation (2017), ation of the recognition of nominal lease payments as an expense • Amendments to IAS 28 Long-term Interests in Associates and provided adjusted EBITDA in the period under review with relief of Joint Ventures (2017), roughly the same amount, as a result of which net income was not • Amendments to IAS 19 Plan Amendment, Curtailment or affected significantly. Settlement (2018), • IFRIC 23 Uncertainty over Income Tax Treatments (2017). 115 IFRS 9 Financial Instruments – Physical Settlement of Contracts to Buy or Sell a Non-financial Item (Own Use New accounting policies Contracts) The IASB issued further standards and amendments to standards, The IFRS IC found within the scope of an agenda decision in which were not yet mandatory in the EU in fiscal 2019. These March 2019 that physically settled contracts for the purchase or standards and amendments to standards, which are not expected sale of non-financial items must be recognised at the market price to have any material effects on RWE’s consolidated financial applicable at settlement, as long as such contracts are not covered statements, are listed below: by an own use scope exception according to IFRS 9 Financial Instruments (referred to as ‘failed own-use contracts’). The practice • IFRS 17 Insurance Contracts (2017), customary thus far has been to recognise the contracts at their • Amendments to References to the Conceptual Framework in settlement amount. IFRS Standards (2018), • Amendment to IFRS 3 Business Combinations (2018), This caused revenue for fiscal 2018 to rise by €108 million, with the • Amendments to IAS 1 and IAS 8 Definition of Material (2018), cost of materials declining by €149 million. In sum, this did not have • Amendments to IFRS 9, IAS 39 and IFRS 7 Interest Rate an effect on earnings, because other operating expenses and other Benchmark Reform (2019), operating income dropped by €44 million and €301 million in this • Amendments to IAS 1 Presentation of Financial Statements: context. Classification of Liabilities as Current or Non-current (2020). IAS 12/IFRIC 23 – Uncertainty over Income Tax Treatments At its meeting in September 2019, the IFRS IC found within the IFRS 16 – Determining the Lease Term scope of an agenda decision that uncertain income tax items must At its meeting in November 2019, the IFRS IC established that both be recognised as current tax liabilities. contractual penalties and other financial incentives must be considered when determining the binding term of a lease. Consider- In RWE’s consolidated financial statements, this causes amounts ation of financial incentives can generally result in longer lease previously recognized as tax provisions in other provisions to be terms and, in turn, higher amounts recognised for right-of-use reclassified to income tax liabilities. Prior-year figures were adjusted assets and lease liabilities. accordingly. The effects of the IFRS IC agenda decision on the consolidated financial statements of RWE are currently being determined. We plan to implement the IFRS IC agenda decision at the end of the first half of 2020. 116 RWE Annual Report 2019Consolidated financial statements > Notes Notes to the Income Statement (1) Revenue A breakdown of revenue by division, geographical region and prod- uct is contained in the segment reporting on page 169 et seqq. Revenue is recorded when the customer has obtained control over The item ‘Natural gas tax/electricity tax’ comprises the taxes paid goods or services. directly by Group companies. We recognise income from the sale of our in-house generation and Certain performance obligations of the RWE Group were not yet or the consumer business in revenue. Revenue from in-house not yet fully met by the end of the fiscal year. The €4,276 million in generation is based on the sale price achieved through commercial revenue due from these performance obligations (previous year: optimisation. Consumer revenue is reported on a gross basis. €4,650 million) is expected to be received over the following three In the year under review, RWE generated external revenue of performance obligations to the customer are met. It does not €7,455 million with the innogy Group and €1,472 million with the include future revenue from contracts with an original contractual years. The receipt of this revenue will depend on when these Centrica Group (previous year: gross revenue of €13,752 million term of twelve months or less. from discontinued innogy operations) in the Supply & Trading segment. (2) Other operating income Other operating income € million Income from own work capitalised Income from changes in product inventories Release of provisions Cost allocations /refunds Disposal and write-back of current assets (excluding marketable securities) Disposal and write-back of non-current assets including income from deconsolidation Income from derivative financial instruments Compensation and insurance benefits Income from leases Miscellaneous 2019 2018 67 30 10 116 525 897 34 16 3,061 4,756 45 57 63 4 103 1071 26 20 205 630 1 Figure restated: The implementation of the failed own use IFRS IC agenda decision caused income from derivative financial instruments to drop by €301 million. In the year under review, write-backs of €71 million were recognised In the previous year, write-backs of €38 million were made for for the Scottish biomass-fired power station Markinch in the onshore wind farms in Poland in the innogy – continuing operations European Power segment (recoverable amount: €0.2 billion). This segment (recoverable amount: €0.2 billion). This was primarily due was predominantly due to changed assumptions regarding to the rise in the prices of electricity and of green electricity subsidies in the renewable energy business. The write-ups were fully certificates. Of the write-backs, €36 million was allocable to allocated to property, plant and equipment. property, plant and equipment and €2 milion was allocable to Furthermore, write-backs of €363 million were recognised for the German Gas and Hydroelectric Power Plants cash-generating unit Miscellaneous income contained the compensatory payments of along with the associated power purchase agreements in the €2,600 million for the early exit from our lignite business awarded European Power segment (recoverable amount: €0.5 billion). This by the German government. operating rights recognised as intangible assets. was largely due to the new definition of cash-generating units in the European Power segment presented on page 118 et seq. All of the write-backs were allocable to property, plant and equipment. 117 Income from the disposal of non-current financial assets and The stated number of employees (average for the year) encompasses loans is disclosed under income from investments if it relates to the continuing innogy operations, the acquired E.ON operations and – investments; otherwise it is recorded as part of the financial result until and including Q2 2019 – the discontinued innogy operations. as is the income from the disposal of current marketable securities. The discontinued innogy operations account for 14,663 wage earners To improve the presentation of the development of business, we staff (previous year: 8,614). On average, 1,280 trainees were state unrealised and realised income from contracts measured at employed (previous year: 2,031), of which 659 (previous year: 1,452) fair value of the Supply & Trading segment as net amounts. The net were assigned to the innogy – discontinued operations segment. and other personnel (previous year: 32,232) and 4,561 salaried amount totalled €258 million (previous year: €42 million). (5) Depreciation, amortisation and impairment losses (3) Cost of materials Cost of materials € million Cost of raw materials and of goods for resale Cost of purchased services 2019 20181 Depreciation, amortisation and impairment losses 2019 2018 € million Intangible assets Property, plant and equipment 7,663 8,615 1,415 1,383 9,078 9,998 107 3,059 3,166 26 922 948 1 Figure restated: due to changes in income recognition in relation to derivative transactions, the cost of materials decreased by €90 million. The implementation of the failed own use IFRS IC agenda decision caused it to drop by a further €149 million. Depreciation, amortisation and impairment losses contain the following impairments: The cost of materials primarily includes expenses for the input materials of power plants. Expenses for coal of €195 million Impairments € million Intangible assets (previous year: €370 million) were recognised at the market price Property, plant and equipment prevailing at settlement. 2019 2018 46 1,922 1,968 47 47 In the year under review, an impairment of €21 million (previous year: €4 million) was recognised for coal inventories due to a drop in The legal steps to reduce and end electricity generation from lignite market prices. (4) Staff costs Staff costs € million and hard coal in Germany that are materialising resulted in the split-up and spin-off of the two former Lignite & Nuclear and German Power Plant Portfolio cash-generating units in the European Power segment. In so doing, RWE is reacting to the 2019 2018 changing regulatory environment and the resulting consequences for electricity sales. Wages and salaries 2,124 1,487 Cost of social security, pensions and other benefits 402 408 2,526 1,895 The impairment test performed in the Lignite & Nuclear segment for this reason resulted in the recognition of an impairment loss of €400 million (recoverable amount: – €0.2 billion) for the new Hambach cash-generating unit, of €114 million for the new Inden cash-generating unit (recoverable amount: €0.0 billion) and of Number of employees 2019 2018 €253 million for the new Garzweiler cash-generating unit (recover- Employees covered by collective agreements and other employees Employees not covered by collective agreements 28,214 45,333 agreement reached with the German government to phase out able amount: €1.3 billion). These effects are solely due to the 9,868 13,108 38,082 58,441 electricity generation from lignite early. The assets are distributed among the new cash-generating units based on their association with lignite or nuclear energy, with the lignite assets being further distinguished by their geographical, logistical and technical circumstances. €240 million in impairments are attributable to The number of employees is arrived at by conversion to full-time changes in provisions that were capitalised in the ‘property, plant positions, meaning that part-time and fixed-term employment and equipment’ item. relationships are included in accordance with the ratio of the part-time work or the duration of the employment to the annual employment time. 118 RWE Annual Report 2019 Consolidated financial statements > Notes Moreover, the impairment test performed in the European Power Other impairments on intangible assets and property, plant and segment led to reversals of write-downs of €363 million for the equipment were recognised primarily on the basis of cost increases new Gas and Hydroelectric Power Plants cash-generating unit and changes in price expectations. along with the associated power purchase agreements, which was recognised in other operating income (recoverable amount: Recoverable amounts are generally determined on the basis of fair €0.5 billion). For the first time, the recoverable amount was values less costs to sell; in the innogy – continuing operations calculated separately for each of the assets in the hard coal segment, they are also determined on the basis of values in use. Fair business, owing to the changed regulatory environment. This values are determined using valuation models based on planned resulted in impairment losses of €76 million (recoverable amount: cash flows. In the fiscal year, the valuation models were based on €0.2 billion). These effects stem from the compensation lost due discount rates (after taxes) in the range of 2.50 % to 4.75 %. In the to the spin-off of the hard coal-fired power stations along with the innogy – continuing operations segment, they are based on discount associated power purchase agreements from the former cash- rates (before taxes) of 3.90 % and 4.25 %. In the previous year, the generating unit. The latter were also valued separately for the valuation model for the UK power station Staythorpe used a first time. In addition, an impairment loss of €693 million (recoverable amount: €1.1 billion) was recognised for the Dutch Power Plant discount rate of 4.75 %. Our key planning assumptions relate to the development of wholesale prices of electricity, crude oil, natural gas, coal and CO2 emission allowances, retail prices of electricity and gas, market shares and regulatory framework conditions. Based on Portfolio cash-generating unit in the European Power segment. the use of internal planning assumptions, the determined fair values This was due to the early phase-out of electricity generation from are assigned to Level 3 of the fair value hierarchy. hard coal in the Netherlands. In the previous year, a €29 million impairment was recognised for the UK power station Staythorpe in the European Power segment (recoverable amount: €0.3 billion). In the innogy – continuing operations segment, an impairment loss of €225 million was recognised for the Nordsee Ost offshore wind farm (recoverable amount: €0.6 billion). This primarily resulted from changed price and cost expectations. Furthermore, an impairment loss of €69 million was recognised for gas storage facilities (of which €65 million for property, plant and equipment and €4 million for intangible assets) in the innogy – continuing operations segment, primarily due to changed price expectations (recoverable amount: €0.0 billion). 119 (6) Other operating expenses Other operating expenses € million Expenses associated with changes in product inventories Maintenance and renewal obligations Additions to provisions/reversals Structural and adaptation measures Legal and other consulting and data processing services Disposal of current assets and decreases in values (excluding decreases in the value of inventories and marketable securities) Disposal of non-current assets including expenses from deconsolidation Insurance, commissions, freight and similar distribution costs General administration Expenses from derivative financial instruments Expenses from leases Fees and membership dues Exchange rate losses Other taxes (primarily on property) Miscellaneous 2019 2018 505 1,814 151 273 4 24 61 65 70 42 65 1 29 150 3,254 5 465 – 196 33 166 8 56 59 56 1 48 61 3 27 115 906 1 Figure restated: The implementation of the failed own use IFRS IC agenda decision caused expenses from derivative financial instruments to drop by €44 million . Additions to provisions in fiscal 2019 primarily relate to the nuclear (7) Income from investments energy and mining business (see commentary on page 146 et seqq.). Income from investments includes all income and expenses which have arisen in relation to operating investments. It is comprised of income from investments accounted for using the equity method and other income from investments. Income from investments € million Income from investments accounted for using the equity method Income from non-consolidated subsidiaries Income from other investments Income from the disposal of investments Income from loans to investments Other income from investments 2019 2018 321 1 1 5 1 8 329 211 – 45 – 6 9 – 42 169 120 RWE Annual Report 2019 Consolidated financial statements > Notes (8) Financial result Financial result € million Interest and similar income Other financial income Financial income Interest and similar expenses Interest accretion to Provisions for pensions and similar obligations (including capitalised surplus of plan assets) Provisions for nuclear waste management as well as to mining provisions Other provisions Other finance costs Finance costs 2019 2018 185 503 688 258 49 723 109 487 1,626 – 938 166 306 472 180 45 183 36 437 881 – 409 The financial result breaks down into net interest, interest accretion Net interest stems from financial assets and liabilities, which were to provisions, other financial income and other finance costs. allocated to the following measurement categories pursuant to Interest accretion to provisions contains the annual amounts of accrued interest. It is reduced by the imputed interest income on IFRS 9: plan assets for the coverage of pension obligations. Due to the Interest result by category 2019 2018 early end of electricity generation from lignite resulting from the € million German coal phase-out, the real discount rate used to calculate provisions for mining damage was reduced and the associated Debt instruments measured at amortised cost increase in the net present value of obligations of €463 million was recognised as an expense in the interest accretion to additions to provisions.Interest expenses incurred for lease liabilities amounted to €26 million in the year under review. Net interest essentially includes interest income from interest- bearing securities and loans, income and expenses relating to marketable securities, and interest expenses. In the year under review, €39 million in borrowing costs were capitalised as costs in connection with the acquisition, construction or production of qualifying assets (previous year: €9 million). The underlying capitalisation rate ranged from 3.7 % to 4.0 % (previous year: from 4.4 % to 4.8 %). Financial instruments measured at fair value through profit or loss Debt instruments measured at fair value through other comprehensive income Equity instruments measured at fair value through other comprehensive income Financial liabilities measured at (amortised) cost 123 108 30 30 16 14 16 14 – 258 – 180 – 73 – 14 Other financial income includes €19 million in gains realised from the disposal of marketable securities (previous year: €6 million). Of the other finance costs, €5 million (previous year: €13 million) stem Net interest € million Interest and similar income Interest and similar expenses 2019 2018 from realised losses on the disposal of marketable securities. 185 258 – 73 166 180 – 14 121 (9) Taxes on income Taxes on income € million Current taxes on income Deferred taxes Due to the utilisation of tax loss carryforwards unrecognised in prior years, current taxes on income were reduced by €37 million 2019 2018 (previous year: €28 million). – 136 44 – 92 122 – 19 103 Income taxes recognised in other comprehensive income € million 2019 2018 Fair valuation of equity instruments Fair valuation of debt instruments – 3 – 12 7 Fair valuation of financial instruments used for hedging purposes Actuarial gains and losses of defined benefit pension plans and similar obligations1 1 Including valuation allowances. – 288 – 1,442 176 410 – 127 – 1,025 Taxes in the amount of €394 million (previous year: – €61 million) were offset directly against equity. 2019 2018 – 752 – 245 – 37 – 49 – 10 30 – 55 175 – 48 29 207 – 89 – 92 12.2 49 16 – 28 – 38 – 21 42 – 24 – 14 12 – 3 172 – 11 103 210.2 Of the deferred taxes, €29 million is related to temporary differences (previous year: – €2 million). In the year under review, changes in valuation allowances for deferred tax assets amounted to €572 mil- lion (previous year: – €73 million). Current taxes on income contain €74 million in net tax income (previous year: expense of €30 million) relating to prior periods. Tax reconciliation € million Income before tax Theoretical tax expense Differences to foreign tax rates Tax effects on Tax-free dividends Other tax-free income Expenses not deductible for tax purposes Accounting for associates using the equity method (including impairment losses on associates’ goodwill) Unutilisable loss carryforwards, utilisation of unrecognised loss carryforwards, write-downs on loss carryforwards, recognition of loss carryforwards Income on the disposal of investments Changes in foreign tax rates Other allowances for deferred taxes in the RWE AG tax group Other Effective tax expense Effective tax rate in % The theoretical tax expense is calculated using the tax rate for the RWE Group of 32.6 % (previous year: 32.6 %). This is derived from the prevailing 15 % corporate tax rate, the solidarity surcharge of 5.5 %, and the Group’s average local trade tax rate. 122 RWE Annual Report 2019 Notes Consolidated financial statements > Notes Notes to the Balance Sheet (10) Intangible assets Intangible assets € million Cost Development costs Concessions, patent rights, licences and similar rights Customer relationships and similar assets Goodwill Prepayments Total Balance at 1 Jan 2019 36 2,214 1 1,718 9 3,978 Additions /disposals due to changes in the scope of consoli- dation Additions Transfers Currency translation adjustments Disposals Balance at 31 Dec 2019 Accumulated amortisation / impairment losses Balance at 1 Jan 2019 Additions /disposals due to changes in the scope of consolidation Amortisation /impairment losses in the reporting period Currency translation adjustments Balance at 31 Dec 2019 Carrying amounts Balance at 31 Dec 2019 1 2 1 1,601 295 653 22 5 80 5 5 15 2 – 5 2,550 26 1 100 5 40 3,917 301 2,386 6 6,650 33 – 2 4 1 36 4 1,751 – 57 98 7 1,799 1 5 6 1,785 – 59 107 8 1,841 2,118 295 2,386 6 4,809 123 Intangible assets € million Cost Development costs Concessions, patent rights, licences and similar rights Customer relationships and similar assets Goodwill Prepayments Total Balance at 1 Jan 2018 837 3,054 2,810 11,671 Additions /disposals due to changes in the scope of consolidation of which: stated as ‘held for sale’ Additions Transfers Currency translation adjustments Disposals Balance at 31 Dec 2018 Accumulated amortisation / impairment losses – 821 – 821 42 2 1 25 36 – 890 – 999 37 29 – 15 1 2,214 – 2,812 – 2,812 – 9,929 – 9,929 31 – 3 – 3 6 – 25 18,403 – 14,455 – 14,564 85 6 – 35 26 – 24 3 1 1,718 9 3,978 Balance at 1 Jan 2018 489 2,493 2,564 474 Additions /disposals due to changes in the scope of consolidation of which: stated as ‘held for sale’ Amortisation /impairment losses in the reporting period Currency translation adjustments Disposals Write-ups Balance at 31 Dec 2018 Carrying amounts Balance at 31 Dec 2018 – 460 – 460 29 25 33 3 – 2,579 – 2,579 13 3 – 475 – 475 1 – 792 – 792 63 – 10 1 2 1,751 1 6,020 – 4,306 – 4,306 105 – 6 26 2 1,785 463 1,718 9 2,193 124 RWE Annual Report 2019 Consolidated financial statements > Notes In the reporting period, the RWE Group’s total expenditures on Mid-term business plans are based on country-specific assumptions research and development amounted to €25 million (previous year: regarding the development of key economic indicators such as €116 million). gross domestic product, consumer prices, interest rate levels and nominal wages. These estimates are, amongst others, derived from Goodwill breaks down as follows: macro- economic and financial studies. Goodwill € million Acquired E.ON operations innogy – continuing operations1 Supply & Trading 31 Dec 2019 31 Dec 2018 Our key planning assumptions for the business segments active in 653 727 1,006 2,386 electricity and gas markets relate to the development of wholesale prices of electricity, crude oil, natural gas, coal and CO2 emission allowances, retail prices of electricity and gas, market shares and regulatory framework conditions. 712 1,006 1,718 The discount rates used for business valuations are determined on 1 Goodwill is solely allocable to the renewable energy activities recognised in ' innogy – continuing operations'. the basis of market data. During the period under review, they were 5.50 % (previous year: 5.25 %) for the Supply & Trading and 4.00 % (previous year: 4.25 %) for the innogy – continuing operations cash-generating units. In the year under review, goodwill increased by €653 million as a result of the first-time consolidation of the acquired E.ON operations. We do not base the extrapolation of future cash flows going beyond This goodwill passed the impairment test in the fourth quarter. In the the detailed planning period on growth rates. The growth rate for previous year, goodwill increased by €0 million as a result of each division is generally derived from experience and expectations first-time consolidations. of the future and does not exceed the long-term average growth rates of the respective markets in which the Group companies In the third quarter of every fiscal year, an impairment test is are active. The annual cash flows assumed for the years after the performed to determine if there is any need to write down goodwill. detailed planning period include as a deduction capital expenditure In the course of this, goodwill is allocated to the cash-generating units. in the amount necessary to maintain the scope of business. The recoverable amount of the cash-generating unit is determined, As of the balance-sheet date, the recoverable amounts of the which is defined as the higher of fair value less costs to sell or value cash-generating units – determined as the fair value less costs to in use. Fair value is the best estimate of the price that an independent sell – were higher than their carrying amounts. The surpluses react third party would pay to purchase the cash-generating unit as of especially sensitively to changes in the discount rate, the growth the balance-sheet date. Value in use reflects the present value of rate and cash flows in terminal value. the future cash flows which are expected to be generated with the cash-generating unit. The Supply & Trading cash-generating unit exhibited the smallest surplus of recoverable amount over the carrying amounts. The Fair value less costs to sell is assessed from an external perspective recoverable amount was €1.4 billion higher than the carrying and value in use from a company-internal perspective. Values are amount. Impairment would have been necessary if the calculations determined using a business valuation model, based on planned had used an after-tax discount rate increased by more than future cash flows. These cash flows, in turn, are based on the business 3.2 percentage points to above 8.7 %, a growth rate decreased by plan, as approved by the Executive Board and valid at the time of more than 3.9 percentage points to below – 3.9 %, or cash flows the impairment test. They pertain to a detailed planning period of reduced by more than €86 million in terminal value. three years. In certain justifiable cases, a longer detailed planning period is taken as a basis, insofar as it is necessary due to economic or regulatory conditions. The cash flow plans are based on experience as well as on expected market trends in the future. If available, market transactions in the same sector or third-party valuations are taken as a basis for determining fair value. Based on the use of internal planning assumptions, the determined fair values are assigned to Level 3 of the fair value hierarchy. 125 (11) Property, plant and equipment Property, plant and equipment € million Cost Land, land rights and buildings incl. buildings on third-party land Technical plant and machinery Other equipment, factory and office equipment Prepayments and plants under construction Total Balance at 1 Jan 2019 4,868 43,733 934 2,061 51,5961 Additions /disposals due to changes in the scope of consolidation Additions Transfers Currency translation adjustments Disposals 282 300 1 23 151 3,863 1,153 217 401 683 19 66 13 4 47 1,450 1,077 −239 42 14 5,614 2,596 – 8 470 895 Balance at 31 Dec 2019 5,323 48,684 989 4,377 59,373 Accumulated depreciation /impairment losses Balance at 1 Jan 2019 3,073 34,214 Additions /disposals due to changes in the scope of consolidation Amortisation /impairment losses in the reporting period Transfers Currency translation adjustments Disposals Additions Balance at 31 Dec 2019 Carrying amounts Balance at 31 Dec 2019 – 51 222 – 6 8 91 27 – 640 2,685 – 2 169 509 412 756 – 12 64 5 4 47 791 38,834 88 – 1 5 – 703 3,059 – 4 181 652 439 3,128 35,505 770 873 40,276 2,195 13,179 219 3,504 19,097 126 RWE Annual Report 2019 Consolidated financial statements > Notes Property, plant and equipment € million Cost Land, land rights and buildings incl. buildings on third-party land Technical plant and machinery Other equipment, factory and office equipment Prepayments and plants under construction Total Balance at 1 Jan 2018 7,325 74,280 2,123 2,317 86,045 Additions /disposals due to changes in the scope of consolidation of which: stated as ‘held for sale’ Additions Transfers Currency translation adjustments Disposals – 2,740 – 30,747 – 2,738 – 30,708 – 1,238 – 1,238 65 45 – 42 109 665 283 – 294 478 74 – 2 – 7 35 – 845 – 859 1,014 – 332 – 10 69 – 35,570 – 35,543 1,818 – 6 – 353 691 Balance at 31 Dec 2018 4,544 43,709 915 2,075 51,243 Accumulated depreciation /impairment losses Balance at 1 Jan 2018 4,555 54,187 1,505 851 61,098 Additions /disposals due to changes in the scope of consolidation of which: stated as ‘held for sale’ Amortisation /impairment losses in the reporting period Transfers Currency translation adjustments Disposals Additions Balance at 31 Dec 2018 Carrying amounts Balance at 31 Dec 2018 – 1,455 – 20,646 – 1,453 – 20,580 66 1 – 20 69 5 1,209 – 1 – 149 352 34 – 803 – 803 93 – 4 35 3,073 34,214 756 – 1 – 1 7 65 1 791 – 22,905 – 22,837 1,375 – 173 521 40 38,834 1,471 9,495 159 1,284 12,409 1 Including the effect of the initial adoption of IFRS 16 in the amount of €353 million. 127 Property, plant and equipment in the amount of €1,024 million These leases primarily comprise long-term rights of use to leased (previous year: €504 million) were subject to restrictions from land office buildings and land (e. g. leaseholds, properties for renewable charges, chattel mortgages or other restrictions. Disposals of energy production) and rights of use to leased assets relating to property, plant and equipment resulted from sale or decommissioning. vehicle fleets and power plants. Property, plant and equipment includes owned assets as well as The following table shows the development of right-of-use assets right-of-use assets from leases of which RWE is the lessee. recognised in property, plant and equipment: Right-of-use assets € million Cost Buildings Land Technical plant and machinery Pumped storage power stations Vehicle fleet Other plant, factory and office equipment Balance at: 1 Jan 2019 Additions Depreciation, amortisation and impairments Disposals Other changes1 Balance at: 31 Dec 2019 51 274 8 27 8 12 380 30 142 37 31 7 23 270 12 25 5 1 6 12 61 4 4 1 279 7 204 9 70 666 43 261 18 23 8 500 1,081 1 Other changes comprise transfers, additions, currency translation adjustments as well as additions and disposals in the scope of consolidation. Disclosure on the corresponding lease liabilities and interest In addition, leases had the following effect on the RWE Group’s expenses can be found in Notes (8) Financial result, (23) Financial earnings and cash flows in the year under review: liabilities and (27) Reporting on financial instruments. Effects of leases on income and cash flows € million RWE as lessee Expenses from short-term leases Expenses from variable lease payments not considered in the measurement of lease liabilities Total cash outflows from leases RWE as lessor Income from operating leases 2019 14 18 60 13 128 RWE Annual Report 2019Consolidated financial statements > Notes Leases primarily relating to office buildings that have been In addition to right-of-use assets, property, plant and equipment contractually agreed, but not begun yet, lead to future lease also include land and buildings leased as operating leases by RWE payments of €195 million. Moreover, potential lease payments as lessor. The carrying amount of these assets totalled €193 million predominantly relating to leases of wind farm space were disregarded as of 31 December 2019. when valuing lease liabilities. This relates to €471 million in variable payments which may come due depending on generation volumes The following payment claims resulted from these operating leases: and €100 million in potential payments associated with extension and termination options. Nominal Lease payments from operating leases € million Due in up to 1 year Due in > 1 to 2 years Due in > 2 to 3 years Due in > 3 to 4 years Due in > 4 to 5 years Due after 5 years 4 7 6 6 6 55 129 (12) Investments accounted for using the equity method Information on material and non-material investments in associates and joint ventures accounted for using the equity method is presented in the following summaries: Material investments accounted for using the equity method Amprion GmbH, Dortmund KELAG-Kärntner Elektrizitäts-AG/ Kärntner Energieholding Beteiligungs GmbH (KEH), Klagenfurt (Austria) € million Balance sheet1 Non-current assets Current assets Non-current liabilities Current liabilities Share of equity2 Goodwill Carrying amounts Statement of comprehensive income1 Revenue Income Other comprehensive income Total comprehensive income Dividends (prorated) RWE shareholding 1 Figures based on a shareholding of 100 % in KEH. 2 Figures based on proportional share of equity in KEH and Kelag. 31 Dec 2019 31 Dec 2018 31 Dec 2019 31 Dec 2018 5,225 1,825 2,012 2,496 638 4,192 2,906 1,401 3,555 538 638 538 1,664 1,630 383 869 285 383 198 581 373 857 276 365 198 563 14,773 13,495 1,285 1,172 523 –22 501 25 25 % 372 – 17 355 25 25 % 93 –15 78 15 49 % 79 – 1 78 15 49 % Amprion GmbH, headquartered in Dortmund, Germany, is a KELAG-Kärntner Elektrizitäts-AG, headquartered in Klagenfurt, transmission system operator (TSO) for the electricity sector, Austria, is a leading Austrian energy supplier in the fields of electricity, pursuant to the German Energy Act (EnwG). Amprion’s main district heating and natural gas. RWE has an economic interest of shareholder is a consortium of financial investors led by Commerz 49 % in Kärntner Energieholding Beteiligungs GmbH (KEH), which is Real, a subsidiary of Commerzbank. Kelag’s largest shareholder and is assigned to innogy – continuing operations. 130 RWE Annual Report 2019 Consolidated financial statements > Notes Non-material investments accounted for using the equity method Associates Joint ventures € million Income (pro-rata) Other comprehensive income Total comprehensive income Carrying amounts 31 Dec 2019 31 Dec 2018 31 Dec 2019 31 Dec 2018 58 41 99 27 8 35 246 142 88 16 104 1,771 56 56 224 The RWE Group holds shares with a book value of €3 million subject to temporary restrictions or conditions in relation to their (previous year: €3 million) in associates and joint ventures, which are distributions of profits, due to provisions of loan agreements. (13) Other non-current financial assets Non-current securities amounting to €29 million and €4 million Other financial assets encompass non-consolidated subsidiaries, (previous year: €31 million and €4 million) were deposited in a trust other investments and non-current securities. account for RWE AG and its subsidiaries, in order to cover credit balances stemming from the block model for pre-retirement The rise in other financial assets in fiscal 2019 was primarily due to part-time work, pursuant to Sec. 8a of the Pre-Retirement Part-Time the addition of the stake in E.ON SE within the scope of the sale of Work Act (AltTZG) and from the management of long-term working discontinued innogy operations. hours accounts pursuant to Sec. 7e of the German Code of Social Law (SGB IV), respectively. This coverage applies to the employees of RWE AG as well as to the employees of Group companies. (14) Financial receivables Financial receivables € million 31 Dec 2019 31 Dec 2018 Non-current Current Non-current Current Loans to non-consolidated subsidiaries and investments 103 Collateral for trading activities Other financial receivables Accrued interest Miscellaneous other financial receivables 25 128 1 1,638 39 681 2,359 82 28 110 1 2,458 89 234 2,782 Companies of the RWE Group deposited collateral for the trading favourable for RWE. Regular replacement of the deposited collateral activities stated above for exchange-based and over-the-counter depends on the contractually agreed thresholds, above which transactions. These are to guarantee that the obligations from the collateral must be provided for the market value of the trading transactions are discharged even if the development of prices is not activities. 131 (15) Other receivables and other assets Other receivables and other assets 31 Dec 2019 31 Dec 2018 € million Derivatives Capitalised surplus of plan assets over benefit obligations Prepayments for items other than inventories CO2 emission allowances Miscellaneous other assets of which: financial assets of which: non-financial assets Non-current Current Non-current Current 661 153 2,506 3,320 824 2,496 11,447 144 407 758 12,756 11,564 1,192 704 213 29 946 924 22 6,567 137 329 375 7,408 6,684 724 The financial instruments reported under miscellaneous other assets are measured at amortised cost. Derivative financial instruments are stated at fair value. The carrying values of exchange- traded derivatives with netting agreements are offset. €2,600 million of the miscellaneous other assets comprise the compensatory payments for the early exit from our lignite business awarded by the German government. Furthermore, €43 million of the miscellaneous other assets (previous year: €7 million in other liabilities) were allocable to government grants awarded in relation with co-firing biomass in two Dutch power plants. 132 RWE Annual Report 2019 Consolidated financial statements > Notes (16) Deferred taxes Deferred tax assets and liabilities principally stem from the fact that differences reduce in the foreseeable future. €5,316 million and measurements in the IFRS statements differ from those in the tax €6,166 million of the gross deferred tax assets and liabilities, bases. As of 31 December 2019, no deferred tax liabilities were respectively, will be realised within twelve months (previous year: recognised for the difference between net assets and the carrying €5,335 million and €6,254 million). value of the subsidiaries and associates for tax purposes (known as ‘outside basis differences’) in the amount of €969 million (previous The following is a breakdown of deferred tax assets and liabilities by year: €618 million), as it is neither probable that there will be any item: distributions in the foreseeable future, nor will the temporary Deferred taxes € million Non-current assets Current assets Exceptional tax items Non-current liabilities Provisions for pensions Other non-current liabilities Current liabilities Tax loss carryforwards Corporate income tax (or comparable foreign income tax) Trade tax Gross total Netting Net total 31 Dec 2019 31 Dec 2018 Assets Liabilities Assets Liabilities 1,157 1,450 2,506 3,876 815 2,101 47 40 50 2,290 8,809 139 289 3,234 6,578 77 16 148 487 3,866 7,108 125 23 938 3,009 58 41 194 3,245 7,485 7,256 8,809 6,671 7,485 – 6,550 – 6,550 – 5,847 – 5,847 706 2,259 824 1,638 As of 31 December 2019, RWE reported deferred tax claims which €569 million in corporate income tax loss carryforwards for which exceeded the deferred tax liabilities by €144 million (previous year: no deferred tax claims have been recognised will apply to the €56 million), in relation to companies which suffered a loss in the following eight years. The other loss carryforwards do not have any current or previous period. The basis for the recognition of deferred time limits, but they are mostly not expected to be used. tax assets is the judgement of the management that it is likely that the companies in question will generate taxable earnings, against As of 31 December 2019, temporary differences for which no which unutilised tax losses and deductible temporary differences deferred tax assets were recognised amounted to €12,791 million can be applied. (previous year: €11,180 million). The capitalised tax reduction claims from loss carryforwards result In the year under review, a deferred tax expense of €14 million from the expected utilisation of previously unused tax loss carryfor- arising from the currency translation of foreign financial statements wards in subsequent years. was offset against equity (previous year: €5 million). It is sufficiently certain that these tax carryforwards will be realised. At the end of the reporting period, corporate income tax loss carryforwards and trade tax loss carryforwards for which no deferred tax claims have been recognised amounted to €1,492 million and €879 million, respectively (previous year: €1,463 million and €490 million). 133 (17) Inventories Inventories € million Raw materials, incl. nuclear fuel assemblies and earth excavated for lignite mining Work in progress – goods /services Finished goods and goods for resale Prepayments 31 Dec 2019 31 Dec 2018 728 33 839 –15 723 37 872 – 1 1,585 1,631 The carrying amount of inventories acquired for resale purposes (19) Cash and cash equivalents was €605 million (previous year: €33 million). In the year under review, the entire amount related to gas inventories (previous year: Cash and cash equivalents 31 Dec 2019 31 Dec 2018 €29 million). In the previous year, €4 million of this sum was € million attributable to coal inventories. Cash and demand deposits 3,192 3,521 The fair value of gas and coal inventories is determined every month on the basis of the current price curves of the relevant indices for gas (e. g. NCG) and coal (e. g. API#2). The valuations are based on prices which can be observed directly or indirectly (Level 2 of the fair value hierarchy). Differences between the fair value and the carrying value of inventories acquired for resale purposes are recognised on the Marketable securities and other cash investments (maturity less than three months from the date of acquisition) 2 3,192 3,523 income statement at the end of the month. RWE keeps demand deposits exclusively for short-term cash positions. (18) Marketable securities creditworthiness criteria. Such criteria include their rating from one Of the current marketable securities, €2,809 million were fixed- of the three renowned rating agencies – Moody’s, Standard & Poor’s interest marketable securities (previous year: €3,226 million) with a and Fitch – as well as their equity capital and the prices for credit maturity of more than three months from the date of acquisition, and default swaps. As in the previous year, interest rates on cash and €449 million were stocks and profit-participation certificates cash equivalents were at market levels in 2019. For cash investments, banks are selected on the basis of various (previous year: €383 million). Marketable securities are stated at fair value. 134 RWE Annual Report 2019 Consolidated financial statements > Notes (20) Equity A breakdown of fully paid-up equity is shown on page 102 et seq. The subscribed capital of RWE AG is structured as follows: Subscribed capital Common shares Preferred shares 31 Dec 2019 Number of shares 31 Dec 2018 Number of shares in ’000 in % in ’000 614,745 100.0 575,745 39,000 in % 93.7 6.3 614,745 100.0 614,745 100.0 1,574 31 Dec 2019 Carrying amount 31 Dec 2018 Carrying amount € million € million 1,574 1,474 100 1,574 Pursuant to resolutions passed by the Annual General Meeting and Furthermore, treasury shares may be issued to holders of option or the Preferred Shareholders Meeting on 3 May 2019 as well as the convertible bonds. The Executive Board is also authorised to use entry of the amendment to the Articles of Incorporation in the the treasury shares to discharge obligations from future employee Commercial Register on 28 June 2019, all of the 39,000,000 share schemes; in this regard, shareholders’ subscription rights non-voting preferred shares in RWE AG were converted to voting shall be excluded. common shares. The conversion was effected at a 1:1 ratio without additional payment. The number of common shares thus rose from No treasury shares were held as of 31 December 2019. 575,745,499 to 614,745,499. In fiscal 2019, RWE AG purchased a total of 305,216 RWE shares The common shares are no-par-value bearer share certificates. for a purchase price of €7,998,155.06 on the capital market. This is Pursuant to a resolution passed by the Annual General Meeting on bed capital). Employees of RWE AG and its subsidiaries received a 26 April 2018, the Executive Board was authorised to increase the total of 305,216 shares for capital formation under the employee company’s capital stock with the Supervisory Board’s approval by share plan. This generated total proceeds of €7,924,538.24. The up to €314,749,693.44 until 25 April 2023 through the issue of up difference to the purchase price was offset against freely available equivalent to €781,352.96 of the capital stock (0.05 % of subscri- to 122,949,099 bearer common shares in return for contributions retained earnings. in cash and/or in kind (approved capital). In certain cases, with the approval of the Supervisory Board, the subscription rights of On 6 February 2019, RWE cancelled the hybrid bond issued by shareholders can be excluded. Group companies that was previously classified as equity pursuant Pursuant to a resolution passed by the Annual General Meeting on effected on 20 March 2019 without refinancing the hybrid bond 26 April 2018, the Company was further authorised until 25 April with fresh hybrid capital. The hybrid bond had a 7 % coupon and a 2023 to acquire any kind of shares of the Company up to a volume theoretically perpetual tenor. to IAS 32. The redemption in the amount of €869 million was of 10 % of the capital stock when the resolution on this authorisation was passed, or if the following is lower, when this authorisation is exercised. Based on the authorisation, the Executive Board is also authorised to cancel treasury shares without a further resolution by the Annual General Meeting. Moreover, the Executive Board is authorised to transfer or sell such shares to third parties under certain conditions and excluding shareholders’ subscription rights. 135 As a result of equity capital transactions with subsidiary companies Dividend proposal which did not lead to a change of control, the share of equity We propose to the Annual General Meeting that RWE AG’s distribu- attributable to RWE AG’s shareholders changed by a total of table profit for fiscal 2019 be appropriated as follows: – €149 million (previous year: €491 million) and the share of equity attributable to other shareholders changed by a total of – €746 million Distribution of a dividend of €0.80 per share. (previous year: €258 million). This includes the effects of the acquisition of the 25 % and 12.5 % minority interests in the Gundremmingen and Emsland nuclear power stations operated by Dividend RWE held by the E.ON subsidiary Preussen Elektra (change in RWE AG shareholders' interest in Group equity of €58 million) and the effects of the acquisition of the 23.2 % minority interest in the continuing innogy operations (change in RWE AG shareholders' interest in Profit carryforward Distributable profit € 491,796,399.20 € 61,201.42 € 491,857,600.62 Group equity of – €201 million). Based on a resolution of RWE AG’s Annual General Meeting on 3 May 2019, the dividend for fiscal 2018 amounted to €0.70 per Accumulated other comprehensive income reflects changes in dividend-bearing common and preferred share. The dividend the fair values of debt instruments measured at fair value through payment to shareholders of RWE AG amounted to €430 million. other comprehensive income, cash flow hedges and hedges of the net investment in foreign operations, as well as changes stemming from foreign currency translation adjustments from foreign financial statements. As of 31 December 2019, the share of accumulated other comprehensive income attributable to investments accounted for using the equity method amounted to – €22 million (previous year: – €7 million). During the reporting year, €523 million in differences from currency translation which had originally been recognised without an effect on income were realised as an expense (previous year: expense of €48 million). 136 RWE Annual Report 2019 Consolidated financial statements > Notes Non-controlling interests The income and expenses recognised directly in equity (other The share ownership of third parties in Group entities is presented in comprehensive income – OCI) include the following non-controlling this item. interests: Non-controlling interests in OCI € million Actuarial gains and losses of defined benefit pension plans and similar obligations Pro-rata income and expenses of investments accounted for using the equity method Fair valuation of equity instruments 2019 2018 – 138 – 134 43 – 10 – 2 – 13 Income and expenses recognised directly in equity, not to be reclassified through profit or loss – 105 – 149 Currency translation adjustment Fair valuation of debt instruments Fair valuation of financial instruments used for hedging purposes Pro-rata income and expenses of investments accounted for using the equity method Income and expenses recognised directly in equity, to be reclassified through profit or loss in the future 267 – 3 – 29 2 237 132 11 – 4 – 5 2 – 147 137 (21) Share-based payment RWE AG‘s and innogy SE’s share price. Executives receive conditio- For executives of RWE AG and innogy SE as well as of affiliated nally granted virtual shares (performance shares). The final number companies, Long Term Incentive Plans (LTIPs) are in place as of virtual shares in a tranche is determined based on the achie- share-based payment systems known as Strategic Performance vement of the adjusted net income target. Each of the issued LTIP Plans (SPPs) and the predecessor model Beat 2010, which is being SPP tranches has a term of four years before payment is possible. phased out. The expenses associated with these are borne by the The prerequisite for participating in the plan was the renounce- Group companies which employ the persons holding notional stocks. ment of the options of the predecessor model Beat 2010 which The LTIP SPP was introduced in 2016. It uses an internal performance renouncement declarations. The plan has expired with the exception target (net income of relevance to remuneration) derived from the of some immaterial remaining components. had not yet lapsed. The large majority of the participants made such mid-term planning and takes into account the development of RWE AG SPP Start of term 2016 tranche 2017 tranche 2018 tranche 2019 tranche 1 Jan 2016 1 Jan 2017 1 Jan 2018 1 Jan 2019 Number of conditionally granted performance shares Term 486,436 4 years 1,338,027 4 years 883,974 4 years 932,889 4 years Performance target Adjusted net income Adjusted net income Adjusted net income Adjusted net income Cap/number of performance shares 150 % Cap/payment amount 200 % 150 % 200 % 150 % 200 % 150 % 200 % Determination of payment The payment amount is calculated on the basis of the determined number of performance shares multiplied by Change in corporate control/merger the sum of a) the mathematical average of the closing share price of the RWE common share (ISIN DE 000703129), with all available decimal places, in Xetra trading of Deutsche Börse AG (or a successor trading system which subsequently takes the place of the Xetra system) for the last 30 trading days prior to the end of the vesting period rounded according to standard commercial practice to two decimal places, and b) the dividends paid per share for the fiscal years between the determination of the final number of performance shares and the end of the vesting period. Dividends do not bear interest and are not reinvested. If a dividend payment occurs during the 30-day period for calculating the share price in accordance with item a), the share prices of the trading days leading up to the payment (CUM share prices) are adjusted by the dividend, as the dividend would otherwise be considered twice. Payment amount = (number of finally granted performance shares) x (mathematical average of the share price + dividends paid) The payment amount calculated in this manner is limited to no more than 200 % of the grant amount. A change in corporate control (‘change of control’) shall occur if a) a shareholder gains control in accordance with Sec. 29 of the German Securities Acquisition and Takeover Act (WpÜG) by holding at least 30 % of the voting rights including third-party voting rights attributable to it in accordance with Sec. 30 WpÜG, or b) a control agreement in accordance with Sec. 291 of the Stock Corporation Act (AktG) is concluded with RWE AG as the dependent company, or c) RWE AG is merged with another legal entity that does not belong to the Group in accordance with Sec. 2 of the German Company Transformation Act (UmwG), unless the value of the other legal entity is less than 50 % of the value of RWE AG based on the agreed conversion rate; in such a case, item a) shall not apply. In the event of a change of control, all of the performance shares which have been fully granted and have not been paid out shall be paid out early. The payment amount is determined according to the exercise condi- tions, with the deviation that the last 30 trading days prior to the announcement of the change in control is to be used; plus the dividends paid per share in the fiscal years between the determination of the final number of performance shares and the time of the change in control. The payment amount calculated in this manner shall be paid to the plan participant together with his or her next salary payment. All conditionally granted performance shares as of the effective date of the change of control shall lapse without consideration. Form of settlement Cash settlement Cash settlement Cash settlement Cash settlement Payment date 2020 2021 2022 2023 138 RWE Annual Report 2019 Consolidated financial statements > Notes innogy SE SPP 2016 tranche 2017 tranche 2018 tranche Start of term 1 Jan 2016 1 Jan 2017 1 Jan 2018 Number of conditionally granted performance shares Term 352,834 4 years 1,178,133 4 years 1,108,599 4 years Performance target Adjusted net income Adjusted net income Adjusted net income Cap/number of perfor- mance shares 150 % Cap/payment amount 200 % 150 % 200 % 150 % 200 % Determination of payment The payment amount is calculated on the basis of the determined number of finally granted performance shares multiplied by the sum of a) the mathematical average of the closing share price (including all available decimal places) of the innogy SE share (ISIN DE 000A2AADD2) in Deutsche Börse AG’s Xetra trading (or a successor trading system which subsequently takes the place of the Xetra system) for the last 30 trading days prior to the end of the vesting period rounded to two decimal places according to standard commercial practice and b) the dividends paid per share for the fiscal years between the determination of the final number of performance shares and the end of the vesting period. Dividends do not bear interest and are not reinvested. If a dividend payment occurs during the 30-day period for calculating the share price in accordance with item a), the share prices of the trading days leading up to the payment (CUM share prices) are adjusted by the dividend, as the dividend would otherwise be considered twice. Payment amount = (number of finally granted performance shares) x (mathematical average of the share price + dividends paid) The payment amount calculated in this manner is limited to no more than 200 % of the grant amount. Change in corporate control/merger A change in corporate control (‘change of control’) shall occur if a) a shareholder obtains control in the sense of Sec. 29 of the German Securities Acquisition and Takeover Act (WpÜG) by acquiring at least 30 % of the voting rights, including the voting rights of third parties which can be attributed to the shareholder pursuant to Sec. 30 of WpÜG, whereby RWE AG or an RWE Group company may no longer have control in the sense of Sec. 29 of WpÜG (30 % of the voting rights), or b) a control agreement in accordance with Sec. 291 of the Stock Corporation Act (AktG) is concluded with a company which is not part of the RWE Group with innogy SE as the dependent company, or c) innogy SE is merged with another legal entity that does not belong to the Group in accordance with Sec. 2 of the German Company Transformation Act (UmwG), unless the value of the other legal entity is less than 50 % of the value of innogy SE based on the agreed conversion rate; in such a case, item a) shall not apply. In the event of a change of control, all of the performance shares which have been fully granted and have not been paid out shall be paid out early. The payment amount is determined according to the exercise condi- tions, with the deviation that the last 30 trading days prior to the announcement of the change in control is to be used; plus the dividends paid per share in the fiscal years between the determination of the final number of performance shares and the time of the change in control. The payment amount calculated in this manner shall be paid to the plan participant together with his or her next salary payment. All conditionally granted performance shares as of the effective date of the change of control shall lapse without consideration. Form of settlement Cash settlement Cash settlement Cash settlement Payment date 2020 2021 2022 139 The fair value of the performance shares conditionally granted under SPP included the following sums on the grant date: Performance Shares from the RWE AG SPP € 2016 tranche 2017 tranche 2018 tranche 2019 tranche Fair value per share 13.78 11.62 18.80 19.10 Performance Shares from the innogy SE SPP € 2016 tranche 2017 tranche 2018 tranche Fair value per share 37.13 32.07 36.78 The fair values of the tranches of the RWE AG SPP are based on The fair values of the tranches of the innogy SE SPP are affected by RWE AG’s and innogy SE’s current share price plus the dividends the asset swap with E.ON announced in March 2018 because the per share which have already been paid to the shareholders during rules set out earlier will be reflected in the valuation in the event of a the term of the corresponding tranche. The limited payment per SPP change of control. The expected payout amount will be calculated on was implemented via a sold call option. The option value calculated the basis of the average innogy share price on the 30 stock using the Black Scholes Model was deducted. The maximum market trading days leading up to 11 March 2018 plus dividends payments per conditionally granted SPP (= option strike) established paid. In line with the payout conditions in the event of a change of in the plan conditions, the discount rates relative to the remaining control, the amount was paid after the completion of the transaction. term as well as the volatilities and expected dividends of RWE AG and innogy SE were considered in determining the option price. The performance shares displayed the following development in the fiscal year that just came to a close: Performance Shares from the RWE AG SPP 2016 tranche 2017 tranche 2018 tranche 2019 tranche Outstanding at the start of the fiscal year 528,207 1,628,391 883,974 Granted 932,889 Change (granted/expired) 306 3,737 207,021 Paid out Outstanding at the end of the fiscal year Payable at the end of the fiscal year 528,513 528,513 1,632,128 1,090,995 932,889 Performance Shares from the innogy SE SPP 2016 tranche 2017 tranche 2018 tranche Outstanding at the start of the fiscal year 27,876 55,212 56,546 Granted Change (granted/expired) Paid out Outstanding at the end of the fiscal year Payable at the end of the fiscal year 8,041 – 35,917 25,699 – 80,911 3,321 – 59,867 During the period under review, expenses for the share-based based payment programmes amounted to €60 million (previous payment system totalled €34 million (previous year: €20 million). year: €32 million). As of the balance-sheet date, provisions for cash-settled share- 140 RWE Annual Report 2019 Consolidated financial statements > Notes (22) Provisions Provisions € million Provisions for pensions and similar obligations Provisions for nuclear waste management Provisions for mining damage Other provisions1 Staff-related obligations (excluding restructuring) Restructuring obligations Purchase and sales obligations Provisions for dismantling wind farms Other dismantling and retrofitting obligations Environmental protection obligations Interest payment obligations Obligations to deliver CO2 emission allowances/ certificates for renewable energies Miscellaneous other provisions 31 Dec 2019 31 Dec 2018 Non- current 3,446 6,355 4,559 Current Total 3,446 6,723 4,618 368 59 Non- current 3,287 5,659 2,460 Current Total 3,287 5,944 2,516 285 56 14,360 427 14,787 11,406 341 11,747 361 591 1,390 948 557 78 281 370 622 31 116 4 77 2 771 588 983 622 1,506 952 634 80 281 771 958 378 109 905 358 528 90 261 331 446 23 92 4 52 7 1 824 132 997 362 580 97 262 885 721 885 1,052 4,576 2,211 6,787 2,960 2,231 5,191 18,936 2,638 21,574 14,366 2,572 16,938 1 Prior-year figures restated: Due to the IFRS IC agenda decision of September 2019, tax balances previously stated as tax provisions are now recognised in income tax liabilities. Provisions for pensions and similar obligations. The company post-employment benefits, or increase the contributions of the pension plan consists of defined contribution and defined benefit employer and employees. In the event that RWE terminates the plans. The defined benefit commitments mainly relate to pension ABP pension plan, ABP will charge a termination fee. Amongst other benefits based on final salary. These are exposed to the typical risks things, its level depends on the number of participants in the plan, of longevity, inflation and salary increases. the amount of salary and the age structure of the participants. As of 31 December 2019, we had around 600 active participants in In the reporting period, €24 million (previous year: €23 million) was the plan (previous year: approximately 600). paid into defined contribution plans. This includes payments made by RWE for a benefit plan in the Netherlands which covers the RWE transferred assets to RWE Pensionstreuhand e.V. within the commitments of various employers. This fund does not provide the framework of a contractual trust arrangement (CTA) in order to participating companies with information allowing for the pro-rata finance the pension commitments of German Group companies. allocation of defined benefit obligations, plan assets and service There is no obligation to provide further funds. From the assets held cost. In the consolidated financial statements, the contributions are in trust, funds were transferred to RWE Pensionsfonds AG to cover thus recognised analogously to a defined contribution plan, although pension commitments to most of the employees who have already this is a defined benefit plan. The pension plan for employees in the retired. RWE Pensionsfonds AG falls under the scope of the Act on Netherlands is administered by Stichting Pensioenfonds ABP (see the Supervision of Insurance Undertakings and oversight by the www.abp.nl). Contributions to the pension plan are calculated as a Federal Financial Supervisory Agency (BaFin). Insofar as a regulatory percentage rate of employees’ salaries and are paid by the emplo- deficit occurs in the pension fund, supplementary payment shall be yees and employers. The rate of the contributions is determined by requested from the employer. Independently of the aforementioned ABP. There are no minimum funding obligations. Approximately rules, the liability of the employer shall remain in place. The boards €9 million in employer contributions are expected to be paid to the of RWE Pensionstreuhand e.V. and RWE Pensionsfonds AG are ABP pension fund in fiscal 2020 (previous year: €8 million). The responsible for ensuring that the funds under management are used contributions are used for all of the beneficiaries. If ABP’s funds are in compliance with the contract and thus fulfil the requirements for insufficient, it can either curtail pension benefits and future recognition as plan assets. 141 In the United Kingdom, it is legally mandated that defined benefit The last funding valuations of the ESPS sections were carried out on plans are provided with adequate and suitable assets to cover 31 March 2019. They showed that the RWE section had a financing pension obligations. The corporate pension system is managed by deficit of £44.3 million. RWE will rectify this deficit with a payment of the sector-wide Electricity Supply Pension Scheme (ESPS), in which £48.3 million as of 31 March 2020. A technical financing deficit of RWE and the continuing innogy operations each have their own £103.4 million was revealed for the section of the continuing innogy dedicated independent sections. The sections are managed by operations. innogy and the trustees subsequently agreed to rectify trustees which are elected by members of the pension plans or this deficit with annual payments of £37.5 million, £36.3 million, appointed by the sponsoring employers. The trustees are respon- £17.0 million and £17.0 million from 2020 to 2023. The next sible for managing the pension plans. This includes investments, valuations have to occur by 31 March 2022. From this point in time, pension payments and financing plans. The pension plans the company and the trustees have 15 months to approve the comprise the benefit obligations and plan assets for the funding valuation. subsidiaries of the RWE Group and the continuing innogy opera- tions. It is required by law to assess the required financing of the The payments to settle the deficit are charged to the participating pension plans once every three years. This involves measuring companies on the basis of a contractual agreement. Above and pension obligations on the basis of conservative assumptions, which beyond this, payments are regularly made to finance the newly arising deviate from the requirements imposed by IFRS. The underlying benefit obligations of active employees which increase the pension actuarial assumptions primarily include the projected life expectan- claims. cies of the members of the pension plans as well as assumptions relating to inflation, imputed interest rates and the market returns Provisions for defined benefit plans are determined using actuarial on the plan assets. methods. We apply the following assumptions: Calculation assumptions 31 Dec 2019 31 Dec 2018 in % Discount rate Wage and salary growth rate Germany Foreign 1 Germany Foreign 1 1.20 2.35 2.00 3.00 1.70 2.35 2.70 3.30 Pension increase rate 1.00, 1.60 and 1.75 1.90 and 2.80 1.00, 1.60 and 1.75 2.20 and 3.10 1 Pertains to benefit commitments to employees of the RWE Group in the UK. 142 RWE Annual Report 2019Consolidated financial statements > Notes Composition of plan assets (fair value) € million 31 Dec 2019 Of which: Level 1 pur- suant to IFRS 13 Foreign 2 Of which: Level 1 pur- suant to IFRS 13 31 Dec 2018 Of which: Level 1 pur- suant to IFRS 13 Foreign 2 Of which: Level 1 pur- suant to IFRS 13 Ger- many1 Ger- many1 Equity instruments, exchange-traded funds 1,539 1,519 468 131 1,396 1,375 469 208 Interest-bearing instruments 3,620 91 3,502 33 3,245 4 3,720 1,641 Real estate Mixed funds 3 Alternative investments Other 4 3 705 685 64 375 1,539 160 438 30 661 407 69 4 613 689 72 229 406 68 613 784 308 324 2 7 6,616 2,453 6,577 393 6,019 2,082 5,894 2,182 1 Plan assets in Germany primarily pertain to assets of RWE AG and other Group companies which are managed by RWE Pensionstreuhand e.V. as a trust, as well as to assets of RWE Pensionsfonds AG. 2 Foreign plan assets pertain to the assets of two UK pension funds for covering benefit commitments to employees of the RWE Group in the UK. 3 Includes equity and interest-bearing instruments. 4 Includes reinsurance claims against insurance companies and other fund assets of provident funds. Our investment policy in Germany is based on a detailed analysis of investments over the long term. Furthermore, in order to achieve the plan assets and the pension commitments and the relation of consistently high returns, there is also investment in products which these two items to each other, in order to determine the best possible are more likely to offer relatively regular positive returns over time. investment strategy (Asset Liability Management Study). Using an This involves products with returns which fluctuate like those of optimisation process, portfolios are identified which can earn the bond investments, but which achieve an additional return over the best targeted results at a defined level of risk. One of these efficient medium term, such as so-called absolute return products (including portfolios is selected and the strategic asset allocation is determined; funds of hedge funds). furthermore, the related risks are analysed in detail. In the United Kingdom, our capital investment takes account of the The focus of RWE’s strategic investment policy is on domestic and structure of the pension obligations as well as liquidity and risk matters. foreign government bonds. In order to increase the average yield, The goal of the investment strategy in this context is to maintain the corporate bonds with a higher yield are also included in the level of pension plan funding and ensure the full financing of the portfolio. The ratio of equities in the portfolio is lower than that of pension plans over time. To reduce financing costs and earn surplus bonds. Investment occurs in various regions. The investment returns, we also include higher-risk investments in our portfolio. The position in equities is intended to earn a risk premium over bond capital investment focusses on government and corporate bonds. 143 Pension provisions for pension commitments changed as follows: Changes in pension provisions € million Balance at 1 Jan 2019 Current service cost Interest cost/income Return on fund assets less interest components Gain/loss on change in demographic assumptions Gain/loss on change in financial assumptions Experience-based gains/losses Currency translation adjustments Employee contributions Employer contributions 1 Benefits paid 2 Changes in the scope of consolidation/transfers Past service cost General administration expenses Change in capitalised surplus of plan assets Balance at 31 Dec 2019 of which: domestic of which: foreign Present value of pension commitments Fair value of plan assets Capitalised surplus of plan assets 14,987 11,913 213 123 312 – 49 1,272 43 308 6 – 718 209 – 7 16,486 10,041 6,445 262 1,096 315 6 157 – 694 145 – 7 13,193 6,616 6,577 10 – 70 153 153 Total 3,287 123 50 – 1,096 – 49 1,272 43 3 – 157 – 24 64 – 7 7 – 70 3,446 3,425 21 1 Of which: €42 million from initial and subsequent transfers to plan assets and €115 million in cash flows from operating activities. 2 Contained in cash flows from operating activities. 144 RWE Annual Report 2019Consolidated financial statements > Notes Changes in pension provisions € million Balance at 1 Jan 2018 Current service cost Interest cost /income Return on fund assets less interest components Gain /loss on change in demographic assumptions Gain /loss on change in financial assumptions Experience-based gains /losses Currency translation adjustments Employee contributions Employer contributions1 Benefits paid 2 Changes in the scope of consolidation of which: stated as "held for sale" Past service cost General administration expenses Change in capitalised surplus of plan assets Balance at 31 Dec 2018 of which: domestic of which: foreign Present value of pension commitments Fair value of plan assets Capitalised surplus of plan assets Total 25,316 19,999 103 5,420 210 413 44 380 –  71 – 45 8 – 907 – 10,376 – 10,461 15 340 – 788 – 46 8 259 – 852 – 7,001 – 7,005 – 6 14,987 11,913 9,208 5,779 6,019 5,894 210 73 788 44 380 – 71 – 259 – 55 – 3,481 – 3,562 15 6 217 3,287 3,189 98 – 1 – 106 – 106 217 213 213 1 Of which: €138 million from initial and subsequent transfers to plan assets and €121 million in cash flows from operating activities. 2 Contained in cash flows from operating activities. Changes in the actuarial assumptions would lead to the following changes in the present value of the defined benefit obligations: Sensitivity analysis of pension provisions Changes in the present value of defined benefit obligations € million 31 Dec 2019 31 Dec 2018 Change in the discount rate by + 50 /− 50 basis points – Domestic – Foreign Change in the wage and salary growth rate by − 50 /+ 50 basis points – Domestic – Foreign Change in the pension increase rate by − 50 /+ 50 basis points – Domestic – Foreign Increase of one year in life expectancy – Domestic – Foreign – 734 – 433 – 55 – 35 – 489 – 300 145 – 644 – 373 – 49 – 29 – 442 – 267 833 489 57 41 537 407 482 259 728 420 51 32 484 298 425 202 The sensitivity analyses are based on the change of one assumption commitments in the United Kingdom due to a ruling on the each, with all other assumptions remaining unchanged. Actual equalisation of minimum pension entitlements through the developments will probably be different than this. The methods of consideration of gender-specific factors and due to severance calculating the aforementioned sensitivities and for calculating the payments. Furthermore, employee rights to compensation for pension provisions are in agreement. The dependence of pension disadvantages were remeasured in some cases in German provisions on market interest rates is limited by an opposite effect. pre-retirement regulations. The background of this is that the commitments stemming from company pension plans are primarily covered by funds, and mostly Domestic company pensions are subject to an obligation to review plan assets exhibit negative correlation with the market yields of for adjustment every three years pursuant to the Act on the Impro- fixed-interest securities. Consequently, declines in market interest vement of Company Pensions (Sec 16 of the German Company rates are typically reflected in an increase in plan assets, whereas Pension Act (BetrAVG)). Additionally, some commitments grant rising market interest rates are typically reflected in a reduction in annual adjustments of pensions, which may exceed the adjustments plan assets. in compliance with the legally mandated adjustment obligation. The present value of pension obligations, less the fair value of the Some domestic pension plans guarantee a certain pension level, plan assets, equals the net amount of funded and unfunded pension taking into account the statutory pension (total retirement earnings obligations. schemes). As a result, future reductions in the statutory pension can result in higher pension payments by RWE. As of the balance-sheet date, the recognised amount of pension provisions totalled €2,889 million for funded pension plans The weighted average duration of the pension obligations was (previous year: €2,826 million) and €557 million for unfunded 16 years in Germany (previous year: 15 years) and 15 years outside pension plans (previous year: €461 million). of Germany (previous year: 14 years). In fiscal 2019, a substantial portion of the past service cost In fiscal 2020, RWE expects to make €275 million in payments for related to effects in connection with restructuring measures in defined benefit plans of continuing operations (previous-year target: Germany and severance payments in Great Britain. In the previous €220 million), as direct benefits and contributions to plan assets. year, the past service cost predominantly consisted of pension Provisions for nuclear energy and mining Balance at 1 Jan 2019 Additions Unused amounts released Interest accretion Amounts used Balance at 31 Dec 2019 Changes in the scope of consoli dation, currency adjustments, transfers € million Provisions for nuclear waste management Provisions for mining damage 5,944 800 2,516 1,384 8,460 2,184 227 765 992 – 9 – 9 – 3 – 245 – 38 6,723 4,618 – 3 – 283 11,341 Provisions for nuclear waste management are recognised in the as of the balance-sheet date (previous year: 0.4 %). The escalation full amount for the nuclear power plants Biblis A and B, Mülheim- rate based on expectations with regard to general increases in Kärlich, Emsland, Lingen and Gundremmingen A, B and C. Provisions wages and prices and productivity growth was 1.5 % (previous year: for waste disposal for the Dutch nuclear power plant Borssele are 1.5 %). As a result, the real discount rate used for nuclear waste included at a rate of 30 %, in line with RWE’s stake. management purposes, which is the difference between the Provisions for nuclear waste disposal are almost exclusively (previous year: – 1.1 %). An increase (decrease) in this rate by reported as non-current provisions, and their settlement amount is 0.1 percentage point would reduce (increase) the present value of discounted to the balance-sheet date. Based on the current state of the provision by roughly €50 million. discount rate and the escalation rate, amounted to – 1.5 % planning, we will use most of these provisions by the beginning of the 2040s. The discount rate calculated on the basis of the current level of market interest rates for no-risk cash investments was 0.0 % 146 RWE Annual Report 2019 Consolidated financial statements > Notes Excluding the interest accretion, additions to provisions for nuclear Provisions for the residual operation of nuclear power station waste management amount to €800 million. €719 million of this facilities cover all steps that must be taken largely independent of sum is allocable to the nuclear energy obligations assumed from the dismantling and disposal but are necessary to ensure that the E.ON subsidiary PreußenElektra within the scope of the acquisition assets are safe and in compliance with permits or are required by of the minority interests in the Gundremmingen nuclear power plant the authorities. In addition to works monitoring and facility protection, units. Besides quantity-related increases in the provisions, the other these mainly include service, recurrent audits, maintenance, radiation additions to provisions are due to the fact that the current estimates and fire protection as well as infrastructural adjustments. resulted in a net increase in the antici pated nuclear waste manage- ment costs. Of the changes in provisions, – €51 million was offset Provisions for the dismantling of nuclear power plant facilities include against the corresponding costs of nuclear power plants still in all work done to dismantle plants, parts of plants, systems and operation and the fuel elements. Prepayments for services in the components as well as on buildings that must be dismantled to amount of €8 million were deducted from these provisions. In the comply with the Nuclear Energy Act. They also consider the reporting period, we also used provisions of €193 million for the conventional dismantling of nuclear power plant facilities to fulfil decommissioning of nuclear power plants. Decommissioning and legal or other obligations. dismantling costs had originally been capitalised in a corresponding amount and reported under the cost of the respective nuclear Provisions for residual material processing and waste management power plants. include the costs of processing radioactive residual material for non-hazardous recycling and the costs of treating radioactive The provisions of the law on the reassignment of responsibility for waste produced during the plant’s service life and dismantling nuclear waste disposal stipulates that accountability for the operations. This includes the various processes for conditioning, shutdown and dismantling of the assets as well as for packaging proper packaging of the low-level and intermediate-level radioactive radio active waste remains with the companies. The shutdown and waste in suitable containers and the transportation of such waste to dismantling process encompasses all activities following the final BGZ Gesellschaft für Zwischenlagerung mbH (BGZ), which has been termination of production by the nuclear power plant until the plant commissioned by the Federal government for intermediate storage. site is removed from the regulatory scope of the Nuclear Energy Act. This item also contains the cost of transporting the waste produced A request to decommission and dismantle the nuclear power plant by recycling and the cost of the proper packaging of spent nuclear will be filed with the nuclear licensing authority during its operating fuel elements, i.e. the cost of loading and procuring freight and period so that the decommissioning and dismantling work can be interim storage containers. performed in time after the expiry of the operating permit. Dismantling operations essentially consist of dismantling and Commissioned by the plant operator, the internationally renowned removal of the radioactive contamination from the facilities and company NIS Ingenieurgesellschaft mbH (NIS), Alzenau, assesses structures, radiation protection, and regulatory monitoring of the the prospective residual operation and dismantling costs for the dismantling measures and residual operations. nuclear power plants on an annual basis. The costs are determined specifically for each facility and take into consideration the current We thus subdivide our provisions for nuclear waste management state of the art, regulatory requirements and previous practical into the residual operation of nuclear power plants, the dismantling experience from ongoing and completed dismantling projects. of nuclear power station facilities as well as the cost of residual Additionally, current developments are also incorporated into the material processing and radioactive waste treatment facilities. cost calculations. They also include the cost of conditioning and Provisions for nuclear waste management € million Residual operation Dismantling Processing of residual material and waste management 31 Dec 2019 31 Dec 2018 2,840 2,086 1,797 6,723 2,515 1,810 1,619 5,944 packaging radioactive waste generated during dismantling operations and the transportation of such waste to BGZ, which has been commissioned by the Federal government for intermediate storage. Further cost estimates for the disposal of radioactive waste are based on contracts with foreign reprocessing companies and other disposal companies. Furthermore, they are based on plans by internal and external experts, in particular GNS Gesellschaft für Nuklear-Service mbH, (GNS) Essen. 147 In terms of their contractual definition, provisions for nuclear waste So far, due to the long-term nature of the obligations, both the management break down as follows: escalation rate and the discount rate have been determined as the Provisions for nuclear waste management € million Provisions for nuclear obligations, not yet contractually defined Provisions for nuclear obligations, contractually defined 31 Dec 2019 31 Dec 2018 average values for a longer period in the past. Since the develop- ment of inflation has an impact both on the fulfilment amounts and the level of interest rates, this approach resulted in a consistent real discount rate of 1.3 % specific to the provisions, as the difference between the discount rate of 4.1 % and the escalation rate of 2.8 %. Since a major portion of the amounts used will now occur in the next 4,849 4,462 30 years due to the early phase-out of electricity generation from 1,874 6,723 1,482 5,944 lignite and the associated additional cost of restoring the opencast lignite mines, it became necessary to adjust the calculation of the discount rate and the escalation rate. In discounting the amounts used in the coming 30 years, we have oriented ourselves towards the current market interest rates for risk-free cash investments. The provision for obligations which are not yet contractually Since no market interest rates are available for later periods, a defined covers the costs of the remaining operational phase of the sustainable, long-term interest rate is used to discount the amounts operating plants, the costs of dismantling as well as the residual used after the next 30 years. In sum, this results in an average material processing and waste treatment costs incurred in discount rate of 1.99 %. The escalation rate used (1.5 %) is also lower connection with waste produced as a result of shut-downs. than in the previous year (2.8 %). The escalation rate reflects Provisions for contractually defined nuclear obligations relate to applied for mining purposes, which is the difference between the all obligations the value of which is specified in contracts under civil discount rate and the escalation rate, is thus 0.49 % (previous year: law. The obligations include the anticipated residual costs of 1.3 %). An increase (decline) in the real discount rate by 0.1 percen- reprocessing and returning the resulting radioactive waste. These tage point would reduce (increase) the present value of the provision currently expected price and cost increases. The real discount rate costs stem from existing contracts with foreign reprocessing by around €140 million. companies and with GNS. Moreover, these provisions also include the costs for transport and intermediate storage containers for and Excluding the interest accretion, €1,384 million was added to the loading of spent fuel assemblies within the framework of final provisions for mining damage. This includes the cost of the quantity- direct storage. Furthermore, this item also includes the amounts for induced increase in the obligatory volume and the cost of restoring the professional packaging of radioactive operational waste as well the opencast lignite mines due to the phase-out of electricity as the in-house personnel costs incurred for the residual operation generation from lignite by 2038. €258 million of the changes in of plants which are permanently decommissioned. provisions was capitalised under ‘Property, plant and equipment’. Provisions for mining damage also consist almost entirely of non-current provisions and fully covered the volume of obligations as of the balance-sheet date. They are reported at their settlement amount discounted to the balance-sheet date. Provisions for mining damage also contain the expected additional cost of restoring the opencast lignite mines associated with the phase-out of electricity generation from lignite by 2038. In addition to continuous recultivation of opencast mine sites a large part of the claims for site restoration of lignite opencast mining areas is expected through to 2050. The cost estimates are to a great extent based on external expert opinions. 148 RWE Annual Report 2019 Consolidated financial statements > Notes Other provisions Additions Balance at 1 Jan 2019 Unused amounts released Interest accretion Amounts used Balance at 31 Dec 2019 Changes in the scope of consoli- dation, currency adjust- ments, transfers € million Staff-related obligations (excluding restructuring) Restructuring obligations Purchase and sales obligations Provisions for dismantling wind farms Other dismantling and retrofitting obligations Environmental protection obligations Interest payment obligations Obligations to deliver CO2 emission allowances/ certificates for renewable energies Miscellaneous other provisions 824 132 997 362 580 97 262 885 1,052 541 537 367 62 29 7 91 775 605 – 17 – 23 – 178 – 21 – 41 – 19 −5 – 11 – 24 5,1911 3,014 – 339 6 7 32 – 45 83 3 28 114 39 – 28 378 594 2 9 – 355 – 410 – 3 – 90 – 17 – 10 – 67 – 887 – 348 983 622 1,506 952 634 80 281 771 958 639 – 1,832 6,787 1 Figure restated: Due to the IFRS IC agenda decision of September 2019, tax balances previously stated as tax provisions are now recognised in income tax liabilities. 149 Provisions for staff-related obligations mainly consist of This is the case if individual contracts governing socially acceptable provisions for pre-retirement part-time work arrangements, payroll downsizing are signed by affected employees. severance, outstanding vacation and service jubilees and perfor- mance-based pay components. Based on current estimates, we Provisions for purchase and sales obligations primarily relate to expect most of these to be used from 2020 to 2025. contingent losses from pending transactions. Provisions for restructuring obligations pertain mainly to measures From the current perspective, we expect that the majority of the for socially acceptable payroll downsizing. We currently expect most provisions for the dismantling of wind farms will be used from of these to be used from 2020 to 2030. In so doing, sums ear-marked 2020 to 2045, and the other dismantling and retrofitting for personnel measures are reclassified from provisions for obligations will be used from 2020 to 2060. restructuring obligations to provisions for staff-related obligations as soon as the underlying restructuring measure has been specified. (23) Financial liabilities Financial liabilities € million Bonds payable1 Bank debt Other financial liabilities Collateral for trading activities Miscellaneous other financial liabilities 1 Including hybrid bonds classified as debt as per IFRS. 31 Dec 2019 31 Dec 2018 Non-current Current Non-current Current 1,110 965 1,849 3,924 391 400 1,019 1,810 1,103 473 422 1,998 81 533 152 766 €631 million of the non-current financial liabilities were interest- The following overview shows the key data on the bonds of the bearing liabilities (previous year: €523 million). RWE Group as of 31 December 2019: Bonds payable Issuer RWE AG RWE AG RWE AG RWE AG Bonds payable Outstanding amount Carrying amount € million Coupon in % Maturity € 12 million € 539 million1 € 282 million1 US$ 317 million1 12 538 281 279 1,110 3.5 2.75 3.5 October 2037 April 2075 April 2075 6.625 July 2075 1 Hybrid bonds classified as debt as per IFRS. €39 million of the financial liabilities are secured by mortgages (previous year: €72 million). Other financial liabilities contain lease liabilities. 150 RWE Annual Report 2019Consolidated financial statements > Notes In the previous year, liabilities arising from finance lease agreements had the following maturities: Liabilities from finance lease agreements € million Due in the following year Due after 1 to 5 years Due after 5 years The introduction of IFRS 16 abolishes the distinction between operating leases and finance leases by the lessee. A maturity analysis of all lease liabilities as of 31 December 2019 can be found in the reporting on financial instruments (see Note 27). Maturities of minimum lease payments 31 Dec 2018 Nominal value Discount Present value 10 39 192 241 10 39 192 241 (24) Income tax liabilities Income tax liabilities contain uncertain income tax items in the primarily includes income taxes for periods for which the tax amount of €1,174 million (previous year: €1,540 million; authorities have not yet finalised a tax assessment and for the 1 January 2018: €1,969 million). Due to the IFRS IC agenda current year. decision in September 2019, these are now recognised as income tax liabilities instead of as tax provisions. This item (25) Other liabilities Other liabilities € million Tax liabilities Social security liabilities Derivatives Miscellaneous other liabilities of which: financial debt of which: non-financial debt 31 Dec 2019 31 Dec 2018 Non-current Current Non-current Current 2 391 456 849 435 414 129 17 10,088 1,354 11,588 10,303 1,285 2 362 144 508 379 129 105 14 6,698 383 7,200 6,877 323 The principal component of social security liabilities are the Moreover, €46 million (previous year: €56 million) in miscellaneous amounts payable to social security institutions. other liabilities were allocable to state investment subsidies primarily granted in connection with the construction of wind farms and in the Miscellaneous other liabilities contain €269 million in contract preceding year with biomass co-firing. liabilities (previous year: €76 million). 151 Other information (26) Earnings per share • Equity instruments measured at fair value through other Basic and diluted earnings per share are calculated by dividing the comprehensive income: the option to recognise changes in fair portion of net income attributable to RWE shareholders by the value directly in equity is exercised. average number of shares outstanding; treasury shares are not • Financial assets measured at fair value through profit or loss: the taken into account in this calculation. contractual cash flows of a debt instrument do not solely consist of In the previous year, earnings per share were the same for both recognise changes in the fair value of equity instruments in other common and preferred shares. comprehensive income is not exercised. interest and principal on the outstanding capital or the option to Earnings per share 2019 2018 include liabilities measured at amortised cost. On the liabilities side, non-derivative financial instruments principally 8,498 335 Financial instruments recognised at fair value are measured based on the published exchange price, insofar as the financial instru- – 691 – 196 ments are traded on an active market. The fair value of non-quoted Net income for RWE AG shareholders € million of which: from continuing operations of which: from discontinued operations Number of shares outstan- ding (weighted average) in ‘000 614,745 614,745 9,189 531 Basic and diluted earnings per common share of which: from continuing operations of which: from discontinued operations Dividend per common share Dividend per preferred share € € 1 Proposal for fiscal 2019. € 13.82 0.54 – 1.13 – 0.32 14.95 0.801 0.86 0.70 0.70 debt and equity instruments is generally determined on the basis of discounted expected payment flows, taking into consideration macro-economic developments and corporate business plan data. Current market interest rates corresponding to the remaining maturity are used for discounting. Derivative financial instruments are recognised at their fair values as of the balance-sheet date, insofar as they fall under the scope of IFRS 9. Exchange-traded products are measured using the published closing prices of the relevant exchange. Non-exchange traded products are measured on the basis of publicly available broker quotations or, if such quotations are not available, on generally accepted valuation methods. In doing so, we draw on prices on active markets as much as possible. If such prices are not available, company-specific planning estimates are used in the measurement process. These estimates encompass all of the market factors which other market participants would take into (27) Reporting on financial instruments account in the course of price determination. Assumptions Financial instruments are divided into non-derivative and derivative. pertaining to the energy sector and economy are made within the Non-derivative financial assets essentially include other non-current scope of a comprehensive process with the involvement of both financial assets, accounts receivable, marketable securities and in-house and external experts. cash and cash equivalents. Financial instruments are recognised either at amortised cost or at fair value, depending on their Measurement of the fair value of a group of financial assets and classification. Financial instruments are recognised in the following financial liabilities is conducted on the basis of the net risk exposure categories: per business partner. • Debt instruments measured at amortised cost: the contractual cash flows solely consist of interest and principal on the outstan- ding capital: there is an intention to hold the financial instrument until maturity. • Debt instruments measured at fair value through other compre- hensive income: the contractual cash flows solely consist of interest and principal on the outstanding capital: there is an intention to hold and sell the financial instrument. 152 RWE Annual Report 2019 Consolidated financial statements > Notes The following overview presents the classifications of financial • Level 2: Measurement on the basis of input parameters which instruments measured at fair value in the fair value hierarchy are not the prices from Level 1, but which can be observed for the prescribed by IFRS 13. The individual levels of the fair value financial instrument either directly (i.e. as price) or indirectly (i.e. hierarchy are defined as follows: derived from prices), • Level 3: Measurement using factors which cannot be observed on • Level 1: Measurement using (unadjusted) prices of identical financial the basis of market data. instruments formed on active markets, Fair value hierarchy € million Total 2019 Level 1 Level 2 Level 3 Other financial assets 4,391 3,853 188 Derivatives (assets) 12,108 11,443 350 665 of which: used for hedging purposes 2,961 2,961 Total 2018 400 7,271 1,644 93 159 7,115 1,644 Level 1 Level 2 Level 3 Securities 3,258 1,829 1,429 3,606 1,618 1,988 Assets held for sale Derivatives (liabilities) of which: used for hedging purposes Liabilities held for sale 9 10,479 1,513 4 1 8 4,031 1,755 1,472 9,902 577 7,060 1,513 1,134 4 1,343 7,025 1,134 1,343 148 156 804 35 Due to the increase in the number of price quotations on active in the reporting year, derivatives with a fair value of €44 million were markets, financial assets with a fair value of €24 million (previous reclassified from Level 2 to Level 3. year: €14 million) were reclassified from Level 2 to Level 1. Conversely, due to a drop in the number of price quotations, The development of the fair values of Level 3 financial instruments financial assets with a fair value of €25 million (previous year: is presented in the following table: €12 million) were reclassified from Level 1 to Level 2. Furthermore, Level 3 financial instruments: Development in 2019 € million Other financial assets Derivatives (assets) Assets held for sale Derivatives (liabilities) Liabilities held for sale Balance at 1 Jan 2019 148 156 804 35 Changes in the scope of consolidation, currency adjustments and other 155 182 – 819 138 Changes Balance at 31 Dec 2019 Recognised in profit or loss Recognised in OCI With a cash effect – 9 – 23 434 – 8 432 79 – 107 31 – 28 4 350 665 8 577 4 153 Level 3 financial instruments: Development in 2018 € million Other financial assets Financial receivables Derivatives (assets) Assets held for sale Derivatives (liabilities) Balance at 1 Jan 2018 821 35 33 4 Changes in the scope of consolidation, currency adjustments and other – 741 – 35 736 Changes Balance at 31 Dec 2018 Recognised in profit or loss Recognised in OCI With a cash effect – 42 140 30 36 12 – 1 98 – 17 39 – 5 148 156 804 35 Amounts recognised in profit or loss generated through Level 3 financial instruments relate to the following line items on the income statement: Level 3 financial instruments: Amounts recognised in profit or loss € million Revenue Cost of materials Other operating income/expenses Income from investments Income from discontinued operations Total 2019 242 – 449 209 – 23 – 8 – 29 Of which: attributable to financial instru- ments held at the balance-sheet date Total 2018 Of which: attributable to financial instru- ments held at the balance-sheet date 242 – 449 209 – 10 – 8 25 – 24 96 – 45 40 92 25 – 24 96 – 45 48 100 Level 3 derivative financial instruments essentially consist of energy the fair values to increase, whereas declining gas prices cause them purchase and commodity agreements, which relate to trading to drop. A change in pricing by +/– 10 % would cause the market periods for which there are no active markets yet. The valuation of value to rise by €61 million (previous year: €41 million) or decline by such depends on the development of electricity, oil and gas prices in €61 million (previous year: €41 million). particular. All other things being equal, rising market prices cause 154 RWE Annual Report 2019Consolidated financial statements > Notes Financial assets and liabilities can be broken down into the measurement categories with the following carrying amounts according to IFRS 9 in the year under review: Carrying amounts by category € million Financial assets measured at fair value through profit or loss of which: obligatorily measured at fair value – continuing operations of which: obligatorily measured at fair value – held for sale Debt instruments measured at amortised cost of which: held for sale Debt instruments measured at fair value through other comprehensive income of which: held for sale Equity instruments measured at fair value through other comprehensive income of which: held for sale Financial liabilities measured at fair value through profit or loss of which: obligatorily measured at fair value – continuing operations of which: obligatorily measured at fair value – held for sale Financial liabilities measured at (amortised) cost of which: held for sale 31 Dec 2019 31 Dec 2018 10,829 10,821 8 9,543 112 1,727 4,247 8,970 8,966 4 8,091 311 11,128 8,483 2,645 14,757 6,244 1,715 975 817 408 7,258 5,926 1,332 20,621 15,545 The carrying amounts of financial assets and liabilities within the Due to the initial adoption of IFRS 16, the figures stated for financial scope of IFRS 7 basically correspond to their fair values. The only liabilities in the period under review no longer include lease liabilities, deviations are for financial liabilities. The carrying amount of these is whereas these were still considered in the previous year's figures. €4,632 million (previous year: €2,764 million), while the fair value amounts to €4,919 million (previous year: €2,842 million). Of this, The following net results from financial instruments as per IFRS 7 were €1,180 million (previous year: €1,080 million) is related to Level 1 recognised on the income statement, depending on the category: and €3,739 million (previous year: €1,762 million) to Level 2 of the fair value hierarchy. Net gain/loss by category € million Financial assets and liabilities measured at fair value through profit or loss of which: obligatorily measured at fair value Debt instruments measured at amortised cost Debt instruments measured at fair value through other comprehensive income Equity instruments measured at fair value through other comprehensive income 2019 2018 941 941 137 38 27 – 95 – 95 186 25 14 Financial liabilities measured at (amortised) cost – 317 – 236 155 The net result as per IFRS 7 essentially includes interest, dividends and In the 2019 fiscal year, €27 million (previous year: €13 million) in results from the measurement of financial instruments at fair value. income from dividends from these financial instruments was recognised, of which €5 million (previous year: €4 million) is The option to recognise changes in fair value in other comprehensi- attributable to equity instruments sold during the same year. ve income is exercised for a portion of the investments in equity More over, in the year under review, equity instruments measured instruments. These are strategic investments and other long-term through other comprehensive income were sold in line with the investments as well as securities in special funds. existing investment strategy. Their fair value at the derecognition Fair value of equity instruments measured at fair value through other comprehensive income € million 31 Dec 2019 31 Dec 2018 Securities in special funds Nordsee One GmbH E.ON SE 444 22 3,780 378 31 date amounted to €738 million (previous year: €312 million). The resulting gain amounted to €5 million (previous year: loss of €2 million). The following is an overview of the financial assets and financial liabilities which are netted out in accordance with IAS 32 or are subject to enforceable master netting agreements or similar agreements. The netted financial assets and liabilities essentially consist of collateral for stock market transactions due on a daily basis. Netting of financial assets and financial liabilities as of 31 Dec 2019 Gross amounts recognised Netting Net amounts recognised Related amounts not set off Net amount € million Derivatives (assets) Derivatives (liabilities) 10,381 – 9,801 9,031 – 8,185 580 846 – 119 Financial instruments Cash collateral received/ pledged – 318 – 727 262 Netting of financial assets and financial liabilities as of 31 Dec 2018 Gross amounts recognised Netting Net amounts recognised Related amounts not set off Net amount € million Derivatives (assets) Derivatives (liabilities) 14,915 – 14,232 10,532 – 10,101 683 431 – 186 Financial instruments Cash collateral received/ pledged – 400 – 245 283 The related amounts not set off include cash collateral received and Market risks stem from changes in exchange rates and share pledged for over-the-counter transactions as well as collateral prices as well as interest rates and commodity prices, which can pledged in advance for stock market transactions. have an influence on business results. As a utility enterprise with international operations, the RWE Group Due to the RWE Group’s international profile, currency management is exposed to market, credit and liquidity risks in its ordinary business is a key issue. Fuels are traded in British pounds and US dollars as activity. We limit these risks via systematic, groupwide risk manage- well as in other currencies. In addition, RWE does business in a num- ment. The range of action, responsibilities and controls are defined ber of currency areas. The companies of the RWE Group are required in binding internal directives. to hedge their foreign currency risks via RWE AG. Foreign currency risks arising from the involvement in and the financing of the rene- wable energy business are hedged by RWE Renewables Internatio- nal Participations B.V. 156 RWE Annual Report 2019 Consolidated financial statements > Notes Interest rate risks stem primarily from financial debt and the Group’s The key internal control parameters for commodity positions at interest-bearing investments. We hedge against negative changes RWE Supply & Trading are the VaR for the trading business and the in value caused by unexpected interest-rate movements using VaR for the pooled gas and liquefied natural gas (LNG) business. non-derivative and derivative financial instruments. Here, the maximum VaR is €40 million and €14 million, respectively. As of 31 December 2019, the VaR was €12.0 million in the trading Opportunities and risks from changes in the values of non-current business (previous year: €12.4 million) and €4.7 million for the pooled securities are centrally controlled by a professional fund manage- gas and LNG business (previous year: €5.1 million). ment system operated by RWE AG. The Group’s other financial transactions are recorded using centra- relation to the trading and pooled LNG and gas business of lised risk management software and monitored by RWE AG. RWE Supply & Trading to model the impact of commodity price Additionally, stress tests are carried out on a monthly basis in changes on the earnings conditions and take risk-mitigating measures For commodity operations, risk management directives have been if necessary. In these stress tests, market price curves are modified, established by RWE AG’s Controlling & Risk Management Depart- and the commodity position is revalued on this basis. Historical ment. These regulations stipulate that derivatives may be used to scenarios of extreme prices and realistic, fictitious price scenarios hedge price risks. Furthermore, commodity derivatives may be traded, are modelled. In the event that the stress tests exceed internal subject to limits. Compliance with limits is monitored daily. thresholds, these scenarios are then analysed in detail in relation to their impact and probability, and – if necessary – risk-mitigating Risks stemming from fluctuations in commodity prices and financial measures are considered. market risks (foreign currency risks, interest rate risks, securities risks) are monitored and managed by RWE using indicators such as the Commodity risks of the Group’s power generation companies Value at Risk (VaR), amongst other things. In addition, for the manage- belonging to the Lignite & Nuclear and European Power segments ment of interest rate risk, a Cash Flow at Risk (CFaR) is determined. are hedged by the Supply & Trading segment on the basis of available market liquidity in accordance with Group guidelines. In Using the VaR method, RWE determines and monitors the maxi- accordance with the approach for long-term investments for mum expected loss arising from changes in market prices with a example, it is not possible to manage commodity risks from specific level of probability during specific periods. Historical price long-term positions or positions which cannot be hedged due to volatility is taken as a basis in the calculations. With the exception of their size and the prevailing market liquidity using the VaR concept. the CFaR data, all VaR figures are based on a confidence interval of As a result, these positions are not included in the VaR figures. 95 % and a holding period of one day. For the CFaR, a confidence Above and beyond open production positions which have not interval of 95 % and a holding period of one year is taken as a basis. yet been transferred, the Group companies belonging to the Lignite & Nuclear and European Power segments are not allowed to In respect of interest rate risks, RWE distinguishes between two risk maintain significant risk positions, according to a Group guideline. categories: on the one hand, increases in interest rates can result in Furthermore, commodity price risks can exist in relation to the declines in the prices of securities from the holdings of RWE. This renewable generation positions and in the gas storage business. pertains primarily to fixed-rate instruments. A VaR is determined to The commodity price risks associated with the renewable generation quantify securities price risk. As of the balance- sheet date, it amoun- positions are managed by the Renewables Commodity Manage- ted to €4.8 million (previous year: €2.3 million). On the other hand, ment Committee (RES CMC), which was newly established for this financing costs also increase along with the level of interest rates. purpose. The subsidiaries owning the gas storage facilities also The sensitivity of interest expenses to increases in market interest manage their positions independently, in compliance with unbund- rates is measured with the CFaR. As of 31 December 2019 this ling regulations. amounted to €34.8 million (previous year: €5.9 million). RWE cal- culates the CFaR based on the assumption of the refinancing of One of our most important instruments to limit market risk is the maturing debt. conclusion of hedging transactions. The instruments most commonly used are forwards and options with foreign currency, As of 31 December 2019, the VaR for foreign currency positions interest rate swaps, interest rate currency swaps, and forwards, was €1.6 million (previous year: €1.1 million). This corresponds to options, futures and swaps with commodities. the figure used internally, which also includes the underlying transactions for cash flow hedges. The VaR also reflects the risk of Maturities of derivatives related to interest rates, currencies, equities, timing differences. indices and commodities for the purpose of hedging are based on the maturities of the underlying transactions and are thus primarily As of 31 December 2019, the VaR for risks related to the RWE share short term and medium term in nature. Hedges of the foreign currency portfolio amounted to €3.7 million (previous year: €6.9 million). risks of foreign investments have maturities of up to twelve years. 157 All derivative financial instruments are recognised as assets or ineffectiveness. When hedging foreign currency risks, ineffective- liabilities and are measured at fair value. When interpreting their ness can result from the difference in timing between the origination positive and negative fair values, it should be taken into account of the hedged item and the hedging instrument. Ineffectiveness can that, with the exception of trading in commodities, these financial likewise stem from hedges containing material foreign currency instruments are generally matched with underlying transactions basis spreads. Upon realisation of the underlying transaction, the that carry offsetting risks. hedge’s contribution to income from accumulated other compre- hensive income is recognised on the income statement or is offset Hedge accounting pursuant to IFRS 9 is used primarily for mitigating against the initial value recognition of an asset or a liability. currency risks from net investments in foreign functional currencies, commodity market price risks, interest risks from non-current RWE held the following instruments to hedge future cash flows liabilities and currency and price risks from sales and purchase relating to foreign currency risks: transactions. Fair value hedges are used to limit the market price risk exposure related to CO2 emission allowances. In the case of fair value hedges, both the derivative as well as the underlying hedged transaction (in relation to the hedged risk) are recorded at fair value with an effect on income. Cash flow hedges as of 31 Dec 2019 Currency forwards – purchases Maturity 1 – 6 months 7 – 12 months >12 months RWE held the following instruments to hedge the fair value of commodity price risks: Fair value hedges as of 31 Dec 2019 Maturity 1 – 6 months 7 – 12 months >12 months CO2 derivatives Nominal volume (€ million) Secured average price (€/metric ton) 39 5.57 Nominal volume (€ million) 2,276 Avg. EUR/USD exchange rate Avg. EUR/GBP exchange rate Avg. EUR/CAD exchange rate 1.15 0.87 1.54 134 1.18 0.89 1.56 61 1.19 1.64 Currency forwards – sales Nominal volume (€ million) – 2,947 – 401 – 112 Avg. EUR/USD exchange rate Avg. EUR/GBP exchange rate Avg. EUR/CAD exchange rate 1.13 0.87 1.51 1.18 0.88 1.26 0.86 1.57 Fair value hedges as of 31 Dec 2018 Maturity 1 – 6 months 7 – 12 months >12 months Cash flow hedges as of 31 Dec 2018 Maturity 1 – 6 months 7 – 12 months >12 months CO2 derivatives Nominal volume (€ million) Secured average price (€/metric ton) Currency forwards – purchases 39 Nominal volume (€ million) 1,534 135 5.57 Avg. EUR/USD exchange rate 1.20 0.90 1.57 0.91 1.58 738 1.19 0.92 1.55 Avg. EUR/GBP exchange rate Avg. EUR/CAD exchange rate Currency forwards – sales Nominal volume (€ million) – 1,743 – 339 – 217 Cash flow hedges are primarily used to hedge against interest risks from non-current liabilities as well as currency and price risks from sales and purchase transactions. Hedging instruments consist of forwards, swaps and options with foreign currency and interest rates, and forwards, futures and swaps with commodities. Changes Avg. EUR/USD exchange rate in the fair value of the hedging instruments – insofar as they affect the effective portion – are recorded under other comprehensive income until the underlying transaction is realised. The ineffective portion of changes in value is recognised in profit or loss. When hedging commodities, underlying and hedging transactions are based on the same price index. This generally does not result in Avg. EUR/GBP exchange rate Avg. EUR/CAD exchange rate 1.28 0.91 1.17 0.91 1.23 0.90 1.53 158 RWE Annual Report 2019Consolidated financial statements > Notes RWE held the following instruments to hedge future cash flows relating to interest risks: Net investment hedges as of 31 Dec 2019 Maturity 1 – 6 months 7 – 12 months >12 months Cash flow hedges as of 31 Dec 2019 Interest swaps Nominal volume (£ million) Secured average interest rate (%) Maturity Bonds and currency forwards – sales 1 – 6 months 7 – 12 months >12 months 808 1.55 Nominal volume (€ million) – 1,037 – 349 – 631 Avg. EUR/AUD exchange rate Avg. EUR/GBP exchange rate 0.90 0.86 0.63 Avg. EUR/USD exchange rate Cash flow hedges as of 31 Dec 2018 Maturity 1 – 6 months 7 – 12 months >12 months Net investment hedges as of 31 Dec 2018 Bonds and currency forwards – purchases Maturity 1 – 6 months 7 – 12 months >12 months Interest swaps Nominal volume (£ million) Secured average interest rate (%) 1,642 1.56 Nominal volume (€ million) 56 Avg. EUR/GBP exchange rate 0.89 Bonds and currency forwards – sales The commercial optimisation of the power plant portfolio is based on a dynamic hedging strategy. Hedged items and hedging instruments are constantly adjusted based on changes in market Avg. EUR/AUD exchange rate Avg. EUR/GBP exchange rate prices, market liquidity and the sales business with consumers. Avg. EUR/USD exchange rate 1.58 0.89 1.23 0.85 Nominal volume (€ million) – 1,576 – 4,370 Commodity prices are hedged if this leads to a positive margin. Proprietary commodities trading is strictly separated from this when managing risks. As regards bonds used as hedging instruments for net investment hedges, the average price was calculated using the foreign exchange Hedges of net investment in a foreign operation are used to hedge rate valid on the designation date of the hedging relationship. the foreign currency risks of net investment in foreign entities whose functional currency is not the euro. We use bonds with various terms in the appropriate currencies, interest rate currency swaps, and other currency derivatives as hedging instruments. If there are changes in the exchange rates of currencies in which the bonds used for hedging are denominated or changes in the fair value of interest rate currency swaps, this is recorded under foreign currency translation adjustments in other comprehensive income. RWE held the following instruments to hedge net investments in foreign operations: 159 The hedging instruments designated in hedging relationships had the following effects on the company’s net asset, financial and earnings position: Hedging instruments – effects on the net asset, financial and earnings position as of 31 Dec 2019 Nominal amount Carrying amount 1 The net nominal amount stated is made up of purchases in the amount of €3,494 million and sales in the amount of €7,619 million. Hedging instruments – effects on the net asset, financial and earnings position as of 31 Dec 2018 Nominal amount Carrying amount Fair value changes in the current period Recognised ineffective- ness Assets Liabilities Fair value changes in the current period Recognised ineffective- ness Assets Liabilities 39 931 296 135 105 87 11 69 26 52 – 4,1251 2,337 1,046 – 571 328 55 35 39 1,642 108 4,5161 39 1,056 146 – 126 42 63 861 – 26 – 18 4,611 – 11 – 5,890 7 4,070 37 – 3 € million Fair value hedges Commodity price risks Cash Flow Hedges Interest risks Foreign currency risks Commodity price risks Net investment hedges Foreign currency risks € million Fair value hedges Commodity price risks Cash Flow Hedges Interest risks Foreign currency risks Commodity price risks Net investment hedges Foreign currency risks 1 The net nominal amount stated is made up of purchases in the amount of €7,904 million and sales in the amount of €3,388 million. 160 RWE Annual Report 2019Consolidated financial statements > Notes The carrying amounts of the hedging instruments are recognised in The hedged items designated in hedging relationships had the the ‘Other receivables and other assets’ and ‘Other liabilities’ following effects on the company’s net asset, financial and balance- sheet items. earnings position: Fair value hedges as of 31 Dec 2019 € million Commodity price risks Fair value hedges as of 31 Dec 2018 € million Commodity price risks Cash flow hedges and net investment hedges as of 31 Dec 2019 € million Cash flow hedges Interest risks Foreign currency risks Commodity price risks Net investment hedges Foreign currency risks Cash flow hedges and net investment hedges as of 31 Dec 2018 € million Cash flow hedges Interest risks Foreign currency risks Commodity price risks Net investment hedges Foreign currency risks Carrying amount Of which cumulative fair value adjustments Assets Liabilities Assets Liabilities Changes in fair value in the reporting year 174 135 11 Carrying amount Of which cumulative fair value adjustments Assets Liabilities Assets Liabilities Changes in fair value in the reporting year 185 146 126 Changes in fair value during the current period Reserve for current hedges Reserve for terminated hedges 67 623 – 94 107 4,574 55 1,151 – 15 328 Changes in fair value during the current period Reserve for current hedges Reserve for terminated hedges 26 6 4,611 – 158 13 5,004 – 19 1,380 171 161 The carrying amounts of the hedged items for fair value hedges are stated in the ‘Other receivables and other assets’ balance-sheet item. Amounts realised from OCI and any ineffectiveness are recognised in the items on the income statement in which the Hedge reserve – 2018 € million Balance at 1 Jan 2018 underlying transactions are also recognised with an effect on Cash flow hedges income. The amounts realised from OCI are recognised in revenue Effective portion of changes in market value and the cost of materials, whereas any ineffectiveness is recogni- sed in other operating income and expenses. Amounts recognised and any ineffectiveness of hedging interest risks are recognised in Interest risks Foreign currency risks financial income and financial expenses on the income statement. Commodity price risks The reconciliation of the changes in the hedge reserve in relation to the various risk categories of hedge accounting follows below: Gain or loss reclassified from OCI to the income statement – realisation of underlying transactions Commodity price risks Gain or loss recognised as a basis adjustment Hedge reserve – 2019 € million Balance at 1 Jan 2019 Cash flow hedges Interest risks Foreign currency risks 3,344 Commodity price risks 43 5,085 – 26 12 5,099 – 473 – 473 187 31 – 15 171 Tax effect of the change in the hedge reserve – 1,498 Net investment hedges Effective portion of changes in market value Foreign currency risks Ofsetting against currency adjustments Balance at 31 Dec 2018 57 57 – 57 3,344 Effective portion of changes in market value Interest risks Foreign currency risks Commodity price risks Gain or loss reclassified from OCI to the income statement – realisation of underlying transactions Foreign currency risks Commodity price risks 332 – 53 – 223 608 136 – 127 263 Gain or loss recognised as a basis adjustment – 1,267 Interest risks Foreign currency risks Commodity price risks Tax effect of the change in the hedge reserve Net investment hedges Effective portion of changes in market value Foreign currency risks Ofsetting against currency adjustments Balance at 31 Dec 2019 38 2 – 1,307 434 95 95 – 95 2,979 162 RWE Annual Report 2019 Consolidated financial statements > Notes Credit risks. In the fields of finance and commodities, RWE primarily • Stage 1 – Expected 12-month credit losses: At initial recognition, has credit relationships with banks that have good creditworthiness financial assets are generally assigned to this stage – with the and other trading partners, most of which have good creditworthi- exception of those that have been purchased or originated credit ness. Furthermore, RWE has credit relationships primarily with banks impaired, which are thus considered separately. The level of and other business partners with good creditworthiness within the impairment results from the cash flows expected for the entire scope of large-scale projects such as the construction of wind term of the financial instrument, multiplied by the probability of farms. RWE reviews counterparty default risks before contracts are a default within 12 months from the reporting date. The effective concluded. RWE mitigates such risks by establishing limits which are interest rate used for measurement is determined on the basis of adjusted during the business relationships if the creditworthiness of the carrying amount before impairment (gross). the business partners changes. Counterparty risks are monitored • Stage 2 – Lifetime expected credit losses (gross): If the credit constantly so that countermeasures can be initiated early on. risk has risen significantly between initial recognition and the Furthermore, RWE is exposed to credit risks due to the possibility of reporting date, the financial instrument is assigned to this stage. customers failing to meet their payment obligations. We identify Unlike Stage 1, default events expected beyond the 12-month these risks by conducting regular analyses of the creditworthiness period from the reporting date are also considered in calculating of our customers and initate countermeasures if necessary. the impairment. The effective interest rate used for measurement is still determined on the basis of the carrying amount before Amongst other things, RWE demands guarantees, cash collateral impairment (gross). and other forms of security in order to mitigate credit risks. Further- • Stage 3 – Lifetime expected credit losses (net): If in addition to the more, RWE takes out credit insurance policies to protect against criteria for Stage 2 there is an objective indication of an defaults. Bank guarantees received as collateral are from financial impairment, the financial asset is assigned to Stage 3. The institutions with the required good ratings. Collateral for credit impairment is calculated analogously to Stage 2. In this case, insurance is pledged by insurers with an investment-grade rating. however, the effective interest rate used for measurement is The maximum balance-sheet default risk is derived from the carrying amounts of the financial assets stated on the balance In the RWE Group, risk provisions are formed for financial instru- sheet. The default risks for derivatives correspond to their positive ments in the following categories: fair values. Risks can also stem from financial guarantees and loan commitments which we have to fulfill vis-à-vis external creditors in • debt instruments measured at amortised cost, the event of a default of a certain debtor. As of 31 December 2019, • debt instruments measured at fair value through other compre- applied to the carrying amount after impairment (net). these obligations amounted to €174 million (previous year: hensive income. €223 million). As of 31 December 2019, default risks were balanced against credit collateral, financial guarantees, bank For debt instruments for which there has been no significant rise in guarantees and other collaterals amounting to €5.5 billion (previous credit risk since initial recognition, a risk provision is recognised in year: €1.3 billion). Of this, €1.1 billion relates to trade receivables the amount of the expected 12-month credit losses (Stage 1). In (previous year: €0.2 billion), €1.1 billion to derivatives used for addition, a financial instrument is assigned to Stage 1 of the hedging purposes (previous year: €0.3 billion), and €3.3 billion to impairment model if the absolute credit risk is low on the balan- other derivatives (previous year: €0.8 billion). There were no ce-sheet date. The credit risk is classified as low if the debtor’s material defaults in fiscal 2019 or the previous year. internal or external rating is investment-grade. For trade accounts receivable, the risk provision corresponds to the lifetime expected In the RWE Group, the risk provision for financial assets is deter- credit losses (Stage 2). mined on the basis of expected credit losses. These are determined on the basis of the probability of default, loss given default and the To determine whether a financial instrument is assigned to Stage 2 exposure at default. We determine the probability of default and of the impairment model, it must be determined whether the credit loss given default using historical data and forward-looking risk has increased significantly since initial recognition. To make this information. The exposure at default date for financial assets is the assessment, we consider quantitative and qualitative information gross carrying amount on the balance-sheet date. The expected supported by our experience and assumptions regarding future credit loss for financial assets determined on this basis corres- developments. ponds to the difference between the contractually agreed payments and the payments expected by RWE, discounted by the original effective interest rate. The assignment to one of the levels described below influences the level of the expected losses and the effective interest income recognised. 163 In so doing, special importance is accorded to the sector in which • The debtor of the receivable has apparent financial difficulties. the RWE Group’s debtors are active. Our experience is based on • The debtor has already commited a breach of contract by studies and data from financial analysts and government authori- missing or delaying payments. ties, amongst others. Special attention is paid to the following • Concessions already had to be made to the debtor. developments: • An insolvency or another restructuring procedure is impending. • The market for the financial asset is no longer active. • significant deterioration of the internal or external rating of • A sale is only possible at a high discount, which reflects the the financial instrument, debtor’s reduced creditworthiness. • unfavourable changes in risk indicators, e. g. credit spreads or debtor-related credit default swaps, A payment default and an associated assignmet of the financial • negative development of the debtor’s regulatory, technological or asset to Stage 3 is also assumed if the contractually agreed economic environment, payments are more than 90 days overdue and there is no informati- • danger of an unfavourable development of business resulting in on disproving the assumption of a payment default. Based on our a significant reduction in operating income. experience, we generally assume that this assumption does not Independent thereof, a significant rise in credit risk and thus an assignment of the financial instrument to Stage 2 are assumed if A financial asset is depreciated if there are indications that the the contractually agreed payments are more than 30 days overdue counterparty is in serious financial difficulty and the situation is and there is no information that contradicts the assumption of a unlikely to improve. We may also take legal recourse and other payment default. measures in order to enforce the contractually agreed payments apply to trade accounts receivable. in the event of an impairment. We draw conclusions about the potential default of a counterparty from information from internal credit risk management. If internal The following impairments were recognised for financial assets stated or external information indicates that the counterparty cannot fulfil under the following balance-sheet items within the scope of IFRS 7: its obligations, the associated receivables are classified as unreco- verable and assigned to Stage 3 of the impairment model. Examples of such information are: Impairment of financial assets € million Financial receivables Balance at 1 Jan 2019 Remeasurement due to new measure- ment parameters Newly acquired/issued financial assets Redeemed or derecognised financial assets Transfer from Level 2 to Level 1 Balance at 31 Dec 2019 Stage 1 – 12-month expected credit losses Stage 2 – lifetime expected credit losses Stage 3 – lifetime expected credit losses Purchased or originated credit impaired 23 4 2 – 18 11 6 1 – 4 3 11 11 Total 40 4 3 – 18 – 4 25 164 RWE Annual Report 20192 1 – 1 – 81 – 21 40 405 85 – 81 – 2 – 390 10 27 Consolidated financial statements > Notes Impairment of financial assets € million Financial receivables Balance at 1 Jan 2018 Remeasurement due to new measure- ment parameters Newly acquired/issued financial assets Redeemed or derecognised financial assets Change in the scope of consolidation Transfers Balance at 31 Dec 2018 Stage 1 – 12-month expected credit losses Stage 2 – lifetime expected credit losses Stage 3 – lifetime expected credit losses Purchased or originated credit impaired Total 11 71 140 53 1 1 – 1 – 10 – 21 23 5 1 6 – 71 11 For trade accounts receivable, the expected credit loss is deter- Risk provision for trade accounts receivable mined by applying the simplified approach taking account of the € million entire lifetime of the financial instruments. Balance at 1 Jan 2018 In the RWE Group, there are no cases where a risk provision for trade Addition accounts receivable was not recognised due to the collateral on the Withdrawal books. The following table shows the development of the risk provisions for trade accounts receivable: Currency translation Changes in the scope of consolidation Transfers Balance at 31 Dec 2018 Risk provision for trade accounts receivable € million Balance at 1 Jan 2019 Addition Changes in the scope of consolidation Balance at 31 Dec 2019 27 9 – 4 32 165 The following table presents the gross carrying amounts of the financial instruments under the scope of the impairment model: Gross carrying amounts of financial assets as of 31 Dec 2019 € million Equivalent to S&P scale Stage 1 – 12-month expected credit losses Stage 2 – lifetime expected credit losses Stage 3 – lifetime expected credit losses Trade accounts receivable Total Class 1 – 5: low risk AAA to BBB– 7,262 Class 6 – 9: medium risk Class 10: high risk Class 11: doubtful Class 12: loss 121 43 BB+ to BB– B+ to B– CCC to C D 39 1 10 7,426 50 3,261 10,562 95 67 6 36 229 120 6 37 3,465 10,954 12 1 13 Gross carrying amounts of financial assets as of 31 Dec 2018 € million Equivalent to S&P scale Stage 1 – 12-month expected credit losses Stage 2 – lifetime expected credit losses Stage 3 – lifetime expected credit losses Trade accounts receivable Total 8,839 376 83 6 21 1,611 297 65 6 20 1,999 9,325 Class 1 – 5: low risk AAA to BBB– 7,228 Class 6 – 9: medium risk Class 10: high risk Class 11: doubtful Class 12: loss BB+ to BB– B+ to B– CCC to C D 68 5 13 7,301 13 11 1 12 166 RWE Annual Report 2019Consolidated financial statements > Notes Liquidity risks. As a rule, RWE Group companies refinance with RWE AG’s credit line was increased to €5 billion in April 2019. Its two RWE AG. In this regard, there is a risk that liquidity reserves will prove tranches expire in April 2021 (€2 billion) and April 2024 (€3 billion). to be insufficient to meet financial obligations in a timely manner. In As of the balance-sheet date, US$0 billion (previous year: US$0 2020, liabilities owed to banks of €0.4 billion (previous year: billion) of RWE AG’s US$5 billion commercial paper programme €0.1 billion) are due. In addition, short-term debt must be repaid. (previous year: US$5 billion) was used. Above and beyond this, Furthermore, taking account of the earliest possible call date of the RWE AG can finance itself using a €10 billion debt issuance hybrid bond, which is classified as debt pursuant to IFRS, €0.5 billion programme; as of the balance- sheet date, outstanding bonds from in capital market debt matures in 2020 (previous year: €0.8 billion). this programme amounted to €0 billion (previous year: €0 billion) at RWE AG. Accordingly, RWE AG's medium- term liquidity risk can As of 31 December 2019, holdings of cash and cash equivalents be classified as low. and current marketable securities amounted to €6,450 million (previous year: €7,132 million). Financial liabilities falling under the scope of IFRS 7 are expected to result in the following (undiscounted) payments in the coming years: Redemption and interest payments on financial liabilities Redemption payments Interest payments € million Bonds payable 1 Bank debt Lease liabilities Other financial liabilities Derivative financial liabilities Collateral for trading activities Carrying amounts 31 Dec 2019 1,110 1,356 1,102 1,766 2020 539 393 83 921 10,479 10,092 400 400 2021 to 2024 From 2025 2020 2021 to 2024 From 2025 571 894 784 541 302 70 244 329 85 44 23 24 57 22 116 90 89 164 64 53 94 200 508 153 Miscellaneous other financial liabilities 3,147 3,143 9 4 1 Including hybrid bonds classified as debt as per IFRS, taking into account the earliest possible call date. Redemption and interest payments on financial liabilities Redemption payments Interest payments € million Bonds payable 1 Bank debt Lease liabilities Other financial liabilities Carrying amounts 31 Dec 2018 1,103 554 241 333 2019 2020 to 2023 From 2024 539 90 39 13 87 10 155 2019 102 13 7 26 2020 to 2023 129 51 27 58 From 2024 81 31 428 143 564 413 192 170 282 Derivative financial liabilities 7,060 6,681 100 Collateral for trading activities 533 533 Miscellaneous other financial liabilities 2,553 2,549 8 4 1 Including hybrid bonds classified as debt as per IFRS, taking into account the earliest possible call date. 167 Above and beyond this, as of 31 December 2019, there were We bear legal and contractual liability from our membership in financial guarantees for external creditors in the amount of various associations which exist in connection with power plant €121 million (previous year: €145 million), which are to be projects, profit- and loss-pooling agreements and for the provision allocated to the first year of repayment. Additionally, Group of liability cover for nuclear risks, amongst others. companies have provided loan commitments to third-party companies amounting to €53 million (previous year: €78 million), On the basis of a mutual benefit agreement, RWE AG and other which are callable in 2020. parent companies of German nuclear power plant operators undertook to provide approximately €2,244 million in funding to Detailed information on the risks of the RWE Group and on the liable nuclear power plant operators to ensure that they are able to objectives and procedures of the risk management is presented on meet their payment obligations in the event of nuclear damages. page 84 et seqq. in the review of operations. From 1 January 2020, onwards, RWE AG has a 30.452 % contrac- tual share in the liability (23.259 % until 31 December 2019) plus (28) Contingent liabilities and financial commitments 5 % for damage settlement costs. As of 31 December 2019, the amount of capital commitments totalled €1,989 million (previous year: €2,396 million). This mainly RWE AG and its subsidiaries are involved in official, regulatory and consisted of investment in property, plant and equipment. antitrust proceedings, litigation and arbitration proceedings related to their operations and are affected by the results of such. In some In the previous year, commitments from operating leases referred cases, out-of-court claims are also filed. However, RWE does not largely to rental arrangements for power generation and supply expect any material negative repercussions from these proceedings plants as well as rent and lease contracts for storage and administ- on the RWE Group’s economic or financial position. ration buildings. Minimum lease payments had the following maturity structure: Operating leases € million Due within 1 year Due after 1 to 5 years Due after 5 years (29) Segment reporting RWE is divided into five segments, which are separated from each Nominal value other based on functional criteria. 31 Dec 2018 We report on German electricity generation from lignite and nuclear 59 159 354 572 fuel in the Lignite & Nuclear segment. This includes the Rhenish opencast lignite mining operations. The European Power segment encompasses the German, British, Dutch/Belgian and Turkish power generation business via gas and hard coal-fired power stations, the Scottish biomass-fired power plant Markinch, and the project management and engineering We have made long-term contractual purchase commitments for specialist RWE Technology International. The segment is supple- supplies of fuels, including natural gas in particular. Payment mented by hydroelectric power stations in Germany and Luxembourg. obligations stemming from the major long-term purchase contracts amounted to €27.1 billion as of 31 December 2019 The Supply & Trading segment contains energy and commodities (previous year: €27.9 billion), of which €0.3 billion is due within one trading, the marketing and hedging of the RWE Group’s electricity year (previous year: €0.8 billion). position and the gas midstream business. This segment is the respon- Gas purchases by the RWE Group are partially based on long-term industrial and commercial customers with electricity and natural gas. sibility of RWE Supply & Trading, which also supplies certain major take-or-pay contracts. The conditions in these contracts, which have terms up to 2036 in some cases, are renegotiated by the The innogy – continuing operations segment encompasses the contractual partners at certain intervals, which may result in parts of innogy the control of which was not transferred to E.ON. changes in the reported payment obligations. Calculation of the These are the renewables business, innogy’s gas storage facilities payment obligations resulting from the purchase contracts is based located in Germany and the Czech Republic, and the stake in the on parameters from the internal planning. Austrian energy utility Kelag. Along with electricity generation, activities in the field of renewables include the development and Furthermore, RWE has long-term financial commitments for implementation of projects to expand capacities. Wind and purchases of electricity. As of 31 December 2019, the minimum hydro electric power are the two dominant production technologies. payment obligations stemming from the major purchase The main production sites are located in Germany, the United contracts totalled €7.1 billion (previous year: €7.8 billion), of which Kingdom, the Netherlands, Poland, Spain and Italy. €0.2 billion is due within one year (previous year: €0.8 billion). Above and beyond this, there are also long-term purchase and service contracts for uranium, conversion, enrichment and fabrication. 168 RWE Annual Report 2019 Consolidated financial statements > Notes The Acquired E.ON operations segment comprises the main parts ‘Other, consolidation’ covers RWE AG, consolidation effects and the of E.ON's former renewable energy business, of which RWE gained activities of other business areas which are not presented separately. control on 18 September 2019. It includes onshore and offshore These activities primarily include our non-controlling interests in the wind and photovoltaic activities. German transmission system operator Amprion and in E.ON. Segment reporting Divisions 2019 € million Lignite & Nuclear European Power Supply & Trading innogy – continuing operations Acquired E.ON operations Other, consoli- dation RWE Group External revenue (incl. natural gas tax/electricity tax) Intra-group revenue Total revenue Adjusted EBIT Operating income from invest- ments Operating income from invest- ments accounted for using the equity method Operating depreciation, amortisation and impairment losses Impairment losses Adjusted EBITDA Carrying amount of investments accounted for using the equity method Capital expenditure on intangible assets, property, plant and equipment 1,018 2,166 3,184 12 63 62 362 785 374 1,065 3,483 9,649 3,274 1,164 399 4,548² 12,923 1,563 132 691 443 374 7 13,277 – 9,322¹ 374 116 − 9,315 13,277 − 127 1,267 21 20 321 772 453 1 34 11 19 702 74 59 390 414 833 13 133 305 16 132 323 137 11 253 1 −126 1,222 2,001 2,489 68 139 3 750 1,638 638 3,236 342 252 11 1,215 267 3 2,090 1 Of which: consolidation of intra-group revenue of –€9,322 million. 2 Of which: total revenue from power generation in the United Kingdom of €2,640 million. Regions 2019 € million External revenue 1, 2 Intangible assets and property, plant and equipment EU Germany UK Other EU Rest of Europe Other RWE Group 4,840 5,035 2,368 484 398 13,125 6,758 9,845 3,353 3,950 23,906 1 Excluding natural gas tax/electricity tax. 2 Broken down by the region in which the service was provided. 169 Segment reporting Divisions 2018 € million Lignite & Nuclear European Power Supply & Trading innogy – continuing operations Acquired E.ON operations Other, consoli- dation RWE Group External revenue (incl. natural gas tax/electricity tax) Intra-group revenue Total revenue Adjusted EBIT Operating income from invest- ments Operating income from invest- ments accounted for using the equity method Operating depreciation, amortisation and impairment losses Impairment losses Adjusted EBITDA Carrying amount of investments accounted for using the equity method Capital expenditure on intangible assets and property, plant and equipment 1,144 2,340 3,484 77 58 58 279 14 356 926 10,335 1,124 18 13,547 3,768 3,434 386 – 9,928¹ 4,694² 13,769 1,510 – 9,910 13,547 37 177 349 7 6 297 29 334 – 44 6 183 61 53 350 4 699 – 21 94 94 – 13 619 176 211 919 47 – 34 1,538 60 125 3 740 539 1,467 230 245 13 592 – 1 1,079 1 Of which: consolidation of intra-group revenue of – €9,929 million and intra-group revenue of other companies of €1 million. 2 Of which: total revenue from power generation in the United Kingdom of €2,213 million. Regions 2018 € million EU Germany UK Other EU Rest of Europe Other RWE Group External revenue 1, 2, 3 4,549 4,358 3,130 984 385 13,406 Intangible assets and property, plant and equipment 5,882 5,286 3,004 430 14,602 1 Excluding natural gas tax/electricity tax. 2 Broken down by the region in which the service was provided. 3 Prior-figures restated. 170 RWE Annual Report 2019Consolidated financial statements > Notes External revenue by product in 2019 Lignite & Nuclear European Power Supply & Trading € million innogy – continuing operations Acquired E.ON operations Other, consoli- dation RWE Group External revenue1,2 1,003 1,062 of which: electricity of which: gas of which: other revenue 282 721 620 12 430 9,514 8,259 1,094 161 1,164 869 50 245 374 242 132 8 8 13,125 10,272 1,156 1,697 1 Excluding natural gas tax/electricity tax. 2 Of which €3,054 million in external revenue on the basis of coal-based electricity generation and coal sales. External revenue by product in 2018 Lignite & Nuclear European Power Supply & Trading innogy – continuing operations Acquired E.ON operations Other, consoli- dation RWE Group € million External revenue1,2 of which: electricity of which: gas 1,132 303 of which: other revenue 829 925 542 17 366 10,208 1,124 8,478 1,484 246 799 47 278 17 − 1 – 1 19 13,406 10,121 1,547 1,738 1 Excluding natural gas tax/electricity tax. 2 Of which €4,196 million in external revenue on the basis of coal-based electricity generation and coal sales. Notes on segment data. We report revenue between the segments internal management. The following table presents the reconciliation as RWE intra-group revenue. Internal supply of goods and services is of adjusted EBITDA to adjusted EBIT and income from continuing settled at arm’s length conditions. Adjusted EBITDA is used for operations before tax: Reconciliation of income items € million Adjusted EBITDA – Operating depreciation, amortisation and impairment losses Adjusted EBIT + Non-operating result + Financial result Income from continuing operations before tax 2019 2018 2,489 – 1,222 1,267 – 1,081 – 938 – 752 1,538 – 919 619 – 161 – 409 49 Income and expenses that are unusual from an economic perspec- the disposal of investments or non-current assets not required for tive, or stem from exceptional events, prejudice the assessment of operations, impairment of the goodwill of fully consolidated operating activities. They are reclassified to the non-operating result. companies, as well as effects of the fair valuation of certain Amongst other things, these can include book gains or losses from derivatives. Non-operating result € million Disposal result Impact of derivatives on earnings Other Non-operating result Further commentary on the non-operating result can be found on page 57 et seq. of the review of operations. 171 2019 2018 48 81 – 1,210 – 1,081 −25 −146 10 −161 (30) Notes to the cash flow statement Flows of funds from the acquisition and sale of consolidated The cash flow statement classifies cash flows according to companies are included in cash flows from investing activities. operating, investing and financing activities. Cash and cash Effects of foreign exchange rate changes and other changes in value equivalents in the cash flow statement correspond to the amount are stated separately. stated on the balance sheet. Cash and cash equivalents consist of cash on hand, demand deposits and fixed-interest marketable Cash flows from financing activities of continuing operations include securities with a maturity of three months or less from the date of €430 million (previous year: €922 million) which was distributed to acquisition. RWE shareholders, €51 million (previous year: €43 million) which was distributed to non-controlling shareholders, and €61 million Among other things, cash flows from operating activities include: (previous year: €60 million) which was distributed to hybrid • cash flows from interest income of €184 million (previous year: include purchases of €86 million (previous year: €2 million) and €166 million) and cash flows used for interest expenses of sales in the amount of €0 million (previous year: €687 million) of €257 million (previous year: €176 million), shares in subsidiaries and other business units which did not lead to capital investors. Furthermore, cash flows from financing activities • €325 million (previous year: €321 million) in taxes on income a change of control. paid (less refunds), • income from investments, corrected for items without an effect on Changes in liabilities from financing activities are presented in the cash flows, in particular from accounting using the equity method, following table: which amounted to €187 million (previous year: €107 million). Statement of changes in financial liabilities 1 Jan 20191 Increase/ repayment Changes in the scope of consoli- dation Currency effects Changes in fair values Other changes 31 Dec 2019 € million Current financial liabilities Non-current financial liabilities Other items 787 986 7,081 – 392 137 − 6,789 1,810 2,330 218 474 2,468 17 − 1,109 3,924 1 Including the effect of the initial adoption of IFRS 16 in the amount of €353 million. Statement of changes in financial liabilities € million Current financial liabilities Non-current financial liabilities Other items 1 Jan 2018 Increase/ repayment Changes in the scope of consoli- dation Of which stated as ‘held for sale’ Currency effects Changes in fair values Other changes 31 Dec 2018 2,787 −  196 − 2,845 − 2,779 32 − 58 1,046 766 14,414 435 − 13,840 − 13,840 4 1 984 1,998 − 1,494 The amount stated in the ‘Other items’ line item contains cash- Restrictions on the disposal of cash and cash equivalents amounted effective changes resulting from derivative financial instruments to €51 million (previous year: €0 million). and margin payments, which are recognised in cash flows from financing activities in the cash flow statement. 172 RWE Annual Report 2019 Consolidated financial statements > Notes (31) Related party disclosures Business transactions were concluded with major associates and Within the framework of their ordinary business activities, RWE AG joint ventures, resulting in the following items in RWE’s consolidated and its subsidiaries have business relationships with numerous financial statements: companies. These include associated companies and joint ventures, which are classified as related parties. In particular, this category includes material investments of the RWE Group, which are accounted for using the equity method. Key items from transactions with associates and joint ventures € million Income Expenses Receivables Liabilities Associated companies Joint ventures 2019 258 142 88 123 2018 1,855 3,193 140 191 2019 2018 74 45 59 7 79 48 64 8 The key items from transactions with associates and joint ventures The remuneration model and remuneration of the Executive and mainly stem from supply and service transactions. In addition to Supervisory Boards of RWE AG calculated pursuant to the German supply and service transactions, there are also financial links with Commercial Code is presented in the remuneration report, which is joint ventures. During the reporting period, income of €2 million included in the review of operations. (previous year: €4 million) was recorded from interest-bearing loans to joint ventures. As of the balance-sheet date, financial receivables In total, the remuneration of the Executive Board amounted to accounted for €55 million of the receivables from joint ventures €7,571,000 (previous year: €6,880,000). This contains share- (previous year: €56 million). All transactions were completed at based payments amounting to €2,350,000 (123,037 RWE arm’s length conditions, i.e. on principle the conditions of these performance shares) granted within the framework of the LTIP SPP. transactions did not differ from those with other enterprises. In the previous year, share-based payments amounting to €108 million of the receivables (previous year: €165 million) and €2,350,000 (125,000 RWE performance shares) were granted. €10 million of the liabilities (previous year: €166 million) fall due within one year. Other obligations from executory contracts Including remuneration from subsidiaries for the exercise of mandates, amounted to €99 million (previous year: €578 million). the Supervisory Board received total remuneration of €3,304,000 Above and beyond this, the RWE Group did not execute any material tatives on the Supervisory Board have labour contracts with the transactions with related companies or persons. respective Group companies. Remuneration occurs in accordance (previous year: €3,480,000) in fiscal 2019. The employee represen- with the relevant contractual conditions. With regard to fiscal 2019, in addition to the members of the Executive Board and Supervisory Board of RWE AG, the Executive During the period under review, no loans or advances were granted Board members and Supervisory Board members of innogy SE were to members of the Executive or Supervisory Boards. deemed to be key management personnel for the RWE Group until 18 September 2019. The following information pertains to total Former members of the Executive Board and their surviving compensation pursuant to IAS 24. dependants received €10,623,000 (previous year: €10,802,000), of which €651,000 came from subsidiaries (previous year: Key management personnel (Executive and Supervisory Board €940,000). As of the balance-sheet date, €146,568,000 (previous members) received €16,457,000 in short-term compensation year: €146,721,000) were accrued for defined benefit obliga- components for fiscal 2019 (previous year: €19,721,000). tions to former members of the Executive Board and their surviving Additionally, share-based payments within the framework of LTIP dependants. Of this, €6,980,000 was set aside at subsidiaries SPP amounted to €8,386,000 (previous year: €7,479,000) and (previous year: €8,516,000). the pension service cost amounted to €554,000 (previous year: €536,000). Provisions totalling €25,607,000 (previous year: Information on the members of the Executive and Supervisory €36,052,000) were formed for obligations vis-à-vis key manage- Boards is presented on page 207 et seqq. of the Notes. ment personnel. 173 (32) Auditors‘ fees tax-related matters as well as review of resolutions of the tax The fees for audit services primarily contain the fees for the audit of authorities. Other services primarily include compensation for the consolidated financial statements and for the audit of the financial M&A activity and IT project consulting. statements of RWE AG and its subsidiaries, along with the review of the interim statements. Other assurance services include fees for RWE recognised the following fees as expenses for the services review of the internal controlling system, as well as expenses related rendered by the auditors of the consolidated financial statements, to statutory or court-ordered requirements. In particular, the fees PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft for tax services include compensation for consultation in the (PwC) and companies belonging to PwC’s international network: preparation of tax returns and other national and international PwC network fees € million Audit services Other assurance services Tax services Other services 2019 2018 Total 17.5 2.5 0.9 5.8 26.7 Of which: Germany 12.9 2.3 0.3 5.6 21.1 Total 17.7 5.1 0.7 3.8 27.3 Of which: Germany 11.0 4.7 0.6 1.8 18.1 (33) Application of the exemption rule pursuant to Sec. 264, (34) Events after the balance-sheet date Para. 3 and Sec. 264b of the German Commercial Code In the period from 1 January 2020 until the completion of the In fiscal 2019, the following German subsidiaries made partial use consolidated financial statements on 27 February 2020, the of the exemption clause pursuant to Sec. 264, Para. 3 and Sec. following significant events occurred: 264b of the German Commercial Code (HGB): Acquisition of the King's Lynn power station • BGE Beteiligungs-Gesellschaft für Energieunternehmen mbH, On 12 February 2020, the acquisition of a 100 % stake in Centrica Essen, KL Limited (CKLL), Windsor, UK, agreed with the British energy • GBV Vierunddreißigste Gesellschaft für Beteiligungsverwaltung company GB Gas Holdings Limited, a subsidiary of Centrica plc, mbH, Essen, Windsor, UK, at the end of December 2019, was completed. • GBV Zweiunddreißigste Gesellschaft für Beteiligungsverwaltung mbH, Essen, The power station is a combined-cycle gas turbine (CCGT) power • Kernkraftwerk Lingen Gesellschaft mit beschränkter Haftung, plant located in King’s Lynn, Norfolk, UK. The plant has a capacity of Lingen (Ems), 382 megawatts and will receive reliable, stable capacity payments • KMG Kernbrennstoff-Management Gesellschaft mit beschränk- until 2035 based on a 15-year contract in the British capacity ter Haftung, Essen, • Rheinbraun Brennstoff GmbH, Cologne, market with a term starting in October 2020. • Rheinische Baustoffwerke GmbH, Bergheim, The preliminary purchase price amounts to £28 million (excluding • RV Rheinbraun Handel und Dienstleistungen GmbH, Cologne, repaid shareholder loans in the amount of £73 million). The final • RWE Nuclear Beteiligungs-GmbH, Essen, purchase price is subject to adjustments depending on the net debt • RWE Renewables GmbH, Essen, and net working capital as of the completion date. The closing • RWE Technology International GmbH, Essen, balance sheet as of this cut-off date is currently being finalised. • RWE Trading Services GmbH, Essen. Since the closing balance sheet of CKLL had not been finalised when the RWE consolidated financial statements were prepared, the statements cannot present the information on the fair values of the acquired assets (including acquired receivables) and liabilities, or the information on the factors which may comprise goodwill, or any necessary information on acquisition at a price below market value. 174 RWE Annual Report 2019Consolidated financial statements > Notes (35) Declaration according to Sec. 161 of the German Stock Corporation Act The declaration on the German Corporate Governance Code prescribed by Sec. 161 of the German Stock Corporation Act (AktG) has been submitted for RWE AG and has been made permanently and publicly available to shareholders on the Internet pages of RWE AG1. Essen, 27 February 2020 The Executive Board Schmitz Krebber 1 www.rwe.com/statement-of-compliance-2019 175 3.7 List of shareholdings (part of the notes) List of shareholdings as per Sec. 285 No. 11 and No. 11a and Sec. 313 Para. 2 (in relation to Sec. 315 e I) of HGB as of 31 December 2019 I. Affiliated companies which are included in the Shareholding in % Equity Net income/loss consolidated financial statements Direct Total € ’000 Aktivabedrijf Wind Nederland B.V., Zwolle/Netherlands Alte Haase Bergwerks-Verwaltungs-Gesellschaft mbH, Dortmund Amrum-Offshore West GmbH, Düsseldorf An Suidhe Wind Farm Limited, Swindon/United Kingdom Anacacho Holdco, LLC, Wilmington/USA Anacacho Wind Farm, LLC, Wilmington/USA Andromeda Wind s.r.l., Bolzano/Italy Belectric Australia Pty. Limited, Melbourne/Australia Belectric Canada Solar Inc. , Vancouver/Canada Belectric Chile Energia Fotovoltaica LTDA, Santiago de Chile/Chile Belectric Espana Fotovoltaica S.L., Barcelona/Spain Belectric France S.à.r.l., Vendres/France BELECTRIC GmbH, Kolitzheim Belectric Inversiones Latinoamericana S.L., Barcelona/Spain Belectric Israel Ltd., Be’er Scheva/Israel Belectric Italia s.r.l., Latina/Italy Belectric Photovoltaic India Private Limited, Mumbai/India BELECTRIC PV Dach GmbH, Sömmerda Belectric Solar & Battery GmbH, Kolitzheim Belectric Solar Ltd., Slough/United Kingdom BELECTRIC Solar Power, S.L., Barcelona/Spain BGE Beteiligungs-Gesellschaft für Energieunternehmen mbH, Essen 100 Bilbster Wind Farm Limited, Swindon/United Kingdom Boiling Springs Wind Farm, LLC, Wilmington/USA Bruenning’s Breeze Holdco, LLC, Wilmington/USA Bruenning’s Breeze Wind Farm, LLC, Wilmington/USA Carl Scholl GmbH, Cologne Carnedd Wen Wind Farm Limited, Swindon/United Kingdom Cassadaga Wind LLC, Chicago/USA Champion WF Holdco, LLC, Wilmington/USA Champion Wind Farm, LLC, Wilmington/USA Cloghaneleskirt Energy Supply Limited, Kilkenny/Ireland Colbeck’s Corner Holdco, LLC, Wilmington/USA Colbeck’s Corner, LLC, Wilmington/USA Cranell Holdco, LLC, Wilmington/USA Cranell Wind Farm, LLC, Wilmington/USA DOTTO MORCONE S.r.l., Rome/Italy Dromadda Beg Wind Farm Limited, Kilkenny/Ireland Edgware Energy Limited, Swindon/United Kingdom 100 100 100 100 100 100 51 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 25,645 – 67,329 € ’000 23,154 – 3,664 126 149,501 24,290 56,488 1,202 0 134,952 – 5,062 9,579 508 - 978 – 851 554 – 5,710 12,467 28 12,329 3,299 727 1,177 12,461 1,734 50 4,317,938 3,846 - 60 75,011 2,876 1,872 - 964 – 5,747 – 199 – 5,129 – 4,442 – 18 537 409 – 2,980 201 – 3,064 394 0 1 352 - 60 0 238,456 – 5,287 581 – 4,340 66,403 114,010 114,010 76 73,239 45 – 318 – 296 – 5,254 – 5,258 76 0 243,854 – 7,489 29,363 29,298 – 1,161 1,515 – 7 0 – 64 – 1,617 94 – 7 1 Profit and loss-pooling agreement. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 4 Control by virtue of company contract. 5 No control by virtue of company contract. 6 Significant influence via indirect investments. 7 Significant influence by virtue of company contract. 8 Profit and loss-pooling agreement with non-Group companies. 176 RWE Annual Report 2019Consolidated financial statements > List of shareholdings (part of the notes) I. Affiliated companies which are included in the Shareholding in % Equity Net income/loss Direct Total 100 € ’000 29,823 33,206 € ’000 687 1,8782 consolidated financial statements Electra Insurance Limited, Hamilton/Bermuda Energies France S.A.S. – Group – (pre-consolidated) Centrale Hydroelectrique d’Oussiat S.A.S., Paris/France Energies Charentus S.A.S., Paris/France Energies France S.A.S., Paris/France Energies Maintenance S.A.S., Paris/France Energies Saint Remy S.A.S., Paris/France Energies VAR 1 S.A.S., Paris/France Energies VAR 3 S.A.S., Paris/France SAS Île de France S.A.S., Paris/France Energy Resources Holding B.V., ’s-Hertogenbosch/Netherlands Energy Resources Ventures B.V., ’s-Hertogenbosch/Netherlands E.ON Energie Odnawialne Sp. z o.o., Szczecin/Poland Farma Wiatrowa Barzowice Sp. z o.o., Warsaw/Poland Forest Creek Investco, Inc., Wilmington/USA Forest Creek WF Holdco, LLC, Wilmington/USA Forest Creek Wind Farm, LLC, Wilmington/USA Fri-El Anzi Holding s.r.l., Bolzano/Italy Fri-El Anzi s.r.l., Bolzano/Italy Fri-El Guardionara s.r.l., Bolzano/Italy GBV Vierunddreißigste Gesellschaft für Beteiligungsverwaltung mbH, Essen GBV Zweiunddreißigste Gesellschaft für Beteiligungsverwaltung mbH, Essen 100 100 Generación Fotovoltaica De Alarcos, S.L.U., Barcelona/Spain Georgia Biomass Holding LLC, Savannah/USA Georgia Biomass LLC, Savannah/USA GfV Gesellschaft für Vermögensverwaltung mbH, Dortmund 100 Glen Kyllachy Wind Farm Limited, Swindon/United Kingdom Grandview Holdco, LLC, Wilmington/USA Green Gecco GmbH & Co. KG, Essen Hardin Class B Holdings LLC, Wilmington/USA Hardin Wind Holdings LLC, Wilmington/USA Hardin Wind LLC, Chicago/USA Harryburn Wind Farm Limited, Swindon/United Kingdom Inadale Wind Farm, LLC, Wilmington/USA innogy Bergheim Windparkbetriebsgesellschaft mbH, Hanover innogy Brise Windparkbetriebsgesellschaft mbH, Hanover Innogy Energy Marketing LLC, Wilmington/USA innogy Evendorf Windparkbetriebsgesellschaft mbH, Hanover 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 51 100 51 96,292 18,776 61,917 16,727 109 88,869 88,869 7,354 7,629 10,334 – 20,770 -5,191 29,764 7,464 0 – 3,728 – 3,728 1,743 1,776 2,344 100 17,923,746 5,268,288 100 100 100 100 100 100 100 51 100 100 100 100 100 100 100 100 100 100 25 – 20 62,922 46,072 135,281 – 4,198 103,297 80,321 104,969 104,933 42,250 – 2,391 121,398 25 226 1 – 42 18,351 14,266 6,817 – 4,078 2,260 3,795 0 – 3 0 – 464 – 3,842 1 1 – 42,733 – 42,885 25 317,572 1 8 innogy Gas Storage NWE GmbH, Dortmund 1 Profit and loss-pooling agreement. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 4 Control by virtue of company contract. 5 No control by virtue of company contract. 6 Significant influence via indirect investments. 7 Significant influence by virtue of company contract. 8 Profit and loss-pooling agreement with non-Group companies. 177 I. Affiliated companies which are included in the Shareholding in % Equity Net income/loss Direct Total € ’000 consolidated financial statements innogy Gas Storage, s.r.o., Prague/Czech Republic Innogy GyM 2 Limited, Swindon/United Kingdom Innogy GyM 3 Limited, Swindon/United Kingdom Innogy GyM 4 Limited, Swindon/United Kingdom innogy Hörup Windparkbetriebsgesellschaft mbH, Hörup innogy indeland Windpark Eschweiler GmbH & Co. KG, Eschweiler innogy Italia s.p.a., Milan/Italy innogy Kaskasi GmbH, Hamburg innogy Lengerich Windparkbetriebsgesellschaft mbH, Gersten innogy Limondale Sun Farm Holding Pty. Ltd., Melbourne/Australia innogy Lüneburger Heide Windparkbetriebsgesellschaft mbH, Walsrode innogy Mistral Windparkbetriebsgesellschaft mbH, Hanover innogy Offshore Wind Netherlands B.V., ’s-Hertogenbosch/Netherlands Innogy Renewables Australia Pty Ltd., Melbourne/Australia innogy Renewables Benelux B.V., ’s-Hertogenbosch/Netherlands innogy Renewables Beteiligungs GmbH, Dortmund innogy Renewables Canada Inc., Vancouver/Canada Innogy Renewables Ireland Limited, Kilkenny/Ireland innogy Renewables Polska Sp. z o.o., Warsaw/Poland Innogy Renewables UK Holdings Limited, Swindon/United Kingdom Innogy Renewables UK Limited, Swindon/United Kingdom Innogy Renewables US LLC, Chicago/USA innogy Seabreeze II GmbH & Co. KG, Essen innogy Slovensko s.r.o., Bratislava/Slovakia innogy Sommerland Windparkbetriebsgesellschaft mbH, Sommerland innogy Spain, S.A.U. – Group – (pre-consolidated) Danta de Energías, S.A., Soria/Spain Explotaciones Eólicas de Aldehuelas, S.L., Soria/Spain General de Mantenimiento 21, S.L.U., Barcelona/Spain Hidroeléctrica del Trasvase, S.A., Barcelona/Spain innogy Spain, S.A.U., Barcelona/Spain innogy Süderdeich Windparkbetriebsgesellschaft mbH, Süderdeich innogy Titz Windparkbetriebsgesellschaft mbH, Essen innogy Wind Onshore Deutschland GmbH, Hanover innogy Windpark Bedburg GmbH & Co. KG, Bedburg innogy Windpower Netherlands B.V., ’s-Hertogenbosch/Netherlands Inversiones Belectric Chile LTDA, Santiago de Chile/Chile 540,881 – 13,399 – 13,401 – 40,229 26 53,581 16,766 99 25 € ’000 11,337 – 552 – 554 – 1,662 1 3,159 1,507 1 1 40,071 – 582 25 578 621 – 16 1 1 – 396 – 16 – 71,621 54,655 7,350 1,485 – 3,237 245,878 1 – 1,060 – 2,281 38,464 1,842,861 328,572 2,373,332 712,184 197,193 – 11,792 2,550 9,452 26 – 47,591 10,061 1 153,356 20,6082 106 25 77,373 81,458 1,158 – 39 1 1 1 5,845 171,067 – 3 100 100 100 100 100 51 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 99 95 100 60 100 100 100 100 51 100 100 1 Profit and loss-pooling agreement. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 4 Control by virtue of company contract. 5 No control by virtue of company contract. 6 Significant influence via indirect investments. 7 Significant influence by virtue of company contract. 8 Profit and loss-pooling agreement with non-Group companies. 178 RWE Annual Report 2019Consolidated financial statements > List of shareholdings (part of the notes) I. Affiliated companies which are included in the Shareholding in % Equity Net income/loss consolidated financial statements Direct Total € ’000 € ’000 INVESTERG – Investimentos em Energias, SGPS, Lda. – Group – (pre-consolidated) INVESTERG – Investimentos em Energias, Sociedade Gestora de Participações Sociais, Lda., São João do Estoril/Portugal LUSITERG – Gestão e Produção Energética, Lda., São João do Estoril/ Portugal IRUS Solar Development LLC, Dover/USA IRUS Solar Holdings LLC, Dover/USA IRUS Solar NC Lessee LLC, Wilmington/USA IRUS Solar NC Pledgor LLC, Wilmington/USA IRUS Solar Operations LLC, Wilmington/USA IRUS Wind Development LLC, Dover/USA IRUS Wind Holdings LLC, Dover/USA IRUS Wind Operations LLC, Wilmington/USA Jurchen Technology GmbH, Kitzingen Jurchen Technology India Private Limited, Mumbai/India Kernkraftwerk Gundremmingen GmbH, Gundremmingen Kernkraftwerk Lingen Gesellschaft mit beschränkter Haftung, Lingen (Ems) Kernkraftwerke Lippe-Ems Gesellschaft mit beschränkter Haftung, Lingen (Ems) Kernkraftwerksbeteiligung Lippe-Ems beschränkt haftende OHG, Lingen/Ems KMG Kernbrennstoff-Management Gesellschaft mit beschränkter Haftung, Essen Knabs Ridge Wind Farm Limited, Swindon/United Kingdom Limondale Sun Farm Pty. Ltd., Melbourne/Australia Little Cheyne Court Wind Farm Limited, Swindon/United Kingdom MI-FONDS G50, Frankfurt am Main ML Wind LLP, Swindon/United Kingdom Munnsville Investco, LLC, Wilmington/USA Munnsville WF Holdco, LLC, Wilmington/USA Munnsville Wind Farm, LLC, Wilmington/USA Nordsee Windpark Beteiligungs GmbH, Essen NRW Pellets GmbH, Erndtebrück Padcon GmbH, Kitzingen Panther Creek Holdco, LLC, Wilmington/USA Panther Creek Wind Farm I&II, LLC, Wilmington/USA Panther Creek Wind Farm Three, LLC, Wilmington/USA Peyton Creek Holdco, LLC, Wilmington/USA Peyton Creek Wind Farm, LLC, Wilmington/USA Piecki Sp. z o.o., Warsaw/Poland 21,174 2,5802 100 74 100 100 100 100 100 100 100 100 100 100 100 100 – 165 22,385 14,165 14,198 13,361 65,602 198,798 104,969 2,035 1,158 96,736 20,034 100 432,269 – 165 – 270 – 33 0 – 839 – 1,210 0 0 – 397 – 62 8,343 1 1 100 144,433 35,516 100 100 100 59 696,225 11,391 – 172 39,374 100 100 1,940,959 51 100 100 100 90 100 100 100 100 100 100 100 51 75,549 14,309 38,797 38,797 21,408 312 2,574 241,364 259,732 147,251 16,498 15,865 19,635 1 1,378 – 171 9,669 84,296 9,501 0 – 1,378 – 1,378 13,321 1 365 0 – 8,837 510 0 – 635 2,799 1 Profit and loss-pooling agreement. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 4 Control by virtue of company contract. 5 No control by virtue of company contract. 6 Significant influence via indirect investments. 7 Significant influence by virtue of company contract. 8 Profit and loss-pooling agreement with non-Group companies. 179 I. Affiliated companies which are included in the Shareholding in % Equity Net income/loss Direct Total € ’000 consolidated financial statements Pioneer Trail Wind Farm, LLC, Wilmington/USA Primus Projekt GmbH & Co. KG, Hanover Pyron Wind Farm, LLC, Wilmington/USA Radford’s Run Holdco, LLC, Wilmington/USA Radford’s Run Wind Farm, LLC, Wilmington/USA Raymond Holdco, LLC, Wilmington/USA Raymond Wind Farm, LLC, Wilmington/USA Rheinbraun Brennstoff GmbH, Cologne Rheinische Baustoffwerke GmbH, Bergheim Rheinkraftwerk Albbruck-Dogern Aktiengesellschaft, Waldshut-Tiengen Rhenas Insurance Limited, Sliema/Malta 100 Rhyl Flats Wind Farm Limited, Swindon/United Kingdom Roscoe WF Holdco, LLC, Wilmington/USA Roscoe Wind Farm, LLC, Wilmington/USA RV Rheinbraun Handel und Dienstleistungen GmbH, Cologne RWE & Turcas Güney Elektrik Üretim A.S., Ankara/Turkey RWE Aktiengesellschaft, Essen RWE Canada Ltd., Saint John/Canada RWE Czech Gas Grid Holding B.V., Geertruidenberg/Netherlands 100 RWE Eemshaven Holding II B.V., Geertruidenberg/Netherlands RWE Energy Services, LLC, Wilmington/USA RWE Generation NL B.V., Arnhem/Netherlands RWE Generation NL Corner Participations B.V., Geertruidenberg/ Netherlands RWE Generation NL Participations B.V., Arnhem/Netherlands RWE Generation NL Personeel B.V., Arnhem/Netherlands RWE Generation SE, Essen 100 RWE Generation UK Holdings Limited, Swindon/United Kingdom RWE Generation UK plc, Swindon/United Kingdom RWE Investco EPC Mgmt, LLC, Wilmington/USA RWE Investco Mgmt, LLC, Wilmington/USA RWE Investco Mgmt II, LLC, Wilmington/USA RWE Magicat Holdco, LLC, Wilmington/USA RWE Markinch Limited, Swindon/United Kingdom RWE Nuclear Beteiligungs-GmbH, Essen RWE Nuclear GmbH, Essen RWE Personeel B.V., Arnhem/Netherlands RWE Power Aktiengesellschaft, Cologne and Essen RWE Renewables Americas, LLC, Wilmington/USA 1 Profit and loss-pooling agreement. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 167,466 – 1,388 203,648 159,020 432,077 35,514 35,514 82,619 9,236 31,817 59,176 € ’000 – 2,390 – 734 – 1,558 0 12,818 0 0 1 1 1,757 300 152,512 16,393 172,832 – 10,392 172,832 – 10,419 36,694 1 190,537 – 11,278 5,736,616 513,498 78,616 1,526 – 48,396 3,108 0 1,526 9,487 1,683 – 20,424 – 187,664 48,270 – 10,869 12,464 264,673 3,029 2,121 639 1 3,024,201 – 173,543 1,779,495 – 108,464 234,047 1,586,717 24 69 579,256 – 6,778 91,555 49,408 25 100,000 – 17 2,037,209 0 – 5,402 1 1 23 1 263,978 – 156,882 100 100 100 100 100 100 100 100 100 77 100 50 100 100 100 70 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 4 Control by virtue of company contract. 5 No control by virtue of company contract. 6 Significant influence via indirect investments. 7 Significant influence by virtue of company contract. 8 Profit and loss-pooling agreement with non-Group companies. 180 RWE Annual Report 2019Consolidated financial statements > List of shareholdings (part of the notes) I. Affiliated companies which are included in the Shareholding in % Equity Net income/loss Direct Total € ’000 consolidated financial statements RWE Renewables Asset Management, LLC, Wilmington/USA RWE Renewables Canada Ltd., Saint John/Canada RWE Renewables Development, LLC, Wilmington/USA RWE Renewables Energy Marketing, LLC, Wilmington/USA RWE Renewables GmbH, Essen RWE Renewables International GmbH, Essen RWE Renewables International Participations B.V., Geertruidenberg/ Netherlands RWE Renewables Italia S.r.l., Rome/Italy RWE Renewables O&M, LLC, Wilmington/USA RWE Renewables QSE, LLC, Wilmington/USA RWE Renewables Services, LLC, Wilmington/USA RWE Renewables Sweden AB, Malmö/Sweden RWE Renewables UK Blyth Limited, Coventry/United Kingdom RWE Renewables UK Developments Limited, Coventry/United Kingdom RWE Renewables UK Humber Wind Limited, Coventry/United Kingdom RWE Renewables UK Limited, Coventry/United Kingdom RWE Renewables UK London Array Limited, Coventry/United Kingdom RWE Renewables UK Offshore Wind Limited, Coventry/United Kingdom RWE Renewables UK Operations Limited, Coventry/United Kingdom RWE Renewables UK Robin Rigg East Limited, Coventry/United Kingdom RWE Renewables UK Robin Rigg West Limited, Coventry/United Kingdom RWE Renewables UK Wind Limited, Coventry/United Kingdom RWE Renewables UK Zone Six Limited, Coventry/United Kingdom RWE Slovak Holding B.V., Geertruidenberg/Netherlands 100 RWE Solar Development, LLC, Wilmington/USA RWE Solar PV, LLC, Wilmington/USA RWEST Middle East Holdings B.V., ’s-Hertogenbosch/Netherlands RWE Supply & Trading Asia-Pacific PTE. LTD., Singapore/Singapore RWE Supply & Trading CZ, a.s., Prague/Czech Republic RWE Supply & Trading GmbH, Essen 100 RWE Supply & Trading (India) Private Limited, Mumbai/India RWE Supply & Trading Participations Limited, London/United Kingdom RWE Supply and Trading (Shanghai) Co. Ltd, Shanghai/China RWE Technology International GmbH, Essen RWE Technology Tasarim ve Mühendislik Danismanlik Ticaret Limited Sirketi, Istanbul/Turkey RWE Technology UK Limited, Swindon/United Kingdom RWE Trading Americas Inc., New York City/USA – 25,066 8,299 € ’000 32,107 1,877 57,181 – 11,440 – 56,319 – 31,364 25 18,024 1 918 – 111,318 – 28,518 463,789 19,292 6,559 – 9,898 9,375 478 – 46,542 – 48,922 43,392 – 4,557 56,274 116,605 64,839 101,571 51,971 33,842 55,160 60,955 16,051 0 704,083 – 31,891 36,139 6,465 41,607 1,208,523 446,778 801 13,255 2,624 12,463 192 2,948 9,558 1,899 – 708 17,103 45,449 16,403 24,297 6,797 6,770 14,570 10,495 15,058 0 – 317 – 9,735 – 7,435 – 79 10,726 64,941 1 165 – 2,876 – 267 1 113 1,006 47 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 1 Profit and loss-pooling agreement. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 4 Control by virtue of company contract. 5 No control by virtue of company contract. 6 Significant influence via indirect investments. 7 Significant influence by virtue of company contract. 8 Profit and loss-pooling agreement with non-Group companies. 181 I. Affiliated companies which are included in the Shareholding in % Equity Net income/loss consolidated financial statements RWE Trading Services GmbH, Essen RWE Wind Karehamn AB, Malmö/Sweden RWE Wind Services Denmark A/S, Rødby/Denmark Sand Bluff WF Holdco, LLC, Wilmington/USA Sand Bluff Wind Farm, LLC, Wilmington/USA Settlers Trail Wind Farm, LLC, Wilmington/USA Sofia Offshore Wind Farm Holdings Limited, Swindon/United Kingdom Sofia Offshore Wind Farm Limited, Swindon/United Kingdom SOLARENGO Energia, Unipessoal, Lda., Cascais/Portugal Solar Holding India GmbH, Kolitzheim Solar Holding Poland GmbH, Kolitzheim SRS EcoTherm GmbH, Salzbergen Stella Holdco, LLC, Wilmington/USA Stella Wind Farm, LLC, Wilmington/USA Taber Solar 1 Inc., Vancouver/Canada Taber Solar 2 Inc., Vancouver/Canada Tamworth Holdings, LLC, Charlotte/USA Tanager Holdings, LLC, Charlotte/USA Tech Park Solar, LLC, Wilmington/USA The Hollies Wind Farm Limited, Swindon/United Kingdom Transpower Limited, Dublin/Ireland Triton Knoll HoldCo Limited, Swindon/United Kingdom Triton Knoll Offshore Wind Farm Limited, Swindon/United Kingdom Valencia Solar, LLC, Tucson/USA Východoslovenská distribucná, a.s., Košice/Slovakia Východoslovenská energetika a.s., Košice/Slovakia Východoslovenská energetika Holding a.s., Košice/Slovakia West of the Pecos Solar, LLC, Wilmington/USA West Raymond Holdco, LLC, Wilmington/USA West Raymond Wind Farm, LLC, Wilmington/USA Wind Farm Deliceto s.r.l., Bolzano/Italy Windpark Eekerpolder B.V., ’s-Hertogenbosch/Netherlands Windpark Kattenberg B.V., ’s-Hertogenbosch/Netherlands Windpark Nordsee Ost GmbH, Heligoland Windpark Oostpolderdijk B.V., ’s-Hertogenbosch/Netherlands Windpark Zuidwester B.V., ’s-Hertogenbosch/Netherlands WKN Windkraft Nord GmbH & Co. Windpark Wönkhausen KG, Hanover Direct Total 100 100 100 100 100 100 100 100 100 100 100 90 100 100 100 100 100 100 100 100 100 59 100 100 100 100 49 100 100 100 100 100 100 100 100 100 100 € ’000 5,735 33,150 5,400 6,823 6,823 € ’000 1 – 177 2,758 – 13,390 – 13,390 193,435 – 8,844 0 – 394 – 81 5,925 16 13,758 97,537 235,593 9,521 10,210 7,743 7,129 – 11,511 604 3,528 97,484 – 25,460 – 19,810 290,463 67,856 608,317 91,352 33,054 33,054 24,403 – 2 520 256 0 9,336 2,016 0 – 383 – 81 – 50 – 3 1,706 0 – 169 – 69 – 64 77 – 1 767 68 – 1,048 0 1,852 565 30,641 8,641 77,8774 – 3,049 0 0 1,909 – 2 153 1 0 – 593 649 1 Profit and loss-pooling agreement. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 4 Control by virtue of company contract. 5 No control by virtue of company contract. 6 Significant influence via indirect investments. 7 Significant influence by virtue of company contract. 8 Profit and loss-pooling agreement with non-Group companies. 182 RWE Annual Report 2019Consolidated financial statements > List of shareholdings (part of the notes) II. Affiliated companies which are not included in the consolidated Shareholding in % Equity Net income/loss financial statements due to secondary importance for the assets, liabilities, financial position and profit or loss of the Group Direct Total € ’000 € ’000 Adensis GmbH, Dresden Agenzia Carboni S.R.L., Genoa/Italy Alcamo II S.r.l., Milan/Italy Alvarado Solar S.L., Barcelona/Spain Ashwood Solar I, LLC, Wilmington/USA Aurum Solaris 4 GmbH & Co. KG, Kassel Avolta Storage Limited, Kilkenny/Ireland Awel y Môr Offshore Wind Farm Limited, Swindon/United Kingdom Baltic Trade and Invest Sp. z o.o., Slupsk/Poland Baron Winds LLC, Chicago/USA Belectric International GmbH, Kolitzheim BELECTRIC JV GmbH, Kolitzheim Belectric Mexico Fotovoltaica S.de R.L. de C.V., Bosques de las Lomas/ Mexico Belectric Polska Sp. z o.o., Warsaw/Poland Belectric PV 5 (SARL), Vendres/France Belectric PV 10 (SARL), Vendres/France Belectric SP Solarprojekte 14 GmbH & Co. KG, Sömmerda Belectric SP Solarprojekte 14 Verwaltungs-GmbH, Sömmerda Belectric SP Solarprojekte 15 GmbH & Co. KG, Sömmerda Belectric SP Solarprojekte 15 Verwaltungs-GmbH, Sömmerda Belectric SP Solarprojekte 16 GmbH & Co. KG, Sömmerda Belectric SP Solarprojekte 16 Verwaltungs-GmbH, Sömmerda Belectric US LLC, Wilmington/USA Biomasseheizkraftwerk Schameder GmbH, Essen Blackbeard Solar, LLC, Wilmington/USA Blackbriar Battery, LLC, Wilmington/USA Blackjack Creek Wind Farm, LLC, Wilmington/USA Blueberry Hills LLC, Chicago/USA BO Baltic Offshore GmbH, Hamburg Boiling Springs Holdco, LLC, Wilmington/USA Bowler Flats Energy Hub LLC, Chicago/USA Brahman Solar, LLC, Wilmington/USA Broken Spoke Solar, LLC, Wilmington/USA Buckeye Wind LLC, Chicago/USA Burgar Hill Wind Farm Limited, Swindon/United Kingdom Bursjöliden Vind AB, Malmö/Sweden Camellia Solar LLC, Wilmington/USA Camellia Solar Member LLC, Wilmington/USA 1 Profit and loss-pooling agreement. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 98 100 100 100 100 100 100 100 100 100 381 191 6 – 84 0 1 – 292 59 24 – 13 – 138 0 – 12 – 288 3 10,913 – 4,926 0 99 14 – 5 – 146 – 11 – 8 23 0 0 0 0 13 0 0 0 0 0 0 561 0 0 0 10 – 5 356 – 44 – 10 – 2 3 3 3 3 3 3 3 – 1 0 0 0 0 – 7 0 0 0 0 0 0 – 2 0 0 4 Control by virtue of company contract. 5 No control by virtue of company contract. 6 Significant influence via indirect investments. 7 Significant influence by virtue of company contract. 8 Profit and loss-pooling agreement with non-Group companies. 183 II. Affiliated companies which are not included in the consolidated Shareholding in % Equity Net income/loss financial statements due to secondary importance for the assets, liabilities, financial position and profit or loss of the Group Direct Total € ’000 € ’000 Cardinal Wind Farm, LLC, Wilmington/USA Casey Fork Solar, LLC, Wilmington/USA Cassadaga Class B Holdings LLC, Wilmington/USA Cassadaga Wind Holdings LLC, Wilmington/USA Catalina-Cypress Holding Limited, Swindon/United Kingdom Cattleman Wind Farm, LLC, Wilmington/USA Cattleman Wind Farm II, LLC, Wilmington/USA Champaign Wind LLC, Chicago/USA Ciriè Centrale PV s.a.s. (s.r.l.), Rome/Italy Clavellinas Solar, S.L., Barcelona/Spain Climagy Photovoltaikprojekt Verwaltungs-GmbH, Kolitzheim Climagy PV-Sonnenanlage GmbH & Co. KG, Kolitzheim Climagy PV-Sonnenanlage Verwaltungs-GmbH, Kolitzheim Climagy Sonneneinstrahlung GmbH & Co. KG, Kolitzheim Climagy Sonneneinstrahlung Verwaltungs-GmbH, Kolitzheim Climagy Sonnenkraft Verwaltungs-GmbH, Kolitzheim Climagy Sonnenstrom GmbH & Co. KG, Kolitzheim Climagy Sonnenstrom Verwaltungs-GmbH, Kolitzheim Climagy Stromertrag GmbH & Co. KG, Kolitzheim Climagy Stromertrag Verwaltungs-GmbH, Kolitzheim Clinton Wind, LLC, Wilmington/USA Clocaenog Wind Farm Limited, Swindon/United Kingdom Coralese Investments Sp. z o.o., Warsaw/Poland Cordova Wind Farm, LLC, Wilmington/USA Curns Energy Limited, Kilkenny/Ireland Decadia GmbH, Essen E & Z Industrie-Lösungen GmbH, Essen Eko-En 1 Sp. z o.o., Warsaw/Poland Eko-En 2 Sp. z o.o., Warsaw/Poland Eko-En 3 Sp. z o.o., Warsaw/Poland Eko-En 4 Sp. z o.o., Warsaw/Poland El Algarrobo (SpA), Santiago de Chile/Chile El Algodon Alto Wind Farm, LLC, Wilmington/USA El Chañar (SpA), Santiago de Chile/Chile El Navajo Solar, S.L., Barcelona/Spain El Pimiento (SpA), Santiago de Chile/Chile El Solar (SpA), Santiago de Chile/Chile El Tamarugo (SpA), Santiago de Chile/Chile 1 Profit and loss-pooling agreement. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 70 50 100 100 100 100 100 100 100 100 100 100 100 100 0 0 94 0 0 0 – 5 – 26 29 – 26 28 – 20 27 27 – 29 29 – 18 27 0 0 90 0 – 501 893 0 0 3 3 0 0 0 0 – 22 – 39 – 1 – 2 0 – 2 0 – 1 – 2 0 – 2 0 0 0 – 12 0 – 266 – 45 16,874 – 2,885 98 1,236 134 535 1 0 1 – 10 1 1 1 – 78 – 58 – 69 – 76 0 0 0 – 23 0 – 5 0 50 4 Control by virtue of company contract. 5 No control by virtue of company contract. 6 Significant influence via indirect investments. 7 Significant influence by virtue of company contract. 8 Profit and loss-pooling agreement with non-Group companies. 184 RWE Annual Report 2019Consolidated financial statements > List of shareholdings (part of the notes) II. Affiliated companies which are not included in the consolidated Shareholding in % Equity Net income/loss financial statements due to secondary importance for the assets, liabilities, financial position and profit or loss of the Group Direct Total € ’000 € ’000 Enchant Solar 3 Inc., Vancouver/Canada Enchant Solar 4 Inc., Vancouver/Canada Energio Co., Ltd., Bangkok/Thailand Eólica de Sarnago, S.A., Soria/Spain EverPower Maine LLC, Chicago/USA EverPower Ohio LLC, Chicago/USA EverPower Solar LLC, Chicago/USA EverPower Wind Development, LLC, Chicago/USA Farma Wiatrowa Lubsko Sp. z o.o. , Zielona Góra/Poland Fifth Standard Solar PV, LLC, Wilmington/USA "Finelectra" Finanzgesellschaft für Elektrizitäts-Beteiligungen AG in Liquidation, Hausen/Switzerland Five Estuaries Offshore Wind Farm Limited, Swindon/United Kingdom Flatlands Wind Farm, LLC, Wilmington/USA Florida Solar and Power Group LLC, Wilmington/USA Frazier Solar, LLC, Wilmington/USA Gazules I Fotovoltaica, S.L., Barcelona/Spain Gazules II Solar, S.L., Barcelona/Spain GBV Achtunddreißigste Gesellschaft für Beteiligungsverwaltung mbH, Essen GBV Dreiunddreißigste Gesellschaft für Beteiligungsverwaltung mbH, Essen GBV Einunddreißigste Gesellschaft für Beteiligungsverwaltung mbH, Essen 100 100 GBV Sechsunddreißigste Gesellschaft für Beteiligungsverwaltung mbH, Essen GBV Siebenunddreißigste Gesellschaft für Beteiligungsverwaltung mbH, Essen GBV Siebte Gesellschaft für Beteiligungsverwaltung mbH, Essen Generación Fotovoltaica Castellano Manchega, S.L., Murcia/Spain Goole Fields II Wind Farm Limited, Swindon/United Kingdom Grandview Wind Farm III, LLC, Wilmington/USA Grandview Wind Farm IV, LLC, Wilmington/USA Grandview Wind Farm V, LLC, Wilmington/USA Green Gecco Verwaltungs GmbH, Essen Haube Wind Sp. z o.o., Slupsk/Poland Highland III LLC, Chicago/USA Horse Thief Wind Project LLC, Chicago/USA INDI Energie B.V., ’s-Hertogenbosch/Netherlands Infraestructuras de Aldehuelas, S.A., Barcelona/Spain Infrastrukturgesellschaft Netz Lübz mit beschränkter Haftung, Hanover innogy Energy Marketing Australia PTY LTD, Melbourne/Australia 100 100 100 52 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 51 100 100 100 100 100 100 100 0 0 29 1,550 0 0 0 0 0 0 0 – 1 – 29 0 0 0 0 3 0 7,562 122 0 0 0 – 58 – 58 25 25 30 25 25 100 0 0 0 0 36 663 0 0 47 428 18 3 0 0 0 – 137 – 137 1 1 1 1 1 1 3 0 0 0 0 1 – 255 0 0 40 0 – 24 3 1 Profit and loss-pooling agreement. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 4 Control by virtue of company contract. 5 No control by virtue of company contract. 6 Significant influence via indirect investments. 7 Significant influence by virtue of company contract. 8 Profit and loss-pooling agreement with non-Group companies. 185 II. Affiliated companies which are not included in the consolidated Shareholding in % Equity Net income/loss financial statements due to secondary importance for the assets, liabilities, financial position and profit or loss of the Group Direct Total € ’000 Innogy Energy Services LLC, Wilmington/USA innogy Hillston Sun Farm Holding Pty. Ltd., Melbourne/Australia innogy indeland Windpark Eschweiler Verwaltungs GmbH, Eschweiler Innogy Management Services LLC, Wilmington/USA innogy Middle East & North Africa Ltd., Dubai/UAE innogy Offshore Wind Netherlands Participations I B.V., ’s-Hertogenbosch/ Netherlands innogy Offshore Wind Netherlands Participations II B.V., ’s-Hertogenbosch/ Netherlands innogy Offshore Wind Netherlands Participations III B.V., ’s-Hertogenbosch/ Netherlands innogy Offshore Wind Netherlands Participations IV B.V., ’s-Hertogenbosch/ Netherlands innogy Seabreeze II Verwaltungs GmbH, Essen innogy Solar Netherlands B.V., ’s-Hertogenbosch/Netherlands innogy Solar Polska Sp. z o.o., Warsaw/Poland innogy Solutions s.r.o., Bratislava/Slovakia Innogy Stallingborough Limited, Swindon/United Kingdom innogy Windpark Bedburg Verwaltungs GmbH, Bedburg innogy Windpark Garzweiler GmbH & Co. KG, Essen Innogy Windpark Jüchen A44n Verwaltungs GmbH, Essen innogy Windpark Papenhagen GmbH & Co. KG, Hanover innogy Windpark Papenhagen Verwaltungs GmbH, Hanover Iron Horse Battery Storage, LLC, Wilmington/USA IRUS Offshore Wind Holdings LLC, Dover/USA iWATT s.r.o., Košice/Slovakia Jerez Fotovoltaica S.L., Barcelona/Spain Kasson Manteca Solar, LLC, Wilmington/USA Kieswerk Kaarst GmbH & Co. KG, Bergheim Kieswerk Kaarst Verwaltungs GmbH, Bergheim Kiln Pit Hill Wind Farm Limited, Swindon/United Kingdom Kimberly Run LLC, Chicago/USA Lake Fork Wind Farm, LLC, Wilmington/USA Lampasas Wind LLC, Chicago/USA Las Vaguadas I Fotovoltaica S.L., Barcelona/Spain Las Vaguadas II Solar S.L., Barcelona/Spain Lochelbank Wind Farm Limited, Swindon/United Kingdom Mahanoy Mountain, LLC, Chicago/USA Major Wind Farm, LLC, Wilmington/USA 1 Profit and loss-pooling agreement. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 0 – 169 47 € ’000 0 – 168 6 3 – 7,654 – 5,550 0 0 0 0 65 0 22 0 45 559 31 10,849 0 2 0 2,200 30 0 0 0 0 – 17 – 42 0 0 0 0 0 0 0 6 0 – 6 3 0 2 – 23 – 3 3 3 679 0 3 – 35 0 656 0 0 0 0 0 – 54 – 79 0 0 0 100 100 100 100 100 100 100 100 100 100 100 100 100 100 51 51 100 100 100 100 100 100 100 100 51 51 100 100 100 100 100 100 100 100 100 4 Control by virtue of company contract. 5 No control by virtue of company contract. 6 Significant influence via indirect investments. 7 Significant influence by virtue of company contract. 8 Profit and loss-pooling agreement with non-Group companies. 186 RWE Annual Report 2019Consolidated financial statements > List of shareholdings (part of the notes) II. Affiliated companies which are not included in the consolidated Shareholding in % Equity Net income/loss financial statements due to secondary importance for the assets, liabilities, financial position and profit or loss of the Group Direct Total € ’000 € ’000 March Road Solar, LLC, Wilmington/USA Maricopa East Solar PV, LLC, Wilmington/USA Maricopa East Solar PV 2 , LLC, Wilmington/USA Maricopa Land Holding, LLC, Wilmington/USA Maricopa West Solar PV 2, LLC, Wilmington/USA Maryland Sunlight 1 LLC, Wilmington/USA Mason Dixon Wind LLC, Chicago/USA Mud Springs Wind Project LLC, Chicago/USA Nadácia VSE Holding , Košice/Slovakia Northern Orchard Solar PV, LLC, Wilmington/USA Northern Orchard Solar PV 2, LLC, Wilmington/USA Northern Orchard Solar PV 3, LLC, Wilmington/USA Novar Two Wind Farm Limited, Swindon/United Kingdom Offshore-Windpark Delta Nordsee GmbH, Hamburg Ohio Sunlight 1 LLC, Wilmington/USA Oranje Wind Power B.V., ’s-Hertogenbosch/Netherlands Oranje Wind Power C.V., ’s-Hertogenbosch/Netherlands Owen Prairie Wind Farm, LLC, Wilmington/USA Painter Energy Storage, LLC, Wilmington/USA Panther Creek Solar, LLC, Wilmington/USA Paradise Cut Battery, LLC, Wilmington/USA Parc Ynni Cymunedol Alwen Cyfyngedig, Swindon/United Kingdom Park Wiatrowy Dolice Sp. z o.o., Warsaw/Poland Park Wiatrowy Gaworzyce Sp. z o.o., Warsaw/Poland Pawnee Spirit Wind Farm, LLC, Wilmington/USA Pe Ell North LLC, Chicago/USA Peg Project #1 Pty Ltd, Melbourne/Australia Peg Project #2 Pty Ltd, Melbourne/Australia Photovoltaikkraftwerk Götz Verwaltungs-GmbH, Kolitzheim Photovoltaikkraftwerk Groß Dölln Infrastruktur GmbH & Co. KG, Templin Photovoltaikkraftwerk Groß Dölln Infrastruktur Verwaltungs-GmbH, Templin Photovoltaikkraftwerk Reinsdorf GmbH & Co. KG, Kolitzheim Photovoltaikkraftwerk Reinsdorf Verwaltungs-GmbH, Kolitzheim Photovoltaikkraftwerk Tramm GmbH & Co. KG, Kolitzheim Photovoltaikkraftwerk Tramm Netzanschluss GmbH & Co. KG, Kolitzheim Photovoltaikkraftwerk Tramm Netzanschluss Verwaltungs-GmbH, Kolitzheim Photovoltaikkraftwerk Tramm PV-Finanzierung GmbH & Co. KG, Kolitzheim 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 0 0 0 0 0 0 0 0 0 0 0 246 0 0 0 0 0 0 – 2,662 – 143 0 0 28 – 16 29 – 26 30 – 29 – 27 28 – 19 0 0 0 0 0 3 0 0 3 0 0 0 0 0 3 0 0 0 0 0 0 3 – 227 124 0 0 3 3 – 1 – 2 0 1 0 – 2 – 2 0 – 2 1 Profit and loss-pooling agreement. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 4 Control by virtue of company contract. 5 No control by virtue of company contract. 6 Significant influence via indirect investments. 7 Significant influence by virtue of company contract. 8 Profit and loss-pooling agreement with non-Group companies. 187 II. Affiliated companies which are not included in the consolidated Shareholding in % Equity Net income/loss financial statements due to secondary importance for the assets, liabilities, financial position and profit or loss of the Group Photovoltaikkraftwerk Tramm PV-Finanzierung Verwaltungs-GmbH, Kolitzheim Photovoltaikkraftwerk Tramm Verwaltungs-GmbH, Kolitzheim PI E&P Holding Limited, George Town/Cayman Islands PI E&P US Holding LLC, New York City/USA Pinckard Solar LLC, Wilmington/USA Pinckard Solar Member LLC, Wilmington/USA Pipkin Ranch Wind Farm, LLC, Wilmington/USA Proyecto Rio Putaendo S.p.A., Santiago de Chile/Chile Proyecto Tabalongo Solar S.p.A., Santiago de Chile/Chile Proyectos Solares Iberia I, S.L., Barcelona/Spain Proyectos Solares Iberia II, S.L., Barcelona/Spain Proyectos Solares Iberia III, S.L., Barcelona/Spain Proyectos Solares Iberia IV, S.L., Barcelona/Spain Proyectos Solares Iberia V, S.L., Barcelona/Spain Pryor Caves Wind Project LLC, Chicago/USA PT Rheincoal Supply & Trading Indonesia, PT, Jakarta/Indonesia Quintana Fotovoltaica SLU, Barcelona/Spain Rampion Extension Development Limited, Swindon/United Kingdom RD Hanau GmbH, Hanau Rose Rock Wind Farm, LLC, Wilmington/USA Rowantree Wind Farm Ltd., Swindon/United Kingdom RWE & Turcas Dogalgaz Ithalat ve Ihracat A.S., Istanbul/Turkey RWE Australia Pty. Ltd., Brisbane/Australia RWE Belgium BVBA, Brussels/Belgium RWE Carbon Sourcing North America, LLC, Wilmington/USA RWE Energy APAC Co. Ltd., Chengdu/China RWE Enerji Toptan Satis A.S., Istanbul/Turkey RWE Generation Hydro GmbH, Essen RWE Ingen!us Limited, Swindon/United Kingdom RWE NSW PTY LTD, Sydney/Australia RWE Pensionsfonds AG, Essen RWE Power Climate Protection GmbH, Essen RWE Power Climate Protection Southeast Asia Co., Ltd., Bangkok/Thailand RWE Principal Investments USA, LLC, New York City/USA RWE Renewables Australia Holdings Pty Ltd., Brisbane/Australia RWE Renewables Chile SpA, Santiago/Chile RWE Renewables France SAS, Levallois-Perret/France Direct Total € ’000 € ’000 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 27 30 45,505 45,377 0 0 0 1 6 0 19 19 19 0 277 – 5 0 0 0 855 50 1,451 0 1,977 4,294 25 2,670 219 3,694 23 3,032 169 176 1,133 – 1,532 0 0 – 11 – 78 0 0 0 3 0 – 14 – 20 – 1 – 1 – 1 0 4 – 5 3 0 0 0 161 – 14 – 82 0 – 105 – 244 1 82 – 45,462 – 145 1 – 77 – 971 – 27 – 570 – 4,337 100 1 Profit and loss-pooling agreement. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 4 Control by virtue of company contract. 5 No control by virtue of company contract. 6 Significant influence via indirect investments. 7 Significant influence by virtue of company contract. 8 Profit and loss-pooling agreement with non-Group companies. 188 RWE Annual Report 2019Consolidated financial statements > List of shareholdings (part of the notes) II. Affiliated companies which are not included in the consolidated Shareholding in % Equity Net income/loss financial statements due to secondary importance for the assets, liabilities, financial position and profit or loss of the Group Direct Total € ’000 RWE Renewables Japan G.K., Tokyo/Japan RWE Renewables Mexico, S. de R.L. de C.V., Mexico City/Mexico RWE Renewables Services GmbH, Essen RWE Renewables Services Mexico, S. de R.L. de C.V., Mexico City/Mexico RWE Slovensko s.r.o., Bratislava/Slovakia 100 RWEST PI Bras Limited, London/United Kingdom RWEST PI FRE Holding LLC, New York City/USA RWEST PI Limetree GmbH, Essen RWE Supply & Trading CZ GmbH, Essen RWE SUPPLY TRADING TURKEY ENERJI ANONIM SIRKETI, Istanbul/Turkey RWE Technology International Energy Environment Engineering GmbH, Essen RWE TECNOLOGIA LTDA, Rio de Janeiro/Brazil RWE Trading Services Limited, Swindon/United Kingdom RWE Wind Denmark AB, Malmö/Sweden RWE Wind Norway AB, Malmö/Sweden RWE Windparks Deutschland GmbH, Essen RWE Wind Projects AB, Malmö/Sweden RWE Wind Service Italia S.r.l. , Milan/Italy RWE Wind Services GmbH, Neubukow RWE Wind Services Norway AS, Oslo/Norway RWE Wind Songkjølen AS, Oslo/Norway Santa Severa Centrale PV s.a.s. (s.r.l.), Rome/Italy SB Retrofit, LLC, Wilmington/USA Scioto Solar LLC, Wilmington/USA Snow Shoe Wind Farm, LLC, Wilmington/USA Songkjølen Wind Farm DA, Oslo/Norway Sparta North, LLC, Wilmington/USA Sparta South, LLC, Wilmington/USA SP Solarprojekte 1 Verwaltungs-GmbH, Kolitzheim SP Solarprojekte 2 GmbH & Co. KG, Kolitzheim SP Solarprojekte 2 Verwaltungs-GmbH, Kolitzheim SP Solarprojekte 3 GmbH & Co. KG, Kolitzheim SP Solarprojekte 3 Verwaltungs-GmbH, Kolitzheim SP Solarprojekte 4 GmbH & Co. KG, Kolitzheim SP Solarprojekte 4 Verwaltungs-GmbH, Kolitzheim SP Solarprojekte 7 GmbH & Co. KG, Kolitzheim SP Solarprojekte 7 Verwaltungs-GmbH, Kolitzheim 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 3,643 1,166 25 1,360 – 1 25 100,990 1,054 25 1,349 684 6,634 24 4 – 399 2,165 1,515 3,533 – 151 0 0 € ’000 – 384 – 179 0 3 3 – 23 – 31 0 6 176 1 3 32 0 788 – 1 0 – 444 0 – 8 – 18 0 0 3 0 4,943 – 25 0 0 25 – 3 26 – 4 26 – 4 26 – 2 25 0 0 0 – 3 0 – 2 0 – 2 0 – 3 0 1 Profit and loss-pooling agreement. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 4 Control by virtue of company contract. 5 No control by virtue of company contract. 6 Significant influence via indirect investments. 7 Significant influence by virtue of company contract. 8 Profit and loss-pooling agreement with non-Group companies. 189 II. Affiliated companies which are not included in the consolidated Shareholding in % Equity Net income/loss financial statements due to secondary importance for the assets, liabilities, financial position and profit or loss of the Group Direct Total € ’000 € ’000 SP Solarprojekte 8 GmbH & Co. KG, Sömmerda SP Solarprojekte 8 Verwaltungs-GmbH, Sömmerda SP Solarprojekte 9 GmbH & Co. KG, Sömmerda SP Solarprojekte 9 Verwaltungs-GmbH, Sömmerda SP Solarprojekte 10 GmbH & Co. KG, Sömmerda SP Solarprojekte 10 Verwaltungs-GmbH, Sömmerda SP Solarprojekte 11 GmbH & Co. KG, Kolitzheim SP Solarprojekte 11 Verwaltungs-GmbH, Kolitzheim SP Solarprojekte 12 GmbH & Co. KG , Kolitzheim SP Solarprojekte 12 Verwaltungs-GmbH, Kolitzheim SP Solarprojekte 13 GmbH & Co. KG, Kolitzheim SP Solarprojekte 13 Verwaltungs-GmbH, Kolitzheim Stillwater Energy Storage, LLC, Wilmington/USA Stockton Solar I, LLC, Wilmington/USA Stockton Solar II, LLC, Wilmington/USA Storage Facility 1 Ltd., Slough/United Kingdom Sun Data GmbH (i.L.), Kolitzheim Sunpow 1 Sp. z o.o., Warsaw/Poland Sunrise Energy Generation Pvt. Ltd., Mumbai/India Sunrise Wind Holdings, LLC, Chicago/USA SVFR 12 (SAS), Vendres/France Terrapin Hills LLC, Chicago/USA Three Rocks Solar, LLC, Wilmington/USA Tierra Blanca Wind Farm, LLC, Wilmington/USA Tipton Wind, LLC, Wilmington/USA Valverde Wind Farm, LLC, Wilmington/USA VDE Komplementär GmbH, Kassel VDE Projects GmbH, Kassel Venado Wind Farm, LLC, Wilmington/USA Versuchsatomkraftwerk Kahl GmbH, Karlstein am Main Vici Wind Farm, LLC, Wilmington/USA Vici Wind Farm II, LLC, Wilmington/USA Vici Wind Farm III, LLC, Wilmington/USA Vortex Energy Deutschland GmbH, Kassel Vortex Energy Windpark GmbH & Co. KG, Kassel VSE Call centrum, s.r.o., Košice/Slovakia VSE Ekoenergia, s.r.o., Košice/Slovakia West of the Pecos Holdco, LLC, Wilmington/USA 1 Profit and loss-pooling agreement. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 80 100 100 100 100 100 100 100 100 – 28 29 – 29 29 – 29 29 0 0 0 – 20 74 0 70 0 – 112 0 0 0 0 0 8 37 0 604 0 0 0 4,661 1 56 65 0 3 3 3 3 3 3 – 2 0 – 2 0 – 2 0 0 0 0 – 20 70 0 3 0 – 2 0 0 0 0 0 – 9 – 22 0 31 0 0 0 986 – 29 29 – 119 0 4 Control by virtue of company contract. 5 No control by virtue of company contract. 6 Significant influence via indirect investments. 7 Significant influence by virtue of company contract. 8 Profit and loss-pooling agreement with non-Group companies. 190 RWE Annual Report 2019Consolidated financial statements > List of shareholdings (part of the notes) II. Affiliated companies which are not included in the consolidated Shareholding in % Equity Net income/loss financial statements due to secondary importance for the assets, liabilities, financial position and profit or loss of the Group Direct Total € ’000 € ’000 Wildcat Wind Farm II, LLC, Wilmington/USA Wildcat Wind Farm III, LLC, Wilmington/USA Willowbrook Solar I, LLC, Wilmington/USA Windpark Hölzerberg GmbH & Co. KG, Kassel Windpark Winterlingen-Alb GmbH & Co. KG, Kassel Wiregrass, LLC, Wilmington/USA WIT Ranch Wind Farm, LLC, Wilmington/USA WR Graceland Solar, LLC, Wilmington/USA Zielone Glówczyce Sp. z o.o., Glówczyce/Poland 1 Profit and loss-pooling agreement. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 100 100 100 100 100 100 100 100 100 0 0 0 1 1 0 0 0 0 0 0 – 12 – 12 0 0 0 472 – 519 4 Control by virtue of company contract. 5 No control by virtue of company contract. 6 Significant influence via indirect investments. 7 Significant influence by virtue of company contract. 8 Profit and loss-pooling agreement with non-Group companies. III. Joint operations Shareholding in % Equity Net income/loss Direct Total € ’000 € ’000 Greater Gabbard Offshore Winds Limited, Reading/United Kingdom 50 1,122,469 101,728 N.V. Elektriciteits-Produktiemaatschappij Zuid-Nederland EPZ, Borssele/ Netherlands 1 Profit and loss-pooling agreement. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 4 Control by virtue of company contract. 5 No control by virtue of company contract. 6 Significant influence via indirect investments. 30 81,302 5,609 7 Significant influence by virtue of company contract. 8 Profit and loss-pooling agreement with non-Group companies. IV. Associated companies of joint operations Shareholding in % Equity Net income/loss B.V. NEA, Arnhem/Netherlands 1 Profit and loss-pooling agreement. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. Direct Total 28 € ’000 71,714 € ’000 216 4 Control by virtue of company contract. 5 No control by virtue of company contract. 6 Significant influence via indirect investments. 7 Significant influence by virtue of company contract. 8 Profit and loss-pooling agreement with non-Group companies. 191 V. Joint ventures accounted for using the equity method Shareholding in % Equity Net income/loss AS 3 Beteiligungs GmbH, Essen AWE-Arkona-Windpark Entwicklungs-GmbH, Hamburg C-Power N.V., Oostende/Belgium Elevate Wind Holdco, LLC, Wilmington/USA Galloper Wind Farm Holding Company Limited, Swindon/United Kingdom Grandview Wind Farm, LLC, Wilmington/USA Gwynt y Môr Offshore Wind Farm Limited, Swindon/United Kingdom Innogy Venture Capital GmbH, Dortmund Rampion Renewables Limited, Coventry/United Kingdom Société Electrique de l’Our S.A., Luxembourg/Luxembourg TCP Petcoke Corporation, Dover/USA URANIT GmbH, Jülich 1 Profit and loss-pooling agreement. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. Direct Total € ’000 515 36,819 € ’000 5,740 26,952 22,227 16,100 33,135 1,074,954 247,933 245,884 – 101,690 302,098 – 12,364 – 2,103 714 11,617 35,437 72,127 – 992 119 3 5,6862 25,4252 98,094 50 27 50 25 50 50 755 605 40 50 50 4 Control by virtue of company contract. 5 No control by virtue of company contract. 6 Significant influence via indirect investments. 7 Significant influence by virtue of company contract. 8 Profit and loss-pooling agreement with non-Group companies. VI. Associates accounted for using the equity method Shareholding in % Equity Net income/loss Amprion GmbH, Dortmund ATBERG – Eólicas do Alto Tâmega e Barroso, Lda., Ribeira de Pena/Portugal Belectric Gulf Limited, Abu Dhabi/UAE Bray Offshore Wind Limited, Kilkenny/Ireland DOTI Deutsche Offshore-Testfeld- und Infrastruktur-GmbH & Co. KG, Oldenburg GNS Gesellschaft für Nuklear-Service mbH, Essen Grosskraftwerk Mannheim Aktiengesellschaft, Mannheim HIDROERG – Projectos Energéticos, Lda., Lisbon/Portugal Innogy Renewables Technology Fund I GmbH & Co. KG (i.L.), Dortmund Kärntner Energieholding Beteiligungs GmbH, Klagenfurt/Austria KELAG-Kärntner Elektrizitäts-AG, Klagenfurt/Austria Kish Offshore Wind Limited, Kilkenny/Ireland Magicat Holdco, LLC, Wilmington/USA Mingas-Power GmbH, Essen Nysäter Wind AB, Malmö/Sweden PEARL PETROLEUM COMPANY LIMITED, Road Town/British Virgin Islands Rødsand 2 Offshore Wind Farm AB, Malmö/Sweden Direct 25 Total € ’000 € ’000 25 40 49 50 26 28 40 32 785 49 136 50 20 40 20 107 20 1,823,000 203,400 4,862 4,758 – 83 84,844 36,339 127,435 12,588 16,637 912,286 893,675 – 103 278,448 5,114 20,419 532 4,173 – 12 – 46,276 15,6902 6,647 1,964 – 1,833 96,6382 93,316 – 12 1,552 4,445 – 5,869 1,951,247 242,061 143,174 14,320 1 Profit and loss-pooling agreement. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 4 Control by virtue of company contract. 5 No control by virtue of company contract. 6 Significant influence via indirect investments. 7 Significant influence by virtue of company contract. 8 Profit and loss-pooling agreement with non-Group companies. 192 RWE Annual Report 2019Consolidated financial statements > List of shareholdings (part of the notes) VI. Associates accounted for using the equity method Shareholding in % Equity Net income/loss Schluchseewerk Aktiengesellschaft, Laufenburg Baden Vliegasunie B.V., De Bilt/Netherlands Direct 1 Profit and loss-pooling agreement. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 4 Control by virtue of company contract. 5 No control by virtue of company contract. 6 Significant influence via indirect investments. Total 50 605 € ’000 64,957 10,679 € ’000 2,809 3,070 7 Significant influence by virtue of company contract. 8 Profit and loss-pooling agreement with non-Group companies. VII. Companies which are not accounted for using the equity method Shareholding in % Equity Net income/loss due to secondary importance for the assets, liabilities, financial position and profit or loss of the Group Abwasser-Gesellschaft Knapsack, Gesellschaft mit beschränkter Haftung, Hürth Alfred Thiel-Gedächtnis-Unterstützungskasse GmbH, Essen Ascent Energy LLC, Wilmington/USA CARBON Climate Protection GmbH, Langenlois/Austria CARBON Egypt Ltd. (Under Liquidation), Cairo/Egypt DBO Energia S.A., Rio de Janeiro /Brazil Deutsche Gesellschaft für Wiederaufarbeitung von Kernbrennstoffen AG & Co. oHG, Essen DOTI Management GmbH, Oldenburg EMDO S.A.S., Paris/France Energotel, a.s., Bratislava/Slovakia Eoliennes en mer de Dunkerque (EMD) S.A.S., Paris/France Fassi Coal Pty. Ltd., Rutherford/Australia First River Energy LLC, Denver/USA Focal Energy Photovoltaic Holdings Limited, Nicosia/Cyprus Gemeinschaftswerk Hattingen Gesellschaft mit beschränkter Haftung, Essen GfS Gesellschaft für Simulatorschulung mbH, Essen Kraftwerk Buer GbR, Gelsenkirchen KSG Kraftwerks-Simulator-Gesellschaft mbH, Essen KÜCKHOVENER Deponiebetrieb GmbH & Co. Kommanditgesellschaft, Bergheim KÜCKHOVENER Deponiebetrieb Verwaltungs-GmbH, Bergheim LDO Coal Pty. Ltd., Rutherford/Australia Limetree Bay Preferred Holdings LLC, Boston/USA London Array Limited, Tunbridge Wells/United Kingdom Moravske Hidroelektrane d.o.o., Belgrade/Serbia Netzanbindung Tewel OHG, Cuxhaven PV Projects GmbH & Co. KG (i.L.), Kolitzheim 1 Profit and loss-pooling agreement. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. Direct Total € ’000 € ’000 33 50 50 50 49 90 31 26 30 20 30 47 40 50 52 33 50 33 50 50 47 28 30 51 25 50 415 5,113 83,664 3,052 – 2,274 604 2,159 119 – 10,890 6,922 – 9,954 – 1,410 1,476 2,045 62 5,113 615 32 39 – 101 0 3,538 627 236 185 0 – 3,349 1,422 – 245 – 988 1,647 0 – 5,906 1,410 3 – 2,975 – 7,597 – 4 – 685 3 0 26 – 1 0 77 3 0 – 18 – 41 – 33 4 Control by virtue of company contract. 5 No control by virtue of company contract. 6 Significant influence via indirect investments. 7 Significant influence by virtue of company contract. 8 Profit and loss-pooling agreement with non-Group companies. 193 VII. Companies which are not accounted for using the equity method Shareholding in % Equity Net income/loss due to secondary importance for the assets, liabilities, financial position and profit or loss of the Group Direct Total € ’000 € ’000 PV Projects Komplementär GmbH (i.L.), Kolitzheim RWE Dhabi Union Energy LLC, Abu Dhabi/UAE Scarweather Sands Limited, Coventry/United Kingdom SPX, s.r.o., Zilina/Slovakia TetraSpar Demonstrator ApS, Copenhagen/Denmark Toledo PV A.E.I.E., Madrid/Spain TPG Wind Limited, Coventry/United Kingdom TRANSELEKTRO, s.r.o., Košice/Slovakia Umspannwerk Putlitz GmbH & Co. KG, Oldenburg WALDEN GREEN ENERGY LLC, New York City/USA Walden Renewables Development LLC, New York City/USA Windesco Inc, Boston/USA Windpark Fresenhede GmbH & Co. KG, Kassel Windpark Herßum-Vinnen Projekt GmbH & Co. KG, Kassel Windpark Rotenburg GmbH & Co. KG, Kassel Windpark Schapen GmbH & Co. KG, Kassel WINDTEST Grevenbroich GmbH, Grevenbroich Yorkshire Windpower Limited, Coventry/United Kingdom 50 24 50 33 33 33 50 26 25 74 76 22 50 50 50 50 38 50 26 36 0 163 – 1,037 1,607 516 – 36 0 13,697 1 0 0 9 – 1,985 681 904 – 69 – 137 18,618 3 – 1,029 – 1,120 1 1 1 1 2,276 26,121 – 38 – 7 – 119 – 9 118 4,176 1 Profit and loss-pooling agreement. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 4 Control by virtue of company contract. 5 No control by virtue of company contract. 6 Significant influence via indirect investments. 7 Significant influence by virtue of company contract. 8 Profit and loss-pooling agreement with non-Group companies. VIII. Other investments Shareholding in % Equity Net income/loss Direct 36 APEP Dachfonds GmbH & Co. KG, Munich Chrysalix Energy II U.S. Limited Partnership, Vancouver/Canada Chrysalix Energy III U.S. Limited Partnership, Vancouver/Canada Dry Bulk Partners 2013 LP, Grand Cayman/Cayman Islands Energías Renovables de Ávila, S.A., Madrid/Spain E.ON SE, Essen Focal Energy Solar Three Ltd., Nicosia/Cyprus Glenrothes Paper Limited, Glenrothes/United Kingdom Globus Steel & Power Pvt. Limited, New Delhi/India High-Tech Gründerfonds II GmbH & Co. KG, Bonn HOCHTEMPERATUR-KERNKRAFTWERK Gesellschaft mit beschränkter Haftung (HKG) Gemeinsames Europäisches Unternehmen, Hamm Total € ’000 159,315 9,155 € ’000 67,583 – 51 115,776 – 6,846 6,578 595 85 0 9,431,700 1,053,000 5,430 715 – 1,337 111,181 0 – 4 0 – 937 0 0 36 6 11 23 17 15 8 0 18 1 31 1 Profit and loss-pooling agreement. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 4 Control by virtue of company contract. 5 No control by virtue of company contract. 6 Significant influence via indirect investments. 7 Significant influence by virtue of company contract. 8 Profit and loss-pooling agreement with non-Group companies. 194 RWE Annual Report 2019Consolidated financial statements > List of shareholdings (part of the notes) VIII. Other investments Shareholding in % Equity Net income/loss Direct Total € ’000 Nordsee One GmbH, Oststeinbek Nordsee Three GmbH, Oststeinbek Nordsee Two GmbH, Oststeinbek OPPENHEIM PRIVATE EQUITY Institutionelle Anleger GmbH & Co. KG, Cologne Parque Eólico Cassiopea, S.L., Oviedo/Spain Parque Eólico Escorpio, S.A., Oviedo/Spain Parque Eólico Leo, S.L., Oviedo/Spain PEAG Holding GmbH, Dortmund People2People, s.r.o., Bratislava /Slovakia Promocion y Gestion Cáncer, S.L., Oviedo/Spain REV LNG LLC, Ulysses/USA SET Fund II C.V., Amsterdam/Netherlands Stem Inc., Milbrae/USA 29 12 Sustainable Energy Technology Fund C.V., Amsterdam/Netherlands Technologiezentrum Jülich GmbH, Jülich Transport- und Frischbeton-Gesellschaft mit beschränkter Haftung & Co. Kommanditgesellschaft Aachen, Aachen Trinkaus Secondary GmbH & Co. KGaA, Düsseldorf 43 UMBO GmbH, Hamburg Umspannwerk Lübz GbR, Lübz Versorgungskasse Energie (VVaG) i.L., Hanover 1 Profit and loss-pooling agreement. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 121,250 226 73 385 50 522 126 € ’000 49,274 – 7 – 7 – 20 0 4 0 18,858 2,425 177 63 3,163 49,078 – 43 1 325 10,271 2,211 – 45,187 15,030 1,791 390 1,058 1,487 19 51,729 – 1,949 198 164 – 144 1,387 – 39 0 15 15 15 29 10 10 10 12 9 10 5 13 6 50 5 17 43 10 18 0 4 Control by virtue of company contract. 5 No control by virtue of company contract. 6 Significant influence via indirect investments. 7 Significant influence by virtue of company contract. 8 Profit and loss-pooling agreement with non-Group companies. 195 Changes in shareholding with change of control Shareholding in % 31 Dec 2019 Shareholding in % 31 Dec 2018 Change Additions to affiliated companies included in the consolidated financial statements Amrum-Offshore West GmbH, Düsseldorf Anacacho Holdco, LLC, Wilmington/USA Anacacho Wind Farm, LLC, Wilmington/USA Belectric Canada Solar Inc. , Vancouver/Canada Boiling Springs Wind Farm, LLC, Wilmington/USA Bruenning’s Breeze Holdco, LLC, Wilmington/USA Bruenning’s Breeze Wind Farm, LLC, Wilmington/USA Champion WF Holdco, LLC, Wilmington/USA Champion Wind Farm, LLC, Wilmington/USA Colbeck’s Corner Holdco, LLC, Wilmington/USA Colbeck’s Corner, LLC, Wilmington/USA Cranell Holdco, LLC, Wilmington/USA Cranell Wind Farm, LLC, Wilmington/USA DOTTO MORCONE S.r.l., Rome/Italy E.ON Energie Odnawialne Sp. z o.o., Szczecin/Poland Energiewerken B.V., Almere/Netherlands Farma Wiatrowa Barzowice Sp. z o.o., Warsaw/Poland Forest Creek Investco, Inc., Wilmington/USA Forest Creek WF Holdco, LLC, Wilmington/USA Forest Creek Wind Farm, LLC, Wilmington/USA Get Energy Solutions Szolgáltató Kft., Budapest/Hungary Glen Kyllachy Wind Farm Limited, Swindon/United Kingdom Grandview Holdco, LLC, Wilmington/USA Hardin Class B Holdings LLC, Wilmington/USA Hardin Wind Holdings LLC, Wilmington/USA Inadale Wind Farm, LLC, Wilmington/USA IRUS Solar NC Lessee LLC, Wilmington/USA IRUS Solar NC Pledgor LLC, Wilmington/USA IRUS Solar Operations LLC, Wilmington/USA IRUS Wind Operations LLC, Wilmington/USA Klima és Hutéstechnológia Tervezo, Szerelo és Kereskedelmi Kft., Budapest/ Hungary Munnsville Investco, LLC, Wilmington/USA Munnsville WF Holdco, LLC, Wilmington/USA Munnsville Wind Farm, LLC, Wilmington/USA Panther Creek Holdco, LLC, Wilmington/USA Panther Creek Wind Farm I&II, LLC, Wilmington/USA Panther Creek Wind Farm Three, LLC, Wilmington/USA Peyton Creek Holdco, LLC, Wilmington/USA Peyton Creek Wind Farm, LLC, Wilmington/USA Pioneer Trail Wind Farm, LLC, Wilmington/USA 196 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 91 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 91 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 RWE Annual Report 2019Consolidated financial statements > List of shareholdings (part of the notes) Changes in shareholding with change of control Shareholding in % 31 Dec 2019 Shareholding in % 31 Dec 2018 Change Additions to affiliated companies included in the consolidated financial statements Pyron Wind Farm, LLC, Wilmington/USA Radford’s Run Holdco, LLC, Wilmington/USA Radford’s Run Wind Farm, LLC, Wilmington/USA Raymond Holdco, LLC, Wilmington/USA Raymond Wind Farm, LLC, Wilmington/USA Roscoe WF Holdco, LLC, Wilmington/USA Roscoe Wind Farm, LLC, Wilmington/USA RWE Canada Ltd., Saint John/Canada RWE Czech Gas Grid Holding B.V., Geertruidenberg/Netherlands RWE Energy Services, LLC, Wilmington/USA RWE Investco EPC Mgmt, LLC, Wilmington/USA RWE Investco Mgmt, LLC, Wilmington/USA RWE Investco Mgmt II, LLC, Wilmington/USA RWE Magicat Holdco, LLC, Wilmington/USA RWE Renewables Americas, LLC, Wilmington/USA RWE Renewables Asset Management, LLC, Wilmington/USA RWE Renewables Canada Ltd., Saint John/Canada RWE Renewables Development, LLC, Wilmington/USA RWE Renewables Energy Marketing, LLC, Wilmington/USA RWE Renewables International GmbH, Essen RWE Renewables International Participations B.V., Geertruidenberg/Netherlands RWE Renewables Italia S.r.l., Rome/Italy RWE Renewables O&M, LLC, Wilmington/USA RWE Renewables QSE, LLC, Wilmington/USA RWE Renewables Services, LLC, Wilmington/USA RWE Renewables Sweden AB, Malmö/Sweden RWE Renewables UK Blyth Limited, Coventry/United Kingdom RWE Renewables UK Developments Limited, Coventry/United Kingdom RWE Renewables UK Humber Wind Limited, Coventry/United Kingdom RWE Renewables UK Limited, Coventry/United Kingdom RWE Renewables UK London Array Limited, Coventry/United Kingdom RWE Renewables UK Offshore Wind Limited, Coventry/United Kingdom RWE Renewables UK Operations Limited, Coventry/United Kingdom RWE Renewables UK Robin Rigg East Limited, Coventry/United Kingdom RWE Renewables UK Robin Rigg West Limited, Coventry/United Kingdom RWE Renewables UK Wind Limited, Coventry/United Kingdom RWE Renewables UK Zone Six Limited, Coventry/United Kingdom RWE Slovak Holding B.V., Geertruidenberg/Netherlands RWE Solar Development, LLC, Wilmington/USA RWE Solar PV, LLC, Wilmington/USA RWE Wind Karehamn AB, Malmö/Sweden 197 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Changes in shareholding with change of control Shareholding in % 31 Dec 2019 Shareholding in % 31 Dec 2018 Change Additions to affiliated companies included in the consolidated financial statements RWE Wind Services Denmark A/S, Rødby/Denmark Sand Bluff WF Holdco, LLC, Wilmington/USA Sand Bluff Wind Farm, LLC, Wilmington/USA Settlers Trail Wind Farm, LLC, Wilmington/USA Stella Holdco, LLC, Wilmington/USA Stella Wind Farm, LLC, Wilmington/USA Tamworth Holdings, LLC, Charlotte/USA Tanager Holdings, LLC, Charlotte/USA Tech Park Solar, LLC, Wilmington/USA Valencia Solar, LLC, Tucson/USA West of the Pecos Solar, LLC, Wilmington/USA West Raymond Holdco, LLC, Wilmington/USA West Raymond Wind Farm, LLC, Wilmington/USA Additions to joint ventures accounted for using the equity method AWE-Arkona-Windpark Entwicklungs-GmbH, Hamburg Elevate Wind Holdco, LLC, Wilmington/USA Grandview Wind Farm, LLC, Wilmington/USA Rampion Renewables Limited, Coventry/United Kingdom Additions to associates accounted for using the equity method DOTI Deutsche Offshore-Testfeld- und Infrastruktur-GmbH & Co. KG, Oldenburg Magicat Holdco, LLC, Wilmington/USA Nysäter Wind AB, Malmö/Sweden Rødsand 2 Offshore Wind Farm AB, Malmö/Sweden Disposal of affiliated companies included in the consolidated financial statements 2. CR-Immobilien-Vermietungsgesellschaft mbH & Co. KG Cottbus, Düsseldorf 2. CR Immobilien-Vermietungsgesellschaft mbH & Co. Objekt MEAG Halle KG, Düsseldorf Artelis S.A., Luxembourg/Luxembourg A/V/E GmbH, Halle (Saale) Bayerische Bergbahnen-Beteiligungs-Gesellschaft mbH, Gundremmingen Bayerische Elektrizitätswerke Gesellschaft mit beschränkter Haftung, Augsburg Bayerische-Schwäbische Wasserkraftwerke Beteiligungsgesellschaft mbH, Gundremmingen Bristol Channel Zone Limited, Bristol/United Kingdom Broadband TelCom Power, Inc., Santa Ana/USA BTB-Blockheizkraftwerks, Träger- und Betreibergesellschaft mbH Berlin, Berlin Budapesti Elektromos Muvek Nyrt., Budapest/Hungary 100 100 100 100 100 100 100 100 100 100 100 100 100 50 50 50 603 26 20 20 20 100 100 100 100 100 100 100 100 100 100 100 100 100 50 50 50 60 26 20 20 20 – 90 – 76 – 100 – 100 – 62 – 100 – 100 – 100 – 55 1 1 90 76 100 100 62 100 100 100 55 1 Structured entity pursuant to IFRS 10 and 12. 2 Control by virtue of company contract. 3 No control by virtue of company contract. 4 Significant influence via indirect investments. 5 Addition 2019. 198 RWE Annual Report 2019Consolidated financial statements > List of shareholdings (part of the notes) Changes in shareholding with change of control Shareholding in % 31 Dec 2019 Shareholding in % 31 Dec 2018 Change Disposal of affiliated companies included in the consolidated financial statements Cegecom S.A., Luxembourg/Luxembourg Certified B.V., Amsterdam/Netherlands Channel Energy Limited, Bristol/United Kingdom EGD-Energiewacht Facilities B.V., Assen/Netherlands Elektrizitätswerk Landsberg GmbH, Landsberg am Lech ELE Verteilnetz GmbH, Gelsenkirchen ELMU DSO Holding Korlátolt Felelosségu Társaság, Budapest/Hungary ELMU-ÉMÁSZ Energiakereskedo Kft., Budapest/Hungary ELMU-ÉMÁSZ Energiaszolgáltató Zrt., Budapest/Hungary ELMU-ÉMÁSZ Energiatároló Kft., Budapest/Hungary ELMU-ÉMÁSZ Solutions Kft., Budapest/Hungary ELMU-ÉMÁSZ Telco Kft., Budapest/Hungary ELMU-ÉMÁSZ Ügyfélszolgálati Kft., Budapest/Hungary ELMU Halozati Eloszto Kft., Budapest/Hungary ÉMÁSZ Halozati Kft., Miskolc/Hungary Emscher Lippe Energie GmbH, Gelsenkirchen Energiedirect B.V., Waalre/Netherlands Energienetze Berlin GmbH, Berlin Energiewacht Facilities B.V., Zwolle/Netherlands Energiewacht Groep B.V., Meppel/Netherlands Energiewacht N.V., Veendam/Netherlands Energiewacht West Nederland B.V., Assen/Netherlands Energiewerken B.V., Almere/Netherlands energis GmbH, Saarbrücken energis-Netzgesellschaft mbH, Saarbrücken enviaM Beteiligungsgesellschaft Chemnitz GmbH, Chemnitz enviaM Beteiligungsgesellschaft mbH, Essen envia Mitteldeutsche Energie AG, Chemnitz envia SERVICE GmbH, Cottbus envia TEL GmbH, Markkleeberg envia THERM GmbH, Bitterfeld-Wolfen eprimo GmbH, Neu-Isenburg Essent Belgium N.V., Antwerp/Belgium Essent EnergieBewust Holding B.V., ’s-Hertogenbosch/Netherlands Essent Energie Verkoop Nederland B.V., ’s-Hertogenbosch/Netherlands Essent Energy Group B.V., Arnhem/Netherlands Essent IT B.V., Arnhem/Netherlands Essent Nederland B.V., Arnhem/Netherlands Essent N.V., ’s-Hertogenbosch/Netherlands 1 Structured entity pursuant to IFRS 10 and 12. 2 Control by virtue of company contract. 3 No control by virtue of company contract. 4 Significant influence via indirect investments. 5 Addition 2019. 199 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 50 100 100 100 100 100 100 72 100 100 100 59 100 100 100 100 100 100 100 100 100 100 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 50 – 100 – 100 – 100 – 100 – 100 – 100 5 – 72 – 100 – 100 – 100 – 59 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 Changes in shareholding with change of control Shareholding in % 31 Dec 2019 Shareholding in % 31 Dec 2018 Change Disposal of affiliated companies included in the consolidated financial statements Essent Retail Energie B.V., ’s-Hertogenbosch/Netherlands Essent Rights B.V., ’s-Hertogenbosch/Netherlands Essent Sales Portfolio Management B.V., ’s-Hertogenbosch/Netherlands Eszak-magyarorszagi Aramszolgáltató Nyrt., Miskolc/Hungary EuroSkyPark GmbH, Saarbrücken EVIP GmbH, Bitterfeld-Wolfen EWIS BV, Ede/Netherlands EWV Energie- und Wasser-Versorgung GmbH, Stolberg FAMIS Gesellschaft für Facility Management und Industrieservice mbH, Saarbrücken GasNet, s.r.o., Ústí nad Labem/Czech Republic GasWacht Friesland Facilities B.V., Leeuwarden/Netherlands Geas Energiewacht B.V., Enschede/Netherlands Gemeinschaftskraftwerk Bergkamen A beschränkt haftende OHG, Bergkamen Get Energy Solutions Szolgáltató Kft., Budapest/Hungary GridServices, s.r.o., Brno/Czech Republic GWG Grevenbroich GmbH, Grevenbroich Hof Promotion B.V., Eindhoven/Netherlands Improvers B.V., ’s-Hertogenbosch/Netherlands Improvers Community B.V., Amsterdam/Netherlands innogy Aqua GmbH, Mülheim an der Ruhr innogy Benelux Holding B.V., ’s-Hertogenbosch/Netherlands innogy Beteiligungsholding GmbH, Essen innogy Business Services Benelux B.V., Arnhem/Netherlands innogy Business Services Polska Sp. z o.o., Cracow/Poland Innogy Business Services UK Limited, Swindon/United Kingdom innogy Ceská republika a.s., Prague/Czech Republic innogy eMobility Solutions GmbH, Dortmund innogy e-mobility US LLC, Delaware/USA innogy Energie, s.r.o., Prague/Czech Republic innogy Energo, s.r.o., Prague/Czech Republic innogy Finance B.V., ’s-Hertogenbosch/Netherlands innogy Gastronomie GmbH, Essen innogy Grid Holding, a.s., Prague/Czech Republic innogy Hungária Tanácsadó Kft., Budapest/Hungary innogy Innovation Berlin GmbH, Berlin INNOGY INNOVATION CENTER LTD, Tel Aviv/Israel innogy Innovation GmbH, Essen innogy Innovation UK Ltd., London/United Kingdom innogy International Participations N.V., ’s-Hertogenbosch/Netherlands 1 Structured entity pursuant to IFRS 10 and 12. 2 Control by virtue of company contract. 3 No control by virtue of company contract. 4 Significant influence via indirect investments. 5 Addition 2019. 200 100 100 100 54 51 100 100 54 100 100 100 100 51 100 60 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 50 100 100 100 100 100 100 – 100 – 100 – 100 – 54 – 51 – 100 – 100 – 54 – 100 – 100 – 100 – 100 – 51 5 – 100 – 60 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 50 – 100 – 100 – 100 – 100 – 100 – 100 RWE Annual Report 2019Consolidated financial statements > List of shareholdings (part of the notes) Changes in shareholding with change of control Shareholding in % 31 Dec 2019 Shareholding in % 31 Dec 2018 Change Disposal of affiliated companies included in the consolidated financial statements innogy IT Magyarország Kft. „v.a.”, Budapest/Hungary innogy Metering GmbH, Mülheim an der Ruhr innogy Netze Deutschland GmbH, Essen innogy New Ventures LLC, Palo Alto/USA innogy Polska IT Support Sp. z o.o., Warsaw/Poland innogy Polska S.A., Warsaw/Poland innogy Polska Solutions Sp. z o.o., Warsaw/Poland innogy Rheinhessen Beteiligungs GmbH, Essen innogy SE, Essen Innogy Solutions Ireland Limited, Dublin/Ireland innogy solutions Kft., Budapest/Hungary innogy Solutions s.r.o., Banská Bystrica/Slovakia innogy South East Europe s.r.o., Bratislava/Slovakia innogy Stoen Operator Sp. z o.o., Warsaw/Poland innogy TelNet GmbH, Essen innogy Ventures GmbH, Essen innogy Zákaznické služby, s.r.o., Ostrava/Czech Republic innogy Zweite Vermögensverwaltungs GmbH, Essen Installatietechniek Totaal B.V., Leeuwarden/Netherlands IsoFitters BVBA, Herentals/Belgium Isoprofs België BVBA, Hasselt/Belgium Isoprofs B.V., Meijel/Netherlands iSWITCH GmbH, Essen It’s a beautiful world B.V., Amersfoort/Netherlands Klima és Hutéstechnológia Tervezo, Szerelo és Kereskedelmi Kft., Budapest/ Hungary Konnektor B.V., Amsterdam/Netherlands Koprivnica Opskrba d.o.o., Koprivnica/Croatia Koprivnica Plin d.o.o., Koprivnica/Croatia Lechwerke AG, Augsburg Leitungspartner GmbH, Düren LEW Anlagenverwaltung Gesellschaft mit beschränkter Haftung, Gundremmingen LEW Beteiligungsgesellschaft mbH, Gundremmingen LEW Netzservice GmbH, Augsburg LEW Service & Consulting GmbH, Augsburg LEW TelNet GmbH, Neusäß LEW Verteilnetz GmbH, Augsburg Licht Groen B.V., Amsterdam/Netherlands Livisi GmbH, Essen 1 Structured entity pursuant to IFRS 10 and 12. 2 Control by virtue of company contract. 3 No control by virtue of company contract. 4 Significant influence via indirect investments. 5 Addition 2019. 201 100 100 100 100 100 100 100 100 77 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 75 75 90 100 100 100 100 100 100 100 100 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 77 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 5 – 100 – 75 – 75 – 90 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 Changes in shareholding with change of control Shareholding in % 31 Dec 2019 Shareholding in % 31 Dec 2018 Change Disposal of affiliated companies included in the consolidated financial statements MI-FONDS 178, Frankfurt am Main MI-FONDS F55, Frankfurt am Main MI-FONDS G55, Frankfurt am Main MI-FONDS J55, Frankfurt am Main MI-FONDS K55, Frankfurt am Main MITGAS Mitteldeutsche Gasversorgung GmbH, Halle (Saale) Mitteldeutsche Netzgesellschaft Gas mbH, Halle (Saale) Mitteldeutsche Netzgesellschaft Strom mbH, Halle (Saale) Mittlere Donau Kraftwerke AG, Munich Montcogim – Plinara d.o.o., Sveta Nedelja/Croatia Nederland Isoleert B.V., Amersfoort/Netherlands Nederland Schildert B.V., Amersfoort/Netherlands Nederland Schildert Rijnmond B.V., Amersfoort/Netherlands Nederland Verkoopt B.V., Amersfoort/Netherlands NEW AG, Mönchengladbach NEW Netz GmbH, Geilenkirchen NEW Niederrhein Energie und Wasser GmbH, Mönchengladbach NEW NiederrheinWasser GmbH, Viersen NEW Tönisvorst GmbH, Tönisvorst NEW Viersen GmbH, Viersen Npower Business and Social Housing Limited, Swindon/United Kingdom Npower Commercial Gas Limited, Swindon/United Kingdom Npower Direct Limited, Swindon/United Kingdom Npower Financial Services Limited, Swindon/United Kingdom Npower Gas Limited, Swindon/United Kingdom Npower Group Limited, Swindon/United Kingdom Npower Limited, Swindon/United Kingdom Npower Northern Limited, Swindon/United Kingdom Npower Yorkshire Limited, Swindon/United Kingdom Npower Yorkshire Supply Limited, Swindon/United Kingdom Octopus Electrical Limited, Swindon/United Kingdom OIE Aktiengesellschaft, Idar-Oberstein Plus Shipping Services Limited, Swindon/United Kingdom Powerhouse B.V., Almere/Netherlands PS Energy UK Limited, Swindon/United Kingdom Recargo Inc., El Segundo/USA Regionetz GmbH, Aachen Rhein-Sieg Netz GmbH, Siegburg rhenag Rheinische Energie Aktiengesellschaft, Cologne 1 Structured entity pursuant to IFRS 10 and 12. 2 Control by virtue of company contract. 3 No control by virtue of company contract. 4 Significant influence via indirect investments. 5 Addition 2019. 202 100 100 100 100 100 75 100 100 401 100 100 100 100 100 402 100 100 100 98 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 492 100 67 – 100 – 100 – 100 – 100 – 100 – 75 – 100 – 100 – 40 – 100 – 100 – 100 – 100 – 100 – 40 – 100 – 100 – 100 – 98 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 49 – 100 – 67 RWE Annual Report 2019Consolidated financial statements > List of shareholdings (part of the notes) Changes in shareholding with change of control Shareholding in % 31 Dec 2019 Shareholding in % 31 Dec 2018 Change Disposal of affiliated companies included in the consolidated financial statements RL Besitzgesellschaft mbH, Gundremmingen RL Beteiligungsverwaltung beschr. haft. OHG, Gundremmingen RUMM Limited, Ystrad Mynach/United Kingdom RWE Cogen UK (Hythe) Limited, Swindon/United Kingdom RWE Cogen UK Limited, Swindon/United Kingdom RWE Energija d.o.o., Zagreb/Croatia RWE Generation Belgium N.V., Antwerp/Belgium RWE Hrvatska d.o.o., Zagreb/Croatia RWE Ljubljana d.o.o., Ljubljana/Slovenia RWE Plin d.o.o., Zagreb/Croatia RWE Supply & Trading Switzerland S.A., Geneva/Switzerland RWW Rheinisch-Westfälische Wasserwerksgesellschaft mbH, Mülheim an der Ruhr SARIO Grundstücks-Vermietungsgesellschaft mbH & Co. Objekt Würzburg KG, Düsseldorf Stadtwerke Düren GmbH, Düren Südwestsächsische Netz GmbH, Crimmitschau Süwag Energie AG, Frankfurt am Main Süwag Grüne Energien und Wasser GmbH, Frankfurt am Main Süwag Vertrieb AG & Co. KG, Frankfurt am Main Syna GmbH, Frankfurt am Main Überlandwerk Krumbach GmbH, Krumbach Verteilnetz Plauen GmbH, Plauen VKB-GmbH, Neunkirchen Volta Energycare N.V., Houthalen-Helchteren/Belgium Volta Limburg B.V., Schinnen/Netherlands Volta Service B.V., Schinnen/Netherlands Volta Solar B.V., Heerlen/Netherlands Volta Solar VOF, Heerlen/Netherlands VSE Aktiengesellschaft, Saarbrücken VSE NET GmbH, Saarbrücken VSE Verteilnetz GmbH, Saarbrücken VWS Verbundwerke Südwestsachsen GmbH, Lichtenstein/Sa. Wendelsteinbahn Gesellschaft mit beschränkter Haftung, Brannenburg Wendelsteinbahn Verteilnetz GmbH, Brannenburg Westerwald-Netz GmbH, Betzdorf-Alsdorf Westnetz GmbH, Dortmund WTTP B.V., Arnhem/Netherlands ZonnigBeheer B.V., Lelystad/Netherlands 1 Structured entity pursuant to IFRS 10 and 12. 2 Control by virtue of company contract. 3 No control by virtue of company contract. 4 Significant influence via indirect investments. 5 Addition 2019. 203 100 100 100 100 100 100 100 100 100 100 100 80 1 502 100 78 100 100 100 75 100 50 100 100 100 95 60 51 100 100 98 100 100 100 100 100 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 80 – 50 – 100 – 78 – 100 – 100 – 100 – 75 – 100 – 50 – 100 – 100 – 100 – 95 – 60 – 51 – 100 – 100 – 98 – 100 – 100 – 100 – 100 – 100 – 100 Changes in shareholding with change of control Shareholding in % 31 Dec 2019 Shareholding in % 31 Dec 2018 Change Disposal of joint ventures not accounted for using the equity method due to application of IFRS 5 AVU Aktiengesellschaft für Versorgungs-Unternehmen, Gevelsberg BEW Netze GmbH, Wipperfürth Budapesti Disz- es Közvilagitasi Korlatolt Felelössegü Tarsasag, Budapest/ Hungary Energie Nordeifel GmbH & Co. KG, Kall FSO GmbH & Co. KG, Oberhausen Konsortium Energieversorgung Opel beschränkt haftende oHG, Karlstein PRENU Projektgesellschaft für Rationelle Energienutzung in Neuss mit beschränkter Haftung, Neuss Rain Biomasse Wärmegesellschaft mbH, Rain SHW/RWE Umwelt Aqua Vodogradnja d.o.o., Zagreb/Croatia Stadtwerke Dülmen Dienstleistungs- und Beteiligungs-GmbH & Co. KG, Dülmen Stadtwerke Lingen GmbH, Lingen (Ems) Stromnetz Friedberg GmbH & Co. KG, Friedberg Stromnetz Gersthofen GmbH & Co. KG, Gersthofen Stromnetz Günzburg GmbH & Co. KG, Günzburg SVS-Versorgungsbetriebe GmbH, Stadtlohn Zagrebacke otpadne vode d.o.o., Zagreb/Croatia Disposal of associates not accounted for using the equity method due to application of IFRS 5 Dortmunder Energie- und Wasserversorgung Gesellschaft mit beschränkter Haftung, Dortmund EnergieServicePlus GmbH, Düsseldorf Energieversorgung Guben GmbH, Guben Energieversorgung Hürth GmbH, Hürth Energieversorgung Oberhausen Aktiengesellschaft, Oberhausen ENNI Energie & Umwelt Niederrhein GmbH, Moers e-regio GmbH & Co. KG, Euskirchen EWR Aktiengesellschaft, Worms EWR Dienstleistungen GmbH & Co. KG, Worms EWR GmbH, Remscheid Freiberger Stromversorgung GmbH (FSG), Freiberg Gas- und Wasserwerke Bous – Schwalbach GmbH, Bous Kemkens B.V., Oss/Netherlands KEW Kommunale Energie- und Wasserversorgung Aktiengesellschaft, Neunkirchen MAINGAU Energie GmbH, Obertshausen medl GmbH, Mülheim an der Ruhr Nebelhornbahn-Aktiengesellschaft, Oberstdorf PFALZWERKE AKTIENGESELLSCHAFT, Ludwigshafen am Rhein Projecta 14 GmbH, Saarbrücken 1 Structured entity pursuant to IFRS 10 and 12. 2 Control by virtue of company contract. 3 No control by virtue of company contract. 4 Significant influence via indirect investments. 5 Addition 2019. 204 50 613 50 33 50 673 50 703 50 50 40 49 49 49 30 49 40 49 45 25 104 20 43 14 25 20 30 49 49 29 47 39 20 27 50 – 50 – 61 – 50 – 33 – 50 – 67 – 50 – 70 – 50 – 50 – 40 – 49 – 49 – 49 – 30 – 49 – 40 – 49 – 45 – 25 – 10 – 20 – 43 – 1 – 25 – 20 – 30 – 49 – 49 – 29 – 47 – 39 – 20 – 27 – 50 RWE Annual Report 2019Consolidated financial statements > List of shareholdings (part of the notes) Changes in shareholding with change of control Shareholding in % 31 Dec 2019 Shareholding in % 31 Dec 2018 Change Disposal of associates not accounted for using the equity method due to application of IFRS 5 Propan Rheingas GmbH & Co Kommanditgesellschaft, Brühl Recklinghausen Netzgesellschaft mbH & Co. KG, Recklinghausen RheinEnergie AG, Cologne Rhein-Main-Donau GmbH, Munich Siegener Versorgungsbetriebe GmbH, Siegen SpreeGas Gesellschaft für Gasversorgung und Energiedienstleistung mbH, Cottbus SSW – Stadtwerke St. Wendel GmbH & Co KG., St. Wendel Stadtwerke Aschersleben GmbH, Aschersleben Stadtwerke Bernburg GmbH, Bernburg (Saale) Stadtwerke Bitterfeld-Wolfen GmbH, Bitterfeld-Wolfen Stadtwerke Duisburg Aktiengesellschaft, Duisburg Stadtwerke Emmerich GmbH, Emmerich am Rhein Stadtwerke Essen Aktiengesellschaft, Essen Stadtwerke Geldern GmbH, Geldern Stadtwerke GmbH Bad Kreuznach, Bad Kreuznach Stadtwerke Kamp-Lintfort GmbH, Kamp-Lintfort Stadtwerke Kirn GmbH, Kirn/Nahe Stadtwerke Meerane GmbH, Meerane Stadtwerke Meerbusch GmbH, Meerbusch Stadtwerke Merseburg GmbH, Merseburg Stadtwerke Merzig Gesellschaft mit beschränkter Haftung, Merzig Stadtwerke Neuss Energie und Wasser GmbH, Neuss Stadtwerke Radevormwald GmbH, Radevormwald Stadtwerke Ratingen GmbH, Ratingen Stadtwerke Reichenbach/Vogtland GmbH, Reichenbach im Vogtland Stadtwerke Saarlouis GmbH, Saarlouis Stadtwerke Velbert GmbH, Velbert Stadtwerke Weißenfels Gesellschaft mit beschränkter Haftung, Weißenfels Stadtwerke Willich Gesellschaft mit beschränkter Haftung, Willich Stadtwerke Zeitz GmbH, Zeitz SWTE Netz GmbH & Co. KG, Ibbenbüren Tankey B.V., ’s-Hertogenbosch/Netherlands WVW Wasser- und Energieversorgung Kreis St. Wendel Gesellschaft mit beschränkter Haftung, St. Wendel Xelan SAS, Saint-Denis La Plaine/France Zagrebacke otpadne vode-upravljanje i pogon d.o.o., Zagreb/Croatia Zwickauer Energieversorgung GmbH, Zwickau 205 30 50 20 23 25 33 50 35 45 40 20 25 29 49 25 49 49 25 40 40 50 25 50 25 25 49 30 25 25 25 33 43 28 34 31 27 – 30 – 50 – 20 – 23 – 25 – 33 – 50 – 35 – 45 – 40 – 20 – 25 – 29 – 49 – 25 – 49 – 49 – 25 – 40 – 40 – 50 – 25 – 50 – 25 – 25 – 49 – 30 – 25 – 25 – 25 – 33 – 43 – 28 – 34 – 31 – 27 Changes in shareholding without change of control Shareholding in % 31 Dec 2019 Shareholding in % 31 Dec 2018 Change Affiliated companies which are included in the consolidated financial statements Fri-El Guardionara s.r.l., Bolzano/Italy innogy indeland Windpark Eschweiler GmbH & Co. KG, Eschweiler Kernkraftwerk Gundremmingen GmbH, Gundremmingen Kernkraftwerke Lippe-Ems Gesellschaft mit beschränkter Haftung, Lingen (Ems) Kernkraftwerksbeteiligung Lippe-Ems beschränkt haftende OHG, Lingen/Ems RWE & Turcas Güney Elektrik Üretim A.S., Ankara/Turkey 51 51 100 100 100 70 100 100 75 99 88 70 – 49 – 49 25 1 12 0 206 RWE Annual Report 2019Consolidated financial statements > Boards (part of the notes) 3.8 Boards (part of the notes) As of: 28 February 2020 Supervisory Board (End of term: 2021 Annual General Meeting) Dr. Werner Brandt Bad Homburg Chairman Martin Bröker2 Bochum Head of HR & Business Functions IT at RWE Generation SE Chairman of the Supervisory Board of ProSiebenSat.1 Media SE Year of birth: 1966 Year of birth: 1954 Member since 18 April 2013 Other appointments: • ProSiebenSat.1 Media SE (Chairman)1 • Siemens AG1 Frank Bsirske2 Berlin Deputy Chairman Member since 1 September 2018 Anja Dubbert2 Essen Business Development Manager / Member of the Works Council of RWE Supply & Trading GmbH Year of birth 1979 Member since 27 September 2019 Matthias Dürbaum2 Former Chairman of ver.di Vereinte Dienstleistungsgewerkschaft Heimbach Year of birth: 1952 Member since 9 January 2001 Other appointments: • DB Privat- und Firmenkundenbank AG • Deutsche Bank AG1 • innogy SE1,3 Michael Bochinsky2 Grevenbroich Chairman of the Works Council of the Hambach Opencast Mine Year of birth: 1987 Member since 27 September 2019 Ute Gerbaulet Düsseldorf General Partner of Bankhaus Lampe KG Year of birth: 1968 Member since 27 April 2017 Deputy Chairman of the General Works Council of RWE Power AG Other appointments: Year of birth: 1967 Member since 1 August 2018 Reiner Böhle2,4 Witten - NRW.Bank AöR Prof. Dr.-Ing. Dr.-Ing. E. h. Hans-Peter Keitel Essen Former Chairman of the Executive Board of HOCHTIEF AG Consultant for Special Tasks and Project Work at Westnetz GmbH Year of birth: 1947 Year of birth: 1960 Member since 18 April 2013 Member from 1 January 2013 to 18 September 2019 Sandra Bossemeyer2 Duisburg Chairwoman of the Works Council of RWE AG Representative of the disabled Year of birth: 1965 Member since 20 April 2016 Other appointments: • National-Bank AG - Consolidated Contractors Group S.A.L. • Member of other mandatory supervisory boards as defined in Section 125 - of the German Stock Corporation Act. Member of comparable domestic and foreign supervisory boards of commercial enterprises as defined in Section 125 of the German Stock Corporation Act. 1 Listed company. 2 Employee representative. 3 Office within the Group until 18 September 2019. 4 Information valid as of the date of retirement. 207 Mag. Dr. h. c. Monika Kircher Krumpendorf, Austria Consultant Year of birth: 1957 Peter Ottmann Nettetal Managing Director of Verband der kommunalen RWE-Aktionäre GmbH Member since 15 October 2016 Attorney, Former Chief Administrative Officer of Viersen County Other appointments: - Andritz AG1 Year of birth: 1951 Member since 20 April 2016 - Kärntner Energieholding Beteiligungs GmbH (Chairwoman)3 Günther Schartz - KELAG-Kärntner Elektrizitäts AG1,3 - Siemens AG Österreich Wincheringen Chief Administrative Officer of the District of Trier-Saarburg Monika Krebber2,4 Mülheim an der Ruhr Year of birth: 1962 Member since 20 April 2016 Deputy Chairwoman of the General Works Council of innogy SE Other appointments: Year of birth: 1962 - A.R.T. Abfallberatungs- und Verwertungsgesellschaft mbH Member from 20 April 2016 to 18 September 2019 (Chairman) Other appointments: • innogy SE1,3 Harald Louis2 Jülich - Kreiskrankenhaus St. Franziskus Saarburg GmbH (Chairman) - Sparkassenverband Rheinland-Pfalz - Sparkasse Trier (Chairman) - Trierer Hafengesellschaft mbH - Zweckverband Abfallwirtschaft Region Trier Chairman of the General Works Council of RWE Power AG Dr. Erhard Schipporeit Year of birth: 1967 Member since 20 April 2016 Other appointments: • RWE Power AG5 Dagmar Mühlenfeld Mülheim an der Ruhr Former Mayor of the City of Mülheim an der Ruhr/ Managing Director of JUNI gGmbH (Junior-Uni Ruhr) Year of birth: 1951 Member since 4 January 2005 Hanover Independent Corporate Consultant Year of birth: 1949 Member since 20 April 2016 Other appointments: • BDO AG • Fuchs Petrolub SE1 • Hannover Rück SE1 • HDI V. a. G. • Talanx AG1 • Member of other mandatory supervisory boards as defined in Section 125 - of the German Stock Corporation Act. Member of comparable domestic and foreign supervisory boards of commercial enterprises as defined in Section 125 of the German Stock Corporation Act. 1 Listed company. 2 Employee representative. 3 Office within the Group until 18 September 2019. 4 Information valid as of the date of retirement. 5 Office within the Group. 208 RWE Annual Report 2019Consolidated financial statements > Boards (part of the notes) Dr. Wolfgang Schüssel Vienna, Austria Former Federal Chancellor of the Republic of Austria Year of birth: 1945 Member since 1 March 2010 Other appointments: - Adenauer Stiftung (Chairman of the Board of Trustees) - PJSC LUKOIL1 Ullrich Sierau Dortmund Mayor of the City of Dortmund Year of birth: 1956 Member since 20 April 2011 Other appointments: • Dortmunder Energie- und Wasserversorgung GmbH (Chairman) Marion Weckes2 Dormagen Head of Unit Institut für Mitbestimmung und Unternehmensführung der Hans-Böckler-Stiftung Year of birth: 1975 Member since 20 April 2016 Leonhard Zubrowski2 Lippetal Chairman of the Group Works Council of RWE AG Year of birth: 1961 Member since 1 July 2014 Other appointments: • RWE Generation SE5 • Dortmunder Stadtwerke AG (Chairman) • Dortmunder Stadtwerke Holding GmbH (Chairman) • KEB Holding AG (Chairman) - KSBG Kommunale Verwaltungsgesellschaft GmbH - Schüchtermann-Schiller’sche Kliniken Bad Rothenfelde GmbH & Co. KG - Sparkasse Dortmund (Chairman) Ralf Sikorski2 Hanover Deputy Chairman of IG Bergbau, Chemie, Energie Year of birth: 1961 Member since 1 July 2014 Other appointments: • CHEMIE Pensionsfonds AG (Chairman) • Lanxess AG1 • Lanxess Deutschland GmbH • RAG AG • RWE Generation SE5 • RWE Power AG5 - KSBG Kommunale Verwaltungsgesellschaft GmbH • Member of other mandatory supervisory boards as defined in Section 125 - of the German Stock Corporation Act. Member of comparable domestic and foreign supervisory boards of commercial enterprises as defined in Section 125 of the German Stock Corporation Act. 1 Listed company. 2 Employee representative. 3 Office within the Group until 18 September 2019. 4 Information valid as of the date of retirement. 5 Office within the Group. 209 Supervisory Board Committees Executive Committee of the Supervisory Board Audit Committee Dr. Werner Brandt (Chairman) Frank Bsirske Sandra Bossemeyer Anja Dubbert Matthias Dürbaum Prof. Dr. Hans-Peter Keitel Dagmar Mühlenfeld Dr. Wolfgang Schüssel Dr. Erhard Schipporeit (Chairman) Michael Bochinsky Mag. Dr. h. c. Monika Kircher Ullrich Sierau Ralf Sikorski Marion Weckes Nomination Committee Dr. Werner Brandt (Chairman) Mediation Committee in accordance with Section 27, Prof. Dr. Hans-Peter Keitel Paragraph 3 of the German Co-Determination Act Peter Ottmann Dr. Werner Brandt (Chairman) Frank Bsirske Dr. Wolfgang Schüssel Ralf Sikorski Personnel Affairs Committee Dr. Werner Brandt (Chairman) Frank Bsirske Harald Louis Peter Ottmann Dr. Wolfgang Schüssel Leonhard Zubrowski Strategy Committee Dr. Werner Brandt (Chairman) Frank Bsirske Prof. Dr. Hans-Peter Keitel Günther Schartz Ralf Sikorski Leonhard Zubrowski 210 RWE Annual Report 2019Consolidated financial statements > Boards (part of the notes) The Executive Board Dr. Rolf Martin Schmitz (Chief Executive Officer) Chairman of the Executive Board of RWE AG since 15 October 2016 Member of the Executive Board of RWE AG since 1 May 2009, appointed until 30 June 2021 Labour Director of RWE AG since 1 May 2017 Other appointments: • Amprion GmbH • E.ON SE1 • RWE Generation SE5 (Chairman) • RWE Power AG5 (Chairman) • RWE Supply & Trading GmbH5 • TÜV Rheinland AG - Jaeger Grund GmbH & Co. KG (Jaeger Gruppe, Chairman) - Kärntner Energieholding Beteiligungs GmbH3 - KELAG-Kärntner Elektrizitäts-AG1,3 Dr. Markus Krebber (Chief Financial Officer) Member of the Executive Board of RWE AG since 1 October 2016, appointed until 30 September 2024 Other appointments: • RWE Generation SE5 • RWE Pensionsfonds AG5 (Chairman) • RWE Power AG5 • RWE Supply & Trading GmbH5 (Chairman) • Member of other mandatory supervisory boards as defined in Section 125 - of the German Stock Corporation Act. Member of comparable domestic and foreign supervisory boards of commercial enterprises as defined in Section 125 of the German Stock Corporation Act. 1 Listed company. 2 Employee representative. 3 Office within the Group until 18 September 2019. 4 Information valid as of the date of retirement. 5 Office within the Group. 211 3.9 Independent auditor’s report To RWE Aktiengesellschaft, Essen Report on the audit of the consolidated financial statements and of the group management report Audit Opinions Basis for the Audit Opinions We conducted our audit of the consolidated financial statements and of the group management report in accordance with § 317 HGB and the EU Audit Regulation (No. 537/2014, referred to We have audited the consolidated financial statements of RWE subsequently as “EU Audit Regulation”) in compliance with German Aktiengesellschaft, Essen, and its subsidiaries (the Group), which Generally Accepted Standards for Financial Statement Audits comprise the consolidated statement of financial position as at promulgated by the Institut der Wirtschaftsprüfer [Institute of Public December 31, 2019, and the consolidated statement of profit or Auditors in Germany] (IDW). We performed the audit of the loss, the consolidated statement of comprehensive income, consolidated financial statements in supplementary compliance consolidated statement of changes in equity and consolidated with the International Standards on Auditing (ISAs). Our statement of cash flows for the financial year from January 1 to responsibilities under those requirements, principles and standards December 31, 2019, and notes to the consolidated financial are further described in the “Auditor’s Responsibilities for the statements, including a summary of significant accounting policies. Audit of the Consolidated Financial Statements and of the Group In addition, we have audited the group management report of Management Report” section of our auditor’s report. We are RWE Aktiengesellschaft, which is combined with the Company’s independent of the group entities in accordance with the management report, for the financial year from January 1 to requirements of European law and German commercial and December 31, 2019. We have not audited the content of those professional law, and we have fulfilled our other German parts of the group management report listed in the “Other professional responsibilities in accordance with these requirements. Information” section of our auditor’s report in accordance with the In addition, in accordance with Article 10 (2) point (f) of the EU Audit German legal requirements. Regulation, we declare that we have not provided non-audit In our opinion, on the basis of the knowledge obtained in the audit, We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions on the • the accompanying consolidated financial statements comply, in consolidated financial statements and on the group management services prohibited under Article 5 (1) of the EU Audit Regulation. all material respects, with the IFRSs as adopted by the EU, and report. the additional requirements of German commercial law pursuant to § [Article] 315e Abs. [paragraph] 1 HGB [Handelsgesetzbuch: Key Audit Matters in the Audit of the Consolidated Financial German Commercial Code] and, in compliance with these Statements requirements, give a true and fair view of the assets, liabilities, and Key audit matters are those matters that, in our professional financial position of the Group as at December 31, 2019, and of judgment, were of most significance in our audit of the consolidated its financial performance for the financial year from January 1 to financial statements for the financial year January 1 to December 31, 2019 and December 31, 2019. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and • the accompanying group management report as a whole in forming our audit opinion thereon; we do not provide a separate provides an appropriate view of the Group’s position. In all audit opinion on these matters. material respects, this group management report is consistent with the consolidated financial statements, complies with In our view, the matters of most significance in our audit were as German legal requirements and appropriately presents the follows: opportunities and risks of future development. Our audit opinion on the group management report does not cover the content of Deconsolidation of the discontinued operations those parts of the group management report listed in the “Other Business combinations Information” section of our auditor’s report. Accounting effects from the coal phaseout Recoverability of goodwill Pursuant to § 322 Abs. 3 Satz [sentence] 1 HGB, we declare that our audit has not led to any reservations relating to the legal Our presentation of these key audit matters has been structured in compliance of the consolidated financial statements and of the each case as follows: group management report. Matter and issue Audit approach and findings Reference to further information 212 RWE Annual Report 2019Consolidated financial statements > Independent auditor’s report Hereinafter we present the key audit matters: As part of our audit, we first assessed whether the conditions for Deconsolidation of the discontinued operations On March 12, 2018, RWE Aktiengesellschaft and E.ON SE the accounting treatment of the transaction were generally fulfilled, e.g. that the approval of the antitrust authorities for the execution of the transaction was obtained, and whether the (hereinafter E.ON SE and its subsidiaries are abbreviated as conditions for deconsolidation in compliance with IFRS 10 were “E.ON”) agreed to divestments and acquisitions of business met. We then assessed which assets should be included in the operations. It stipulates the following, among other items: deconsolidation. For this purpose, we reviewed the contractual RWE AG will transfer its entire stake in innogy SE (innogy) agreements with E.ON and assessed the underlying IT concept (76.8 %) to E.ON. In return, the renewable energy business and for executing the deconsolidation and its implementation in the the gas storage activities of innogy as well as the investment in consolidation system. On this basis, we also assessed whether KELAG-Kärntner Elektrizitäts-AG/Kärntner Energieholding the separation of the assets of VSEH to be deconsolidated and Beteiligungs GmbH, Klagenfurt/Austria, will be returned to the the assets not to be deconsolidated was performed Group. The renewable energy business of E.ON will also be appropriately. transferred to RWE. Since June 30, 2018, RWE Aktiengesellschaft has accounted for the operations of innogy to be transferred on We also assessed the appropriateness of the methods and a long-term basis to E.ON – essentially the grid and retail calculations used in the deconsolidation in accordance with business – as discontinued operations in accordance with IFRS 5. IFRS 10 and the amount of the equity value of the assets given up for the discontinued operations as of September 18, 2019. Following regulatory approval by the antitrust authorities, the Furthermore, we reviewed the amount of the consideration first partial transaction took place on September 18, 2019 with received on the basis of agreements and other correspondence the sale of the innogy shares. The discontinued operations were with E.ON as well as calculations of the Company and in particular therefore– with the retention of the relatively insignificant share considered the allocation between the deconsolidation in the Slovakian electricity and gas supplier Východoslovenská calculation and the calculation for derecognition of minority energetika Holding a.s. (VSEH), which will probably be transferred interests for the renewable energy business. In addition, we to E.ON in 2020 – deconsolidated. assessed the determination of the assets and liabilities (especially derivatives) for transactions now restored to an The equity value of the assets given in the amount of about external outside-the-group basis and assessed their recognition €3.5 billion was offset by a fair value of the consideration and measurement in the consolidated balance sheet. received of approximately €12.8 billion. Taking into account further technical deconsolidation effects (primarily: In addition and in connection with the assumption of the sole reclassification of the other earnings attributable to the control of RWE over the renewable energy business of innogy, deconsolidated subsidiaries (so-called “Recycling”) to the we assessed whether the carrying value of the former minority income statement and restoring the transactions that were interests, which existed at the innogy SE level, was appropriately previously considered intercompany to a new external derecognized against retained earnings with no effect on profit outside-the-group basis with respect to innogy), a or loss. deconsolidation profit was generated in the total amount of €8.1 billion. The profit is reported in the result from discontinued In our view, the estimates applied and assumptions made by operations. the executive directors regarding the deconsolidation of the discontinued operations are sufficiently documented and At the same time of the deconsolidation of the grid and retail justified and result in a fair presentation in the consolidated business, RWE acquired the sole control over the renewable financial statements overall. energy business of innogy. The carrying value (€607 million) of the previous minority interests of the renewable energy The disclosures required under IFRS 5 up until deconsolidation business, that existed at the level of innogy SE, was accordingly are contained in the notes to the consolidated financial derecognized against the retained earnings (reduction to statements in the section “Disposals and discontinued retained earnings: €347 million) as of September 18, 2019 with operations”. Explanations about the divestment are also given in no effect on profit or loss. this section. In addition, information from the Group concerning the transaction in general can be found in the section “Strategy The deconsolidation was of particular significance in the and Structure” of the Group Management Report. context of our audit due to the complexity of the contractual agreements and accounting provisions as well as the overall material effects of the transaction on the assets, liabilities, financial position and financial performance of the RWE Group. 213  Business combinations Overall, we were able to satisfy ourselves that the accounting On March 12, 2018, RWE Aktiengesellschaft and E.ON SE presentation of the acquisition of the renewable energy (hereinafter E.ON SE and its subsidiaries are abbreviated as business is appropriately made on the basis of the preliminary “E.ON”) agreed to divestments and acquisitions of business results of the purchase price allocation and is sufficiently operations. It stipulates the following, among other items: documented. RWE AG will transfer its entire stake in innogy SE (innogy) (76.8 %) to E.ON. In return, the renewable energy business and the gas The disclosures required under IFRS 3 concerning business storage activities of innogy as well as the investment in combinations are contained in the notes to the consolidated KELAG-Kärntner Elektrizitäts-AG/Kärntner Energieholding financial statements in the section “Acquisitions”. In addition, Beteiligungs GmbH, Klagenfurt/Austria, will remain in the information from the Group concerning the transaction in RWE Group. The renewable energy business of E.ON will also general can be found in the section “Strategy and Structure” of be transferred to RWE. the Group Management Report. The economic and legal transfer of the renewable energy Accounting effects from the coal phaseout business from E.ON to RWE, which is accounted for as a business In 2019, political developments in Germany and the combination under IFRS 3, took place in September 2019. The Netherlands progressed further, which further specified the first-time consolidation occurred on September 18, 2019. The termination of coal-fired power generation in both countries. preliminary purchase price (taking into account purchase price This applies to the use of black coal and, in Germany, also to adjustments) amounted to €3,593 million. The identified assets brown coal (lignite) for electricity generation and the acquired and the liabilities assumed of the renewable energy decommissioning of the corresponding surface lignite mines business from E.ON were recognized at their fair values at the (hereinafter collectively referred to as “coal phaseout”). date of acquisition. Including acquired net assets of €2,940 million, goodwill arose in the amount of €653 million. Due to the shorter operating lives of black coal and lignite-fired The fair values and the goodwill are preliminary because the power plants, impairment charges were recognized on property, purchase price allocation has not yet been fully completed as of plant and equipment in the total amount of €1,540 million. The December 31, 2019. recoverability of the power plant assets was reviewed on the basis of their fair values less costs of disposal. The fair values of The purchase price allocation was of particular significance in the respective power plants assets were determined by the the context of our audit due to the complexity of the contractual Company as the present values of future cash flows using agreements and accounting provisions. discounted cash flow models. This was based on the planning As part of our audit of the presentation of the acquisition of the renewable energy business from E.ON, we first gained an projections prepared by the executive directors, which include long-term assumptions regarding electricity, coal and CO2 certificate prices and planned power plant operating times. The understanding of the underlying contractual stipulations and, results from these valuations depends to a large extent on the among other items, the determination of the closing date for planning assumptions and the estimates of the future cash the acquisition of control and the preliminary purchase price. inflows made by the executive directors as well as on the On this basis, we assessed the opening balance sheet of the discount rates used in the valuation models. The amount of the underlying business combination. To this end, we assessed the impairment charges was also impacted by the fact that the recognition and measurement of the assets and liabilities. This definition of cash-generating units for power plants changed. included their identification, the application of uniform accounting policies and the recognition of the preliminary fair The coal phaseout was also a major reason for the increase in values at the date of first-time consolidation. In this context, we the provisions for loss-making power purchase agreements. assessed in particular the preliminary fair values calculated The consideration of the shorter terms of the coal-fired power with the support of an external expert from RWE. Among other plants associated with the individual contracts resulted in the items, we assessed the models underlying the valuations and fact that the expected positive value contributions in later years the valuation parameters and assumptions applied. The of the contract terms no longer applied. The provisions for assessment covered in particular the examination of the loss-making power purchase agreements increased in 2019 by methodology and mathematical accuracy of the valuation €225 million year-on-year. models. In addition, we assessed the costs of capital applied. We also reviewed the technical implementation of the first-time consolidation and the derivation of the preliminary goodwill. 214 RWE Annual Report 2019 Consolidated financial statements > Independent auditor’s report Due to the coal phaseout, additional provisions had to be rates applied and the escalation rates used in the measurement increased or recognized for the first time by a total of of the provisions for recultivation can in some cases have a €2,262 million. This mainly relates to the increase in provisions material impact on the amount of the fair value less costs of for recultivation. In order to determine the settlement amount, disposal or settlement amount calculated using this method, the expected future disbursements are first escalated at the we also evaluated the parameters used to determine the closing date prices using the expected rates of price increase discount rates and escalation rates and assessed the and then discounted using an appropriate discount rate. This respective measurement model. We reviewed the appraisals was based on the recultivation plans drawn up by the executive prepared by external experts and assessed their usability by, directors with the assistance of reports prepared by external among other items, assessing and checking the plausibility of expert appraisers. The escalation rate and discount rate were the premises contained in the appraisals. We also assessed that adjusted in the financial year to reflect the earlier incurrence of the capitalization of the compensation claim is appropriate in expenditure due to the coal phaseout and the market interest terms of reason and amount. rate level in that period. The result from the measurement of the provisions depends to directors of the underlying accounting treatment of the coal a large extent on the planning assumptions and the estimates phaseout are sufficiently justified and documented. Overall, the of the executive directors regarding the amount and the timing measurement parameters and assumptions used by the of future cash outflows as well as the escalation rates and executive directors are in line with our expectations and are also discount rates used in the valuation models. within the ranges considered by us to be reasonable. In our view, the estimates and assumptions of the executive Due to the connection between the lignite phaseout and the related compensation, RWE recognized the compensation The information provided by the Company on the impact of the coal phaseout in Germany and the Netherlands is contained in amount of €2,600 million provided by the German government the notes to the consolidated financial statements under as a reimbursement or indemnification claim for increased or section “Notes to the income statement” in note “(5) newly arising obligations and for impairment charges and Depreciation, amortization and impairment losses” and in reported it under other assets. section “Notes to the balance sheet” in note “(15) Other receivables and other assets” and in note “(22) Provisions”. The accounting presentation of the fixed or expected effects of Supplementary information can also be found in section the coal phaseout on the basis of measures taken in 2019 and “Political environment” of the Group Management Report. on the basis of its accountability to be ascertained has a significant impact on the assets, liabilities and financial Recoverability of goodwill performance of the RWE group. In addition, the assessment of In the consolidated financial statements of RWE Aktien- the impact is subject to considerable uncertainty and is gesellschaft, goodwill amounting to €2.4 billion (3.7 % of complex. In this context, this matter was of particular consolidated total assets) (prior year: €1.7 billion or 2 % of significance for our audit. As part of our audit, we first assessed whether the conditions for accounting of the coal phaseout were basically met. We then consolidated total assets) is reported under the balance sheet item “Intangible assets”. In addition to the goodwill of the cash-generating units “innogy – continuing operations” and “supply & trading”, this item includes the newly acquired business assessed which assets could be impaired or which obligations value of “operations acquired from E.ON” for the first time as of could be increased in value and which obligations and claims December 31, 2019. should be recognized for the first time. Goodwill is tested for impairment (“impairment test”) annually or In our audit of the measurement of the power plant assets as when there are indications of impairment, to determine any well as the provisions for existing or newly incurred obligations, possible need for write-downs. The carrying amounts of the we have, among other items, assessed the methodology for relevant cash-generating units, including goodwill, are carrying out the measurements and assessed the calculations compared with the corresponding recoverable amounts in the of the discount rates and escalation rates. We also assessed context of the impairment tests. The recoverable amount is whether the future cash inflows and outflows of the underlying generally calculated on the basis of fair value less costs of measurements in connection with the discount rates and disposal. The impairment tests are performed at the level of the escalation rates used, form an appropriate basis for the cash-generating units or groups of cash-generating units to measurement overall. We assessed the appropriateness of the which the respective goodwill is allocated. The measurements to future cash flows used in the calculations by comparing these calculate the fair value less costs of disposal carried out for the figures with the planning projections or recultivation plans purposes of the impairment tests are based on the present prepared by the executive directors and by reconciling them values of the future cash flows derived from the planning with general and sector-specific market expectations. In the projections for the next three years (medium-term plan) knowledge that even relatively small changes in the discount prepared by the executive directors and acknowledged by the 215 supervisory board. In doing so, expectations relating to future Other information market developments and country-specific assumptions about The executive directors are responsible for the other information. the performance of macroeconomic indicators are also taken The other information comprises the following non-audited parts of into account. Present values are calculated using discounted the group management report: cash flow models. The discount rate applied is the weighted average cost of capital for the relevant cash-generating unit. • the statement on corporate governance pursuant to § 289f HGB The impairment test did not result in the recognition of a and § 315d HGB included in section 1.8 of the group write-down. The outcome of these valuations is dependent to a management report large extent on the estimates made by the executive directors of the future cash inflows of the cash-generating units, and on • the separate non-financial group report pursuant to § 315b the respective discount rates and rates of growth employed as Abs. 3 HGB well as on further assumptions. The valuation is therefore subject to considerable uncertainty. Against this background The other information comprises further the remaining parts of the and due to the underlying complexity of the valuation, this annual report – excluding cross-references to external information matter was of particular significance in the context of our audit. – with the exception of the audited consolidated financial statements, the audited group management report and our As part of our audit, we evaluated the methodology used for the auditor’s report. purpose of performing the impairment tests and assessed the calculation of the weighted average cost of capital, among Our audit opinions on the consolidated financial statements and on other items. In addition, we assessed whether the future cash the group management report do not cover the other information, inflows underlying the measurements together with the and consequently we do not express an audit opinion or any other weighted cost of capital used represent an appropriate basis for form of assurance conclusion thereon. the impairment tests overall. We evaluated the appropriateness of the future cash inflows used in the calculations, among other In connection with our audit, our responsibility is to read the other items, by comparing this data with the Group’s medium-term information and, in so doing, to consider whether the other plan and by reconciling it against general and sector-specific information market expectations. In this context, we also assessed whether the costs of Group functions were properly included in the • is materially inconsistent with the consolidated financial respective cash-generating unit. In the knowledge that even statements, with the group management report or our knowledge relatively small changes in the discount rate applied can in obtained in the audit, or some cases have a material impact on the fair value less costs of disposal calculated using this method, we also evaluated the • otherwise appears to be materially misstated. parameters used to determine the discount rate applied and assessed the measurement model. Furthermore, we evaluated If, based on the work we have performed, we conclude that there is a the sensitivity analyses performed by the Company in order to material misstatement of this other information, we are required to evaluate any impairment risk (carrying amount higher than report that fact. We have nothing to report in this regard. recoverable amount) in the event of a reasonably possible change in a material assumption underlying the measurement. Overall, the measurement parameters and assumptions used by the executive directors are in line with our expectations and are also within the ranges considered by us to be reasonable. The Company’s disclosures relating to goodwill are contained in the notes to the consolidated financial statements in section “Notes to the Balance Sheet” in note “(10) Intangible assets”. 216 RWE Annual Report 2019 Consolidated financial statements > Independent auditor’s report Responsibilities of the Executive Directors and the Supervisory Reasonable assurance is a high level of assurance, but is not a Board for the Consolidated Financial Statements and the Group guarantee that an audit conducted in accordance with § 317 HGB Management Report and the EU Audit Regulation and in compliance with German The executive directors are responsible for the preparation of the Generally Accepted Standards for Financial Statement Audits consolidated financial statements that comply, in all material promulgated by the Institut der Wirtschaftsprüfer (IDW) and respects, with IFRSs as adopted by the EU and the additional supplementary compliance with the ISAs will always detect a requirements of German commercial law pursuant to § 315e Abs. 1 material misstatement. Misstatements can arise from fraud or error HGB and that the consolidated financial statements, in compliance and are considered material if, individually or in the aggregate, they with these requirements, give a true and fair view of the assets, could reasonably be expected to influence the economic decisions liabilities, financial position, and financial performance of the Group. of users taken on the basis of these consolidated financial In addition, the executive directors are responsible for such internal statements and this group management report. control as they have determined necessary to enable the preparation of consolidated financial statements that are free We exercise professional judgment and maintain professional from material misstatement, whether due to fraud or error. skepticism throughout the audit. We also In preparing the consolidated financial statements, the executive • Identify and assess the risks of material misstatement of the directors are responsible for assessing the Group’s ability to consolidated financial statements and of the group management continue as a going concern. They also have the responsibility for report, whether due to fraud or error, design and perform audit disclosing, as applicable, matters related to going concern. In procedures responsive to those risks, and obtain audit evidence addition, they are responsible for financial reporting based on the that is sufficient and appropriate to provide a basis for our audit going concern basis of accounting unless there is an intention to opinions. The risk of not detecting a material misstatement liquidate the Group or to cease operations, or there is no realistic resulting from fraud is higher than for one resulting from error, as alternative but to do so. fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Furthermore, the executive directors are responsible for the preparation of the group management report that, as a whole, • Obtain an understanding of internal control relevant to the audit provides an appropriate view of the Group’s position and is, in all of the consolidated financial statements and of arrangements material respects, consistent with the consolidated financial and measures (systems) relevant to the audit of the group statements, complies with German legal requirements, and management report in order to design audit procedures that are appropriately presents the opportunities and risks of future appropriate in the circumstances, but not for the purpose of development. In addition, the executive directors are responsible expressing an audit opinion on the effectiveness of these systems. for such arrangements and measures (systems) as they have considered necessary to enable the preparation of a group • Evaluate the appropriateness of accounting policies used by the management report that is in accordance with the applicable executive directors and the reasonableness of estimates made by German legal requirements, and to be able to provide sufficient the executive directors and related disclosures. appropriate evidence for the assertions in the group management report. • Conclude on the appropriateness of the executive directors’ use of the going concern basis of accounting and, based on the audit The supervisory board is responsible for overseeing the Group’s evidence obtained, whether a material uncertainty exists related financial reporting process for the preparation of the consolidated to events or conditions that may cast significant doubt on the financial statements and of the group management report. Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in Auditor’s Responsibilities for the Audit of the Consolidated the auditor’s report to the related disclosures in the consolidated Financial Statements and of the Group Management Report financial statements and in the group management report or, if Our objectives are to obtain reasonable assurance about whether such disclosures are inadequate, to modify our respective audit the consolidated financial statements as a whole are free from opinions. Our conclusions are based on the audit evidence material misstatement, whether due to fraud or error, and whether obtained up to the date of our auditor’s report. However, future the group management report as a whole provides an appropriate events or conditions may cause the Group to cease to be able to view of the Group’s position and, in all material respects, is continue as a going concern. consistent with the consolidated financial statements and the knowledge obtained in the audit, complies with the German legal • Evaluate the overall presentation, structure and content of the requirements and appropriately presents the opportunities and consolidated financial statements, including the disclosures, and risks of future development, as well as to issue an auditor’s report whether the consolidated financial statements present the that includes our audit opinions on the consolidated financial underlying transactions and events in a manner that the statements and on the group management report. consolidated financial statements give a true and fair view of the 217 assets, liabilities, financial position and financial performance of We communicate with those charged with governance regarding, the Group in compliance with IFRSs as adopted by the EU and the among other matters, the planned scope and timing of the audit additional requirements of German commercial law pursuant to and significant audit findings, including any significant deficiencies § 315e Abs. 1 HGB. in internal control that we identify during our audit. • Obtain sufficient appropriate audit evidence regarding the We also provide those charged with governance with a statement financial information of the entities or business activities within that we have complied with the relevant independence the Group to express audit opinions on the consolidated financial requirements, and communicate with them all relationships and statements and on the group management report. We are other matters that may reasonably be thought to bear on our responsible for the direction, supervision and performance of the independence, and where applicable, the related safeguards. group audit. We remain solely responsible for our audit opinions. From the matters communicated with those charged with • Evaluate the consistency of the group management report with governance, we determine those matters that were of most the consolidated financial statements, its conformity with significance in the audit of the consolidated financial statements German law, and the view of the Group’s position it provides. of the current period and are therefore the key audit matters. We • Perform audit procedures on the prospective information regulation precludes public disclosure about the matter. describe these matters in our auditor’s report unless law or presented by the executive directors in the group management report. On the basis of sufficient appropriate audit evidence we evaluate, in particular, the significant assumptions used by the executive directors as a basis for the prospective information, and evaluate the proper derivation of the prospective information from these assumptions. We do not express a separate audit opinion on the prospective information and on the assumptions used as a basis. There is a substantial unavoidable risk that future events will differ materially from the prospective information. 218 RWE Annual Report 2019Consolidated financial statements > Independent auditor’s report Other legal and regulatory requirements Further Information pursuant to Article 10 of the EU Audit Regulation We were elected as group auditor by the annual general meeting on May 3, 2019. We were engaged by the supervisory board on May 6, 2019. We have been the group auditor of RWE Aktien- gesellschaft, Essen, without interruption since the financial year 2001. We declare that the audit opinions expressed in this auditor’s report are consistent with the additional report to the audit committee pursuant to Article 11 of the EU Audit Regulation (long-form audit report). German Public Auditor responsible for the engagement The German Public Auditor responsible for the engagement is Ralph Welter. Essen, 28 February 2020 PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft Michael Reuther Wirtschaftsprüfer Ralph Welter Wirtschaftsprüfer (German Public Auditor) (German Public Auditor) 219 3.10 Information on the auditor The consolidated financial statements of RWE AG and its subsidiaries for the 2018 fiscal year – consisting of the Group balance sheet, Group income statement and statement of comprehen sive income, Group statement of changes in equity, Group cash flow statement and Group notes to the financial statements – were audited by the auditing company PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft. The auditor at PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft responsible for RWE is Mr Ralph Welter. Mr Welter has performed this function in six previous audits of RWE. 220 RWE Annual Report 2019Five-year overview Five-year overview Key figures of the RWE Group1 External revenue (excluding natural gas tax/electricity tax) Income Adjusted EBITDA Adjusted EBIT Income before tax Net income /RWE AG shareholders’ share in income Earnings per share Cash flow 2019 2018 2017 2016 2015 € million 13,125 13,406 13,822 43,590 45,848 € million € million € million € million € 2,489 1,267 – 752 8,498 13.82 1,538 619 49 335 0.54 2,149 1,170 5,403 3,082 2,056 – 5,807 1,900 – 5,710 7,017 3,837 – 637 – 170 3.09 – 9.29 – 0.28 Cash flows from operating activities € million – 977 4,611 – 3,771 2,352 3,339 Free cash flow Asset /capital structure Non-current assets Current assets Balance sheet equity Non-current liabilities Current liabilities Balance sheet total Equity ratio Net debt € million – 2,053 3,439 – 4,439 809 441 € million 35,951 18,595 45,694 45,911 51,453 € million 28,241 61,513 23,365 30,491 27,881 € million 17,448 14,257 11,991 7,990 8,894 € million 27,018 20,007 36,774 39,646 45,315 € million 19,726 45,844 20,294 28,766 25,125 € million 64,192 80,108 69,059 76,402 79,334 % 27.2 17.8 17.4 10.5 11.2 € million 9,298 19,339 20,227 22,709 25,463 Net debt of continuing operations € million 9,066 4,389 – – – Workforce Workforce at year-end2 Research & development Operating R & D costs Emissions balance CO2 emissions Free allocation of CO2 certificates Shortage of CO2 certificates3 Specific CO2 emissions 19,792 17,748 59,547 58,652 59,762 € million 21 18 182 165 101 million metric tons million metric tons million metric tons metric tons/ MWh 88.1 118.0 131.8 148.3 150.8 1.1 1.3 1.3 4.5 5.6 86.0 115.6 129.1 142.6 143.9 0.575 0.670 0.658 0.686 0.708 1 The comparability of some of the figures for various fiscal years is limited due to changes in reporting. 2 Converted to full-time positions. 3 As Turkey does not participate in the European Union Emissions Trading System, we do not need emission allowances for our CO2 emissions in that country. 221 Imprint RWE Aktiengesellschaft Altenessener Strasse 35 45141 Essen Germany Phone +49 201 5179-0 Fax +49 201 5179-5005 E-mail contact@rwe.com Investor Relations Phone +49 201 5179-3112 Fax +49 201 12-15033 Internet www.rwe.com/ir E-mail invest@rwe.com Corporate Communications Phone +49 201 12-23986 Fax +49 201 12-22115 Typesetting and production MPM Corporate Communication Solutions, Mainz, Düsseldorf, Germany www.mpm.de Design concept and layout Scholz & Friends Düsseldorf GmbH Photography André Laaks, Essen, Germany Printing D+L Printpartner GmbH, Bocholt, Germany Translation Olu Taylor Translation & Interpretation Services, Geretsried, Germany Proofreading Nicola Thackeray, Swindon, UK For annual reports, interim reports, interim statements and further information on RWE, please visit us on the internet at RWE is a member of DIRK – www.rwe.com. the German Investor Relations Association. This annual report was published on 12 March 2020. This is a translation of the German annual report. In case of divergence from the German version, the German version shall prevail. 222 RWE Annual Report 2019Further information Financial Calendar 2020/2021 12 March 2020 Capital Market Day 28 April 2020 29 April 2020  4 May 2020 14 May 2020 Annual General Meeting Ex-dividend date Dividend payment Interim statement on the first quarter of 2020 13 August 2020 Interim report on the first half of 2020 12 November 2020 Interim statement on the first three quarters of 2020 16 March 2021 Annual report for fiscal 2020 28 April 2021 29 April 2021  3 May 2021 12 May 2021 Annual General Meeting Ex-dividend date Dividend payment Interim statement on the first quarter of 2021 12 August 2021 Interim report on the first half of 2021 11 November 2021 Interim statement on the first three quarters of 2021 The Annual General Meeting (until the beginning of the Q & A session) and all events concerning the publication of our financial reports are broadcast live on the internet and recorded. We will keep the recordings on our website for at least twelve months. RWE Aktiengesellschaft Altenessener Strasse 35 45141 Essen Germany www.rwe.com 

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